STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
RECOMMENDED ORDER
These consolidated cases were heard by David M. Maloney, Administrative Law Judge at the Division of Administrative Hearings, from March 31, 2008 through April 4, 2008, April 8
through 11, 14 through 18, and 21, 2008, in Tallahassee, Florida.
APPEARANCES
For Petitioner BayCare of Southeast Pasco, Inc.:
Robert A. Weiss, Esquire
Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200
118 North Gadsden Street Tallahassee, Florida 32301
Jonathan A. Rue, Esquire
Parker, Hudson, Rainer & Dobbs, LLP 1500 Marquis Two Tower
285 Peachtree Center Avenue, Northeast Atlanta, Georgia 30303
For Petitioner New Port Richey Hospital, Inc., d/b/a Community Hospital of New Port Richey:
R. David Prescott, Esquire Rutledge, Ecenia, & Purnell, P.A.
215 South Monroe Street, Suite 420 Post Office Box 551
Tallahassee, Florida 32302-0551
For Petitioner Pasco-Pinellas Hillsborough Community Health System, Inc.:
Stephen K. Boone, Esquire
Boone, Boone, Boone, Hines & Koda, P.A. 1001 Avenida del Circo
Post Office Box 1596 Venice, Florida 34284
For Respondent Agency for Health Care Administration:
Karin M. Byrne, Esquire
Agency for Health Care Administration 2727 Mahan Drive
Building Three, Suite 3431 Tallahassee, Florida 32308-5403
INTRODUCTION
Pasco-Pinellas Hillsborough Community Health System, Inc., ("Pasco-Pinellas") and BayCare of Southeast Pasco, Inc., (BayCare) each filed a Certificate of Need (CON) application in the 2007 batching cycle to establish a new hospital in District 5, Acute Care Subdistrict 5-2 (eastern Pasco County.) Pasco- Pinellas' application is identified by the Agency for Health Care Administration ("AHCA" or "the Agency") as CON 9975; BayCare's as CON 9977. The two are different in a number of significant ways but each proposes to establish an acute care hospital in the Wesley Chapel area of Subdistrict 5-2.
STATEMENT OF THE ISSUES
Whether there is need for a new hospital in AHCA Acute Care Subdistrict 5-2 (eastern Pasco County)? If so, whether AHCA should approve either CON 9975 or CON 9977?
PRELIMINARY STATEMENT
On July 26, 2007, the Agency filed three notices at the Division of Administrative Hearings (DOAH). Each advised the Division of a separate request for a formal administrative hearing that related to AHCA's decision to approve Pasco-
Pinellas' application for a new hospital in Subdistrict 5-2 and deny BayCare's application for a new hospital in the subdistrict.
The first of the three requests was filed by BayCare. As relief, it requests that Bay Care's application be approved and that Pasco-Pinellas' be denied. The petition was assigned DOAH Case No. 07-3482CON.
The second was filed by New Port Richey Hospital, Inc., d/b/a Community Hospital of New Port Richey ("Community Hospital" or "Community"). Community Hospital is located in New Port Richey in western Pasco County. Community Hospital is also the holder of CON 9539; it approves the establishment of a new hospital in Subdistrict 5-2 to replace Community's existing facility in New Port Richey. Community Hospital requests that Pasco-Pinellas' application be denied.
The third was filed by Pasco-Pinellas. It "demands a full comparative review hearing and challenges [any] award of a CON to the co-batched applicant [Bay Care] and specifically alleges that [Pasco-Pinellas'] application is superior to the application filed by the other co-batched applicant and best satisfies the statutory and rule review criteria" for the approval of a CON application for a new hospital. In addition to the demand, Pasco-Pinellas requested that all challenges to approval of its application be consolidated and ultimately that
its application be approved and Bay Care's denied. Pasco- Pinellas' request was assigned DOAH Case No. 07-3483.
An administrative law judge was designated to conduct the proceedings. The three cases were consolidated by order of the ALJ and final hearing was set to commence March 31, 2008, for three weeks. The consolidated cases were transferred to the undersigned prior to the commencement of the final hearing.
Final hearing commenced as scheduled and was concluded on April 21, 2008.
At hearing the parties' positions remained the same with the exception of a refinement by Community. In light of Pasco- Pinellas' request for comparative review, Community Hospital continued to adhere to its position that there is no need for a new hospital in Subdistrict 5-2. If a need for a new hospital were established, however, Community advanced the view
"that . . . on a comparative basis . . . the CON proposal of Pasco-Pinellas is more reasonable and, therefore, . . . a superior application to that of BayCare." Tr. 26.
At final hearing, Pasco-Pinellas presented its case first. It presented 16 witnesses, all of whom were accepted as experts in various fields as follows: Norm Stein, an expert in healthcare administration; Don Welch, an expert in hospital operations; Brigitte Shaw, an expert in hospital administration; Ruth Hemphill, an expert in nursing, nursing administration,
including nursing and respiratory therapy staffing; Bernette L. Johnson, M.D., an expert in graduate medical education (GME); Mike Schultz, an expert in hospital administration;
Victoria Rich, an expert in nursing education and GME; Oliver Rogers, an expert in staffing of hospital emergency departments; Tom Testerman, an expert in healthcare facility planning; Paul Macheske, an expert in healthcare design and
construction costs; Lara Daly, an expert in civil engineering and real property site development; Armand Balsano, an expert in health planning and healthcare finance; Linda Pearson, an expert in land planning; Richard Diaz, an expert in transportation planning; Patricia Greenberg, an expert in health planning and healthcare finance; and, Charles Lambert, M.D., an expert in cardiology and GME. Pasco-Pinellas offered 58 exhibits into evidence. The exhibits were marked for identification as Pasco- Pinellas Exhibits 1-58. All were admitted into evidence.
BayCare proceeded with its case-in-chief next. It presented the testimony of 13 witnesses accepted as experts in various fields as follows: Stephen R. Mason, an expert in healthcare administration; Steve Klasko, M.D., Dean of the University of South Florida (USF) College of Medicine and an expert in medical education; Rick Knapp, an expert in healthcare finance; Roland Dove, an expert in civil engineering; Samuel H. Finkin, an expert in medical equipment planning and costs;
Debra Woodring, an expert in healthcare architecture, facility planning and design and project costs; Patricia Ann Teeuwen, an expert in health care human resources; Bryan Bognar, M.D., an expert in undergraduate medical education and internal medicine; Robert Belsole, M.D., an expert in orthopedics; Kimberly Guy, an expert in hospital operations; Peter Jeffrey Fabri, M.D., an expert in GME; Patricia Donnelly, an expert in acute care hospital nursing and nursing administration; and
Mark Richardson, an expert in healthcare planning.
BayCare also presented the deposition testimony of Tommy Inzina (BayCare 36); Richard Green (BayCare 26); and
Rony Francois, M.D. (BayCare 37), as part of its case-in-chief, and, as part of rebuttal, the deposition testimony of Rick Knapp (BayCare 40). BayCare offered 38 exhibits. Marked for identification as BayCare Exhibits 1-27 and 30-40, they were admitted in evidence. BayCare marked two exhibits for identification as BayCare Exhibits 28 and 29 but the two were not offered.
The Agency presented the testimony of two witnesses: Jeffrey Gregg, accepted as an expert in health planning and CON review; and, Greg Benner, accepted as an expert in medical equipment planning, budgeting and purchasing. The Agency offered one exhibit. Marked for identification as AHCA 1, it was admitted.
Community presented the testimony of three witnesses. The three were accepted as experts in their fields as follows: Kathryn Gillette, an expert in the fields of hospital administration and hospital finance; Darryl Weiner, an expert in the field of healthcare finance including financial feasibility determinations; and Richard Baehr, an expert in the field of healthcare planning. Community offered 7 exhibits. Marked for identification as Community Exhibit Numbers 1-7 all were admitted into evidence.
At the conclusion of the hearing, the parties agreed to submit proposed recommended orders and memoranda of law on outstanding legal issues by a date in mid-July. By agreement of the parties or without objection, the time for submission of the proposals and memoranda was extended several times. All parties timely filed their proposed orders and memoranda on August 12, 2008. This Recommended Order follows.
FINDINGS OF FACT
The Applicants and Background
Pasco-Pinellas
Pasco-Pinellas, the applicant for CON 9975, is a joint venture between two nonprofit healthcare organizations: University Community Hospital, Inc. (UCH) and Adventist Health System Sunbelt Healthcare Corporation (Adventist).
A not-for-profit healthcare system, UCH has served the Tampa Bay area for the last 40 years. It owns and operates two hospitals in Hillsborough County and one in Pinellas County. UCH has approximately $100 million available for capital expenditures to fund the hospital proposed by CON 9975.
One of its Hillsborough County facilities, University Community Hospital, is located on Fletcher Avenue in northern Hillsborough County, AHCA Health Planning District VI. Across the street from the main campus of the University of South Florida (USF) and its College of Medicine, University Community Hospital has an agreement with USF for GME. University Community Hospital at present serves the Wesley Chapel area in eastern Pasco County.
The other member of the joint venture, Adventist, is a financially successful not-for-profit healthcare organization. It operates 17 hospitals in the state of Florida. As of December 31, 2007, Adventist's cash on hand, including investments, exceeded $3.6 billion and net revenue for 2007 was approximately $368 million.
The joint venture between UCH and Adventist was formed to establish a hospital to serve the Wesley Chapel area of Pasco County and to provide other healthcare services in the county.
At present, the two members of the joint venture compete to serve the Wesley Chapel area through University
Community Hospital and Adventist's Florida Hospital Zephyrhills (FHZ), a 154-bed general acute care hospital in Pasco County.
The collaboration of competing hospitals in seeking approval for a new hospital through Florida's CON process is unusual. But by bringing the similar missions, strength in community interests and capable leadership of UCH and Adventist together, the Pasco Pinellas joint venture poses potential healthcare benefits to eastern Pasco County.
BayCare
The Applicant for CON 9977, BayCare of Southeast Pasco, Inc., is a not-for-profit corporation formed to develop the hospital proposed in the application. The sole member of BayCare is BayCare Health System, Inc. ("BayCare System").
BayCare System is the largest full-service community- based health care system in the Tampa Bay area. It operates 9 nonprofit hospitals and 11 ambulatory/outpatient centers in Hillsborough, Pasco and Pinellas counties.
Initially organized in 1997 under a joint operating agreement between several hospitals, BayCare System's purpose has been to compete effectively in managed care operations in order to reduce the expenses of the individual organizations that are its members. In the first 5 years of operation, BayCare System saved its members a total of $90 million because of the enhanced cost efficiencies it achieved through business
function consolidations and group purchasing. Its members are all not-for-profit hospitals.
BayCare System's focus is on the treatment of one patient at a time. Its mission is to improve the lives of people in the community it serves, to operate effectively as a group of not-for-profit hospitals, and to provide high quality, compassionate healthcare.
BayCare's application, because it provides potential for its proposal with its teaching aspects, draws significant and considerable support from USF, a national research university. USF has a College of Medicine, a College of Nursing, and a College of Public Health, collectively "USF Health." USF Health will collaborate with BayCare in the development of the hospital BayCare proposes, should it be approved and should its teaching functions come to fruition.
The Agency
The Agency for Health Care Administration is the state agency that administers the CON program pursuant to Section 408.034, Florida Statutes. It will make the final decisions to approve or deny the two CON applications at issue in this
proceeding.
Community
Community Hospital is a general acute care for profit hospital with 386 beds. It is located within the City of New
Port Richey in western Pasco County, Acute Care Subdistrict 5-1.
With the exception of neonatal intensive care, open heart surgery and organ transplantation, Community is a full- service community hospital. It provides OB services. It is licensed for 46 adult psychiatric beds. It offers a variety of outpatient services including outpatient surgery, endoscopy, and outpatient procedures and lab testing. Its medical staff consists of approximately 400 physicians.
Community serves patients without regard to ability to pay, and does not discriminate in any manner. Accredited by the Joint Commission on Accreditation of Hospital Organizations, it has received numerous awards and recognition for the quality of its health care services.
Community's hospital facility is over 30 years old.
Access to the campus from US 19, the closest major thoroughfare approximately 1.5 miles away, is gained via a two-lane street through a residential area. Land-locked but for the two-lane street, the campus is sandwiched between the residences and a high school. There are no medical office buildings ("MOB") owned by Community on the campus; less than 20 acres in size, it is completely built out.
Community's Replacement Hospital
Community has a replacement hospital facility currently under construction in Acute Care Subdistrict 5-2.
Approximately five miles southeast of Community's New Port Richey location, the replacement facility is located at the intersection of Little Road and State Road 54. Expected to open in late 2010 at a cost in excess of $200 million, it is to be known as Medical Center of Trinity ("Trinity").
All current Community services will be offered at Trinity. At the same time, the new hospital will offer many advantages over the old facility. Trinity will initially be five stories in height, with fewer licensed beds, but constructed with the ability to expand. It will offer new medical equipment with the latest technology. Situated on 52 acres, with a new three-story MOB adjacent to the hospital, Trinity has plans to add a second MOB at some time in the future. Unlike existing Community Hospital, Trinity will have all private rooms. Its more efficient layout among service areas will improve efficiencies and patient satisfaction.
Trinity's location is more accessible than Community's current location in New Port Richey. It is on State Road 54 (SR 54), a six-lane highway that runs east/west through Pasco County. The road has recently undergone major construction and expansion which was nearly complete at the time of hearing. Suncoast Parkway (a/k/a Veterans Expressway), furthermore, is an expressway toll road system that runs north/south from Hernando County through Pasco County to Tampa airport. From the
intersection of Suncoast Parkway and SR 54, it takes approximately seven minutes to reach Trinity. Little Road runs north/south along the Trinity site, and north through Pasco County to Regional Medical Center Bayonet Point ("Bayonet Point").
Community's poor financial performance in recent years is expected to improve after the opening of Trinity.
The Proposals
Although both applicants propose a new hospital in roughly the same location in Subdistrict 5-2, the two are different both in scope and approach.
Pasco-Pinellas' Proposal
Pasco-Pinellas proposes to build an 80-bed acute care hospital on Bruce B. Downs Boulevard in the area known as Wesley Chapel in eastern Pasco County. If approved and constructed, the hospital will include 36 medical/surgical beds, 8 labor/delivery/recovery/post partum beds, 12 critical care beds, and 24 progressive care beds. The project would involve 184,000 gross square feet of new construction, at a total estimated cost of $121 million.
Pasco-Pinellas proposes a typical primary service area (PSA). Five and one-half zip codes comprise the PSA; Pinellas- Pasco reasonably projects 82% of its admissions will come from the PSA. Two and one-half zip codes comprise the secondary
service area (SSA). The zip code that is shared by the PSA and the SSA (33559) is split roughly in half between Pasco County and Hillsborough County. The half that is in Pasco County is in Pasco-Pinellas' PSA. The five full zip codes in the PSA are 33541, 33543, 33544, 34639, and 33576. The two full zip codes in the SSA are 33549 and 33647.
Pasco-Pinellas' in-migration from outside its proposed service area (the PSA and the SSA) is forecast by Pasco- Pinellas's health planner at 12%. For a community hospital in the Wesley Chapel area without tertiary services, the in- migration percentage projected by Pasco-Pinellas is reasonable.
BayCare's Proposal
BayCare proposes to establish a general acute care hospital with 130 beds. The application proposes that it be collaboratively developed by BayCare System and USF Health so as to provide teaching functions associated with the USF College of Medicine and other health-related university components of USF Health. Consisting of approximately 476,000 square feet of new construction at an estimated total project cost of approximately
$308 million, the hospital will have 92 medical/surgical beds,
24 critical care beds, and 14 post-partum beds.
Like Pasco-Pinellas' proposal, BayCare's proposed hospital will be located on Bruce B. Downs Boulevard in the Wesley Chapel area of southeastern Pasco County.
BayCare's proposed PSA is circular. The center point of the PSA is the proposed BayCare hospital site in the Wesley Chapel area. The circumference is along a series of seven-mile radii so that the diameter of the circular PSA is 14 miles. The seven-mile radius was chosen to approximate a fifteen-minute travel time by automobile from the outer edge of the circular PSA to the hospital site.
BayCare's PSA includes some part of seven zip codes.
Two are Wesley Chapel zip codes: 33543 and 33544. Two are Lutz area zip codes: 33549 and 33559. Two are Land O'Lakes zip codes: 34639 and 34638, and one is a zip code in Hillsborough County: 33647.
Relative to typical PSAs for most proposed hospitals, the PSA proposed by BayCare's application was described at hearing by BayCare's health planner as "small." See Tr. 1855. For calendar years 2013 and 2014, BayCare projects that 19,0976 and 20,008 patient days, respectively, will be generated from within the PSA. These projections constitute a projection of 60% of all patient days projected for the two years, a percentage substantially lower than would be generated from a typical PSA. The remaining 40% of projected patient days is roughly double what would be expected from beyond a PSA under a more typical proposal. The high number of projected patient days for patients originating outside the PSA was explained at
hearing by BayCare's health planner. The involvement of the USF Physician's Group and the "teaching" nature of the proposal "pumps up and provides an additive level of in-migration that would not be experienced without the USF combination with BayCare in [the] project." Tr. 1856-7.
Pasco County Hospitals
There are five hospitals in Pasco County. Two in western Pasco County will continue to remain in Subdistrict 5-1 in the near future: Regional Medical Center Bayonet Point, located in northwest Pasco County and Morton Plant North Bay Hospital, located in New Port Richey. Two are in eastern Pasco County, Subdistrict 5-2: Pasco Regional Medical Center in east central Pasco County, and FHZ, located in southeast Pasco. The fifth is Community/Trinity.
No Need for Both Hospitals
None of the parties contends there is need for both hospitals. Nor would such a contention be reasonable. Indeed, the record does not demonstrate need for both a new 80-bed community hospital as proposed by Pinellas-Pasco and a new 130- bed hospital that BayCare denominates a "teaching" hospital, each with an intended location on Bruce B. Downs Boulevard in the Wesley Chapel area of southeastern Pasco County in Subdistrict 5-2.
The question remains: is there a need for one new hospital? If so, which of the two applications, if either, should be approved?
Need for a New Hospital; Access Enhancement
Among the counties in the Tampa Bay area, Pasco County has been the fastest growing in recent years. From 1990 to 2000, its population grew 22.6%. Three times higher than the state average, this represents tremendous growth for any locale.
The Wesley Chapel area of south Pasco County roughly coincides with the PSAs of the two applicants. Dramatic growth over the last 20 years has marked the Wesley Chapel area's transformation from an agricultural area to a suburban community. North of Hillsborough County and its largest city, Tampa, improvements in the transportation network has made south Pasco County and in particular, the Wesley Chapel area, a bedroom community for workers commuting to Tampa.
Claritas, a national demographic data service, is a generally accepted population projection source for CON applications. Claritas projects the growth in Pasco County to continue. For example, the projected population for Pasco- Pinellas' proposed PSA, which substantially overlaps with BayCare's proposed PSA, is 113,397 in 2011 and 118,505 in 2012. The Claritas projections are based on the most recent decennial
U.S. Census, that is, 2000, and do not take into account data of
impending population growth, such as new housing starts and new schools. Claritas, therefore, may understate projections in areas that have experienced more recent, rapid growth.
The University of Florida Bureau of Economic and Business Research ("BEBR") also provides reliable population data by county. In the year 2000, the census for the Pasco County population was 344,765. By 2030, that population is projected by BEBR to grow to 526,100 based on low projections, 681,100 based on medium projections, and 876,900 based on high projections. For the high projection rate, this would constitute a 154% increase in population. Even assuming the low growth rate, the population would increase by 53%. According to BEBR data, the county can be expected to grow at a rate of 4.71% per year.
Another source of population data relied upon by population experts is Demographics USA. The Demographics USA data shows a substantial growth in population for Pasco County. According to Demographics USA, the population for Pasco County can be expected to grow from 343,795 in the year 2000 to 440,527 in the year 2010 and then to 504,277 by the year 2015. Based on the Demographics USA data, the county can be expected to grow at a rate of 3.11% per year.
The Wesley Chapel area is considered to be the area of Pasco County with the most development and development potential
now and in the future. Of 175 major projects actively undergoing development in Pasco County, 76 are in the Wesley Chapel area. Between 2010 and 2012, the population in the area is projected to grow by 5,000 persons per year. With the increase in the general population in the area comes an expected increase in the need for schools. Of 37 schools identified by the Pasco County School Board to be built in the near future, 19 are to be located in the Wesley Chapel area.
Whether the historic growth rate of the last few decades will continue for sure is an open question with the downturn in the economy and the housing market that commenced in Pasco County in mid-2007. Absent a major recession, however, it is reasonable to expect growth in the Wesley Chapel area to continue even if not at a rate as rapid as in the recent past.
Whatever the future holds for Wesley Chapel's growth rate, there is clearly a demand for inpatient general acute care services in the Wesley Chapel area. The total non-tertiary discharges from the Pasco-Pinellas service area was 15,777, excluding newborns, for the 12-month period ending June 30, 2006. As a result, AHCA found the existing and growing population in the Wesley Chapel area warranted a new hospital.
Along with significant growth in the Wesley Chapel area comes resulting traffic and healthcare and hospital access issues.
Drive time analysis shows the average drive time from each of the Pasco-Pinellas PSA six area zip codes to the eight area hospitals in 2007 to be 46.11 minutes. The analysis shows that future drive time is expected to be lengthier, strengthening the need for a hospital in the Wesley Chapel area. In 2012, the average time increase is expected to 57.68 minutes.
A Drive Time Study Report prepared by Diaz Pearson & Associates compared drive times to the proposed site for Pasco- Pinellas hospital to eight existing hospitals: UCH, Pasco Regional, FHZ, Tampa General, University Community Hospital on Dale Mabry in Tampa, St. Joseph's North, St. Joseph's in Tampa, and the site for Community's replacement hospital. The study
concluded:
The results of this travel study demonstrate that the vehicular travel times for access to the proposed PPHCHS Hospital [Pasco- Pinellas' Hospital] are consistently LESS for residents within the six Zip codes of the Primary Service Area for years 2007, 2011, and 2012 than for comparable trips to any of the eight area hospitals for alternate choice.
Pasco-Pinellas 36, p. 27.
Of particular note are the travel times from each of the six zip codes in Pasco-Pinellas' PSA to UCH, FHZ, and Tampa General. For example, a patient driving from the centroid point in zip code 33559 to UCH would take 24.28 minutes and to FHZ would take 37.97 minutes in 2007. This increases to 29.55
minutes and 50.94 minutes in 2012. Another example, the time it takes a patient to travel from zip code 33541 to Tampa General was 75.51 minutes in 2007. In 2012, the travel time is projected to increase approximately 20 minutes to 95.33 minutes.
In contrast, a new hospital in the Wesley Chapel area would decrease travel times significantly for patients in the six zip code areas of the Pasco-Pinellas PSA. For example, in 2007, it would only take a zip code 33559 patient 11.41 minutes to reach the proposed site for Pasco-Pinellas. This represents a time savings of 12.87 minutes compared to the average driving time to UCH and 26.56 minutes compared to the average driving time to FHZ. In 2012, the reduction in time to drive to Pasco- Pinellas' proposed hospital site instead of UCH is 18.34 minutes and for FHZ, it is 39.53 minutes. The time savings for patients from the 33541 zip code traveling to Tampa General for non- tertiary services is even greater. Using Pasco-Pinellas' site in the Wesley Chapel area would save the patient 52.67 minutes in 2007 and is projected to save 63.88 minutes in 2012.
Anecdotal evidence supports the need for a new hospital in the Wesley Chapel area. Dr. Niraj Patel practices obstetrics and gynecology in the Wesley Chapel area. A drive for him in good traffic is typically 20 minutes to UCH (the only hospital at which he practices because the distance between area hospitals is too great). In morning traffic during "rush"
periods, the drive can exceed 40 minutes. Caught in such a drive in January of 2008, Dr. Patel missed the delivery of a patient's baby. He was required to appear before the UCH Medical Staff's credentials committee to "explain the situation
. . . [because it] was the third or fourth [such] episode." Pasco-Pinellas 47, p. 11. As Dr. Patel explained in a pre- hearing deposition, "it doesn't fare well for me . . . credential and requirement wise but it doesn't fare well for the patient [who] had to be delivered by the nursing staff which [without a physician present] increases patient risk and [the chance] of complication[s]." Id.
A new hospital in the Wesley Chapel area will provide residents of the Pasco-Pinellas PSA or the BayCare PSA with shorter travel time to a hospital compared to the time necessary to reach one of the eight existing hospitals in the region. In 2007, residents of the six zip codes in the Pasco-Pinellas' PSA could be expected to access Pasco-Pinellas' proposed hospital in a range of 10.9 to 21.8 minutes. For the year 2012, the time can be reasonably predicted to range from 17 to 31.4 minutes.
In comparison the drive times to the eight hospitals in the region for residents of Pasco-Pinellas' PSA are significantly longer. In 2007, it took a resident in zip code 34639 approximately 55 minutes to get to UCH and 73 minutes to get to St. Joseph's Tampa. By 2012, those drive times are reasonably
projected to increase to 64 minutes and 83 minutes, respectively. Simply put, travel times are expected to increase as the population increases in coming years.
The site of Pasco-Pinellas' hospital is approximately one mile from the site of the proposed BayCare hospital. The travel times suggested for the residents of the Pasco-Pinellas PSA to the proposed Pasco-Pinellas hospital can be expected to be similar to travel times to the proposed BayCare hospital. Given the proximity of the two proposed sites, either will significantly reduce travel time to hospitals for patients in the Wesley Chapel area.
The existence in the Wesley Chapel area of a community hospital with an emergency room and primary inpatient services will benefit doctors, patients and their families. Heightened driving concerns among elderly patients and traffic congestion and inadequate roadways that delay Emergency Medical services support the need for a Wesley Chapel area hospital. The support is based not only on 2007 travel times but also on the reasonable expectation that travel time will be greater in the future.
Existing hospitals are capable of absorbing the increased need for acute care hospital services that result from the increased growth that is reasonably projected to occur in Subdistrict 5-2. If there is to be a new hospital in the
subdistrict, the Wesley Chapel area is the best location for it. A new hospital in the Wesley Chapel area will enhance access to acute care services for residents of Subdistrict 5-2.
Preliminary Agency Action; the SAAR
The Agency determined that there is a need for a new hospital in the Wesley Chapel Area when it issued its State Agency Action Report on CONs 9975 and 9977.
The Agency also determined that between the two applications, Pasco-Pinellas was superior and should therefore be approved over BayCare's. This determination was founded primarily on Pasco-Pinellas' application being more reasonable in terms of size and impacts on existing providers.
The Agency maintained at hearing the position it took in it preliminary action memorialized by the SAAR.
Jeffrey Gregg, Chief of AHCA's Bureau of Health Facility Regulation received in this proceeding as an expert in health planning and CON Review explained when called to the stand to testify:
The proposal by [Pasco-Pinellas] was on the smaller side and gave us more comfort [than BayCare's] . . . [W]hile we . . . agree with these applicants that there is a hospital in the future of [the Wesley Chapel area], we are more comfortable with the conservative approach, the smaller approach [of Pasco- Pinellas], particularly given that should it be necessary in the future, any hospital can add beds, acute care beds, merely by notifying us. And we were more comfortable
that [Pasco-Pinellas'] approach would be able to expand access and improve services for people in this area while at the same time minimally impacting all of the competitors.
Tr. 1995. As detailed below, AHCA's determination that the Pasco-Pinellas application is superior to BayCare's is supported by the record even if the basis for the determination made on the state of the record is not quite the same as the basis advanced at hearing by AHCA.
Size and Cost
Pasco-Pinellas proposed hospital involves about 184,000 square feet of new construction at a cost of approximately $121 million dollars. It is much smaller and less costly than BayCare's proposed hospital of 476,000 square feet of new construction for about $308 million.
The Pasco-Pinellas proposal is more reasonably sized to meet the needs of the Wesley Chapel area and, in turn, Subdistrict 5-2. The difference in size and cost of the two proposals, however, is a function of a major difference in approach in the applications. Pasco-Pinellas' proposal is for a typical community hospital that would start out with a bed size within a range that includes 80 beds. BayCare, on the other hand, proposes to serve not only the Wesley Chapel area and Subdistrict 5-2, but also a substantial population of patients to be drawn to the subdistrict particularly from Hillsborough
County. Patients migrating to the hospital from outside the subdistrict will for the most part be the product of BayCare's affiliation with USF Health and its service to the USF College of Medicine in its proposal denominated in the application as a "teaching hospital."
Need for a New Teaching Hospital
"Teaching hospital" is a term defined in the Health Facility and Services Development Act, sections 408.031-408.045, Florida Statutes:
"Teaching hospital" means any Florida hospital officially affiliated with an accredited Florida medical school which exhibits activity in the area of graduate medical education as reflected by at least seven different graduate medical education programs accredited by the Accreditation Council for Graduate Medical Education or the Council of Postdoctoral Training of the American Osteopathic Association and the presence of 100 or more full-time equivalent resident physicians. The Director of the Agency for Health Care Administration shall be responsible for determining which hospital meets this definition.
§ 408.07(45), Fla. Stat.
The Agency has not determined that BayCare's proposal meets the statutory definition as directed by the statute for it to qualify as a "teaching hospital." The record indicates that the proposal is not a typical teaching hospital. For example, teaching hospitals in the United States are usually located near indigent populations to achieve the efficiency of training
future practitioners with treating people who otherwise could not afford services. BayCare's proposal in a small county with a more affluent population does not serve that purpose.
BayCare contends neither that it is a "statutory" teaching hospital nor that it should be determined by the Agency to meet the statutory definition of "teaching hospital."
Instead it grounds its case for need in the teaching functions its proposal would fulfill for USF Health and in particular for the GME needs of the students of the USF College of Medicine and the results those teaching functions would produce.
Considerable testimony was offered by BayCare at hearing with regard to GME and the needs and aspirations of the USF College of Medicine. The Dean of the College, Stephen K. Klasko, M.D., spiritedly and eloquently related a narrative of need which was supported and amplified by other witnesses including faculty members at the college. There were many elements to the narrative. Highlights include the hybrid nature of the USF College of Medicine, "acting like a research intensive medical school . . . in a community-based body" (tr. 1132)," its on-going successful striving towards becoming an academic center for world class physicians as evidenced by this year's receipt of a research grant from the National Institute for Health, "the largest . . . given to a medical school in the last four or five years," id., and the GME challenges the
college faces in the Tampa Bay area such as the recent loss of its anesthesiology residency program.
BayCare's opponents point out the many ways in which the proposal is not only not a statutory teaching hospital but does not fit a nationwide model for teaching hospitals. BayCare counters that its model is one of many different models for a teaching facility. Whatever the merits of the various assertions of the parties on the point, USF's need for a teaching facility will be filled at least in part by the BayCare proposal. It is not an exaggeration, moreover, to call USF's need in this regard compelling.
USF's institution-specific need, however, does not fall under any of the CON review criteria. See paragraphs 167- 8, below, in the Conclusions of Law. Perhaps not unmindful of the limits of the criteria, BayCare's presented other evidence that flows from the teaching function of the BayCare proposal. Relevant to the general criterion of "need" in subsection (1) of the Statutory CON Review Criteria, the evidence relates to physician shortages.
The Physician Shortage
There is a shortage of physicians in the district as there is in Pasco County.
The problem has statewide dimensions. The state is not doing enough to replace aging doctors in Florida with
younger doctors. Nor are aging doctors providing sufficient emergency room call coverage. The physician shortage both in general and in emergency rooms in the state is likely to increase.
Residents are more likely to remain and practice in the community in which they train. Residents in the Tampa Bay area, in particular, are more likely to remain in the Tampa Bay area to practice. Even 20 residents per year in training at BayCare's proposed hospital would make a difference in existing physician shortages.
Should BayCare's proposed hospital be built and operated as contemplated, the teaching functions that BayCare's application proposes to offer at the hospital would serve as a step, however small, toward meeting Florida's physician shortage as well as the shortage in District V, Pasco County, Subdistrict 5-2 and the Tampa Bay area.
Nonetheless, there is a feature of this case that undermines BayCare's claim that the proposal will aid the physician shortage and its denomination in the application of the proposal as a "teaching hospital." The feature is present in the agreement between USF and BayCare (the "BayCare and USF Agreement) to make the BayCare proposed hospital a University Hospital.
The BayCare and USF Agreement
The BayCare and USF Agreement contains a section devoted to implementation and termination. The following is excerpted from the section's six separately numbered paragraphs:
The Parties [the University of South Florida Board of Trustees or USF and BayCare Health System, Inc.] shall negotiate in good faith all other terms and conditions relating to the execution and implementation of this Agreement, including, without limitation, any revisions to the provisions of the Articles of Incorporation and Bylaws of the Hospital Corporation, the terms and conditions of the Health Affiliation Agreement, the design and layout of the University Hospital . . . [etc.] and such other documents and instruments as the Parties may find necessary or desirable to implement the terms of this Agreement.
In the event the Parties are unable to agree on all such terms and conditions and all such documents required to implement the terms and provisions of this Agreement despite their good faith efforts to do so, either Party shall have the option after a period of at least twenty four months from the Effective Date or six months after the final approval of the Certificate of Need for the University Hospital is received, whichever is longer, to terminate this Agreement on the terms described in this [s]ection . . . .
BayCare 2, Appendix C, BayCare and USF Agreement, Section G,
p. 8. (Emphasis supplied.) For USF to terminate, the terms include payment to BayCare of $500,000 and agreement that for five years after termination it will not enter into an
affiliation or other agreement with any other provider for the establishment of a university hospital in Pasco County. See id.
The ability of USF to terminate the agreement is not "at will." It requires good faith efforts to have been made at implementations that fail to work. Furthermore, termination is not without consequences. But the termination provision in the agreement is consistent with the lack of a condition in BayCare's application that the BayCare proposal be a teaching hospital, "one more detail that made [AHCA officials] scratch our heads about the characterization of this hospital as a teaching hospital." Tr. 2011. It is also consistent with USF's support for "legislation that would be statewide that would allow state medical schools at some point, if they chose to, to make it easier . . . to have a hospital or research hospital on campus . . . [of which] USF would be one . . . " Tr. 1190-91.
Adverse Impact
Providers Outside the District
Evidence was produced at hearing about the adverse impact of approval of either of the two applications on providers outside the district.
Objections to the evidence were taken under advisement pending consideration of post-hearing memoranda submitted by the parties. Upon consideration of the memoranda, the objections
are sustained. See paragraphs 159-66, below, in the Conclusions of Law.
Providers Within the District
The Pasco-Pinellas proposal will have minimal impact on Community/Trinity Medical Center. Its impact on other hospitals will be minimal with the exception of its two partner hospitals--UCH and FHZ--and of those two, only FHZ is in the District.
There will be no adverse impact on Community as a result of the BayCare proposal. There is little patient flow from eastern Pasco to the western Pasco hospitals. Only about 1% of the patients in eastern Pasco travel west for services at Community, Morton Plant or Bayonet Point.
It is reasonable to project that there will be no material change in Community's patient draw as a result of the new Trinity Medical Center. The projections by Community's health care and financial experts of patient days that would be lost and adverse financial impact to Community/Trinity should the BayCare proposal be approved were based on faulty assumptions. The majority of the adverse impact from BayCare's proposal, as in the case of Pasco-Pinellas' proposal, will be on UCH and FHZ.
Availability of Resources
Nursing and Non-Nursing Staff
Pasco-Pinellas should be able to recruit and retain nursing and other staff for its hospital based on the Adventist experience at FHZ. The nursing vacancy at FHZ is 1% lower than the vacancy rate reported by the Florida Hospital Association (7.5% and 8.5%, respectively.) The turn-over rate for nurses at FHZ is 12%, significantly lower than the national rate in the
18-19% range.
Recruitment of nurses has been successful at FHZ particularly in the last few years. In 2007, FHZ hired 100 nurses and reduced its use of agency nursing staff by roughly 75%. Among its different recruitment tactics have been a foreign nursing program, education and training incentives, scholarships at local colleges and specialty pay programs.
Pasco-Pinellas will use many of the same recruiting techniques that have been successful at FHZ. It is reasonably anticipated that the same recruitment practices employed by FHZ will work for Pasco-Pinellas. Many members of the current nursing staff at FHZ, moreover, live in the Wesley Chapel area and have expressed an interest in working at Pasco-Pinellas.
Retention programs at FHZ have been aimed at retaining better nurses. These include the magnet concept and a self- governance program with "a unit based council and nursing
council so nurses . . . practicing . . . at the bedside have the opportunity to help govern the practice of nursing." Tr. 225-6. Retention programs similar to those used at FHZ will be implemented at Pasco-Pinellas.
Schedule 6 in Pasco-Pinellas application reflects anticipated staffing for its new hospital. The staffing model is consistent with staffing at other Adventist facilities, specifically FHZ. The average salaries and wages are based on actual salaries inflated forward to the projected date of opening. The FTEs per adjusted occupied bed are adequate and consistent with the staffing patterns at FHZ.
All necessary staffing positions are accounted for and the number of FTEs and salaries are sufficient for the hospital to operate and provide high quality of care. The registered nurse FTEs, as opposed to LPNs and lower-level nursing care, in Schedule 6 offer optimal staffing to provide high quality care and positive patient safety.
The nursing salaries are adequate for the time frame in which Pasco-Pinellas will open with a one-time 5% increase and a 4% increase per year from present until opening. Schedule
6 supports the reasonable expectation that Pasco-Pinellas will be able to recruit and hire nursing staff and retain an adequate staff. The proposed staffing pattern in Schedule 6 of the
Pasco-Pinellas application, which includes nursing staff, moreover, is reasonable.
BayCare has a comprehensive recruitment program for recruiting and retaining nursing personnel as well. The strategies include a partnership with the nursing programs at USF and St. Petersburg College. BayCare System provides additional training to its nurses and with regard to salaries has committed to remaining competitive in the market.
BayCare's recruitment and retention initiatives have been successful. In the 2008 year to date at the time of hearing, BayCare System had been able to hire more experienced nurses that it did in 2007 for the same time period. Overall, the BayCare System has a turnover rate of about 15%. The RN vacancy is 10% with a 13% turnover rate. These figures are comparable to state and national figures; in some cases they are lower. With regard to non-nursing employees or team members, BayCare System also had developed recruitment initiatives that are targeted toward those individuals.
BayCare System has a positive reputation in the community as a good place to work. As an example, the three St. Joseph's hospitals (St. Joseph', Women's and Children's) and South Florida Baptist received recognition among the "Best Work Places in Health Care" for the years 2005 and 2006. The award recognizes outstanding practices related to employees.
BayCare has the ability to recruit and retain the staff necessary to staff the proposed BayCare SE Pasco hospital. The staffing projections in Schedule 6 of BayCare's application, which includes nursing staff, are reasonable.
Physician Support
Despite the physician shortage, both applicants should be able to adequately staff their hospitals with physicians as shown by the evidence with regard to physician support for the hospitals.
Florida Medical Clinic (FMC), a multi-specialty physician group practice with 85 physicians, is the primary physician group that serves the Wesley Chapel area. Thirty percent of its members are family practitioners or specialists in internal medicine. The remainder of the members cover 20 or so specialties that include both secondary and tertiary specialties.
FMC has determined that it will support the Pasco- Pinellas proposal through its physicians, admissions and outpatients activity. Ninety percent or more of the clinic's patients use the UCH and FHZ facilities. FMC has a long- standing relationship with the administrators, personnel, and strategic issues of FHZ and UCH and is comfortable developing future plans for a hospital facility in Wesley Chapel with the two organizations
FMC is able to meet the needs of the Wesley Chapel community both today and in the future. In addition, there are numerous other individual physicians who practice in the Wesley Chapel area who "predominantly support University Community Medical Center and Florida Hospital in Zephyrhills." Tr. 63. Having relationships with physicians already in a market when a hospital is being developed is advantageous to the new hospital. Among other advantages, it minimizes resources used to recruit and move new physicians into the area.
In contrast to support for the Pasco-Pinellas proposal, FMC has not made a commitment to BayCare as to its proposal because of lack of knowledge about the structure of the facility, its strategic plans and whether or not FMC's interests align with the BayCare proposal but it has not foreclosed such a commitment.
The USF physicians group will be a source of many of the physicians who will staff the BayCare proposed hospital, a likely reason for FMC's lukewarm to non-existing support for BayCare's proposal. USF emergency physicians will staff the Emergency Department.
The BayCare System has approximately 28 physicians with privileges at BayCare System facilities with offices in the Wesley Chapel area.
The proposed BayCare hospital will be staffed by recruited physicians and USF faculty physicians. Other physicians from the Wesley Chapel area provided testimony of their support for the BayCare proposal. It is reasonable to anticipate that some local Wesley Chapel area physicians will join the medical staff of the proposed BayCare hospital.
Despite the physician shortages in the subdistrict, District V and the Tampa Bay area, both Pasco-Pinellas and BayCare will be able to staff their hospitals adequately with physicians.
Charity and Medicaid; Conditions
Pasco-Pinellas committed to a number of conditions of its applications. These include a 12.6% commitment to charity and Medicaid; the establishment of funding for a clinic for the underserved, provision of educational programs for the community, and two neonatal transports and funding for local fire and rescue services.
BayCare projects a 6.1% level of charity care, 2.4% higher than Pasco-Pinellas' charity care commitment. It projects 10.3% of its Medicaid and Medicaid HMO patients will be attributable to Medicaid and Medicaid HMO patients versus 8.9% at Pasco-Pinellas.
BayCare System has a history of providing services to Medicaid and Charity Patients. In 2006, for example, as not-
for-profit entities, BayCare System facilities and related entities provided a total community benefit of $135 million in uncompensated care. Approximately 50% was pure charity care. BayCare System facilities currently serve patients from the Wesley Chapel area, including, of course, Medicaid and charity patients. BayCare System facilities provide 57% of the charity care and 31% of the Medicaid in the market.
St. Joseph's Children's Hospital and St. Joseph's Women's Hospital operate at approximately 50-to-60% Medicaid and un-reimbursed care. St. Joseph's Hospital currently serves approximately 20% of the patients from the Wesley Chapel area. St. Joseph's, however, provides 36% of the total charity, Medicaid, and Medicaid HMO care rendered to patients who reside in the Wesley Chapel area. Thus, the facilities within the BayCare System have a demonstrated track record of providing care without regard to a patient's resources. In light of the record, it is reasonable to expect BayCare to carry on in the same vein under the BayCare proposal.
Utilization
Schedule 5 relates to projected utilization after project completion. The projections in the schedule in Pasco- Pinellas' application were developed by looking at service area population, applying a use rate growth and taking a market share by individual zip code. They are based on the expectation that
the hospital would be operating at approximately 70% occupancy in its third year of operation, which equates to an average census of approximately 56 patients. The assumptions contained in the schedule are reasonable.
The utilization projections in Schedule 5 in Pasco- Pinellas' application are reasonable; they indicate that an 80- bed hospital is appropriate to meet the need for a new hospital in the Wesley Chapel area of the subdistrict.
BayCare will able to achieve its projected utilization from its primary service area and from the 40% of its patients it expects to receive by way of in-migration.
The population forecast and market share forecast for the primary service area are reasonable. While the support among local physicians is much stronger for the Pasco-Pinellas proposal, it is likely that they will admit patients to the BayCare proposed hospital since it will be in the Wesley Chapel area, the area of the subdistrict that is most suitable for a new hospital.
The 40% projected in-migration from outside of the seven mile service area is a reasonable projection. It is reasonable to expect that the bulk of these admissions will come from USF physicians located at the USF north Hillsborough campus.
Projected Revenues
Schedule 7A governs projected revenues. The payor mix in Schedule 7A of Pasco-Pinellas' application is based on historic admission and patient days by payor class occurring in the proposed Pasco-Pinellas service area based on the most recent available AHCA data. Gross charges and net revenues were developed based on historical data from FHZ as reported to AHCA. These figures were inflated forward using a net increase over all in revenue payments of approximately 3%. The projected revenues including net revenues in Schedule 7A of Pasco- Pinellas' application are reasonable and consistent with the marketplace.
The payor mix in BayCare's Schedule 7A was based on an analysis of patient discharge data from the proposed primary service area plus an analysis of the experience of other BayCare System facilities in the same market. It is a reasonable payor mix. It allows for consideration of the experience of BayCare System, including the high level of charity care and Medicaid and Medicaid HMO services and at the same time reflects that the Wesley Chapel area is more affluent and younger than other areas of Pasco and Hillsborough Counties.
BayCare's revenue assumptions were based on an analysis of gross and net revenue per patient day from another BayCare System facility, South Florida Baptist. Financial class
specific projected patient days were applied to derive a gross and net revenue number for each of the three pro forma years for the proposed project denominated by Schedule 7A as "Projected Operating Year 1, 2 and 3" and ending "12/31/11, 12/31/12 and 12/31/13" respectively as indicated by BayCare in the application. See BayCare 2, pp. 133-135. The 2006 South Florida Baptist gross and net revenue per patient day were trended forward for each of the three projected operating years to reach the projected revenue figures in Schedule 7A.
The projected revenues in Schedule 7A of the BayCare application are reasonable.
Projected Income and Expenses
Schedule 8A in a CON application contains projected income and expenses for the proposal.
Pasco-Pinellas' application used a methodology in Schedule 8 that its expert had used in other CON cases. The methodology is consistent with methodologies of other health care experts and has been accepted in recommended and final orders in CON cases.
The projections in Schedule 8 of Pasco-Pinellas' application are appropriate and reasonable.
BayCare's methodology used to project income and expenses in Schedule 8A is also appropriate and reasonable. BayCare's healthcare finance expert asked BayCare financial
analysts to look at his initial projections. They recommended that expenses be increased in physical therapy, radiology lab and pharmacy and that expense be reduced in plant operations. The recommendations were accepted; the projections were adjusted.
Medicare GME reimbursement in year 3 of operations was assumed to be $1.7 million. If no addition Medicare GME reimbursement were received, BayCare's proposal would still show a profit of $2.8 million by year 3. It is virtually certain, moreover, that some portion of the $1.7 million included in calculation of BayCare's income projections will be realized. However valid criticism of the inclusion of the $1.7 million, BayCare's proposal remains financially feasible in the long- term.
Financial Feasibility
Pasco-Pinellas proved the immediate and long-term financial feasibility of its proposal. The schedules in its application related to financial feasibility used reasonable methodologies that yielded reasonable projections.
Analysis of capital costs and funding is contained in Schedules 1 through 3. Schedule 1 presents an accurate summation of total project cost. That figure, $121 million, is a reasonable and typical cost for a new 80-bed community hospital. The $149 million on Schedule 2 reflects an accurate
summation of anticipated capital costs, including the hospital project and necessary capital expenditures for the first tow or three years of operation. Schedule 3 set forth the sources of funding, a combination of equity and debt financing, discussed below.
Both UCH and Adventist are financially successful systems. They will have not difficulty funding the Pasco- Pinellas proposal. As of December 31, 2007, Adventist's net revenue was approximately $368 million. About $100 million in funds were available to UCH at the time of hearing to contribute to development of the project.
Due to the financial strength of its members, Pasco- Pinellas will easily be able to fund the project through a combination of equity and debt. The equity, $45 million, will be provided equally by Adventist and UCH, $22.5 million each. The remaining $76 million will be financed through tax-free bonds issued by Ziegler Securities. The project is immediately financially feasible.
The Pasco-Pinellas project is also financially feasible in the long-term. Schedule 8 in the application, year 3, shows the project will generate a return of approximately
$5.3 million in revenue over expenses, an amount that "more than meet[s] the test for financial feasibility in the long-term." Id.
Based on the sources of BayCare System, BayCare has access to the financial resources to implement its proposed hospital. Funding for the hospital will come from BayCare System on the basis of 50% debt and 50% equity investment. As of early 2008, BayCare System had approximately $1.2 billion in unrestricted cash on hand. BayCare System's financial strength will allow BayCare to obtain the financing it needs for the project. Schedule 3 of the BayCare application sets forth an accurate and reasonable statement of the sources of funds necessary to develop the project.
The immediate financial feasibility of BayCare's proposal is demonstrated by the evidence presented by BayCare.
By year three of the pro forma, the BayCare proposal is reasonably projected to generate a net income over expenses in the amount of $4,498,637. BayCare demonstrated that the proposal's long-term financial feasibility.
Costs and Construction Methods
The costs and methods of the proposed construction of the Pasco-Pinellas project are reasonable.
The facility is adequately sized and programmed for the services included in the Pasco-Pinellas application. All of the departments, including central storage, fall within an appropriate benchmark range for community hospitals. The 2,300 square feet per bed is reasonable as are the construction costs
when compared to similar community hospitals. The proposed Pasco-Pinellas facility meets the codes for all of the services included in the application.
The design of the Pasco-Pinellas facility enable expansion. The designed expansion capabilities are reasonable, logical and appropriate to meet the needs of the Wesley Chapel community.
The drawings contained in the CON application show an efficient community hospital. The departments allow for efficient intra-department circulation and department-to- department circulation. There are adequate separation of public and staff flow corridors.
All of the areas and departments as shown in the Pasco-Pinellas plans are code compliant. The layout of the patient rooms is consistent with industry standards for the design of single patient rooms. The number and size of the operating rooms are adequate and appropriate for an 80-bed community hospital not offering tertiary services.
The emergency department, including the trauma room, complies with code and its layout is adequate and appropriate for an 80-bed hospital. The ambulance entrance in relation to the trauma bay allows for efficient location of patients based on acuity level. The number of treatment beds, treatment bays,
including observation areas, provide adequate emergency department capacity.
The Schedule 1 costs set forth in the BayCare application are reasonable. These costs include projected costs associated with necessary medical equipment. The medical equipment costs set forth in Schedule 1 are reasonable and BayCare has properly accounted for the items and costs of equipment necessary to operate the hospital.
The Schedule 9 construction costs of approximately
$180 million are reasonable as are the construction costs per square foot ($347 versus $325 for Pasco-Pinellas).
Contingencies and escalation factors have been built into the
projected costs.
Facilities, Sites, Related Costs
At the time the UCH and Adventist joint venture was formed, UCH had a parcel of land under contract located on State Road 54 across from the Saddlebrook Resort (the "UCH Parcel"). When it filed its application, Pasco-Pinellas hoped the UCH Parcel would serve as the site of its hospital. In fact, Pasco- Pinellas touted the location of the parcel for meeting the need of the growing population in Pasco County when it represented in the application that the UCH Parcel is the center point of the Wesley Chapel area.
Close to Interstate 75, the UCH Parcel is a good location for a hospital. Pasco-Pinellas' aspiration for the use of the parcel was defeated, however, when the Pasco County denied a request to re-zone the UCH Parcel for use as a hospital.
After the inability to have the UCH Parcel re-zoned, Pasco-Pinellas changed the site for the hospital to a parcel owned by FHZ (the "Pasco-Pinellas Site"). Located on Bruce B. Downs Boulevard, a major north-south corridor in the Wesley Chapel area, the site is 51.5 acres.
The Pasco-Pinellas Site had been purchased by FHZ in 2001 with the intention of using it for a hospital. Subject to a height variance to allow a seven-story building, the site is zoned for special use as a hospital and related medical uses. The site has good visibility and access from Bruce B. Downs Boulevard as evidenced by its compliance with the State Road 581 (Bruce B. Downs Boulevard) access management plan. It meets other regulatory requirements such as the minimum spacing criteria for Pasco County.
The Pasco-Pinellas Site is governed by a development order associated with the Wiregrass Ranch Development of Regional Impact (the "Wiregrass DRI DO"). The Wiregrass DRI DO "indicates that the phasing schedule assumed 100 hospital beds would be developed within the building phase." Tr. 597. As
explained at hearing by Lara Daly, Pasco-Pinellas' expert in civil engineering and property site development, there are other aspects of the Wiregrass DRI DO, "like trade-off matrices" and "entitlement advancements" that indicate "entitlements are not limited on a parcel-by-parcel basis." Tr. 598. The assumption, therefore, does not necessarily restrict the number of hospital beds on the Pasco-Pinellas Site; rather it allows impacts associated with 100 hospital beds. The number of allowable beds may be increased following action taken under other provisions of the Wiregrass DRI DO.
A significant portion of the Pasco-Pinellas Site is wetlands: some of low quality, some of high quality.
The higher quality wetlands, referred to in the record as "a high quality category 1 wetland as defined by Pasco County," tr. 552, (the "Category 1 Wetland") are on the north and east perimeter of the site. The project is designed so as to have no impacts on the Category 1 Wetland. The only potential impact to these high quality wetlands is if there were a county-mandated road to be built in their vicinity.
The lesser quality wetlands located in the interior of the site are herbaceous in nature or an open water feature that is "an older borrow pit that naturalized over time."
Tr. 552-53. These lower quality wetlands constitute roughly
11.5 acres of the site. They will be impacted by the project
but it is reasonable to expect that the impacts will be permitted. As Ms. Daly put it at hearing, "[a]fter reviewing, running stormwater models, looking at the proposed wetland impacts, coming up with appropriate mitigation ratios based on our experience elsewhere on the Wiregrass site, the site will accommodate all the necessary wetland and floodplain historic basin compensation . . . ." Tr. 550.
The costs contained in Schedule 1 of the application were arrived assuming the use of the UCH Parcel as the site for the Pasco-Pinellas project. The Pasco-Pinellas Site requires expenditures for site preparation and other expenditures, such as wetland mitigation, related to the site that were not required had the UCH Parcel been used. For example, three potential foundation systems have been suggested for the hospital because of the wetland and subsurface conditions on the Pasco-Pinellas Site had the UCH Parcel been the site. Using the most expensive of the three, however, would not cause Pasco- Pinellas to exceed the construction costs contained in Schedule
1 of the CON Application. The land acquisition costs were reasonably projected to be less for the Pinellas-Pasco Site than for the UCH Parcel as reflected in the application. All told, the estimated project cost using the Pasco-Pinellas site was not materially different from the cost projected in the application
and presented the possibility of being less than the $121 million reflected in the application.
Likewise, the equipment cost figure shown in Schedule
1 of the Pasco-Pinellas application is reasonable and achievable.
The total of the costs for the project sited at the Pasco-Pinellas Site, despite the change of site that occurred after the filing of the application, should not exceed the total of the costs listed in the Pasco-Pinellas application.
The preponderance of the evidence is that the Pasco- Pinellas Site should ultimately qualify as an appropriate, developable site for the Pasco-Pinellas project.
The BayCare site, north of Highway 56 and bordering I-75, (the "BayCare Site") includes two parcels of 54 and 17 acres. The 54 contiguous acres will be used for the hospital, outpatient services, and a planned medical office building. The
17 acres will be used for research space, physician office space, and academic training space necessary for the research and education function at the project. BayCare has the appropriate zoning and approvals necessary to develop the hospital.
The hospital will have all private beds. It will be fully digital and will rely on electronic medical records.
The BayCare Site is well suited for construction of the hospital and related buildings. The available footprint and design of the hospital, which includes shelled-in space, will readily allow for future expansion of the hospital up to 300
beds.
Design of the BayCare facility is based on principles
of family-centered care, flexibility to allow for change and future growth, efficiency, a quality of environment for teaching, a sustainable, green building, and patient safety. A "health building" with improved environmental quality and energy efficiency, the facility will seek LEED certification given to facilities constructed to have minimal adverse environmental impact. In keeping with the teaching function intended by the application, the facility's design includes additional work space, reading areas, sleep areas and conference rooms to facilitate teaching.
Overall, the BayCare facility is twice as large as the Pasco-Pinellas facility. Size has its advantages. For example, it allows for larger treatment patient areas. But the facility is much more expensive to build. It is reasonably projected to cost more than $180 million above the costs associated with the Pasco-Pinellas facility which is more than twice as much. The high expense associated with the BayCare
facility is shown by its cost per bed: in excess of $2 million-- much more than the cost per bed of the Pasco-Pinellas facility.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of these proceedings. §§ 120.569, 120.57(1), and 408.039(5), Fla. Stat.
An applicant for a CON has the burden of proving that its application should be granted. Boca Raton Artificial Kidney Center v. the Dep't of Health and Rehabilitative Services, 475 So. 2d 260 (Fla. 1st DCA 1985). The award of a CON must be based on a balanced consideration of the applicable statutory and rule review criteria. The weight to be given to each criterion depends on the facts and circumstances of each
case. Collier Medical Center, Inc. v. Dep't of Health and Rehabilitative Services, 462 So. 2d 83 (Fla. 1st DCA 1985).
Intervenor Standing
In order for an existing health care facility to have standing to intervene in a CON proceeding, it must show that it will be "substantially affected" by approval of the certificate of need application at issue. § 408.039(5), Fla. Stat. Community Hospital did not show that it will be substantially affected by approval of either Pasco-Pinellas CON Application 9975 or BayCare's CON 9977.
Community Hospital lacks standing to participate in this proceeding.
Impermissible Amendment to Pasco-Pinellas' Application?
At the time Pasco-Pinellas filed its CON application, it intended to use the UCH Parcel for its proposed hospital. It was unable to do so because of its inability to obtain proper zoning. As a result, Pasco Pinellas changed its site to the Pasco-Pinellas Site on Bruce B. Downs Boulevard.
The Pasco-Pinellas application was not conditioned on the use of any particular site. There is no CON statute or rule that requires applicants for new hospitals to identify a specific site in an application. Nor has there been any AHCA Final Order, DOAH Recommended Order or appellate court decision that required a CON applicant for a new hospital to identify a site for its proposed facility in the application.
It is not unusual for an applicant for a new hospital to not identify a site for its proposal in the application.
See, e.g., Central Florida Regional Hospital, Inc. vs. Agency for Health Care Administration, DOAH Case No. 05-0296 (DOAH August 23, 2006; AHCA January 4, 2007) in which neither of two competing applicants identified a specific site for their proposed new hospitals. Even where AHCA conditions approval of an application on the use of a specific site in its preliminary decision memorialized in a SAAR, a change of site prior to
issuance of a recommended order is not an impermissible amendment to an application. Baptist Medical Center of Clay, Inc. vs. Agency for Health Care Administration, DOAH Case No. 06-0555CON, (DOAH December 3, 2007; AHCA May 30, 2008).
In light of the change of site by Pasco-Pinellas, the applicant adjusted discrete line items on Schedule 1 of the application to reflect the costs associated with the new site. These adjustments did not change the nature or scope of the project. As such, they were not impermissible amendments to the application. See Vitas Health Care Corporation vs. Agency for Health Care Administration, DOAH Case No. 04-3856 (DOAH
October 19, 2006; AHCA December 18, 2006).
Adverse Impact
Statutory Review Criteria
Section 408.035, Florida Statutes, provides criteria by which "[t]he agency shall … review applications for health care facilities . . . ." None of the statutory CON review criteria set forth in subsections (1) through (10) explicitly provide for consideration of adverse impact on existing providers.
Providers in the District of a Proposed Facility
Subsection (2) of the statutory CON review criteria reads: "The availability, quality of care, accessibility, and extent of utilization of existing health care facilities and
health care services in the service district of the applicant." (emphasis supplied).
Described by AHCA as "the catch-all" provision of CON review criteria, see Baptist Medical Center of Clay, Inc., infra., at 84, Subsection (2) has been interpreted by AHCA to allow adverse impact on providers within the District to be cognizable under Subsection (2) of the CON statutory review criteria. Id.
Likewise, adverse impact on providers in the District or the subdistrict may be considered under Florida Administrative Code Rule 59C-1.008(e)2.b. (the "No Need Methodology Rule") which calls for consideration of the "[a]vailability, utilization and quality of like services in the district, subdistrict or both." (emphasis supplied).
By plain language, underscored above, both provisions unambiguously limit their application to providers within the district of the applicant. These provisions are of no avail to Pasco-Pinellas' claim with regard to providers outside the district.
Providers Outside the District
Pasco-Pinellas cites to Charter Medical Southeast, Inc. vs. State, Dep't. of Health and Rehabilitative Services,
495 So. 2d 759 (Fla. 1st DCA 1986) for the proposition that adverse impact to providers outside the district of the
applicant is to be considered. It also cites to administrative decisions that followed Charter, including Humana of Florida, Inc. vs. Agency for Health Care Administration, DOAH Case No.
92-1497 (DOAH February 9, 1993; AHCA June 3, 1993). In its
Final Order in Humana, AHCA stated, "The boundaries of a health planning area are not 'iron curtains.'" Id., AHCA Final Order, paragraph 16-17.
Charter and the administrative cases relied on by Pasco-Pinellas, however, preceded amendments to the CON statutory review criteria pertinent to the issue. The amendments deleted criteria that arguably called for CON consideration of adverse impact to providers outside the district. See, e.g., Ch. 2000-318, § 7, Laws of Fla., which repealed Section 408.035(1)(l), Fla. Stat. (1999).
Pasco-Pinellas advances the view that adverse impact on existing providers outside the district is cognizable under Subsection (7) of the statutory CON review criteria: "The extent to which the proposal will foster competition that promotes quality and cost-effectiveness." It cites to Hospice of Naples, Inc. vs. Agency for Health Care Administration, Case No. 07-1264 (DOAH March 3, 2008; AHCA April 3, 2008).
Hospice of Naples concerned adverse impact to a health care service in the same district as the district in which the applicant sought to establish a new service. In
Hospice of Naples, the issue of adverse impact outside the district was not subject to the close examination undertaken here. Furthermore, the "adverse impact" language in Hospice of Naples relative to Subsection (7) is cumulative to Hospice of
Naples' consideration of adverse impact within the district under Subsection (2).
Subsection (7) is not like Subsection (2) and the No Need Methodology Rule in the latters' limitation with reference to the "district." Argument is made by Pasco-Pinellas, therefore, that adverse impact to providers outside the District is cognizable under Subsection (7). Subsection (7), however, does not appear to be susceptible to the interpretation of
Pasco-Pinellas. Consideration under the subsection is limited to whether an application will foster competition that promotes quality and cost-effectiveness. Its language is in the affirmative. It does not call for consideration of the negative affects of competition on existing providers.
In short, Subsection (7) does not support consideration of competition that would hurt financial status or otherwise have adverse impact on a provider by fostering competition that would discourage or hinder quality and cost- effectiveness.
Pasco-Pinellas also draws support for its position under Subsection (1), of the statutory review criteria: "The
need for the health care facilities and health services being proposed." Pasco-Pinellas quite rightly points out that the consideration under Subsection (1) is not limited to factors or events within the District. Thus, for example, an opponent to approval of an application would be able to present evidence that residents of a district did not "need" a new facility in the district because the needs of the residents were met by a near-by facility outside the district. But that is quite a different matter from adverse impact to a provider outside the district of the applicant caused by the proposed facility. That a new facility in a district would create adverse impact to a facility outside the district has no bearing on whether the facility is needed, the inquiry to be conducted under Subsection (1). In other words, a facility that is needed satisfies Subsection (1) whether or not the facility will adversely impact providers outside the district.
In sum, there are no CON review criteria, in statute or rule, that allow adverse impact on providers outside the district of the applicant to be considered in this case.
USF's Institution-specific Need
Prior to 2004, Section 408.035 mandated the agency to review applications for certificates of need "in context with
. . . criteria" that included:
The needs of research and educational facilities, including, but not limited to, facilities with institutional training programs and community training programs for health care practitioners and for doctors of osteopathic medicine and medicine at the student, internship, and residency training levels.
§ 408.035(5), Fla. Stat. (2003). In 2004, however, the quoted provision was deleted from the CON review criteria. See Ch.
2004-383, § 5, Laws of Fla.
There is no longer any CON review criterion that provides for consideration of USF's need for a teaching hospital or its need for a hospital that would serve GME and teaching needs.
Application of Review Criteria; Comparative Review
Whether a new hospital is needed in Subdistrict 5-2 is not at issue since Community Hospital does not have standing to intervene. The Agency, Pasco-Pinellas, and BayCare all agree that a new hospital is needed in Subdistrict 5-2.
Furthermore, the evidence of record is that a new hospital is needed in the subdistrict and the ideal location for the hospital is in the Wesley Chapel area.
The need shown by the record in this proceeding is best met by Pasco-Pinellas because its hospital is more reasonably sized to meet the need in the subdistrict.
The larger size of BayCare's proposed facility is due to the teaching functions that BayCare hopes its facility will provide through collaboration with USF Health. The record demonstrates that USF Health needs a hospital that will provide teaching functions but that institution-specific need is not cognizable in this proceeding. The commitment on USF's part to participate at the facility proposed by BayCare, moreover, is questionable. The larger size of BayCare's facility, especially considering its cost, is not needed to serve the need for the hospital otherwise.
There is an issue of access for the residents of the Wesley Chapel area although the issue falls more clearly under "enhancement of access" rather than lack of access. Either of the two proposed hospitals will enhance access in the Wesley Chapel area.
Both applicants have the ability to provide quality of care.
Both applicants have available to them resources, including health personnel, management personnel and funds for capital and operating expenditures.
Both applicants proved the immediate and long-term financial feasibility of their proposals.
The costs and methods of the construction proposed by both applicants are reasonable. BayCare's costs are much
higher, but the higher costs are reasonably associated with the hospital BayCare proposes assuming that it fulfills the teaching function it proposes. Between the two applicants, however, Pasco-Pinellas' application is given greater weight under Subsection (8) of the statutory review criteria because of the questionable nature of USF's commitment to the facility proposed by BayCare. If USF failed to collaborate as envisioned by the BayCare application, the cost of the BayCare proposal would not be reasonable.
Both applicants have good records of past provision of health care services to Medicaid patients and the medically indigent. Both propose adequate provision of such care in their applications.
The Pasco-Pinellas application meets the criteria for approval of its application.
The Pasco-Pinellas proposal is superior to BayCare's.
Had the language in the statutory CON review criteria that favored teaching hospitals not been repealed in 2004, were the BayCare proposal to meet the statutory definition of "teaching hospital" and were it to have been so determined by AHCA, and had the BayCare USF Agreement not provided USF with the option to terminate its participation in the BayCare project under the terms expressed in the agreements so as to indicate a firmer commitment on the part of USF to the proposal, the
BayCare application would fare better than it does under present circumstances in comparison to Pasco-Pinellas'. As it is, comparative review of the two competing applications dictates the determination that the Pasco-Pinellas proposal is superior. Pasco-Pinellas' application should be approved; BayCare's should be denied.
Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Agency for Health Care Administration approve CON 9975, Pasco-Pinellas' application for a new hospital in AHCA Subdistrict 5-2, and deny CON 9977, BayCare's application for a new hospital in the same subdistrict.
DONE AND ENTERED this 28th day of October, 2008, in Tallahassee, Leon County, Florida.
S
DAVID M. MALONEY
Administrative Law Judge
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-3060
(850) 488-9675 SUNCOM 278-9675
Fax Filing (850) 921-6847 www.doah.state.fl.us
Filed with the Clerk of the Division of Administrative Hearings this 28th day of October, 2008.
COPIES FURNISHED:
Richard J. Shoop, Agency Clerk
Agency for Health Care Administration 2727 Mahan Drive, Building 3
Mail Station 3
Tallahassee, Florida 32308
Craig H. Smith, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Building 3
Mail Station 3
Tallahassee, Florida 32308
Karin M. Byrne, Esquire
Agency for Health Care Administration 2727 Mahan Drive, Building 3
Mail Station 3
Tallahassee, Florida 32308
Stephen K. Boone, Esquire
Boone, Boone, Boone, Koda & Frook, P.A. 1001 Avenida Del Circo
Post Office Box 1596 Venice, Florida 34284
Jonathan L. Rue, Esquire
Parker, Hudson, Rainer & Dobbs, LLP 1500 Marquis Two Tower
285 Peachtree Center Avenue Northeast Atlanta, Georgia 30303
Robert A. Weiss, Esquire
Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200
118 North Gadsden Street Tallahassee, Florida 32301
R. David Prescott, Esquire Rutledge, Ecenia, Purnell &
Hoffman, P.A.
215 South Monroe Street, Suite 420 Post Office Box 551
Tallahassee, Florida 32302-0551
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 |
|---|---|---|
| Dec. 31, 2008 | Agency Final Order | |
| Oct. 28, 2008 | Recommended Order | Pasco-Pinellas` application for a new hospital to fill the need in eastern Pasco County is superior to BayCare`s. |
