STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
SELECT SPECIALTY HOSPITAL- SARASOTA, INC.,
Petitioner,
vs.
AGENCY FOR HEALTH CARE ADMINISTRATION,
Respondent.
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) Case No. 03-2484CON
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RECOMMENDED ORDER
Pursuant to notice, a formal hearing was held in this case on January 20, 2004, in Tallahassee, Florida, before
Kent Wetherell, II, the designated Administrative Law Judge of the Division of Administrative Hearings.
APPEARANCES
For Petitioner: Mark A. Emanuele, Esquire
Deborah S. Platz, Esquire Panza, Maurer & Maynard, P.A.
Bank of America Building, Third Floor 3600 North Federal Highway
Fort Lauderdale, Florida 33308-6225
For Respondent: Nelson E. Rodney, Esquire
Agency for Health Care Administration 8355 Northwest 53rd Street, First Floor Miami, Florida 33166
STATEMENT OF THE ISSUE
The issue is whether the Agency for Health Care Administration should approve Petitioner's application for a
Certificate of Need to establish a freestanding 44-bed long-term acute care hospital in Sarasota County.
PRELIMINARY STATEMENT
The Agency of Health Care Administration (Agency) published notice of its intent to deny Petitioner's application for a Certificate of Need (CON) to establish a long-term acute care hospital (LTACH) in Sarasota County in the June 27, 2003, edition of the Florida Administrative Weekly. Petitioner timely filed a petition challenging the Agency's decision, and on
July 9, 2003, the Agency referred the matter to the Division of Administrative Hearings (Division) for the assignment of an administrative law judge to conduct the hearing requested by Petitioner.
The final hearing was originally scheduled for October 28- 29, 2003, but it was subsequently rescheduled for January 20-21, 2004, upon Petitioner’s unopposed motion. On January 14, 2004, the Agency filed a motion for a continuance, which was denied through an Order dated January 15, 2004. The hearing commenced as scheduled on January 20, 2004, and it was completed on that date.
At the hearing, Petitioner presented the testimony of Gregory Sassman, who was accepted as an expert in LTACH development; Marsha Webb-Medlin, who was accepted as an expert in critical care nursing and LTACH nursing; and Sharon Gordon-
Girvin, who was accepted as an expert in health planning. Petitioner's Exhibits P1 through P4 and P6 were received into evidence. Exhibit P5 was offered but not received.
The Agency presented the testimony of Jeffrey Gregg, who was accepted as an expert in health planning and CON review. The Agency's Exhibit AHCA-1 was received into evidence.
The one-volume Transcript of the hearing was filed with the Division on February 2, 2004. The parties requested and were given 10 days from the date that the Transcript was filed to file their proposed recommended orders (PROs). The parties' PROs were timely filed on February 12, 2004, and were given due consideration by the undersigned in preparing this Recommended Order.
On March 4, 2004, Petitioner filed a motion to strike paragraphs 42 and 43 of the Agency’s PRO. The Agency filed a response to the motion on March 12, 2004. The motion is granted. See Endnote 1.
FINDINGS OF FACT
Based upon the testimony and evidence received at the hearing and the parties' stipulations, the following findings are made:
Parties
Petitioner is a wholly-owned subsidiary of Select Medical Corporation (Select), which owns and operates 79 LTACHs
in 24 states including a 40-bed LTACH in Miami-Dade County that was licensed in December 2002.
The Agency is the state agency responsible for administering the CON process and licensing LTACHs and other hospital facilities.
Petitioner’s Proposed LTACH
In the first batching cycle of 2003 for “other beds and programs,” Petitioner timely filed an application for a CON to establish a freestanding 44-bed LTACH in Sarasota County.
Sarasota County is located in District 8 for health planning purposes. The other counties in District 8 are DeSoto, Charlotte, Lee, Glades, Hendry, and Collier.
Petitioner's proposed LTACH will be located in the city of Sarasota, which is in northern Sarasota County, close to the boundary between Sarasota and Manatee Counties.
Petitioner projected in the application that its proposed LTACH would be operational by June 2005. The utilization projections in the application focused on the facility's third year of operation, which is the 12-month period ending June 2008.
The specific mix of services to be provided at Petitioner’s proposed LTACH has not yet been determined; however, it is expected that the services will include the same "core" services found at other Select LTACHs. Those services
are the treatment of pulmonary and ventilator patients, neuro- trauma and stroke patients, medically complex patients, and wound care.
Petitioner’s facility will include a four-bed “high observation” unit in which the most unstable and highest acuity patients will be located. The nurse-to-patient ratio in that unit will be two-to-one, and the level of monitoring will be similar to that of an intensive care unit (ICU) in a general acute care hospital.
Application Review and Denial
Petitioner's application was designated CON 9657, and was reviewed along with the CON application filed by Petitioner for a 60-bed LTACH in Lee County. The Lee County application, CON 9656, is not at issue in this proceeding.
On June 11, 2003, the Agency issued its State Agency Action Report (SAAR), which recommended denial of both CON applications filed by Petitioner. The primary basis for denial of the Sarasota County application described in the SAAR was Petitioner's failure to demonstrate a need for its proposed 44- bed LTACH.
The parties stipulated that Petitioner's CON application satisfied all of the applicable statutory and rule criteria except those related to "need," and that the only issue
to be determined in this proceeding is whether Petitioner established a need for its proposed facility.1
LTACHs, Generally
LTACHs are health care facilities that provide extended medical and rehabilitative care to patients with multiple, chronic, and/or clinically complex acute medical conditions. To qualify as an LTACH, the facility must serve a patient population whose average length of stay exceeds 25 days.
LTACH services are most highly utilized by persons in the 65 and older (“65+”) age cohort because those persons are more likely to have complex and/or co-morbid medical conditions that require long-term acute care.
The typical LTACH patient is still in need of considerable acute care, but a traditional acute care hospital is no longer the most appropriate or lowest cost setting for that care.
Most LTACH admissions are patients transferred from a traditional acute care hospital. It is not uncommon for an LTACH patient to be transferred directly from the hospital's critical care unit or ICU after the patient has been diagnosed and stabilized.
Traditional post-acute care settings -- nursing homes, skilled nursing facilities (SNFs), skilled nursing units (SNUs), comprehensive medical rehabilitation (CMR) hospitals, and home
health care -- are not appropriate for the typical LTACH patient because the patient's acuity level and medical/therapeutic needs are higher than those generally treated in those settings.
Indeed, unlike traditional post-acute care settings which typically do not admit patients who still require acute care, the core patient-group served by LTACHs are patients who require considerable acute care through daily physician visits and intensive nursing care which can average as much as nine hours per day.
LTACH patients are often discharged to a traditional post-acute care setting such as a nursing home, SNF, SNU, CMR, or home health care. Thus, those facilities cannot be considered as "substitutes" for LTACHs, even though there is overlap between the diagnoses and services provided to lower acuity LTACH patients and higher acuity patients in those traditional post-acute care settings.
The federal government has recently developed a Medicare payment system specifically for LTACHs. That system recognizes the LTACH patient population as being distinct from the patient populations treated by traditional acute care hospitals and post-acute care providers such as nursing homes, SNFs, SNUs, and CMRs, even though there may be some overlap between the patient populations served by LTACHs and those other types of facilities.
LTACH services are reimbursed by Medicare at a predetermined rate that is weighted based upon the patient's diagnosis and acuity, regardless of the cost of care. This reimbursement system is similar to, but uses Diagnosis Related Groups (DRGs) that are different than the DRGs used in the traditional acute care hospital setting.
LTACHs fit into the continuum of care between traditional acute care hospitals and traditional post-acute care facilities. LTACHs are designed to serve patients that would otherwise have to be maintained in a traditional acute care hospital, where the standard reimbursement rates may be insufficient to cover the costs associated with a lengthy stay, or be moved to an alternative setting such as a nursing home, SNF, SNU, or CMR, where the patient may not receive the level of curative care needed. The recently-adopted, LTACH-specific system for Medicare reimbursements is expected to enhance the status of LTACHs as part of the continuum of care.
LTACHs in Florida
Currently, there are only nine LTACHs operating in Florida with a total of 683 licensed beds. The facilities are concentrated in six counties, Dade, Broward, Hillsborough, Pinellas, Duval, and Clay.
There are an additional 182 beds which have been approved by the Agency but which are not yet operational. Those
beds include a new 40-bed facility in Sarasota County (discussed below) and an additional 22 beds at the existing 60-bed Pinellas County facility, which is in the health planning district (District 5) immediately to the north of District 8.
The Pinellas County facility is located in St.
Petersburg, which is approximately 25 to 30 miles north of Petitioner’s proposed facility.
The Florida LTACH facilities are well utilized. The occupancy rates at the facilities range from 54.6 percent to
99.2 percent. Four of the nine facilities have occupancy rates higher than 80 percent, and the average occupancy rate for all of the facilities is 76.6 percent.
The average length of stay for all patients discharged from Florida LTACHs between July 2001 and June 2002 was 42.2 days. The 65+ age cohort accounted for approximately 77 percent of the LTACH discharges in Florida for that period.
Relevant Demographics of Sarasota County
The 2003 population of Sarasota County was 343,966, which was 25.8 percent of the total District 8 population.
In 2008, which is the third year of operation for Petitioner's proposed LTACH, the population of Sarasota County is projected to increase by 6.2 percent to 365,439. Over that same period, the population of District 8 as a whole is projected to increase by 10.4 percent.
The 65+ age cohort, which is the group most likely to utilize LTACH services and the group that utilizes LTACH services at the highest rate, represents 31.2 percent of Sarasota County's 2003 population and 31.5 percent of the county's projected 2008 population. By contrast, in 2003 the District 8 average for the 65+ age cohort was 26.9 percent and the statewide average was 17.5 percent.
Sarasota County has a higher percentage of persons in the 65+ age cohort than do any of the counties that currently have an LTACH facility. Pinellas County, with 22 percent of its population in the 65+ age cohort (and 82 licensed and approved LTACH beds), has the highest rate of the counties with LTACHs.
There are four acute care hospitals in Sarasota County, two of which -- Sarasota Memorial Hospital and Doctors Hospital of Sarasota -- are located in the city of Sarasota in close proximity to the proposed location of Petitioner's LTACH. The other two hospitals in Sarasota County -- Bon Secours Venice Hospital and Englewood Community Hospital -- are located in the southern part of the county and are 16 miles and 28 miles, respectively, from the proposed location of Petitioner's LTACH.
In the CON application, Petitioner stated that the four hospitals in Sarasota County would "provide a solid base of patients" for the proposed LTACH. The application further stated that patients would also likely come from three hospitals
in Charlotte County -- Charlotte Regional Medical Center, Fawcett Memorial Hospital, and Bon Secours St. Joseph Hospital -
- and one hospital in DeSoto County -- Desoto Memorial Hospital
-- even though the Charlotte County hospitals are almost 40 miles from the proposed site of Petitioner's LTACH and the DeSoto County hospital is more than 40 miles from the proposed site.
The record does not reflect how many total acute care beds are in these hospitals, nor does it reflect whether any of the hospitals are trauma centers or whether they have any specialty programs that might impact (either positively or negatively) the potential LTACH patient pool for Petitioner's proposed facility.
Approved LTACH in District 8
There are no LTACHs currently operating in Sarasota County or District 8. HealthSouth received a CON in October 2002 to establish a freestanding 40-bed LTACH in Sarasota County, but that facility has not yet opened.
HealthSouth is behind schedule in the development of its LTACH. If HealthSouth does not "break ground" on its LTACH by April 2004, its CON will expire; however, as of the date of the hearing, HealthSouth's CON was still valid.
The Agency expressed a concern in the SAAR that "the ultimate development of the HealthSouth LTCH [sic] in District 8
is uncertain" based upon legal and financial problems at HealthSouth. However, as of the date of the hearing, the Agency had not received any formal indication from HealthSouth that it is not going forward with the development of its Sarasota County LTACH.
HealthSouth did not seek to intervene in this proceeding.
Numeric Need for Petitioner’s Proposed LTACH
Petitioner has the burden to demonstrate "need" for its proposed LTACH.
The Agency does not publish a fixed-need pool for LTACHs, nor is there an Agency rule which provides a specific formula or methodology for determining numeric need for an LTACH.2
HealthSouth's 40 approved, but not yet operational LTACH beds must be factored into the analysis of need for any additional LTACH beds in District 8. Accordingly, it is necessary for Petitioner to demonstrate a numeric need for at least 84 LTACH beds for its application to be granted.
The application states that “the primary service area [for Petitioner’s proposed LTACH] is Sarasota County and the broader service area includes portions of Charlotte County and DeSoto County . . . .” This service area encompasses an approximately 40-mile radius around the site of the proposed
facility, and includes the eight acute care hospitals referenced above.
In contrast to the application’s description of the service area, Petitioner’s expert witness in the area of LTACH development, Greg Sasserman, testified that the “actual” service area for Petitioner’s proposed LTACH would be a 10 to 20-mile radius around the facility. That distance is a more reasonable estimate of the distance that patients would likely travel for LTACH services.
In its application, Petitioner attempted to demonstrate numerical need for the proposed facility under two distinct methodologies, one based upon "use rate" and another based upon "length of stay."
“Use Rate” Methodology
Petitioner’s "use rate" methodology projected the number of LTACH patient days that will likely be generated by Sarasota County residents based upon the utilization rates of LTACH services by the residents of the counties in which LTACH facilities are currently located.
The utilization rates for the existing facilities were calculated by age cohort and were shown as a number of patient days per 1,000 persons in each age cohort. Those rates were then applied to the projected population of Sarasota County in 2008 in each age cohort in order to calculate a projected number
of patient days that will be generated by Sarasota County residents in that year. Those patient days were then "grossed up” by an occupancy standard of 80 percent and then "grossed up" by an additional 44.5 percent to account for patients coming to the facility from outside of Sarasota County.
The utilization rate calculated under this methodology is not a true “statewide” rate. The existing LTACHs are concentrated in only six of the states 67 counties, and more significantly, Petitioner excluded the facilities in Miami-Dade and Pinellas Counties from its calculations because their utilization rates were, according to Petitioner, “misleadingly conservative.”
The 44.5 percent out-of-county rate was purportedly derived from the experience of the other LTACHs operating in Florida. However, the record does not include the raw data upon which that rate was calculated, and it does not reflect whether the rate includes the two facilities excluded from the calculation of the “statewide” utilization rate or the distances from which out-of-county patients are drawn to the facilities. Nor can the 44.5 percent rate be squared with the calculations of potential LTACH discharges from the eight area hospitals as part of the “length of stay” methodology (discussed below), which reflect only 24.7 to 26.8 percent of the patients coming from hospitals outside of Sarasota County.3
Petitioner's calculations produced an estimate of 29,654 LTACH patient days generated by Sarasota County residents in 2008, which translated into an average daily census (ADC) of
81 patients and a need for 101 LTACH beds; and an estimate of 53,431 LTACH patient days, which translated into an ADC of 146 patients and a need for 182 LTACH beds when the out-of-county residents were taken into consideration.
Use rate methodologies are commonly used by health planners to project need for acute care beds and other types of services. However, in the LTACH context, a use rate methodology is not necessarily a reliable indicator of bed need because the existing LTACHs are not evenly distributed statewide and the utilization rates for the existing LTACHs vary significantly.
The unreliability of Petitioner’s “use rate” analysis is further demonstrated by the fact that Petitioner excluded two of the existing facilities in the calculation of its “statewide” utilization rate. If the utilization rates of those facilities were included, the number of patient days and bed need projected by Petitioner would have been lower.
“Length of Stay” Methodology
Petitioner’s "length of stay" methodology projected bed need based upon an analysis of the discharges from the eight District 8 hospitals identified above. More specifically, the analysis focused on the discharges that Petitioner considered to
be “appropriate” LTACH admissions based upon the nature of the patient’s diagnosis and the length of the patient’s stay at the hospital.
Open heart surgery DRGs were included in the analysis, and DRGs “for people age 0 to 17, obstetric and gynecological care, newborns, alcohol and drug abuse, rehabilitation and psychoses” were excluded from the analysis. The application also makes various references to LTACH-appropriate diagnoses by Major Diagnostic Category (MDC) and "program area"; however, the specific discharges identified by Petitioner as being potential LTACH patients from the eight hospitals are not broken down by DRG in the application.
Petitioner used two approaches to determine whether the patient is an “appropriate” LTACH patient from a length of stay perspective. Both approaches estimate the number of days that patients who otherwise would have remained in and been discharged from an acute care hospital would have likely spent at an LTACH, if one was available
The first approach, which was characterized in the application and at hearing as the more “conservative” measure, only considered patients whose length of stay at the acute care hospital was at least 15 days longer than the geometric mean length of stay (GMLOS) for the patient's DRG (hereafter “the GMLOS plus 15 methodology.)” The estimated number of patient
days produced by the GMLOS plus 15 methodology is the sum of the patients' actual lengths of stay less the GMLOS, which represents the number of days that the patients would likely stay in the LTACH facility.
The second approach, which was characterized in the application as the more “aggressive” measure, considered all patients whose length of stay was more than 15 days (hereafter “the LOS plus 15 methodology”). The estimated number of patient days produced by the LOS plus 15 methodology is the sum of the patients' actual lengths of stay less 15 days, which again reflects the number of days that the patients would likely stay in an LTACH facility.
The GMLOS is a statistically-adjusted value for all cases within a DRG that takes into account “outlier” cases,4 transfer cases, and other cases that could skew an arithmetic average length of stay. The GMLOS is calculated by the federal government.
The only difference in the two approaches is that the GMLOS plus 15 methodology includes only those patients with considerably longer lengths of stay than expected for their diagnoses (i.e., 15 days in excess of the GMLOS for the applicable DRG), whereas the LOS plus 15 methodology includes all patients with long lengths of stay (i.e., in excess of 15 days) irrespective of their diagnoses.
Patients who, because of co-morbidities, otherwise complex medical conditions, or frailties due to age, have lengths of stay in excess of the GMLOS plus 15 days are generally appropriate LTACH patients, particularly if the patient would otherwise remain in the ICU of the acute care hospital. In such circumstances, an LTACH would likely be the more appropriate setting for the patient from both a financial and patient-care standpoint.
The GMLOS plus 15 methodology resulted in an estimated 13,263 LTACH patient days, which translates into an ADC of 36.3 patients and a need of 45 LTACH beds based upon an 80 percent occupancy standard.
The LOS plus 15 methodology resulted in an estimated 21,753 LTACH patient days, which translates into an ADC of 59.6 patients and a need for 74 LTACH beds based upon an 80 percent occupancy standard.
The patient days computed through the GMLOS plus 15 methodology and the LOS plus 15 methodology were characterized in the application and at the hearing as the lower and upper ends, respectively, of the projected LTACH patient days in the area to be served by Petitioner’s proposed LTACH. The mid-point of that range, 17,508 patient days, was then broken out by age cohort and was used to compute “hospital specific” utilization rates by age cohort.
Those “hospital-specific” utilization rates were then multiplied by the projected future population of the respective age cohorts in the area to be served by Petitioner’s LTACH – Sarasota County and one-half of the population of Charlotte County – to project the total number of LTACH beds needed in 2008. No adjustment was made for out-of-county admissions because the hospitals included in both of the length-of-stay methodologies already included projected admissions from out-of- county hospitals.
The end-result of the mid-point analysis and, hence, the end-result of Petitioner’s “length of stay” methodology was a projected need for 67 LTACH beds in 2008.
Under the circumstances of this case, the GMLOS plus
15 methodology provides a more reasonable projection of LTACH patient days than does the LOS plus 15 methodology or the mid- point analysis. Specifically, the LOS plus 15 methodology is based upon the premise that physicians would be more likely to transfer their patients who would otherwise require long hospital lengths of stays to an LTACH “as soon as possible in their treatment regiment when LTAC [sic] beds are available,” but the record is devoid of competent evidence, such as letters or testimony from local physicians, that would provide support for that premise.
Both of the “length of stay” methodologies appear to assume a 100 percent capture rate of the LTACH-appropriate patients by Petitioner’s proposed facility. The record is devoid of competent evidence demonstrating the reasonableness of that assumption, either with or without the HealthSouth facility in place. For example, the record does not include any tentative transfer agreements or other documentation that demonstrates a willingness of the local hospitals to transfer patients to Petitioner’s LTACH if it is constructed.5
Furthermore, based upon Mr. Sasserman’s definition of the service area of Petitioner’s proposed LTACH, it was not reasonable to include the patient days generated by discharges from five of the eight hospitals used by Petitioner in its “length of stay” methodologies, since those hospitals are outside of the 10 to 20-mile radius identified by Mr. Sasserman.
Finally, there is no basis in the record to conclude that any overstatement of the bed need resulting from the inclusion of hospitals outside of the service area as defined by Mr. Sasserman would be offset by referrals from Manatee Memorial Hospital, which is located in District 5 approximately 10 miles north of the proposed site for Petitioner’s LTACH. The testimony on this point by Mr. Sasserman and Petitioner's Health Planner is pure speculation.
Ultimate Findings Regarding Numeric “Need”
The bed need projected by Petitioner through its “use rate” methodology is not reliable because of the significant shortcomings in that methodology described above.
Of the two measures used by Petitioner as part of its “length of stay” methodology, the GMLOS plus 15 methodology is more reasonable than the LOS plus 15 methodology; however, neither methodology resulted in a projected bed need that is sufficient to account for HealthSouth’s 40 approved beds and Petitioner’s 44 proposed beds.
CONCLUSIONS OF LAW
The Division has jurisdiction over the parties to and the subject matter of this proceeding Pursuant to Sections 120.569, 120.57(1), and 408.039(5), Florida Statutes (2003).
Petitioner has the burden to prove by a preponderance of the evidence that its CON application should be approved. See Boca Raton Artificial Kidney Center, Inc. v. Dept. of Health & Rehabilitative Servs., 475 So. 2d 260 (Fla. 1st DCA 1985);
§ 120.57(1)(j), Fla. Stat. (2003).
In light of the parties' stipulation that Petitioner's application satisfied the applicable statutory and rule criteria (subject to proof of need), it is not necessary to conduct a balancing of all of the statutory and rule criteria. Stated another way, based upon the parties’ stipulation, if Petitioner
were able to establish need for its proposed facility then the balancing of the other statutory and rule criteria would tilt in favor of granting Petitioner’s application, but if Petitioner were unable to establish need then that balancing would tilt in favor of denying Petitioner’s application.
Because the Agency does not have either a fixed-need pool for LTACHs or a rule providing a specific formula for determining need for LTACHs, the determination of need is governed by Florida Administrative Code Rule 59C-1.008(2)(e). That rule provides:
(e) . . . . If an agency need methodology does not exist for the proposed project:
The agency will provide to the applicant, if one exists, any policy upon which to determine need for the proposed beds or service. The applicant is not precluded from using other methodologies to compare and contrast with the agency policy.
If no agency policy exists, the applicant will be responsible for demonstrating need through a needs assessment methodology which must include, at a minimum, consideration of the following topics, except when they are inconsistent with the applicable statutory and rule criteria:
Population demographics and dynamics;
Availability, utilization and quality of like services in the district, subdistrict or both;
Medical treatment trends; and
Market conditions.
Florida Administrative Code Rule 59C-1.008(2)(e)1. is not implicated in this case because the Agency did not provide Petitioner with a policy to be used in its analysis of “need,” and as demonstrated in the SAAR and the hearing testimony of Jeffrey Gregg, the administrator of the Agency's CON program, the Agency does not have a specific or clearly articulated policy on the issue. Accordingly, Petitioner was required to establish need based upon the criteria in Florida Administrative Code Rule 59C-1.008(2)(e)2.
“Use rate” methodologies have been used (and accepted) in prior cases to demonstrate need for new LTACH beds. See, e.g., Kindred Hospitals East, LLC d/b/a Kindred Hospital South
Florida v. Mercy Medical Development, Inc. and Agency for Health Care Admin., Case No. 01-2712CON, at 19-21, 52 (DOAH July 23, 2002; AHCA November 1, 2002); Vencor Hospitals South v. Agency for Health Care Admin., DOAH Case No. 97-1181CON, 1998 WL 870012, at *3 (DOAH March 3, 1998). However, Petitioner’s exclusion of the lower utilization rates at two of the existing LTACHs in calculating its “statewide” utilization rate distinguishes its “use rate” methodology from the methodologies used in those prior cases.
Sarasota County includes a large elderly population, which is the group that most heavily utilizes LTACH services. The percentage of persons in the 65+ age cohort in Sarasota County is higher than the District 8 percentage in that age cohort, and it is also higher than the percentage of persons in that age cohort in the counties that currently have LTACHs. The favorable demographics of the county provide support for Petitioner’s application. See Florida Administrative Code Rule 59C-1.008(2)(e)2.a.
There are currently no LTACHs operating in Sarasota County or District 8; however, HealthSouth’s approved 40-bed LTACH must be taken into account when evaluating the availability of “like services” (Florida Administrative Code Rule 59C-1.008(2)(e)2.b.) and "market conditions" (Florida Administrative Code Rule 59C-1.008(2)(e)2.d.). Because Petitioner’s projections of numerical need based upon its “use rate” methodology were not reliable, and because the projections based upon its “length of stay” methodology failed to demonstrate a need for at least 84 LTACH beds, Petitioner failed to demonstrate that “like services” were not going to be available in the district and/or that the market in the area requires or could support the number of additional LTACH beds proposed by Petitioner in its CON application.6
Although the evidence indicates that there is a general trend towards the increased utilization of LTACHs due to the recent adoption of LTACH-specific reimbursement rates by the federal government, Petitioner offered no credible evidence to demonstrate the extent to which that trend is impacting the delivery of health care services in Sarasota County. See Fla. Admin. Code Rule 59C-1.008(2)(e)2.c.
In sum and on balance, Petitioner failed to demonstrate a need for its proposed facility based upon the criteria in Fla. Admin. Code Rule 59C-1.008(2)(e)2., and for the same reasons, Petitioner failed to satisfy the statutory criteria relating to need. See § 408.035(2),and (4), Fla Stat. (2003).
Based upon the foregoing findings of fact and conclusions of law, it is
RECOMMENDED that the Agency for Health Care Administration issue a final order denying Petitioner’s application for a Certificate of Need to establish a 44-bed LTACH in Sarasota County.
DONE AND ENTERED this 15th day of March, 2004, in Tallahassee, Leon County, Florida.
S
T. KENT WETHERELL, II 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 15th day of March, 2004.
ENDNOTES
1/ In the Joint Pre-hearing Stipulation, filed December 24, 2003, the parties stipulated that Petitioner complied with the letter of intent and application submission requirements in Sections 408.037 and 408.039, Florida Statutes (2003), and Florida Administrative Code Rule 59C-1.008(1), (4), and (5).
The parties further stipulated that the review criteria in Section 408.035(1), (8), (10), and (12), Florida Statutes (2003), were either not implicated or were satisfied by Petitioner. At the hearing, the parties further stipulated that “need” was the only issue in this proceeding as reflected in the following colloquy:
MR. EMANUELE [counsel for Petitioner]: .
. . . What the parties have stipulated and agreed is the issue in this case is need, that we can put in our CON and admit that into evidence with the need for testimony, except as to proving up and establishing need and how that may impact upon the program.
THE COURT: Mr. Rodney [counsel for the Agency], is that a fair characterization of where y’all are?
MR. RODNEY: Yes, your honor. I would expect that each of the witnesses would address that question, primarily stick to that question. We don’t need to hear a lot of testimony about extraneous matters . . .
.
Transcript, at 6-7. See also id. at 28 (Mr. Rodney’s objection to the relevance of testimony on matters other than “need”), 48-
50 (similar comments by Mr. Rodney), and 173 (similar comments by Mr. Rodney).
2/ At some point in the past, the Agency published a proposed rule which included a “regression analysis” methodology which projected need for LTACH beds in relation to the CMR and skilled nursing patient days in the district. That proposed rule was withdrawn by the Agency and it was not introduced into evidence, nor was its operation fully explained at the hearing. For those reasons, no weight has been given to the projection of need by Petitioner’s health planner, based upon her “regression analysis.”
3/ One of the “length of stay” methodologies projected 541 discharges of potential LTACH patients from the eight area hospitals, of which 397 (or 75.3 percent) came from the four hospitals in Sarasota County; the other “length of stay” methodology projected 1,450 discharges of potential LTACH patients, of which 1,092 (or 73.2 percent) came from the four hospitals in Sarasota County.
4/ “Outliers” are patients who have stayed in the hospital proportionally longer than the projected length of stay for the DRG that relates to the patient’s diagnosis.
5/ The application states at page 39 that “letters from hospitals anticipating establishing referral relationships with Select Specialty Hospital – Sarasota are included in the Supporting Materials.” No such letters are included in the Supporting Materials, which is Volume II of the application, or elsewhere in the record of this proceeding.
6/ This result would not change even if, as Petitioner argues in its PRO, it was appropriate to use 80 percent of the 84 beds in determining whether there is bed need when the facilities were fully occupied from an efficiency standpoint. In that circumstance, the comparison would be between 67.2 beds (80 percent of 84 beds) and the non-“grossed up” ADC figures of 36.3 patients (GMLOS plus 15 methodology) and 59.6 patients (LOS plus
15 methodology); and the ADC figures projected under the “use rate” methodology would be no more reliable than “grossed up” figures.
COPIES FURNISHED:
Mark A. Emanuele, Esquire Panza, Maurer, & Maynard, P.A.
Bank of America Building, Third Floor 3600 North Federal Highway
Fort Lauderdale, Florida 33308
Nelson E. Rodney, Esquire
Agency for Health Care Administration Spokane Building, Suite 103
8350 Northwest 52nd Terrace Miami, Florida 33166
Leland McCharen, Agency Clerk Licensure and Certification
Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3
Tallahassee, Florida 32308
Valda Clark Christian, General Counsel Agency for Health Care Administration Fort Knox Building, Suite 3431
2727 Mahan Drive
Tallahassee, Florida 32308
Rhonda M. Medows, M.D., Secretary Agency for Health Care Administration Fort Knox Building, Suite 3116
2727 Mahan Drive
Tallahassee, Florida 32308
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 |
|---|---|---|
| May 14, 2004 | Agency Final Order | |
| Mar. 15, 2004 | Recommended Order | Respondent`s Certificate of Need (CON) application for a 44-bed, long-term acute care hospital should be denied because the applicant failed to demonstrate the need for the facility after taking into account the previously approved CON in the same county. |
