STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS ORLANDO REGIONAL HEALTHCARE, ) SYSTEM, INC., ) ) Petitioner, ) ) vs. ) Case No. 02 0448CON ) AGENCY FOR HEALTH CARE ) ADMINISTRATION, ) ) Respondent. ) __________________________________) ADV ENTIST HEALTH SYSTEM/SUNBELT, ) INC., d/b/a FLORIDA HOSPITAL, ) ) Petitioner, ) ) vs. ) Case No. 02 0449CON ) AGENCY FOR HEALTH CARE ) ADMINISTRATION, ) ) Respondent. ) __________________________________) RECOMMENDED ORDER This case was heard by David M. Maloney, Administrative Law Judge of the Division of Administrative Hearings, from August 12 through August 16, 2002; August 19 through August 21, 2002; and August 26 through August 27, 2002, in Tallahassee, Florida. APPEARANCES For Petitioner Orlando Regional Healthcare System, Inc.: James M. Barclay, Esquire Ruden, McClosky, Smith, Schuster & Russell, P.A. 215 South Monroe Street, Suite 815 Tallahassee, Florida 32301 Steven R. Bechtel, Esquire Mateer & Harbert, P.A. Post Office Box 2854 225 East Robinson Street, Suite 600 Orlan do, Florida 32802 For Petitioner Adventist Health System/Sunbelt, Inc., d/b/a Florida Hospital: Stephen K. Boone, Esquire Boone, Boone, Boone, Hines & Koda, P.A. 1001 Avenida del Cir co Post Office Box 1596 Venice, Florida 34284 For Respondent Agency for Health Care Administration: Michael P. Sasso, Esquire Agency for Health Care Administrat ion 525 Mirror Lake Drive, North, Suite 310G St. Petersburg, Florida 33701 STATEMENT OF THE ISSUES Whether there is need for a new 60 bed general acute care hospital in Seminole County? If so, to which of two applicants should a CON be awarded to construct and operate the hospital: Orlando Regional Healthcare System, Inc. (CON 9496), or Adventist Health System/Sunbelt, Inc., d/b/a Florida Hospital (CON 9497)? PRELIMINARY STATEMENT On February 5, 2002, the Div ision of Administrative Hearings ("DOAH") received a notice from the Agency for Health Care Administration ("AHCA" or the "Agency"). The notice informed DOAH of the Agency's receipt of a request for a formal hearing from Orlando Regional Healthcare Syste m, Inc. ("Orlando Regional" or "ORHS"). Attached to the notice was a Petition for Formal Administrative Hearing filed by ORHS. The petition contests "the preliminary decision of [AHCA] denying [ORHS's] CON Application No. 9496 to establish a new 60 bed ac ute care hospital . . . in Oviedo, Seminole County, AHCA Planning District 7, Subdistrict 4 . . . ." It alleges that ORHS's application had been comparatively reviewed with CON No. 9497, an application filed by Adventist Health System/Sunbelt, Inc., d/b/a Florida Hospital ("Florida Hospital") to establish a like hospital that had also been denied preliminarily by AHCA. Finally, the petition requests the relief that recommended and final orders be entered granting ORHS's application. On the same day, DOAH received a second notice from AHCA that related to Florida Hospital's request for a formal administrative proceeding, also contained in a Petition for Formal Administrative Hearing. Florida Hospital's petition was similar in all material respects to ORHS' s except, of course, that it requests as relief that its application be granted rather than that of ORHS. The requests in both cases by AHCA that an administrative law judge be designated to conduct all proceedings required by law was granted by DOAH. The petitions of Orlando Regional and Florida Hospital were assigned DOAH Case Nos. 02 0448CON and 02 0449CON, respectively, and the undersigned was designated as the administrative law judge to conduct the proceedings. Following responses to initial orders s ent out in the two cases, the two were consolidated on February 22, 2002. On the same date, an O rder of P re H earing I nstructions was issued and the consolidated cases were set for hearing for 10 days in August 2002: August 12 through 16; 19 through 21; a nd 26 and 27. Final hearing took place as noticed. At final hearing, ORHS proceeded first. It presented the testimony of Karl W. Hodges, vice president of Business Development for Orlando Regional Healthcare System; Gregory S. Pace; William E. Tipton, an expert in traffic, transportation and civil engineering; Charles Braun, an expert in architecture and health facility design; Phil Rond, Ph.D., an expert in health care planning; Glenn Allen Melnick, Ph.D., an expert in health care economics; and Gene Nel son, an expert in health care planning. Orlando Regional also presented the videotaped deposition testimony of Scott D. Greenwood, M.D. and Robert J. Bowles, M.D. Orlando Regional offered into evidence 86 exhibits, identified as ORHS Exhibits 1 through 8 6. All of ORHS' exhibits were admitted. Florida Hospital presented the testimony of Lars Houmann, an expert in hospital administration; Connie Hamilton, an expert in the nursing and nursing administration; Kenneth Bradley, an expert in hospital administr ation; Monica Reed, M.D., an expert in medical care and obstetrical services; Kathleen Mitchell, an expert in nursing; Paul Macheske, an expert in hospital architecture and design; Lawrence L. Smith, an expert in land development and civil engineering; Cha rles W. Cole, an expert in hospital architecture and design; Joseph Portoghese, M.D.; Robert A Schamberger, M.D.; Zulma Cintron, M.D.; Judy Horowitz, an expert in health care planning and health care finance; and David Eisenstadt, an expert in industrial o rganization and antitrust economics. Florida Hospital offered into evidence 27 exhibits, identified as Florida Hospital Exhibits 1 through 8 and 10 through 28. (Florida Hospital Exhibit 9, a picture of wetlands, was marked for identification but not offe red.) All 27 offered exhibits were admitted into evidence. The Agency presented the testimony of Jeffrey M. Gregg, the Chief of AHCA's Bureau of Health Facility Regulation and an expert in CON review and health care planning. Three exhibits offered by AHCA were marked as AHCA Exhibits 1 through 3 and all were admitted into evidence. Orlando Regional and Florida Hospital jointly presented the testimony of four witnesses: Grant Malloy, Seminole County Commissioner; Tom O'Hanlon, Chairman of the Oviedo C ity Council; Wayne Martin, Fire Chief of the City of Oviedo; and Terry Schenk, Fire Chief for Seminole County. Twelve joint exhibits, marked for identification as Joint Exhibits 1 through 12, were offered by ORHS and Florida Hospital. All were admitted i nto evidence. Official recognition was taken of Rule 59A 3.081, Florida Administrative Code, at the behest of ORHS and with the concurrence of all of the parties. The last volume of the transcript of the final hearing was filed on August 30, 2002. Propo sed recommended orders were filed timely by the parties: the proposed orders of ORHS and AHCA on September 30, 2002, the proposed order of Florida Hospital on October 1, 2002. This R ecommended O rder follows. FINDINGS OF FACT The Battleground: District 7 1. At the heart of the conflict in this proceeding is that the two corporate combatants are the dominant providers of hospital services in major metropolitan Orlando and both are providers of very high quality acute care hospital services. Each seeks authority to construct and operate a 60 bed general acute care hospital in the fast growing community of Oviedo, Florida. The Agency for Health Care Administration, arbiter of the conflict, has introduced a quarrel of its own by its determination that the re is no need for the hospital in Oviedo, a determination with which the hospitals decidedly take issue. 2. Oviedo is an incorporated area in east Seminole County. Seminole County, in turn, is a county that with two other counties makes a contribution by suburb or city center to the conurbation in and around Orlando, Florida's largest non coastal city. 3. Seminole County is also one of four counties that comprise District 7, one of eleven health service planning districts into which the Legislature has partitioned the state. See Section 408.032(5), Florida Statutes. The other three counties in the District are Orange, Osceola and, removed from the controversy in this case, Brevard. 4. The four counties are each considered by rule of AHCA to constitut e a sub district of District 7. Brevard is Sub district 1; Orange, sub district 2; Seminole, sub district 3; and, Osceola, sub district 4. 5. The parties consider parts of Seminole and Osceola Counties to constitute the major metropolitan area of the Ci ty of Orlando together with, of course, parts of Orange County, the county that contains incorporated Orlando. As indicated above and by its irrelevance to this proceeding, no part of Brevard County is considered by the parties to make up any of metropol itan Orlando. 6. There is also one county outside District 7 about which the parties introduced evidence, Lake County in District 3. Nonetheless, District 7 remains the primary battleground with a focus on sub district 3 as the site of the CON sought by the parties. The Parties i. AHCA 7. The Agency for Health Care Administration is the state agency responsible for the administration of the CON program in Florida pursuant to the Health Facility and Services Development Act, Sections 408.031 408.045, F lorida Statutes. ii. ORHS 8. One of the two dominant health care providers in the Orlando area, Orlando Regional Healthcare System, Inc., is a Florida not for profit corporation that owns and operates eight facilities in the four county area of Orange, Seminole, Osceola and Lake Counties, "the only market" (tr. 22) that it serves. 9. Half of ORHS's facilities are in Orange County. These four facilities are: Orlando Regional Medical Center, a 517 bed general acute care hospital that provides tertiary s ervices in addition to routine acute care hospital services and that is the site of a trauma center; Arnold Palmer Hospital for Children and Women, a 281 bed specialty hospital that provides women's and children's services including neonatal services; Orla ndo Regional Sand Lake Hospital, a 153 bed general acute care facility that provides comprehensive medical rehabilitation services; and Orlando Regional Lucerne Hospital, a 267 bed general acute care hospital that provides comprehensive medical rehabilitat ion and skilled nursing unit services. 10. In Seminole County, ORHS wholly owns and operates Orlando Regional South Seminole Hospital ("South Seminole"), a 206 bed general acute care facility that provides adult/child psychiatric and adult substance abuse services as well as general acute care services. 11. In Osceola County, ORHS owns Orlando Regional St. Cloud Hospital, an 84 bed general acute care facility. 12. In Lake County, ORHS jointly owns and operates two health care facilities under joint ventu re business arrangements: South Lake Hospital, a 68 bed general acute care facility and Leesburg Regional Medical Center, a 294 bed general acute care facility. 13. The wholly owned facilities operate under a single license and are accredited by the Join t Commission on Accreditation of Health Care Organizations ("JCAHO"). 14. One of six statutory teaching hospitals in the state, ORHS has been in continuous existence since 1918. Its mission is to be a local, unaffiliated health care provider, providing health care services to the citizens of Central Florida. 15. Recognized as one of the top 100 hospitals in the United States by US News and World Report, ORHS has been the recipient of numerous awards and recognitions. As but one example, it was the winn er of a Consumer Choice Award from the National Research Corporation for the years 1999 through 2001. 16. Orlando Regional Healthcare System provides outstanding health care of the highest quality to patients at its eight facilities in three of the four c ounties in AHCA's Health Care Planning District 7. iii. Florida Hospital 17. The other dominant health care provider in the Orlando area is Florida Hospital. Founded as a sanitarium, Florida Hospital has been in existence and a presence in the Orlando medical community since 1908. 18. Florida Hospital is part of the Adventist Health System, a not for profit hospital organization that operates hospitals throughout the country. 19. In the Orlando area, Florida Hospital has seven acute care campus syst ems operated under a single license in a three county area: Orange, Seminole and Osceola Counties. The original and main campus is located in downtown Orlando. A second campus is in East Orlando. The five other facilities are in Altamonte Springs, to t he northwest of Orlando; Apopka, further northwest; Winter Park, just north of Orlando; and Celebration and Kissimmee, both southwest of the city. Florida Hospital also operates Florida Hospital Waterman under a separate license in Lake County in District 3. 20. The seven campuses in District 7 are unified by more than just licensure. Consistent with their operation under a single license, all seven operate under a single provider number with Medicare/Medicaid. They have a single medical staff and a si ngle accreditation with JCAHO. The seven Florida Hospital campuses operate under a single leadership structure; all policies, procedures and matters that pertain to the operation of the hospital are part of the single body of operational guidelines and pr ocedures that are provided by the organization. The seven campuses also operate under a single price structure, a single charge master that runs across the entire organization. 21. The goal of operating the seven campuses in a unified manner is to maint ain continuity and promote one standard of care so that when a patient enters any of the facilities, the patient can rely on receiving the same high standard of care as would be received at any other Florida Hospital facility. Operation under a single str ucture also provides a patient with the coverage of physicians and staff throughout the system to cover any and all needs of the patient. 22. From its inception, the mission of Florida Hospital has been to extend a religious ministry of healing to the co mmunity consistent with Adventist principles. Among these principles are awareness of the eternal nature of the moment at which care is extended to the patient as well as recognition of each patient as a child of God, entitled to the highest possible qual ity of care embodied in "whole person health" (tr. 876) composed of physical, mental and spiritual well being. 23. Florida Hospital carries out its mission with "a strong sense of stewardship for providing care in the communities that [the hospital] serve [s] . . . ." (Tr. 875). 24. The success of Florida Hospital's philosophy of care is evident in recognition bestowed by others. For example, Florida Hospital was recognized as being among the top 50 hospitals in the country for nine specialties in the Ju ly 2002 edition of U.S. News & World Report's "America's Best Hospitals." To take but one of the nine, "Heart & Heart Surgery," Florida Hospital is ranked 12th in the nation in the company of those ranked just above: Cleveland Clinic, Mayo Clinic (Roches ter), Massachusetts General, Brigham and Women's Hospital, Duke University Medical Center, Johns Hopkins, Texas Heart Institute St. Luke's in Houston, Emory University Hospital, Stanford University Hospital, Barnes Jewish Hospital in St. Louis and the UC LA Medical Center. iv. Well Matched Applicants 25. In its state agency action report ("SAAR"), AHCA noted that ORHS and Florida Hospital are two large, well matched hospital systems. Both operate over 1,500 beds in the Orlando area. Both generate appr oximately two billion dollars of gross charges annually. Both deliver over 300,000 patient days of patient care. Together, they are the overwhelmingly dominant providers of health care in the major metropolitan Orlando area. 26. In the SAAR, the Agency discussed distinctions between the two applicants. Had AHCA determined that there was need for the facility, it would have had a difficult time deciding which corporation should be awarded the CON. None of the distinctions between the two were found by AHCA to be substantial enough to serve as a basis for choosing either applicant over the other. Other District 7 Hospitals 27. Besides the two applicants, the dominant providers of hospital services in District 7 by virtue of number of facilities (13 hos pitals in the District and three hospitals in Lake County immediately adjacent to the District), among other reasons, there are three other hospitals in the District. 28. Health Central is a hospital operated by a statutorily created tax district in the City of Ocoee, in Orange County. 29. Central Florida Regional Hospital is owned and operated by Hospital Corporation of America ("HCA") located in the City of Sanford in Seminole County. It is approximately 14 miles from the proposed locations of the ap plicant's facilities. 30. Osceola Regional Medical Center, another HCA facility, is located in Kissimmee in Osceola County, not far from Florida Hospital's Kissimmee and Celebration facilities. Stipulation 31. The parties stipulated to the following: a. The applicable fixed need is zero. b. Both applications complied with the requirements of Sections 408.037, 408.038 and S ubsections (1), (2) and (3) of Section 408.039, Florida Statutes, and the requirements of Rules 59C 1.008 and 59C 1.010, Florida Administrative Code. c. Both applications meet the review criteria contained in Subsections 408.035 (3),(6),(8),(10) and (11), Florida Statutes and the review criteria in Subsections 408.035(4),(5) and (12), Florida Statutes, are not applicable in this c ase. d. The statutory review criteria at issue in this case are Subsections 408.035(1), (2), (7) and (9), Florida Statutes. Numeric Need 32. Numeric need for general acute care beds is determined pursuant to Agency rule, Rule 59C 1.038, Florida Administ rative Code. The rule's methodology for the calculation of numeric need for general acute care beds is by sub district. 33. Since "there really is no longer a future projection methodology in the rule . . . it was stricken out two or three years ago," Ge ne Nelson, one of ORHS' experts in health planning, refers to the rule as containing a "retrospective occupancy model." (Tr. 619). Under the methodology, additional beds are not normally approved in any sub district where historic occupancy is less than 75%. If occupancy exceeds 75%, beds will be awarded to bring occupancy down to 75%. In other words, instead of projecting forward as it once did to determine need, the rule looks back to occupancy. If occupancy in the sub district has met the threshold, then positive numeric need is established. 34. Criticism has been leveled at the methodology. Not taking into account future population growth or occupancy rates at times other than midnight, are but two examples. Criticism, however, of the rule is of little moment in this case since the case is a challenge to agency action not to the rule that contains the methodology. 35. Whatever the appropriateness or validity of the criticism, the calculations pursuant to the methodology have not yielded a fixed n eed pool above zero for any of the many sub districts in the eleven districts of the state for some years now. Nor is numeric need for general acute care beds expected by the Agency to exceed zero anywhere in the state for the foreseeable future. 36. Dur ing this time of numeric need "drought," AHCA, nonetheless has awarded CONs for new general acute care beds and even new hospitals on a number of occasions. For example, "[d]espite the fact that there was an applicant proposing to relocate beds within the subdistrict, which wouldn't have affected the bed inventory at all, the state elected to approve [another] applicant . . . that applied for a brand new 60 bed hospital" (tr. 635) in the community of Lady Lake in District 3. The application in that instan ce had been filed in the fall of 1998. In a second example, in the fall of 2001, a few years later, Osceola Regional and Florida Hospital Celebration were each approved to add beds to existing facilities despite the fact that there was no numeric need and the hospitals did not meet the statutory occupancy levels for additional beds. 37. Mr. Nelson also testified about a third recent example where a new hospital was built when the subdistrict occupancy was low, the facts of which compare favorably, in his view, with the facts in this case. As he tells it, these three cases, compared to this case, produce inconsistency: In the fall of 1999, Sacred Heart Hospital applied to build a new 60 bed hospital in the southern portion of Walton County. That particular subdistrict is actually a two county subdistrict consisting of Okaloosa and Walton counties, has some existing hospitals, current subdistrict occupancy in that area is 56.3 percent. Despite . . . the low occupancy . . . the state recognized the validity of the arguments about a growing population, about accessibility, many of the same issues that you have here and approved Sacred Heart to build a new 60 bed hospital in that location. * * * I am not criticizing any of these approvals. I . . . am critici zing [that the state was] presented with a similar set of circumstances in this case [and] the applications were all denied. And I think there is an inconsistency here. (Tr. 637 8). 38. During the same period, moreover, beds have been added to existing hospitals without CON review, accomplished by way of Section 408.036(n), Florida Statutes. The statute allows 10 beds or 10% of licensed bed capacity to be added to a hospital's acute bed inventory upon certification "that the prior 12 month average occup ancy rate for the category of licensed beds being expanded at the facility meets or exceeds 80% . . . ." Section 408.036(n)(1)a., Florida Statutes. See also Rule 59C 1.038(5), Florida Administrative Code. 39. The bed additions made with and without CON review contribute to current numeric need determinations of "zero" and the continued reasonable expectation that AHCA's methodology for determining acute care bed numeric need will not yield numeric need in excess of zero for years to come. Most pertinent ly to this case, these additions erode AHCA's position advanced in hearing in this case for a preference to keep open the option for a future competitor, a competitor other than one of the two dominant providers, presumably when numeric need has been deter mined to exist, a condition not likely to come into play for the foreseeable future. 40. However the future plays itself out and the effect on AHCA's current methodology, there remains one point central to consideration in this case. In light of a numeri c need of "zero" for the applicable batching cycle, for a CON to be awarded as a result of this proceeding, as a first step, the applicants must demonstrate the existence of "not normal" circumstances that support an award. The two applicants attempt that step in tandem. 41. Both ORHS and Florida Hospital contend that rapid population growth, problems of access to acute care and emergency services in the Oveido area, and mal distribution of beds in the sub district and district constitute circumstances th at justify need for their proposed facilities. In other words, they are "not normal" circumstances. Not Normal Circumstances i. Population Growth 42. A rural farm community not long ago with a population of about 7,500, the City of Oviedo, in the la st 15 years, has grown into an Orlando bedroom community. The population increase within the city limits is proof of the city's metamorphosis from countryside to suburb. During this period of time, the municipal population has nearly quadrupled to 28,000 with no end in sight to continued growth in the area as explained by ORHS' expert, Dr. Rond: The special circumstances . . . that drive this application are, first, the unprecedented population growth. As we have seen, we are experiencing population grow th in excess of a hundred percent in the east Seminole area. In the adjacent Winter Springs area, we are experiencing a rate in excess of 51 percent. We are talking about a population that is going to reach almost 200,000 people by the year 2006. (Tr. 3 77 8). The area is projected for an additional 18.2% growth by 2006, when as testified to by Dr. Rond, the population will reach nearly 200,000. 43. The municipal population is not the only population of a political entity in the area to quadruple in mo dern memory. Over the past three decades Seminole County has grown fourfold from 83,692 in 1970 to 365,196 in 2000. As a result, the county is the third most densely populated of the state's 67 counties. 44. Until the mid 1990's, population growth was concentrated in the western half of the county as Orlando area development spread north into Seminole County along the I 4 and U.S. Highway 17/92 corridors. Since then the rate of population growth has been dramatic in east Seminole County in part becaus e of the opening of another major transportation corridor, the "Greenway," Highway 417. 45. Between 1990 and 2001, east Seminole County more than doubled in size (24,840 to 51,287; a 107% increase) while West Seminole grew by only 22%. East Seminole Coun ty is expected to remain the fastest growing portion of the county into the foreseeable future. With approximately 43% of the total land area of the county but only about 16% of the population, it remains much less densely populated than the remainder of the county, affording greater opportunities for future growth. 46. Seminole County is unique in the state from the perspective of bed to population ratios. The three hospitals in Seminole County with a combined total of 575 licensed beds, yield a ratio o f 1.55 beds per 1,000 population; tied for lowest bed to population ratio of the sub districts in the state. The only area with a comparable ratio is Sub district 8 4, comprised of Glades and Hendry Counties, located southwest of Lake Okeechobee, "a very rural area." (Tr. 625). While these two sub districts are similar in bed to population ratio, they are at opposite extremes in terms of population density. The population of Seminole County, at 371,000 is nearly nine times the combined populations of Gl ades and Hendry Counties at slightly more than 42,000. Sub district 8 4 is "totally unlike Seminole County from the standpoint of population demographics; and yet in terms of resource availability, . . . it has a comparable amount of resources per thousan d population." ( Id. ) Thus, Seminole County occupies a unique place in the state for its low bed to population ratio considering its overall population. 47. Population forecasts for the next five year period support the expectation of continued strong gr owth in east Seminole County. For example, the downtown area of Oviedo plans a residential area with a density up to 50 dwellings per acre, at least one of the highest in the County. In the City of Oviedo vicinity, median densities are increasing from 4 homes per acre to 10, to allow for townhouses. East Seminole County is reasonably expected to have 60,597 residents by the year 2006, an 18.2% increase over 2001. By comparison, West Seminole County is expected to experience only a 6.3% rate of growth. 4 8. Projected growth in the City of Oviedo, moreover, is in all likelihood understated due to significant residential developments currently underway that alone are expected to add up to 6,238 new residents to the city's population. One need only look to actual growth in the area for support for such a prediction. Actual growth has consistently outpaced projected growth governed by methodologies that have repeatedly failed to reflect the reality of population growth in Oviedo. 49. Related to population g rowth are utilization projections by the applicants' health planning experts for an Oviedo hospital. Judy Horowitz, Florida Hospital's expert health care planner, explained Florida Hospital's: [W]e looked at historically what had come out of the service a rea as we defined it. We projected that that volume would grow in proportion to population growth. We looked at a subset of services, those that were likely to be provided at a community hospital as was being proposed by Florida Hospital Oviedo. We look ed at what we thought a reasonable market share would be; and our overall forecast is that within two years of opening this facility, that we would reach 77 percent occupancy at a 60 bed facility. So our year two, which is the 12 months ending June of 200 7, . . . . we would already be at 77 percent occupancy. Then our first year we would be at approximately 68 percent occupancy. * * * [T]here is clearly sufficient demand to support the hospital as proposed; and the fact that we are projecting a relative ly high utilization very quickly shows the magnitude of that demand. (Tr. 1352, 1353). 50. With the high level of population growth and the demand for hospital services that such growth generates, the citizens of Oviedo expect access to hospital care wit hin the community. 51. In keeping with citizen expectation, the City of Oviedo has adopted a resolution that urges AHCA to approve a new hospital in the Oviedo community. It has been joined in its resolve by the Board of County Commissioners for Seminole County through a resolution of its own. 52. To underscore the force of the two resolutions, the corporate parties presented the testimony of representatives of both the City Council and the County Commission. 53. Grant Malloy, the County Commissioner fo r County District I who grew up in the area with fond childhood memories of "being overcome by the orange blossom smells, they were so intense," (tr. 802) described the growth observed first hand by him during his lifetime as "phenomenal." (Tr. 806). In answer to the question whether his constituents would benefit by a new 60 bed hospital, Commissioner Malloy testified I do believe so. There is . . . the growth that's occurring there. And I heard . . . discussion about getting to some of the other hospi tals. And once you get out of Seminole County . . . the roads are very, very difficult to travel on especially getting into Orlando. Especially rush hour . . . . . . . [T]he growth . . . would support such a facility. I know our board passed a resoluti on, along with the City of Oviedo[.] [O]ur board, and all the commissioners are unanimously supportive of a hospital in the area. I haven't heard from any residents or constituents that have said it was a bad idea. . . . [P]eople are pretty excited about it. (Tr. 807 8). 54. Tom O'Hanlon, Chairman of the City Council, in the company of three other members of the council, unequivocally backed up Commissioner Malloy's appeal for a new hospital. The changes he has seen in Oviedo, he described as: Dramati c changes. When I moved there, [Oviedo] was a very rural area, and it is no longer . . .; it’s a highly compacted urban area. [W]e are working on a new master plan for downtown, which will have higher densities than we have in our city today. (Tr. 812). Chairman O'Hanlon went on to describe how the pace of the growth continuously outstrips population projections that are the product of the City's best efforts to follow appropriate methodologies for making such projections: [T]he city continually makes p opulation projections. I have always been involved with them[.] [T]here are guidelines . . .; and everytime we make them, the city grows far in excess of th[e] projections. The area is such a dynamic area because we have got the University of Central Flo rida there, which is just growing as fast as the city is, maybe even faster. You have the Research Park there and you have got excellent schools. And for that combination . . . everybody wants to move there. (Tr. 812 3). 55. The university is just sout h of the city limits. It has minimal dormitory facilities on campus. The result is that "a vast majority [of students] live off campus in housing and apartments [and they are impacting all the services that must be provided in Oviedo.]" (Tr. 814). 56. Following this testimony of Chairman O'Hanlon, the following colloquy ensued between him and counsel for ORHS: Q Is it fair to say, Councilman O'Hanlon, that the City of Oviedo and surrounding area is in growing urban area that has everything but a hospit al? A That is a true statement. Q Are you familiar, Councilman O'Hanlon, with the proposals of Orlando Regional Healthcare System and Florida Hospital to locate a 60 bed hospital in the City of Oviedo? A Yes. Q Do you support that effort? A A hun dred percent. Q Do you believe, Councilman O'Hanlon, it would be of benefit to your constituents to have that [hospital] in the city of Oviedo? A Absolutely. People approach me every week wanting to know where our hospital is. Q Can't understand why it's not there already? A Well what they understand is that there is a tremendous need for a hospital and they don't understand why it's not in the process. (Tr 816 7). 57. Residents of Oviedo also do not understand why they have to drive for such a long time to reach a hospital particularly when their goal is the emergency department. This concern about which Councilman O'Hanlon hears from a constituent "at least once a month" (tr. 819) also made its way into the resolutions of the two political b odies in the form of an identical introductory clause, as follows: "WHEREAS, there are increasing problems with timely access to care especially for emergencies," (Joint ORHS/Florida Hospital Nos. 8 and 10). It is, moreover, a concern that takes up the s econd prong of the applicants' case for "not normal" circumstances: issues of access. ii. Access a. The Oviedo Service Area 58. Although similarities exist between the two, the Oviedo Service Areas defined by the two applicants are somewhat different . The service area selected by ORHS is larger than the service area selected by Florida Hospital. 59. The Primary Service Area ("PSA") for ORHS' proposed hospital is composed of four zip codes: 32765, 32732, 32766, and 32708. Of the four, the first thr ee are in eastern Seminole County, that is, east of Highway 417, the Greenway, and south of Lake Jessup. The fourth, 32708 in the Winter Springs area, is just west of the Greenway. 60. The Winter Springs zip code was included in ORHS' PSA in part because it is adjacent to the Greenway. It has also experienced tremendous population growth and is very close to the proposed site for ORHS' hospital. 61. A secondary service area proposed by ORHS is composed of a zip code in Seminole County north of Lake Jess up, 32773, and three zip codes in Orange County, 32817, 32820, and 32826. 62. Located in the midst of the three Orange County zip codes is zip code 32816. It appears on ORHS exhibits as part of the secondary service area. As the zip code for the Univers ity of Central Florida, it has a very low residential population so that there are only a few students who might live in a dorm that would list it as their residence when receiving hospital services. There are actually "very few" (tr. 302) discharges from zip code 32816. 63. If one does not include zip code 32816 then ORHS' service area is a comprised of eight zip codes. 64. The April 1, 2001, population for the primary and secondary service areas or the service area designated by ORHS is 170,774. This service area has more than doubled in population over the last decade. Over the next five years, the service area is expected to reach 193,408 residents, of which 45% will be of prime child bearing age (15 44), "a dominant position for that age cohort wit hin the population." (Tr. 315). 65. The Oviedo service area is defined by Florida Hospital as four zip codes in Seminole County, 32708, 32732, 32765, and 32766 and one in Orange County: 32826 (all zip codes in ORHS' service area) with a population of mo re than 100,000. Florida Hospital's service area does not include Zip Code 32773 (the zip code north of Lake Jessup) that is in ORHS' service area nor, with the exception of 32826, does it include any of the Orange County zip codes that are in ORHS' servi ce area. Thus, there are five zip codes in what Florida Hospital regards as the Oviedo Service Area and eight in what ORHS regards as the Oviedo Service Area if zip code 32816 is excluded. 66. Although somewhat different, for purposes of examining travel distance and time between Oviedo and area hospitals, the Oviedo Service Areas of the two applicants are similar enough to be considered to be the same. Or, as William E. Tipton, an expert in traffic transportation and civil engineering, testified at hear ing, the results of his study entitled "Travel Time Analysis Proposed ORHS Oviedo Campus, Oviedo, Florida" (ORHS Ex. 14) would not be substantially different if he had focused on the Florida Hospital site instead of the ORHS site. b. Travel Time Analysis 67. Mr. Tipton prepared a travel time analysis to evaluate the differences in travel time that could be anticipated with the development of a hospital campus in Oviedo. 68. Mr. Tipton's study concluded that there would be a reduction of average daily tr avel time from the ORHS PSA to a hospital by 64% or 18 minutes. The maximum reduction will be 75% of the time or 21 minutes. In the critical peak afternoon hour, there will be a maximum reduction of 79% or 22 minutes in time from that which exists today. The reductions in drive distance for Oviedo area residents if a hospital were in Oviedo would be significant especially in the arena of emergency services. c. Emergency Services 69. Access to emergency services at a hospital emergency department ("ED") is one of the most important factors in making sure people have reasonable access to community hospitals. "[Y]ou really need . . . immediate care for emergencies, and so it's important to be able to get to the emergency department quickly and to receive c are rapidly once you get there." (Tr. 336). 70. Between 1997 and 2001, the hospitals experiencing the highest percentage of ED visit increase, other than Health Central, were Florida Hospital East in Orange County and South Seminole Hospital in Seminole County. 71. During the period between 1997 and 2001, although the population of Seminole County grew less than Orange County, Seminole County had a larger percentage of ED visits. Specifically, the population of Seminole County grew 12% but its ED visit s increased 23%, twice its population growth. During the same period, the population of Orange County grew by 15% but its ED visits only increased by 17%. 72. Closer examination of these statistics reveals that ED visits in the downtown area of Orlando, to include Orlando Regional Medical Center and Florida Hospital, were below the county average. However, suburban hospitals, or those in outlying areas, particularly near Oviedo, had much greater ED visit growth: ED visits grew 27% at Florida Hospital Ap opka and 37% at Florida Hospital East. Florida Hospital East is the closest hospital in Orange County to the Oviedo area. Of the hospitals in Seminole County, South Seminole was the most severely affected by ED visit increase with a 38% increase of ED vi sits between 1997 and 2001. (ED visits in excess of 27,000 by area residents are projected in 2006.) 73. In the Oviedo area there are unfortunate but not uncommon delays in emergency transport. More than 20% of emergency transports involve delays of in excess of 45 minutes after arrival at the hospital. These delays are serious because patient outcomes decline dramatically if definitive care is not delivered within the "golden hour," a concept that: reflects the fact that patient outcomes decline [dra]m atically in terms of . . . mortality rates if definitive care is not delivered within one hour of the traumatic injury that has been sustained. In cardiology, they tend to . . . say "time is muscle," * * * the longer it takes for a patient to get defin itive care following a major cardiovascular event, the more muscle mass is likely to be damaged. . . . [Y]ou can go on and talk about stroke victims, cerebral vascular patients and just a whole array of patients who [fare] much better in terms of morbidit y and mortality if they receive definitive care within an hour of the episode. (Tr. 336). 74. Part of the delay for patients in need of prompt emergency services is due to ambulance standing time. Standing time is the time a patient waits in the ambulan ce or hallway of the emergency department before the patient is seen by medical staff. This standing time does not include the time it takes the ambulance to respond to the call or the time the EMS personnel spend at the scene to stabilize the patient. N or does it include the travel time to the hospital from the scene. Ambulance standing time for patients from the Oviedo area on average is between 42 and 47 minutes. 75. When average travel times established in Mr. Tipton's study are combined with the st anding times, there is not one existing provider of emergency services that can provide a patient from Florida Hospital's Oviedo Service Area or ORHS' PSA with emergency care within the "golden hour." This combination, moreover, as stated above, does not take into account the dispatch time and time of the ambulance at the scene. 76. The typical types of emergency calls EMS personnel see in Oviedo include difficulty breathing, auto accidents, kids falling off bicycles, heart attacks, and drug overdoses. T he largest majority of calls would go to a local community hospital as opposed to trauma center in downtown Orlando. 77. Jeffrey M. Gregg, Chief of the Bureau of Health Facility Regulation, which includes the Certificate of Need Program for the Agency for Health Care Administration, testified that emergency room access is a problem that has gotten worse over time. Mr. Gregg also stated that a new hospital in the area will improve emergency access for people in the immediate area. A new hospital in Oviedo service area would also benefit and improve emergency access for patients in Orange County emergency rooms by lessening the emergency patient loads they experience. 78. Wayne Martin, Fire Chief, Emergency Management Director, City of Oviedo, testified th at the standing times and delays at the area hospital emergency rooms tie up Oviedo area ambulance services for an extended period of time. Emergency Medical Service ("EMS") staff must stay with their patient until the patient is taken into the emergency room and given medical care by emergency department staff. Because of these delays, EMS staff are out of their service area for extended periods of time. This decreases the level of service for the residents of the Oviedo area. One aspect of the problem influences another so as to create a compounding effect. 79. Dr. Robert A. Schamberger, a family practitioner in Oviedo, testified that recently a patient went to the emergency room at an area hospital and it took 16 hours from the times she arrived unti l she was seen by the emergency room personnel. Dr. Schamberger tried to admit another patient of his in an area hospital on a recent Friday and was informed there were no beds. The hospital said they would call when they had an available bed. The patie nt was finally admitted on Monday. Emergency room waiting times across the entire community are several hours, which is an unacceptable care standard. 80. Dr. Zulma Cintron practices internal medicine in Oviedo. Dr. Cintron testified that there is a "hu ge need" for a hospital in the Oviedo area. "We definitely need the beds." Dr. Cintron has had patients with chest pains who ended up waiting in the emergency room for four, five, and six hours before receiving care. Patients with less imminent needs ha ve waited 12, 16 even 24 hours. Dr. Cintron's testimony for Florida Hospital was confirmed by the testimony produced by ORHS of Scott Greenwood, M.D., a cardiologist who heads a cardiology group. 81. The evidence provided by Drs. Schamberger, Cintron And Greenwood, anecdotal though it may be, supports the existence of a problem with emergency services access in the Oviedo area that is shown by the analysis provided by the combination of Mr. Tipton's traffic study and ambulance standing time. 82. So does projected volume for ED visits. Projected volume at Florida Hospital Oviedo in year two would be in excess of 27,000 visits. The Oviedo area has a population that "is adequate to support a hospital at high utilization levels within [a] short period of ti me and also will generate a significant number of emergency visits." (Tr. 1355). 83. A new hospital facility in the Oviedo service area would help to alleviate the delays currently being experienced in the area hospital emergency departments. The Agency is not unaware of the problem and the solution that an Oviedo hospital would provide. The issue for AHCA is "[w]ould the improvement that would result for some people justify the construction of an new hospital?" (Tr. 726). 84. The applicants claim tha t the three existing Seminole County hospitals are not appropriately located to provide emergency services required by the growing population of Oviedo. Put another way, within the sub district and District 7, ORHS and Florida Hospital assert there is a m al distribution of beds. iii. Mal distribution of Beds 85. While population growth has increased dramatically in east Seminole the opening of health care facilities in the east part of the county has lagged behind; the area has more than 100,000 people b ut no hospital. 86. The three acute care hospitals in Subdistrict 7 4 are all located in the western portion of Seminole County. People tend to use hospitals closest to them especially for emergency services. Because of the north/south nature of the roa d corridors in Seminole County and the congestion and distances involved in east/west travel in the county, the Oviedo area population's access to existing hospital service in the district is problematic. The population has better access to resources in O range County, a different subdistrict, and, in fact, 66% of the Oviedo population take advantage of that better access. 87. Consistent with the pattern of transportation development in Seminole County, all three hospitals in Seminole County are located be tween I 4 and U.S. Highway 17 92. Florida Hospital Altamonte is situated along the 436 corridor, whereas South Seminole Hospital is located further to the north on State Road 434, while Central Florida Regional Hospital is situated at the northern border of the county along the U.S. Highway 17 92 corridor. 88. Dr. Rond had this to say about the locations of the three Seminole County hospitals in relation to the population in east Seminole County: The resources in the western part of the county are not sit uated in such a way that they are being utilized effectively by residents of [ORHS'] service area. Instead, they seek to move along the north/south corridor, primarily the Greenway, to utilize the services located in Orange County or … they take other rou tes of access to reach Winter Park Hospital, which is . . . in Orange County. (Tr. 319). 89. The problem of distribution of hospitals is not restricted simply to inside the county. There is a mal distribution in District 7 as well. Overall in the distr ict, there are 2.3 beds per thousand. Orange County enjoys a ratio that is very high when compared to Seminole County's. Orange C ounty's bed to population ratio is 2.7 beds per thousand, whereas Seminole County's is only 1.55 beds per thousand. The aver age bed ratio in Florida is 2.85 per thousand. Whether measured against the state ratio or the Orange County ratio, general acute care hospital beds per thousand population in Seminole County is low. 90. The ratio comparison between Orange County and Sem inole County will improve with an Oviedo Hospital although it makes the overall ratio only "a little closer; so that Orange County has 2.4 beds per thousand and Seminole County would have 1.6 beds per thousand." (Tr. 316). The applicants intend to make t hat improvement with their proposed projects. The Proposed Projects a. ORHS' 91. Orlando Regional proposes to construct a new 60 bed acute care hospital in the City of Oviedo. The location was described at hearing by Karl W. Hodges, ORHS vice president of Business Development: [T]he hospital [will be built] within a two mile radius of . . . Highway 426, also called Loma and Mitchell Hammock Road which is also called Red Bug Road. [The CON Application] further stipulates we'll be east of 417. (Tr. 20). Within that area, ORHS proposes to build a three story 155,000 square foot facility on approximately 35 acres of land. Although a site has not yet been purchased, there is at least one parcel of 35 acres of land available in the area that can be acquire d by ORHS at a price of $7,000,000 or less, as indicated in its application. 92. The bed complement of the proposed facility will be eight ICU beds, ten labor delivery recovery and post partum ("LDRP") beds serving the obstetrics department, 15 telemetry monitored beds, and 27 medical/surgical acute care beds. 93. The proposal will add 30 beds to the inventory of beds in the sub district but it will not add beds to the inventory of District 7. The 60 beds will be transferred by ORHS from two facilities. Thirty of the beds will come from South Seminole Hospital (in Seminole County). By itself, moving the 30 beds within the sub district "for the stated goal of enhancing access . . . is a non controversial project" (tr. 627) that is not subject to a certi ficate of need methodology but that still requires CON review and approval. The other thirty beds will come from Orlando Regional Lucerne Hospital in Orange County. 94. However attractive for its minimization of controversy, all 60 beds could not have b een transferred from South Seminole because to do so would have raised its occupancy above 80%, "an untenable result." (Tr. 630). For the additional 30 beds, "Lucerne seemed like a logical choice, given its bed size and its utilization." (Tr. 628). 95. The design of the proposed hospital is based on another ORHS facility: South Lake Hospital, a replacement facility that opened in January of 2000. b. Florida Hospital's 96. Florida Hospital also proposes to construct a 60 bed acute care hospital in t he City of Oviedo. Unlike ORHS, Florida Hospital owns the site, 15 acres at 8000 Red Bug Lake Road near an intersection with the Greenway. The site currently includes a two story, 41,000 square foot medical office building and a one story, 6,000 square f oot urgent care center. 97. A two story, 161,000 square foot facility is proposed to be constructed on the remaining vacant space at the site that has been approved under the Development of Regional Impact process for a 120 bed hospital. Ownership of a DRI approved site will save Florida Hospital time and expense entailed by permitting requirements. 98. All 60 beds will be part of an innovative design referred to as a "universal room and universal care delivery model." For the present, Florida Hospita l does not intend to provide obstetrics at the Oviedo facility but "all of the universal patient rooms are capable of being LDRP rooms" (tr. 1181) should Florida Hospital decide in the future to provide obstetric services at the hospital . 99. Florida Hos pital will transfer 60 beds from Orange County facilities so that Florida Hospital's proposal will increase the sub district's bed inventory by 60 beds, 30 more than the increase that will be affected by ORHS' proposal. Just as with ORHS, Florida Hospital 's proposal will not increase the bed inventory in District 7. Fifty beds will be transferred from Florida Hospital's Winter Park facility and 10 beds will transferred from Florida Hospital's Apopka facility. AHCA's View of the Proposals 100. The Agency 's conclusion that the applications did not demonstrate "not normal" circumstances was reached with difficulty. Review of the applications taxed the agency's decision making process because of the challenging circumstances presented by the applicants. As Jeffrey Gregg testified for the Agency, when there is "no fixed need pool," AHCA look[s] at applicants in terms of a unique set of circumstances that they present . . . and in this instance, The circumstances . . . in this case challenge the system, ma ke it more difficult for [the Agency] to make a sound decision in the tradition of the CON program. (Tr. 723). However much in keeping or not with the tradition of the CON program, the determination that there were no "not normal" circumstances to justif y need afforded a benefit to the Agency; it would not have to make the difficult choice between the applications. While it could have granted both applications, an option considered by the Agency ( see tr. 729), no party contended in this proceeding that c ircumstances justify two new 60 bed hospitals in Oviedo. If need is proven for but one hospital, then a selection must be made. Yet, at every turn, AHCA has found one advantage held by an applicant to be defeated by another held by its opponent or one se t of circumstances that would normally be an advantage neutralized by other considerations. 101. For example, in view of the nature of the Orlando market, AHCA reasonably did not give much weight to ORHS' proposal to add fewer beds than Florida Hospital to the sub district despite the fact that usually there would be advantage to a mere intra sub district move. In the absence of fixed need, for example, such a move would not have to be supported by "not normal" circumstances. 102. To the contrary, how ever, from the point of view of practicality, it makes more sense "to take beds from a more urban setting [in Orange County, a different sub district] where they are not being used [as proposed by Florida Hospital] and move them to a new rapidly growing ar ea where there are not hospital beds." (Tr. 739). 103. A sense of practicality guided AHCA throughout its CON review in this case. The Agency, in fact, approached the applications by "trying to be as practical as possible." ( Id. ) As explained by Mr. G regg, again on behalf of AHCA: [The Agency] do[es] not give much weight to the fact that [the applicants] would be crossing subdistrict lines here and that one of them [ORHS] is in a position to . . . add fewer beds to the planning area. That's noted in t he SAAR, but practically speaking, we are talking about a metropolitan area here. We are talking about in both cases large systems wanting to move beds from one part of their system to another part. So in many ways, . . . once again, [ORHS and Florida Ho spital] are really well matched and difficult to distinguish. (Tr. 724, emphasis supplied ). 104. The difficulty inherent in distinguishing between the applicants was repeatedly emphasized by the Agency. The point was brought home once more in questioni ng of Mr. Gregg by counsel at hearing: Q [W]ith regard to the minute distinctions between the applicants, at your deposition, some of the statements you made in that regard included [that ORHS and Florida Hospital] are both good citizens. All of these th ings in this case, coming up so close and so equal, that . . . in terms of CON analysis, it becomes very difficult . . . to make a distinction between the two of them. They are both just that good. And then also [the Agency] think[s] they compare very fa vorably, and very evenly, noting again and again and again that they are very, very close, very, very comparable. Is that still your position here today? A Yes. (Tr. 766 7). However close the Agency regards the two, there are differences in the applic ations. While some may not be of great benefit to a decision, others may serve to sustain a principled choice. Differences in the Applications i. Obstetrics 105. The leading reason for hospitalization among area residents is the need for obstetrical se rvices with births running at more than 2,000 per year. During the 12 month period ending June 2000, for example, childbirths accounted for 2,041 discharges. Of the top ten DRGs for discharges among area residents, uncomplicated vaginal delivery accounts for the most discharges, cesarean section ranks third and vaginal delivery with complications is seventh. 106. In keeping with the demand for obstetrical services, the utilization patterns of the population in the Oviedo Service Area and the area's age composition, upon the opening of its facility, ORHS proposes to provide obstetrical services. The proposal is also due, in part, in response to the closing of the obstetric program at Florida Hospital East in May of 2001. 107. There is physician support for ORHS' proposed obstetric services. Robert Bowles, M.D., testified by deposition that his group practice, Physician Associates of Florida, comprised of 14 obstetricians and gynecologists would cover obstetrics at an Oviedo hospital. While Dr. Bowles w ould not personally admit obstetrics patients at the new hospital, three of his partners would. 108. Florida Hospital does not propose to provide obstetrics upon opening although it has designed its physical plant to provide an OB unit so that Florida H ospital would have the capability of initiating that service without a problem. In other words, Florida Hospital's proposed facility would be "OB ready." (Tr. 725). 109. Unlike ORHS, Florida Hospital does not have physician support for providing obstetr ic services at its proposed facility, a part of the reason for not offering OB. The basis for Florida Hospital's lack of physician support is a malpractice insurance crisis for obstetricians. 110. Florida Hospital's proposed facility is not projected to open for another three years. If, during that time, the malpractice crisis eases and there is greater physician coverage availability, Florida Hospital could open obstetric services at the same the hospital opens since it will be OB ready. 111. Another r eason that Florida Hospital has decided against offering obstetrics upon opening is that most maternity patients are more comfortable delivering babies in a setting that has neonatal intensive care services available. Two such settings are ORHS Arnold Pal mer and Florida Hospital's main campus. Indeed, a significant number of maternity patients from Oviedo are choosing to travel past multiple hospitals that offer obstetric services to have their babies delivered at one or the other of these two hospitals. Arnold Palmer, in fact, is the leading provider of obstetrical services to the residents of the Oviedo area's two most populous zip codes: 32708 and 32765, both more than 30 minutes driving time away from the hospital. ii. Medicaid and Charity Care Cond itions 112. Approval of ORHS' CON is conditioned on a minimum of 7% of total annual patient days for Medicaid patients and 1% for charity care. 113. Florida Hospital's application offers no conditions with regard to Medicaid or charity care. Like ORHS , Florida Hospital is one of the top ten providers in the State of indigent care, and a disproportionate share Medicaid provider. The Agency's view of the difference between ORHS' provision of indigent care conditions and Florida Hospital's decision to no t condition its application was explained by Mr. Gregg: Conditions [such as those for indigent care] are important when it allows us to distinguish between applicants. . . . They are less important when we have competing applicants, both of whom has such strong track records as these two do. . . . [W]e look at evidence of past performance relative to indigent care . . . . [I]n a case like this . . . both of these applicants have such good records in th[e] area [of indigent care]. They are both in the top ten statewide. . . . [A] promise of this condition or that condition [does not] give us particular concern one way or the other. They are both very good in that area [of Medicaid and charity care] and very tough to distinguish between. (Tr. 735 6). iii . Architectural Design and Site 114. The architectural plans of both applicants meet all codes that apply to a new hospital in the state of Florida. 115. The ORHS design is tried and proven at ORHS' South Lake facility and will work on a 35 acre site. 116. The size of Florida Hospital's site, 15 acres much smaller than ORHS', led to criticism of the site from ORHS experts. But the site is large enough to incorporate growth in the future. It can accommodate 320 beds and ancillary services. The desi gn, moreover, takes these expansion capabilities into account. 117. Related to the size of the site, the site's conservation area, comprised of wetlands and a forested upland buffer that will remain undeveloped indefinitely also produced criticism that th e site is too cramped for a new hospital. But the conservation area, with its mature tree canopy, presents advantages. The hospital was designed to incorporate the view of the conservation area from hospital rooms because such a view is beneficial to the healing process. Furthermore, the conservation area can be used to satisfy water retention requirements. 118. Florida Hospital's site is DRI approved and part of a DRI master storm water plan that connects many ponds and wetlands. Surrounded by three r oads, it has excellent access from existing roadways. Vehicular circulation is split to provide different public, service and emergency entrances. iv. Innovation by Florida Hospital 119. Unlike traditional hospital care models where the patient is mov ed from room to room depending on type and intensity of care, all care and services are provided to the patient in one "universal" room under the "universal delivery of care model." The model was developed by Florida Hospital. 120. "The nursing leadershi p of the universal room design . . . was under the direction of Connie Hamilton." (Tr. 1080). Ms. Hamilton, accepted as an expert in nursing and nursing administration, explained at hearing that under the model, the room is designed to provide any type of care the patient might need. Whether the patient is admitted in acute care and then moves to intermediate care or med surg, all care is provided within one "universal" room. Not only does the patient stay in one place, but as Ms. Hamilton testified, " [t]he nurses stay in one place in providing that care to [the patient] and the families know where the patient is and the physician knows where the patient is [at all times]." (Tr. 933). 121. The universal care model streamlines the interactive processes of care of a patient. The care and attention of physicians, nursing staff and families devoted to moving the patient from room to room and keeping track of the patient as type and intensity of care changes is reduced to nearly zero if not eliminated enti rely. The time, energy and resources formerly devoted to all that is entailed with changes in the patient's room is then free to be re directed to care and attention paid to the patient. 122. The result is enhancement of Florida Hospital's ability to pro vide "whole person" care consistent with Adventist principles of health care. 123. The universal care delivery model is an innovative approach to the delivery of healthcare. Pioneered by Florida Hospital at Celebration Health, the universal care delivery model has been shown there to reduce medical error, reduce length of stay, reduce pharmacy costs, reduce nursing workload, reduce housekeeping work, and probably to reduce infection rates. 124. Following the universal care model employed at Celebration H ealth, Florida Hospital has designed its proposed Oviedo hospital facility with universal rooms. Consistent with the universal care delivery model, the rooms are designed to improve the healing experience during hospitalization and minimize the patient's feeling of being in a hospital setting. 125. Another benefit of the universal care model is high physician satisfaction due to continuity of nursing care and other factors. The physicians know where the patient is, that is, in the same location every day . Physicians, moreover, are not called at all hours of the day and night to effectuate patient transfers to other rooms. 126. Kathleen Mitchell has studied the universal care model and published and submitted articles on the model to nursing journals. S he has consulted with hospitals around the country interested in the model as well as the "health care arm of the Department of Defense, Air Force, Army, Navy, Veteran's Administration." (Tr. 1084). 127. Ms. Mitchell, accepted as an expert in nursing amp lified the testimony of Ms. Hamilton. With regard to the problem the universal care delivery model is designed to address, Ms. Mitchell testified: [T]ransferring patients for different levels of care . . . fractures continuum of care. It is . . . disrupt ive to everyone . . . involved . . . to the patient and their families . . ., to nursing, pharmacy, the physicians . . . . It creates a great deal of anxiety for patient and the families . . . even [those] who are getting better and moving to a lower acui ty of care. One of the most significant things about transferring patients for different levels of care is it involves a great deal of work. Not only bundling the patient up, but the documentation and all the communication that goes along with securing a new location for the patient and expediting a transfer. And moving patients around creates a risk of medical error. The length of stay in hospitals has gotten so short and everybody is focused on reducing the length of stay that in the traditional model of care, nurses are turning over more than half their patient assignment daily . . . . [T]here is the confusion and risk that goes along with that. (Tr. 1086 1088). 128. The benefits of the reduction and elimination of transfers produced by the unive rsal care model were listed by Ms. Mitchell: increase in the continuity of care, reduction in nurse workload, high physician satisfaction, reduction in emergency room waiting time, family satisfaction, connectivity between patient, family and staff. Other s were elaborated on by Ms. Mitchell. For example, reduction in pharmacy costs, probable reduction in infection and reduction in housekeeping costs: When you are meeting the needs of the patient in one location, you are not leaving medications behind or s ending them to the wrong place, and there is work that nurses and pharmacists do with calling each other with ['] where is it, I can't find it, I sent it[',] all that goes away. We are demonstrating a low incidence of nosocomial infections because we expo se our patients to one environment of organisms. This is a very difficult one to prove; even though we have a low incidence of nosocomial infections, we also have a fairly new facility [at Celebration], but it makes common sense that if you are reducing t he transfer of the patient and the exposure . . . to different environments, you are reducing their exposure to organisms and will have a lower . . . infection rate. . . . [W]e don't strip linens off the beds and clean the beds where the bed was just made three hours ago, with all the patient transfers that are involved. So there is a reduction in . . . housekeeping work and . . . linen expense. (Tr. 1089 1090). Like the housekeeping efficiencies, the nursing staff benefits from the efficiencies ass ociated with supplies. All of the supplies the nurse needs to care for the patient are close by, so the nurse saves time otherwise retrieving supplies from down the hall or in other areas of a hospital wing. 129. Another benefit of the design is "connect ivity to the outside world. The rooms have large windows . . . patients feel connected to the outside world . . . . " (Tr. 1091). This design feature will make use of the conservation area on the Florida Hospital site and the soothing vista it will prov ide to the patient, and assist in the healing process. v. Other Design Features 130. Design drawings are a living and continually evolving process. The planning process of Florida Hospital for the design of its new Oviedo hospital involved specialty dep artment experts and ancillary representatives discussing delivery of quality care for a patient throughout the system. The specialty experts and ancillary representative include radiology, emergency department, lab, pharmacy, and respiratory. The involve ment of these people assures optimal patient flow throughout the system. In Florida Hospital's design plans, the patient flow and interaction between departments are well designed and well laid out so as to minimize the opportunity for confusion. 131. In order to maximize efficiency, a larger number of beds in one nursing unit works better than smaller pockets. Florida Hospital's design plans have one 40 bed unit and one 38 bed unit. This design gives more flexibility and can expand or shrink more easil y as needed. You don't have to open up another unit and staff it so often, when adding only one or two patients. 132. Florida Hospital designed its facility specifically to take advantage of the economies of scale that being a satellite hospital in a lar ger system provide. For example, Florida Hospital's general storage, central lab, and other areas were purposely designed smaller than one would typically find because Florida Hospital operates a system wide central warehouse, thus greatly reducing the ne ed for central storage areas. Likewise, Florida Hospital operates a system wide central clinical lab, thus minimizing the space necessary within a hospital like Oviedo for lab space. ORHS did not design its facility to take advantage of the economies sca le of being part of a system. vi. Presence in Oviedo 133. Florida Hospital has had a presence in the Oviedo community since the 1970's, when it purchased land in the Red Bug corridor area. In the 1980's, Florida Hospital built a medical office facility in Oviedo and began to recruit and encourage physicians to practice in the area. When Florida Hospital acquired Winter Park Hospital, its commitment to the community of Oviedo increased by virtue of the fact that the Winter Park H ospital organization alr eady had property and outpatient facilities in Oviedo. 134. The result of Florida Hospital's early presence in Oviedo is that it has a high degree of physician support in place in the Oviedo community. Many of the primary care physicians in Oviedo refer their surgical cases to Florida Hospital. 135. Florida Hospital purchased Winter Park Hospital on or about July 1, 2000. With that purchase, Florida Hospital acquired the hospital site in Oviedo. With the purchase of Winter Park Hospital, Florida Hospi tal also "purchased" W inter Park's plan to build a hospital in Oviedo. The Florida Hospital site has long been recognized as the "Hospital Site" in Oviedo. 136. Immediately after purchasing Winter Park Hospital, Florida Hospital went to work on developi ng a plan to build a hospital in Oviedo. Florida Hospital began meeting with Oviedo city leaders in the fall of 2000 and early 2001; Florida Hospital also assembled a team of people from all areas of Florida Hospital including radiology, clinical services , marketing, finance, facilities, and engineering to work toward the development of a Certificate of Need application for a hospital on its site in Oviedo. 137. Florida Hospital's two existing medical office buildings in Oviedo contain over 60,000 square feet of medical office space, in which are housed physicians practicing in a wide range of areas including Family Practice, Internal Medicine, General Surgery, Orthopedic Surgery, Urology, Radiology, Gastroenterology, Ear, Nose and Throat, OB/GYN, and Den tal and Psychological Practitioners as well. These physicians are all currently on the staff of Florida Hospital. 138. Also included in these facilities are a Florida Hospital owned and operated radiology center, outpatient rehabilitation center, and ou tpatient lab. The radiology center offers general radiology services, including CT scanning and ultrasound. 139. The larger of the two medical facilities that Florida Hospital owns in Oviedo is located on the site where the new hospital will be located. This is the facility that includes the outpatient radiology, rehabilitation and laboratory services. An urgent care center is also located on the site. As a result, residents of Oviedo are used to coming to Florida Hospital's site for medical services and already recognize it as a medical facility site. 140. The fact that Florida Hospital has such a significant presence in the Oviedo Community, and that a large number of staff physicians are already in place in Oviedo, is a great benefit because of th e existing referral patterns in place between the physicians at the existing Florida Hospital facilities in Oviedo and specialists and sub specialists on Florida Hospital's staff. 141. In contrast, ORHS had an outpatient surgery center in Oviedo; howev er, it has been closed due to lack of physician support. Likewise, ORHS originally offered radiology diagnostics at its Oviedo office building, but has since sold that business to the radiologists. Finally, ORHS does not own the medical office building i n Oviedo anymore, having sold it two weeks before this final hearing commenced. 142. Dr. Joseph Portoghese, a Board Certified Surgeon, practicing in the Orlando area for over 13 years and president elect of the Florida Hospital medical staff, testified that his group, Surgical Associates, which is made up of six surgeons, derives approximately 20% of their patients from the Oviedo area. In his opinion, Florida Hospital knows the Oviedo population best as evidenced by its "major presence" in Oviedo with its two facilities. Dr. Portoghese also testified that his group knows most of the primary care physicians in the Oviedo area and that a good many of them send their surgical cases to his group. Dr. Portoghese is on the staff of Florida Hospital, but no t on the staff of Orlando Regional. 143. Dr. Schamberger, a family practitioner who has practiced in Oviedo for 16 years and whose patients come primarily from the Oviedo, Chuluota, Winter Springs and East Orlando area testified that Florida Hospital has the best infrastructure for the provision of medical care in the Oviedo area. "The physicians who provide a great bulk of the care for that Oviedo, Chuluota, Winter Springs area practice at Florida Hospital. Their referral patterns are to Florida Hospit al. Florida Hospital provides us with all the specialty and sub specialty care we need for our patients." Dr. Schamberger is on the staff of Florida Hospital, but he is not on the staff of Orlando Regional. 144. Dr. Schamberger further testified to the disruption in continuity of care that would occur for many Oviedo area patients whose physicians are on the staff at Florida Hospital if Orlando Regional were to be the only applicant approved to build a hospital in Oviedo: "[I]ts a negative impact for co ntinuity of care. If I have been attending a patient for many years, the first thing that happens to a patient when they get in the hospital is that they have a history and physical examination done to establish what their underlying medical conditions ar e. I know a lot more about that from my patients than someone who doesn't see them and doesn't know them." (Tr. 1318) 145. Dr. Cintron, a physician practicing in the area of Internal Medicine, whose main office is in Oviedo at the Florida Hospital site , testified that she has approximately 3,000 active files and 75% to 80% of those are in the Oviedo area. She has been practicing in Oviedo since 1994. Dr. Cintron testified that approximately 85% of her patients that get admitted to a hospital are admit ted to one of Florida Hospital's facilities. Also, when she makes a referral to a specialist or a sub specialist, approximately 85% of those patients go to a Florida Hospital facility. vii. Competition 146. "[T]he U.S. health care system is a competiti vely driven market . . . with some regulatory components and based on a managed care model." (Tr. 485). Rather than every insurance plan having a contract with every provider, the managed care model uses selective contracting. Competing health insurance plans select providers with which to contract for the provision of health care services to their subscribers. The ability of the competing insurance plans to engage in selective contracting requires providers such as the two hospitals in this case to com pete along a number of dimensions including price. When successful, this competitive price model holds down price and maintains quality. 147. The State of Florida has a "fairly well developed and active managed care sector." (Tr. 507). "[M]anaged care in and of itself [however] is not really able to save much money for consumers. . . . [T]he key ingredient in the ability of managed care plans to control health care cost increases is the competitiveness of the hospital market, the structure of the marke t in which they are negotiating on behalf of their health plan subscribers." (Tr. 500). 148. The parties define the "market" differently. Florida Hospital uses the Elzinga Hogarty ("EH") Test. The test, along with appropriate supplemental information, indicates that the market is all of Orange and Seminole Counties or the tri county area that also includes Osceola County. Whether a two county or tri county market, Florida Hospital refers to its market as the metropolitan Orlando market or the "overall Orlando market." 149. Orlando Regional identified a smaller area as the relevant market, one that is more local to Oviedo. The reason for this more local market was explained by Glenn Alan Melnick, Ph.D., and an expert in health care economics who testif ied for ORHS: [I]n order for [managed care plans] to attract subscribers, they have to have a health plan that's attractive to people. And one of the features that people look for in their health plans is the availability of local hospital services. . . . [I]n order to make their products marketable, they have to include reasonably accessible hospitals . . . [I]f there is limited local competition, then the opportunities for them to generate price competition by leveraging competitive conditions . . . ar e very limited and [the managed care] model will not be successful. (Tr. 489). Dr. Melnick used the five and eight zip code Oviedo Service Areas as defined by the applicants as the market. He calculated Herfandahl Hershman Index ("HHI") valuations for e ach zip code in the two Oviedo Service Areas. He also calculated HHI valuations for another seven zip codes in Orange County "to provide background to [his] understanding of the allocations in [the] area . . . . ." (Tr. 516). 150. Dr. Melnick's calcula tions showed that Florida Hospital has a market share between 60 and 69% for the five zip codes in Florida Hospital's Oviedo Service Area and it showed a market share of between 25% and 59% for the three zip codes in ORHS' Oviedo Service Area that were not included in Florida Hospital's Oviedo Service Area. In each of the seven zip codes in the area outside the Oviedo Service Area, Florida Hospital's market share was higher: in excess of 70%. 151. The analysis led Dr. Melnick to conclude that the market i s highly concentrated in favor of Florida Hospital. Using the zip codes in the Oviedo Service (and it appears from the record the seven not in either applicant's Oviedo Service Area that Dr. Melnick had analyzed for background purposes), Dr. Melnick concl uded that if the CON is awarded to Florida Hospital "[i]t would make an already concentrated market much more concentrated." (Tr. 524). Florida Hospital's relative market share would rise from 65.8% to 85.7%. Orlando Regional's would drop from 27.4% to 11.5%. The award of the CON to Florida Hospital would, moreover, "seal its already existing market power into the future." ( Id. ) Conversely, awarding the CON to ORHS led Dr. Melnick to conclude that the market as he defined it would be more competitive; Florida Hospital relative market share would drop to 51% and ORHS' would rise to 44%. 152. What Dr. Melnick's relative market shares would have been had he not used the seven zip codes he selected outside the Oviedo Service Areas of the two applicants d oes not appear to have been shown by ORHS. Including the seven zip codes outside the Oviedo Service Areas for determining the relative market share that led to Dr. Melnick's conclusions runs counter to his premise that the market should be a local one, th at is, an Oviedo market. It is not clear what relevance these seven zip codes had to his analysis since their inclusion runs counter to the underpinnings of his approach to the issue. 153. If the overall Orlando market used by Florida Hospital is consi dered the market, the conclusion is that, whether a CON for an Oviedo hospital is awarded to ORHS or Florida Hospital, the impact on relative market share is minimal. 154. As for pricing, there has been no significant pricing difference between Florida Ho spital and ORHS for Oviedo residents. Furthermore, both Florida Hospital and ORHS contract with managed care companies on a system wide basis; Florida Hospital, moreover, uses a single master charge structure for all of its Orlando area campuses. It is n ot likely that the presence of a hospital in Oviedo would enable either Florida Hospital or ORHS to control pricing. CONCLUSIONS OF LAW 155. The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of these proc eedings. Sections 120.569, 120.57(1), and 120.60(5), Florida Statutes. 156. The applicants have the burden of demonstrating that their applications should be granted. Boca Raton Artificial Kidney Center, Inc. v. Department of Health and Rehabilitative Services , 475 So. 2d 260 (Fla. 1st DCA 1985); Humana, Inc. v. Department of Health and Rehabilitative Services , 469 So. 2d 889 (Fla. 1st DCA 1985). 157. In evaluating CON applications, a balanced consideration of the applicable statutory and rule criter ia must be made. Balsam v. Department of Health and Rehabilitative Services , 486 So. 2d 1341 (Fla. 1st DCA 1986). "The appropriate weight to be given each criterion . . . regarding CON applications is not fixed, but rather must vary on a case by case bas is, depending on the facts in each case." Collier v. Department of Health and Rehabilitative Services , 462 So. 2d 83 (Fla. 1st DCA 1985). 158. Since there is no numeric need in this case, "not normal" circumstances that support the approval of the appli cation must be shown for either application to be granted. The mal distribution of beds in District 7 and S ub district 3 and rapid growth in population that lead the populace to expect a hospital in the Oviedo area, are not factors that in and of themselv es compel a finding of need in a case requiring "not normal" circumstances. They support, however, the access problem in this case: access to emergency services for Oviedo residents is not sufficient. As the Agency has been quick to recognize, access to emergency services will be improved for Oviedo residents if one of the two CON applications is approved. 159. The time it takes for Oviedo area residents to receive emergency services in a hospital emergency department, more than one hour in most cases, caused by geographic mal distribution of beds constitutes "not normal" circumstances that overcome a fixed need pool of zero and that support the approval of a CON for a new hospital in Oviedo. 160. It should be pointed out, however, that this case does n ot present as strong a case for "not normal" circumstances as Columbia Hospital Corporation of South Broward, d/b/a Westside Memorial Regional Medical Center vs. AHCA et al ., DOAH Case No. 01 2891, Recommended Order rendered July 3, 2002, Final Order rende red by AHCA on September 20, 2002. In that case a combination of factors (including rapid population growth and mal distribution of beds, as in this case) supported the "not normal" circumstance of overcrowding at one hospital that caused inappropriate ac cess to hospital services despite the existence of an excess of general acute care beds in the District. Among the numerous supporting factors in Westside was that the applicant would be assisted in continuing to fulfill its mission of indigent care. Thi s factor was given considerable weight in the disposition of that case. 161. Although the severity of the access problem in Westside and the number and force of the supporting factors that created "not normal" circumstances there are not present in this c ase, in the judgment of this administrative law judge, this case presents sufficient "not normal" circumstances to support approval of a new hospital in Oviedo. 162. If the Agency agrees that a new hospital is needed in Oviedo because of the existence of "not normal" circumstances, it should award the CON to Florida Hospital. 163. The Agency was not mistaken in its assertion that the two applicants are well matched. If a hospital is built and operated in Oviedo, AHCA could not go wrong in awarding the C ON to either of the two, both being providers of high quality hospital services. Most of the criteria at issue in this case, in fact, are counter balanced when the applications are reviewed side by side and all evidence of record is considered. Nonethele ss, Florida Hospital has more of a presence in the Oviedo area. Absent a showing of anti competitive diminution of quality and cost effectiveness caused by granting Florida Hospital's CON, its presence in the Oviedo area is an advantage. Orlando Regional , on the other hand, has the advantage of its status as a teaching hospital. This advantage, however, is overcome by the innovation and quality of care improvements that Florida Hospital's "universal care delivery model" will provide. 164. Florida Hospit al's application is superior to Orlando Regional's application. RECOMMENDATION Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency enter a final order on the basis of the facts found in this order concluding that "not normal" circumstances exist for the construction and operation of a new 60 bed hospital in Oviedo and that Florida Hospital's CON application be approved and ORHS' be denied. DONE AND ENTERED this 18th day of November, 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 Fa x Filing (850) 921 6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of November, 2002. COPIES FURNISHED: Lealand McCharen, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308 5403 Valda Clark Christian, General Counsel Agency for Health Care Administratio n Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308 5403 James M. Barclay, Esquire Ruden, McClosky, Smith, Schuster & Russell, P.A. 215 South Monroe Street, Suite 815 Tallahassee, Florida 32301 Steven R. Bechtel, Esquire Mateer & Harbert, P.A. Post Office Box 2854 225 East Robinson Street, Suite 600 Orlando, Florida 32802 Stephen K. Boone, Esquire Boone, Boone, Boone, Hines & Koda, P.A. 1001 Avenida del Circo Post Office Box 1596 Venice, Florida 34284 Michael P. Sasso , Esquire Agency for Health Care Administration 525 Mirror Lake Drive, North Suite 310G St. Petersburg, Florida 33701 NOTICE OF RIGHT TO SUBMIT EXCEPTIONS All parties have the right to submit written exceptions within 15 days from the date of this Reco mmended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.

Docket for Case No: 02-000449CON

Orders for Case No: 02-000449CON