STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LEE MEMORIAL HEALTH SYSTEM,

vs.

Petitioner,

Case No. 13-2508CON

AGENCY FOR HEALTH CARE ADMINISTRATION,

Respondent.

/ NAPLES COMMUNITY HOSPITAL, INC., d/b/a NCH NORTH NAPLES HOSPITAL CAMPUS,

Petitioner,

vs.

AGENCY FOR HEALTH CARE ADMINISTRATION,

Respondent.

/

Case No. 13-2558CON

RECOMMENDED ORDER

Pursuant to notice, an evidentiary hearing was conducted in these consolidated cases on November 4 through 8 and 12 through 15, 2013, in Tallahassee, Florida, before Administrative Law Judge Elizabeth W. McArthur of the Division of Administrative Hearings.

APPEARANCES

For Petitioner, Lee Memorial Health System:

Seann M. Frazier, Esquire Jonathan L. Rue, Esquire

Parker, Hudson, Rainer & Dobbs, LLP

215 South Monroe Street, Suite 750 Tallahassee, Florida 32301

Karl David Acuff, Esquire

Law Offices of Karl David Acuff, P.A. 1615 Village Square Boulevard, Suite 2

Tallahassee, Florida 32309-2770

For Petitioner, Naples Community Hospital, Inc., d/b/a NCH North Naples Hospital Campus:

R. Terry Rigsby, Esquire Brian Newman, Esquire Pennington, Moore, Wilkinson,

Bell and Dunbar, P.A. Post Office Box 10095

Tallahassee, Florida 32302-2095

For Respondent, Agency for Health Care Administration: Richard Saliba, Esquire

Michael Hardy, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308 STATEMENT OF THE ISSUE

The issue in this case is whether the certificate of need (CON) application filed by Lee Memorial Health System (LMHS) to establish a new 80-bed hospital in Lee County, Florida, should be approved or denied.

PRELIMINARY STATEMENT

On March 6, 2013, LMHS filed a CON application to establish a new 80-bed general acute care hospital in Lee County, Florida.

The Agency for Health Care Administration (AHCA) assigned the LMHS CON application number 10185.

On June 7, 2013, AHCA issued its State Agency Action Report (SAAR), which set forth its preliminary decision to deny the LMHS CON application. LMHS timely filed a petition for an administrative hearing to contest AHCA’s preliminary decision.

Naples Community Hospital, Inc. (NCH), doing business as NCH North Naples Hospital Campus (North Naples), an existing hospital located within the service area targeted by the proposed new hospital, timely filed a petition for an administrative hearing to support AHCA’s preliminary decision. AHCA referred the two petitions to the Division of Administrative Hearings, where they were consolidated and set for hearing.

Prior to the hearing, the parties filed a Joint Pre-Hearing Stipulation in which they set forth several admitted facts and agreed statements of law. The parties’ stipulations are incorporated into this Recommended Order to the extent relevant.

At the final hearing, LMHS presented the testimony of the following witnesses: Donald F. Eslick; Leonard “Scotty” Wood; Dave Kistel, accepted as an expert in hospital facility management and compliance with building code requirements of AHCA’s Office of

Plans and Construction; Warren Panem, accepted as an expert in emergency medical service (EMS) operations and quality improvement; Larry Hobbs, M.D., accepted as an expert in emergency medicine and emergency room operations; Rick Knapp, accepted as an expert in health care finance; James Nathan, accepted as an expert in hospital and health care systems administration; Tom Davidson, accepted as an expert in health care planning; and Lisa Sgarlata, accepted as an expert in hospital administration, nursing administration, and emergency department operation.

LMHS Exhibits 3, 5, 7, 8, 10, 11, 13 through 20, 23, 27

through 29, 31 through 39, 43 through 52, part of 53 (pages 14-17 only), 65, and 70 were admitted in evidence. In addition, official recognition was taken of Lee County Ordinance No. 08-16.

NCH presented the testimony of the following witnesses: Allen Weiss, M.D., accepted as an expert in hospital administration, geriatric rheumatology, and internal medicine;

Michelle Thoman, accepted as an expert in hospital administration and clinical care; Jeffrey Panozzo, M.D., accepted as an expert in emergency medicine and area EMS protocol; Elizabeth Novakovich; Kevin Cooper, accepted as an expert in hospital administration; Darryl Weiner, accepted as an expert in health care financial analysis; and Sharon Gordon-Girvin, accepted as an expert in health care planning.

NCH Exhibits 1, 3, 5, 6, 15 through 17, 19 through 21, part

of 22 (page 1 only), 23, 26, 27, 31, 34, 36 through 38, 40, part

of 43 (petition and pages 93-111 only), 45, 46, 48 through 50, 52,

part of 53 (pages 1-19 and 52-53 only), 59, and 65 through 70 were admitted in evidence.

In addition, post-hearing, the undersigned is admitting NCH Exhibit 64, the four-page Harvard Jolly architectural plans submitted with LMHS’s CON application. When offered in evidence by NCH, counsel for LMHS stated that the exhibit duplicated appendix O to the CON application, in evidence as LMHS Exhibit 3. (Tr. 1387). However, upon closer inspection, LMHS Exhibit 3, as offered by LMHS and admitted, did not include appendix N (community support letters) or appendix O. Therefore, NCH Exhibit

64 is admitted in lieu of the missing CON application appendix O.

AHCA presented the testimony of Jeffrey N. Gregg, accepted as an expert in health planning and certificate of need. AHCA’s Exhibits 1 through 3 were admitted in evidence.

At the conclusion of the hearing, the parties requested 60 days after the hearing transcript filing date to file their proposed recommended orders, and also requested an enlarged page limit of 50 pages; the undersigned agreed to both requests. The 11-volume Transcript of the final hearing was filed on December 2, 2013. LMHS and NCH timely filed proposed recommended orders, and

AHCA timely filed a joinder in NCH’s filing. The parties’ filings were given due consideration in preparing this Recommended Order.

FINDINGS OF FACT

1. The Parties

   
   

   1. The Applicant, LMHS

      
      

      1. The applicant, LMHS, is a public, not-for-profit health care system, created in 1968 by special act of the Legislature. A ten-member publicly elected board of directors is responsible for overseeing LMHS on behalf of the citizens of Lee County. LMHS does not have taxing power.

      2. LMHS is the dominant provider of hospital services in Lee County. LMHS operates four hospital facilities under three separate hospital licenses. The four hospital campuses are dispersed throughout Lee County: borrowing the sub-county area descriptors adopted by LMHS’s health planning expert, LMHS operates one hospital in northwest Lee County, one hospital in central Lee County, and two hospitals in south Lee County.1/ At present, the four hospital campuses are licensed to operate a total of 1,423 hospital beds. The only non-LMHS hospital in Lee County is 88-bed Lehigh Regional Medical Center (Lehigh Regional) in northeast Lee County, owned and operated by a for-profit hospital corporation, Health Management Associates, Inc. (HMA).

      3. LMHS has a best-practice strategy of increasing and concentrating clinical specialties at each of its existing

         
         

         hospitals. The LMHS board has already approved which specialty service lines will be the focus at each of its four hospitals. Although there is still some duplication of specialty areas, LMHS has tried to move more to clinical specialization concentrated at a specific hospital to lower costs, better utilize resources, and also to concentrate talent and repetitions, leading to improved clinical outcomes.

      4. Currently licensed to operate 415 hospital beds, Lee Memorial Hospital (Lee Memorial) is located in downtown Fort Myers in central Lee County. The hospital was initially founded in 1916 and established at its current location in the 1930s. In the 1960s, a five-story clinical tower was constructed on the campus, to which three more stories were added in the 1970s. The original 1930s building was demolished and its site became surface parking. Today, Lee Memorial provides a full array of acute care services, plus clinical specialties in such areas as orthopedics, neurology, oncology, and infectious diseases. Lee Memorial’s licensed bed complement includes 15 adult inpatient psychiatric beds (not in operation), and 60 beds for comprehensive medical rehabilitation (CMR), a tertiary health service.2/ Lee Memorial is a designated stroke center, meaning it is a destination to which EMS providers generally seek to transport stroke patients, bypassing any closer hospital that lacks stroke center designation. Lee Memorial operates the only verified level II adult trauma center in the

         
         

         seven-county region designated AHCA district 8. Lee Memorial also is home to a new residency program for medical school graduates.

      5. At its peak, Lee Memorial operated as many as 600 licensed beds at the single downtown Fort Myers location. In 1990, when hospital beds were still regulated under the CON program, Lee Memorial transferred its right to operate 220 beds to establish a new hospital facility to the south, HealthPark Medical Center (HealthPark). One reason to shift some of its regulated hospital beds to the south was because of the growing population in the southern half of Lee County. Another reason was to ensure a paying patient population by moving beds away from Lee Memorial to a more affluent area. That way, LMHS would have better system balance, and be better able to bear the financial burden of caring for disproportionately high numbers of Medicaid and charity care patients at the downtown safety-net hospital. That was a reasonable and appropriate objective.

      6. HealthPark, located in south Lee County ZIP code 33908, to the south and a little to the west of Lee Memorial, now operates 368 licensed beds--320 general acute care and 48 neonatal intensive care beds. HealthPark’s specialty programs and services include cardiac care, open heart surgery, and urology. HealthPark is a designated STEMI3/ (heart attack) center, a destination to which EMS providers generally seek to transport heart attack patients, bypassing any closer hospital lacking STEMI center

         
         

         designation. HealthPark also concentrates in specialty women’s and children’s services, offering obstetrics, neonatal intensive care, perinatal intensive care, and pediatrics. HealthPark is a state-designated children’s cancer center. HealthPark’s open heart surgery, neonatal and perinatal intensive care, and pediatric oncology services are all tertiary health services.

      7. In 1996, LMHS acquired its third hospital, Cape Coral Medical Center (Cape Coral), from another entity.4/ The acquisition of Cape Coral was another step in furtherance of the strategy to improve LMHS’s overall payer mix by establishing hospitals in affluent areas. Cape Coral is located in northwest Lee County, and is licensed to operate 291 general acute care beds. Cape Coral’s specialty concentrations include obstetrics, orthopedics, gastroenterology, urology, and stroke treatment. Cape Coral recently achieved primary stroke center designation, making it an appropriate destination for EMS transport of stroke patients, according to Lee County EMS transport guidelines.

      8. The newest LMHS hospital, built in 2007-2008 and opened in 2009, is Gulf Coast Medical Center (Gulf Coast) in south Lee County ZIP code 33912.5/ With 349 licensed beds, Gulf Coast offers tertiary services including kidney transplantation and open heart surgery, and specialty services including obstetrics, stroke treatment, surgical oncology, and neurology. Gulf Coast is both a designated primary stroke center and a STEMI center.

         
         

   2. NCH

      
      

      1. NCH is a not-for-profit system operating two hospital facilities with a combined 715 licensed beds in Collier County, directly to the south of Lee County. Naples Community Hospital (Naples Community) is in downtown Naples. NCH North Naples Hospital Campus (North Naples) is located in the northernmost part of Collier County, near the Collier-Lee County line.6/ The Petitioner in this case is NCH doing business as North Naples.

      2. North Naples is licensed to operate 262 acute care beds.

         
         

         It provides an array of acute care hospital services, specialty services including obstetrics and pediatrics, and tertiary health services including neonatal intensive care and CMR.

   3. AHCA

      
      

      1. AHCA is the state health planning agency charged with administering the CON program pursuant to the Health Facility and Services Development Act, sections 408.031-408.0455, Florida Statutes (2013).7/ AHCA is responsible for the coordinated planning of health care services in the state. To carry out its responsibilities for health planning and CON determinations, AHCA maintains a comprehensive health care database, with information that health care facilities are required to submit, such as utilization data. See § 408.033(3), Fla. Stat.

      2. AHCA conducts its health planning and CON review based on “health planning service district[s]” defined by statute.

         
         

         See § 408.032(5), Fla. Stat. Relevant in this case is district 8,

         
         

         which includes Sarasota, DeSoto, Charlotte, Lee, Glades, Hendry, and Collier Counties. Additionally, by rule, AHCA has adopted acute care sub-districts, originally utilized in conjunction with an acute care bed need methodology codified as Florida Administrative Code Rule 59C-1.038. The acute care bed need rule was repealed in 2005, following the deregulation of acute care beds from CON review. However, AHCA has maintained its acute care sub-district rule, in which Lee County is designated sub-district 8-5. Fla. Admin. Code R. 59C-2.100(3)(h)5.

2. The Proposed Project

   
   

   1. LMHS proposes to establish a new 80-bed general hospital on the southeast corner of U.S. Highway 41 and Coconut Road in Bonita Springs (ZIP code 34135),8/ in south Lee County. The CON application described the hospital services to be offered at the proposed new hospital in only the most general fashion--medical- surgical services, emergency services, intensive care, and telemetry services. Also planned for the proposed hospital are outpatient care, community education, and chronic care management

      --all non-hospital, non-CON-regulated services.

      
      

   2. At hearing, LMHS did not elaborate on the planned hospital services for the proposed new facility. Instead, no firm decisions have been made by the health system regarding what types of services will be offered at the new hospital.

      
      

   3. The proposed site consists of three contiguous parcels, totaling approximately 31 acres. LMHS purchased a 21-acre parcel in 2004, with a view to building a hospital there someday. LMHS later added to its holdings when additional parcels became available. At present, the site’s development of regional impact (DRI) development order does not permit a hospital, but would allow the establishment of a freestanding emergency department.

   4. The proposed hospital site is adjacent to the Bonita Community Health Center (BCHC). Jointly owned by LMHS and NCH, BCHC is a substantial health care complex described by LMHS President James Nathan as a “hospital without walls.” This 100,000 square-foot complex includes an urgent care center, ambulatory surgery center, and physicians’ offices. A wide variety of outpatient health care services are provided within the BCHC complex, including radiology/diagnostic imaging, endoscopy, rehabilitation, pain management, and lab services.

   5. Although LMHS purchased the adjacent parcels with the intent of establishing a hospital there someday, representatives of LMHS expressed their doubt that “someday” has arrived; they have candidly admitted that this application may be premature.

3. CON Application Filing

   
   

   1. LMHS did not intend to file a CON application when it did, in the first hospital-project review cycle of 2013. LMHS did not file a letter of intent (LOI) by the initial LOI deadline to

      
      

      signify its intent to file a CON application. However, LMHS’s only Lee County hospital competitor, HMA, filed an LOI on the deadline day. LMHS learned that the project planned by HMA was to replace Lehigh Regional with a new hospital, which would be relocated to south Lee County, a little to the north of the Estero/Bonita Springs area.

   2. LMHS was concerned that if the HMA application went forward and was approved, that project would block LMHS’s ability to pursue a hospital in Bonita Springs for many years to come. Therefore, in reaction to HMA’s LOI, LMHS filed a “grace period” LOI, authorized under AHCA’s rules, to submit a competing proposal for a new hospital in south Lee County. But for the HMA LOI, there would have been no grace period for a competing proposal, and LMHS would not have been able to apply when it did.

   3. Two weeks later, on the initial application filing deadline, LMHS submitted a “shell” application. LMHS proceeded to quickly prepare the bulk of its application to file five weeks later by the omissions response deadline of April 10, 2013.

   4. Shortly before the omissions response deadline,

      
      

      Mr. Nathan met with Jeffrey Gregg, who is in charge of the CON program as director of AHCA’s Florida Center for Health Information and Policy Analysis, and Elizabeth Dudek, AHCA Secretary, to discuss the LMHS application. Mr. Nathan told the AHCA representatives that LMHS was not really ready to file a CON

      
      

      application, but felt cornered and forced into it to respond to the HMA proposal. Mr. Nathan also discussed with AHCA representatives the plan to transfer 80 beds from Lee Memorial, but AHCA told Mr. Nathan not to make such a proposal. Since beds are no longer subject to CON regulation, hospitals are free to add or delicense beds as they deem appropriate, and therefore, an offer to delicense beds adds nothing to a CON proposal.

   5. LMHS’s CON application was timely filed on the omissions deadline. A major focus of the application was on why LMHS’s proposal was better than the expected competing HMA proposal. However, HMA did not follow through on its LOI by filing a competing CON application.

   6. The LMHS CON application met the technical content requirements for a general hospital CON application, including an assessment of need for the proposed project. LMHS highlighted the following themes to show need for its proposed new hospital:

      • South Lee County “should have its own acute care hospital” because it is a fast-growing area with an older population; by 2018, the southern ZIP codes of Lee County will contain nearly a third of the county’s total population.

        
        

      • The Estero/Bonita Springs community strongly supports the proposed new hospital.

        
        

      • Approval of the proposed new hospital “will significantly reduce travel times for the service area’s residents and will thereby significantly improve access to acute care services,” as shown by estimated travel times to local hospitals for residents in the proposed primary service area and by Lee County EMS transport logs.

        
        

      • LMHS will agree to a CON condition to delicense 80 beds at Lee Memorial, which are underutilized, so that there will be no net addition of acute care beds to the sub-district’s licensed bed complement.

      
      

4. AHCA’s Preliminary Review and Denial

   
   

   1. AHCA conducted its preliminary review of the CON application in accordance with its standard procedures.

   2. As part of the preliminary review process for general hospital applications, the CON law now permits existing health care facilities whose established programs may be substantially affected by a proposed project to submit a detailed statement in opposition. Indeed, such a detailed statement is a condition precedent to the existing provider being allowed to participate as a party in any subsequent administrative proceedings conducted with respect to the CON application. See § 408.037(2), Fla. Stat. North Naples timely filed a detailed statement in opposition to LMHS’s proposed new hospital. LMHS timely filed a response to North Naples’ opposition submittal, pursuant to the same law.

   3. After considering the CON application, the North Naples opposition submittal, and the LMHS response, AHCA prepared its SAAR in accordance with its standard procedures. A first draft of the SAAR was prepared by the CON reviewer; the primary editor of the SAAR was AHCA CON unit manager James McLemore; and then a second edit was done by Mr. Gregg. Before the SAAR was finalized, Mr. Gregg met with the AHCA Secretary to discuss the proposed

      
      

      decision. The SAAR sets forth AHCA’s preliminary findings and preliminary decision to deny the LMHS application.

   4. Mr. Gregg testified at hearing as AHCA’s representative, as well as in his capacity as an expert in health planning and CON review. Through Mr. Gregg’s testimony, AHCA reaffirmed its position in opposition to the LMHS application, and Mr. Gregg offered his opinions to support that position.

5. Statutory and Rule Review Criteria

   
   

   1. The framework for consideration of LMHS’s proposed project is dictated by the statutory and rule criteria that apply to general hospital CON applications. The applicable statutory review criteria, as amended in 2008 for general hospital CON applications, are as follows:

      1. The need for the health care facilities and health services being proposed.

         
         

      2. The availability, accessibility, and extent of utilization of existing health care facilities and health services in the service district of the applicant.

         
         

         * * *

         
         

         (e) The extent to which the proposed services will enhance access to health care for residents of the service district.

         
         

         * * *

         
         

         (g) The extent to which the proposal will foster competition that promotes quality and cost-effectiveness.

         
         

         * * *

         
         

         (i) The applicant’s past and proposed provision of health care services to Medicaid patients and the medically indigent.

         
         

         § 408.035(1), Fla. Stat.; § 408.035(2), Fla. Stat. (identifying review criteria that apply to general hospital applications).

   2. AHCA has not promulgated a numeric need methodology to calculate need for new hospital facilities. In the absence of a numeric need methodology promulgated by AHCA for the project at issue, Florida Administrative Code Rule 59C-1.008(2)(e) applies.

      This rule provides that

      
      

      the applicant is responsible for demonstrating need through a needs assessment methodology which must include, at a minimum, consideration of the following topics, except where they are inconsistent with the applicable statutory and rule criteria:

      
      

      1. Population demographics and dynamics;

         
         

      2. Availability, utilization and quality of like services in the district, subdistrict or both;

         
         

      3. Medical treatment trends; and

         
         

      4. Market conditions.

      
      

   3. Florida Administrative Code Rule 59C-1.030 also applies.

      
      

      This rule elaborates on “health care access criteria” to be considered in reviewing CON applications, with a focus on the needs of medically underserved groups such as low income persons.

      
      

6. LMHS’s Needs Assessment

   
   

   1. LMHS set forth its assessment of need for the proposed new hospital, highlighting the population demographics of the area proposed to be served.

      1. Theme: South Lee County’s substantial population

         
         

   2. The main theme of LMHS’s need argument is that south Lee County “should have its own acute care hospital” because it is a fast-growing area with a substantial and older population. (LMHS Exh. 3, p. 37). LMHS asserts that south Lee County’s population is sufficient to demonstrate the need for a new hospital because “by 2018, the southern ZIP codes of Lee County will contain nearly a third of the county’s total population.” Id.

   3. LMHS identified eight ZIP codes--33908, 33912, 33913, 33928, 33931, 33967, 34134, and 34135--that constitute “south Lee County.” (LMHS Exh. 3, Table 4). Claritas population projections, reasonably relied on by the applicant, project that by 2018 these eight ZIP codes will have a total population of 200,492 persons, approximately 29 percent of the projected population of 687,795 for all of Lee County. The age 65-and-older population in south Lee County is projected to be 75,150, approximately 40 percent of the projected 65+ population of 185,655 for all of Lee County.

   4. A glaring flaw in LMHS’s primary need theme is that the eight-ZIP-code “south Lee County” identified by LMHS is not

      
      

      without its own hospital. That area already has two of the county’s five existing hospitals: Gulf Coast and HealthPark.

   5. In advancing its need argument, LMHS selectively uses different meanings of “south Lee County.” When describing the “south Lee County” that deserves a hospital of its own, LMHS means the local Estero/Bonita Springs community in and immediately surrounding the proposed hospital site in the southernmost part of south Lee County. However, when offering up a sufficient population to demonstrate need for a new hospital, “south Lee County” expands to encompass an area that appears to be half, if not more, of the entire county.

   6. The total population of the Estero/Bonita Springs community is 76,753, projected to grow to 83,517 by 2018--much more modest population numbers compared to those highlighted by the applicant for the expanded version of south Lee County. While the rate of growth for Estero/Bonita Springs is indeed fast compared to the state and county growth rates, this observation is misleading because the actual numbers are not large.

   7. LMHS also emphasizes the larger proportion of elderly in the Estero/Bonita Springs community, which is also expected to continue to grow at a fast clip. Although no specifics were offered, it is accepted as a generic proposition that elderly persons are more frequent consumers of acute care hospital services. By the same token, elderly persons who require

      
      

      hospitalization tend to be sicker, and to present greater risks of potential complications from comorbidities, than non-elderly patients. As a result, for example, as discussed below, Lee County EMS’s emergency transport guidelines steer certain elderly patients to hospitals with greater breadth of services than the very basic hospital planned by LMHS, “as a reasonable precaution.”

      1. Projections of a Well-Utilized Proposed Hospital

         
         

   8. Mr. Davidson, LMHS’s health planning consultant, was provided with the proposed hospital’s location and number of beds, and was asked to develop the need assessment and projections. No evidence was offered regarding who determined that the proposed hospital should have 80 beds, or how that determination was made.

   9. Mr. Davidson set about to define the proposed primary and secondary service areas, keeping in mind that section 408.037(2) now requires a general hospital CON application to specifically identify, by ZIP codes, the primary service area from which the proposed hospital is expected to receive 75 percent of its patients, and the secondary service area from which 25 percent of the hospital’s patients are expected.

   10. Mr. Davidson selected six ZIP codes for the primary service area. He included the three ZIP codes comprising the Estero/Bonita Springs community. He also included two ZIP codes that are closer to existing hospitals than to the proposed site, according to the drive-time information he compiled. In addition,

       
       

       he included one ZIP code in which there is already a hospital (Gulf Coast, in 33912). Mr. Davidson’s opinion that this was a reasonable, and not overly aggressive, primary service area was not persuasive;9/ the criticisms by the other expert health planning witnesses were more persuasive and are credited.

   11. Mr. Davidson selected six more ZIP codes for the secondary service area. These include: two south Lee County ZIP codes that are HealthPark’s home ZIP code (33908) and a ZIP code to the west of HealthPark (33931); three central Lee County ZIP codes to the north of HealthPark and Gulf Coast; and one Collier County ZIP code that is North Naples’ home ZIP code.

       Mr. Davidson’s opinion that this was a reasonable, and not overly aggressive, secondary service area was not persuasive; the criticisms by the other expert health planning witnesses were more persuasive and are credited.

   12. As noted above, the existing LMHS hospitals provide tertiary-level care and a number of specialty service lines and designations that have not been planned for the proposed new hospital. Conversely, there are no services proposed for the new hospital that are not already provided by the existing LMHS hospitals. In the absence of evidence that the proposed new hospital will offer services not available at closer hospitals, it is not reasonable to project that any appreciable numbers of patients will travel farther, and in some instances, bypass one or

       
       

       more larger existing hospitals with greater breadth of services, to obtain the same services at the substantially smaller proposed new hospital. As aptly observed by AHCA’s representative,

       Mr. Gregg, the evidence to justify such an ambitious service area for a small hospital providing basic services was lacking:

       So if we were to have been given more detail[:] here’s the way we’re going to fit this into our system, here’s -- you know, here’s why we can design this service area as big as we did, even though it would require a lot of people to drive right by HealthPark or right by Gulf Coast to go to this tiny basic hospital for some reason. I mean, there are fundamental basics about this that just make us scratch our head. (Tr. 1457).

       
       

   13. The next step after defining the service area was to develop utilization projections, based on historic utilization data for service area residents who obtained the types of services to be offered by the proposed hospital.

   14. In this case, the utilization projections suffer from a planning void. Mr. Nathan testified that no decisions have been made regarding what types of services, other than general medical- surgical services, will be provided at the proposed new hospital.

   15. In lieu of information regarding the service lines actually planned for the proposed hospital, Mr. Davidson used a subtractive process, eliminating “15 or so” service lines that the proposed hospital either “absolutely wasn’t going to provide,” or that, in his judgment, a small hospital of this type would not

       
       

       provide. The service lines he excluded were: open heart surgery; trauma; neonatal intensive care; inpatient psychiatric, rehabilitation, and substance abuse; and unnamed “others.” His objective was to “narrow the scope of available admissions down to those that a smaller hospital could reasonably aspire to care for.” (Tr. 671-672). That objective is different from identifying the types of services expected because they have been planned for this particular proposed hospital.

   16. The testimony of NCH’s health planner, as well as Mr. Gregg, was persuasive on the point that Mr. Davidson’s

       approach was over-inclusive. The historic data he used included a number of service lines that are not planned for the proposed hospital and, thus, should have been subtracted from the historic utilization base. These include clinical specialties that are the focus of other LMHS hospitals, such as infectious diseases, neurology, neurosurgery, orthopedics, and urology; cardiac care, such as cardiac catheterization and angioplasty that are not planned for the proposed hospital; emergency stroke cases that will be directed to designated stroke centers; pediatric cases that will be referred to HealthPark; and obstetrics, which is not contemplated for the proposed hospital according to the more credible evidence.10/

   17. Mr. Davidson’s market share projections suffer from some of the same flaws as the service area projections: there is

       
       

       no credible evidence to support the assumption that the small proposed new hospital, which has planned to offer only the most basic hospital services, will garner substantial market shares in ZIP codes that are closer to larger existing hospitals providing a greater breadth of services. In addition, variations in market share projections by ZIP code raise questions that were not adequately explained.11/

   18. Overall, the “high-level” theme offered by LMHS’s health planner--that it is unnecessary to know what types of services will be provided at the new hospital in order to reasonably project utilization and market share--was not persuasive. While it is possible that utilization of the proposed new hospital would be sufficient to suggest it is filling a need, LMHS did not offer credible evidence that that is so.

       1. Bed Need Methodology for Proposed Service Area

          
          

   19. Mr. Davidson projected bed need for the proposed service area based on the historic utilization by residents of the 12 ZIP codes in the service lines remaining after his subtractive process, described above. Other than using an over-inclusive base (as described above), Mr. Davidson followed a reasonable approach to determine the average daily census generated by the proposed service area residents, and then applying a 75 percent occupancy standard to convert the average daily census into the number of beds supported by that population. The results of this

       
       

       methodology show that utilization generated by residents of the six-ZIP code primary service area would support 163 hospital beds; and utilization generated by residents of the six-ZIP code secondary service area would support 225 beds in the secondary service area. The total gross bed need for the proposed service area adds up to 388 beds.

   20. However, the critical next step was missing: subtract from the gross number of needed beds the number of existing beds, to arrive at the net bed need (or surplus). In the primary service area, 163 beds are needed, but there are already 349 beds at Gulf Coast. Thus, in the primary service area, there is a surplus of 186 beds, according to the applicant’s methodology. In the secondary service area, 225 beds are needed, but there are already 320 acute care beds at HealthPark and 262 acute care beds at North Naples. Thus, in the secondary service area, there is a surplus of 357 beds, according to the applicant’s methodology.

   21. While it is true that Gulf Coast and HealthPark use some of their beds to provide some tertiary and specialty services that were subtracted out of this methodology, and all three hospitals presumably provide services to residents outside the proposed service area, Mr. Davidson made no attempt to measure these components. Instead, the LMHS bed need methodology ignores completely the fact that there is substantial existing bed capacity--931 acute care beds--within the proposed service area.

       
       

       1. Availability and Utilization of Existing Hospitals

          
          

   22. LMHS offered utilization data for the 12-month period ending June 30, 2012, for Lee County hospitals. Cape Coral’s average annual occupancy rate was 57.6 percent; HealthPark’s was

       77.5 percent; Lee Memorial’s was 55.9 percent; Lehigh Regional’s was 44 percent; and Gulf Coast’s was 79.8 percent.

   23. Mr. Davidson acknowledged that a reasonable occupancy standard to plan for a small hospital the size of the proposed hospital is 75 percent. For a larger operational hospital, 80 percent is a good standard to use, indicating it is well-utilized. Judged by these standards, only HealthPark and Gulf Coast come near the standard for a well-utilized hospital.

   24. As noted in the CON application, these annual averages do not reflect the higher utilization during peak season. According to the application, HealthPark’s occupancy was 88.2 percent and Gulf Coast’s was 86.8 percent for the peak quarter of January-March 2012.

   25. LMHS did not present utilization information for North Naples, even though that hospital is closest to the proposed hospital site and is within the proposed service area targeted by the applicant. For the same 12-month period used for the LMHS hospitals, North Naples’ average annual occupancy rate was 50.97 percent and for the January-March 2012 “peak season” quarter, North Naples’ occupancy was 60.68 percent.

       
       

   26. At the final hearing, LMHS did not present more recent utilization data, choosing instead to rely on the older information in the application. Based on the record evidence, need is not demonstrated by reference to the availability and utilization of existing hospitals in the proposed service area or in the sub-district.

       1. Community Support

       
       

   27. LMHS argued that the strong support by the Estero/Bonita Springs community should be viewed as evidence of need for the proposed new hospital. As summarized in the SAAR, approximately 2,200 letters of support were submitted by local government entities and elected officials, community groups, and area residents, voicing their support for the proposed hospital. LMHS chose not to submit these voluminous support letters in the record. The AHCA reviewer noted in the SAAR that none of the support letters documented instances in which residents of the proposed service area needed acute care hospital services but were unable to obtain them, or suffered poor or undesirable health outcomes due to the current availability of hospital services.

   28. Two community members testified at the final hearing to repeat the theme of support by Estero/Bonita Springs community residents and groups. These witnesses offered anecdotal testimony about traffic congestion during season, population growth, and development activity they have seen or heard about. They

       
       

       acknowledged the role their community organization has played in advocating for a neighborhood hospital, including developing and disseminating form letters for persons to express their support. Consistent with the AHCA reviewer’s characterization of the support letters, neither witness attested to any experiences needing acute care hospital services that they were unable to obtain, or any experiences in which they had poor or undesirable outcomes due to the currently available hospital services. There was no such evidence offered by any witness at the final hearing.

   29. Mr. Gregg characterized the expression of community support by the Estero/Bonita Springs community as typical “for an upper income, kind of retiree-oriented community where, number one, people anticipate needing to use hospitals, and number two, people have more time on their hands to get involved with things like this.” (Tr. 1433).

   30. Mr. Gregg described an extreme example of community support for a prior new hospital CON application, in which AHCA received 21,000 letters of support delivered in two chartered buses that were filled with community residents who wanted to meet with AHCA representatives. Mr. Gregg identified the project as the proposed hospital for North Port, which was ultimately denied following an administrative hearing.

   31. In the North Port case, the Administrative Law Judge made this apt observation with regard to the probative value of

       
       

       the overwhelming community support offered there: “A community’s desire for a new hospital does not mean there is a ‘need’ for a new hospital. Under the CON program, the determination of need for a new hospital must be based upon sound health planning principles, not the desires of a particular local government or its citizens.” Manatee Memorial Hospital, L.P. v. Ag. for Health

       Care Admin., et al., Case Nos. 04-2723CON, 04-3027CON, and 04- 3147CON (Fla. DOAH Dec. 15, 2005; Fla. AHCA April 11, 2006), RO at

       26, ¶ 104, adopted in FO. That finding, which was adopted by AHCA in its final order, remains true today, and is adopted herein.

7. Access

   
   

   1. The statutory review criteria consider access issues from two opposing perspectives: from the perspective of the proposed project, consideration is given to the extent to which the proposal will enhance access to health care services for the applicant’s service district; without the proposed project, consideration is given to the accessibility of existing providers of the health care services proposed by the applicant. Addressing this two-part access inquiry, LMHS contends that the proposed hospital would significantly reduce travel times and significantly enhance access to acute care services.

   2. Three kinds of access are routinely considered in CON cases: geographic access, in this case the drive times by individuals to hospitals; emergency access, i.e., the time it

      
      

      takes for emergency ground transport (ambulances) to deliver patients to hospitals; and economic access, i.e., the extent to which hospital services are provided to Medicaid and charity care patients.

      1. Geographic Access (drive times to hospitals)

         
         

   3. For nearly all residents of the applicable service district, district 8, the proposed new hospital was not shown to enhance access to health care at all. The same is true for nearly all residents of sub-district 8-5, Lee County.

   4. LMHS was substantially less ambitious in its effort to show access enhancement, limiting its focus on attempting to prove that access to acute care services would be enhanced for residents of the primary service area. LMHS did not attempt to prove that there would be any access enhancement to acute care services for residents of the six-ZIP code secondary service area.

   5. As set forth in the CON application, Mr. Davidson used online mapping software to estimate the drive time from each ZIP code in the primary service area to the four existing LMHS hospitals, the two NCH hospitals, and another hospital in north Collier County, Physicians Regional-Pine Ridge.

   6. The drive-time information offered by the applicant showed the following: the drive time from ZIP code 33912 was less to three different existing LMHS hospitals than to the proposed new hospital; the drive time from ZIP code 33913 was less to two

      
      

      different existing LMHS hospitals than to the proposed new hospital; and the drive time from ZIP code 33967 was less to one existing LMHS hospital than to the proposed hospital site. Thus, according to LMHS’s own information, drive times would not be reduced at all for three of the six ZIP codes in the primary service area.

   7. Not surprisingly, according to LMHS’s information, the three Estero/Bonita Springs ZIP codes are shown to have slightly shorter drive times to the proposed neighborhood hospital than to any existing hospital. However, the same information also suggests that those residents already enjoy very reasonable access of 20-minutes’ drive time or less to one or more existing hospitals: the drive time from ZIP code 33928 is between 14 and

      20 minutes to three different existing hospitals; the drive time from ZIP code 34134 is between 18 and 20 minutes to two different existing hospitals; and the drive time from ZIP code 34135 is 19 minutes to one existing hospital. In terms of the extent of drive time enhancement, the LMHS information shows that drive time would be shortened from 14 minutes to seven minutes for ZIP code 33928; from 18 minutes to 12 minutes for ZIP code 34134; and from 19 minutes to 17 minutes for ZIP code 34135.

   8. There used to be an access standard codified in the (now-repealed) acute care bed need rule, providing that acute care services should be accessible within a 30-minute drive time under

      
      

      normal conditions to 90 percent of the service area’s population. Mr. Davidson’s opinion is that the former rule’s 30-minute drive time standard remains a reasonable access standard for acute care services. Here, LMHS’s drive time information shows very reasonable access now, meeting an even more rigorous drive-time standard of 20 minutes.

   9. The establishment of a new hospital facility will always enhance geographic access by shortening drive times for some residents. For example, if LMHS’s proposed hospital were established, another proposed hospital could demonstrate enhanced access by reducing drive times from seven minutes to four minutes for residents of Estero’s ZIP code 33928. But the question is not whether there is any enhanced access, no matter how insignificant. Instead, the appropriate consideration is the “extent” of enhanced access for residents of the service district or sub-district. Here, the only travel time information offered by LMHS shows nothing more than insignificant reductions of already reasonable travel times for residents of only three of six ZIP codes in the primary service area.

   10. The drive-time information offered in the application and at hearing was far from precise, but it was the only evidence offered by the applicant in an attempt to prove its claim that there would be a significant reduction in drive times for residents of the primary service area ZIP codes. No travel time

       
       

       expert or traffic engineer offered his or her expertise to the subject of geographic accessibility in this case. No evidence was presented regarding measured traffic conditions or planned roadway improvements. Anecdotal testimony regarding “congested” roads during “season” was general in nature and insufficient to prove that there is not reasonable access now to basic acute care hospital services for all residents of the proposed service area.

   11. The proposed new hospital is not needed to address a geographic access problem. Consideration of the extent of access enhancement does not weigh in favor of the proposed new hospital.

       1. Emergency Access

          
          

   12. LMHS also sought to establish that emergency access via EMS ambulance transport was becoming problematic during the season because of traffic congestion. In its CON application, LMHS offered Lee County EMS transport logs as evidence that ambulance transport times from the Estero/Bonita Springs community to an existing hospital were higher during season than in the off-season months. LMHS represented in its CON application that the voluminous Lee County EMS transport logs show average transport times of over 22 minutes from Bonita Springs to a hospital in March 2012 compared to 15 minutes for June 2012, and average transport times of just under 22 minutes from Estero to a hospital in March 2012 compared to over 17 minutes for June 2012.

       
       

   13. LMHS suggested that these times were not reasonable because these were all emergency transports at high speeds with flashing lights and sirens. LMHS did not prove the accuracy of this statement. The Lee County EMS ordinance limits the use of sirens and flashing lights to emergency transports, defined to mean transports of patients with life- or limb-threatening conditions. According to Lee County EMS Deputy Chief Panem, 90 to

       95 percent of ambulance transports do not involve such conditions.

       
       

   14. Contrary to the conclusion that LMHS urges should be drawn from the EMS transport logs, the ambulance transport times summarized by LMHS in its application do not demonstrate unreasonable emergency access for residents of Estero/Bonita Springs. The logs do not demonstrate an emergency access problem for the local residents during the season, as contended by LMHS; nor did LMHS offer sufficient evidence to prove that the proposed new hospital would materially improve ambulance transport times.

   15. LMHS’s opinion that the ambulance logs show a seasonal emergency access problem for Estero/Bonita Springs residents cannot be credited unless the travel times on the logs reflect patient transports to the nearest hospital, such that establishing a new hospital in Bonita Springs would result in faster ambulance transports for Estero/Bonita Springs residents.

   16. Deputy Chief Panem testified that ambulance transport destination is dictated in the first instance by patient choice.

       
       

       In addition, for the “most serious calls,” the destination is dictated by emergency transport guidelines with a matrix identifying the most “appropriate” hospitals to direct patients. For example, as Deputy Chief Panem explained:

       In the case of a stroke or heart attack, we want them to go to a stroke facility or a heart attack facility[;] or trauma, we have a trauma center in Lee County as well . . . Lee Memorial Hospital downtown is a level II trauma center. (Tr. 378).

       
       

   17. The emergency transport matrix identifies the hospitals qualified to handle emergency heart attack, stroke, or trauma patients. In addition, the matrix identifies the “most appropriate facility” for emergency pediatrics, obstetrics, pediatric orthopedic emergencies, and other categories involving the “most serious calls.” Of comparable size to the proposed new hospital, 88-bed Lehigh Regional is not identified as an “appropriate facility” to transport patients with any of the serious conditions shown in the matrix. Similar to Lehigh Regional, the slightly smaller proposed new hospital is not expected to be identified as an appropriate facility destination for patients with any of the conditions designated in the Lee County EMS emergency transport matrix.

   18. The Lee County EMS transport guidelines clarify that all trauma alert patients “will be” transported to Lee Memorial as the Level II Trauma Center. In addition, the guidelines provide as

       
       

       follows: “Non-trauma alert patients with a high index of

       
       

       suspicion (elderly, etc.) should preferentially be transported to the Trauma Center as a reasonable precaution.” (emphasis added). For the elderly, then, a condition that would not normally be considered one of the most serious cases to be steered to the most appropriate hospital may be reclassified as such, as a reasonable precaution because the patient is elderly.

   19. The Lee County EMS transport logs do not reflect the reason for the chosen destination. The patients may have requested transport to distant facilities instead of to the nearest facilities. Patients with the most serious conditions may have accepted the advice of ambulance crews that they should be transported to the “most appropriate facility” with special resources to treat their serious conditions; or those patients may have been unable to express their choice due to the seriousness of their condition, in which case the patients would be taken to the most appropriate facility, bypassing closer facilities. Elderly patients may have been convinced to take the reasonable precaution to go to an appropriate facility even if their condition did not fall into the most serious categories.

   20. Since the transport times on the EMS logs do not necessarily reflect transport times to the closest hospital, it is not reasonable to conclude that the transport times would be shorter if there were an even closer hospital, particularly where

       
       

       the closer hospital is not likely to be designated as an appropriate destination in the transport guidelines matrix.

   21. The most serious cases, categorized in the EMS transport matrix, are the ones for which minutes matter. For those cases, a new hospital in Estero/Bonita Springs, which has not planned to be a STEMI receiving center, a stroke center, or a trauma center, is not going to enhance access to emergency care, even for the neighborhood residents.

   22. The evidence at hearing did not establish that ambulance transport times are excessive or cause an emergency access problem now.12/ In fact, Deputy Chief Panem did not offer the opinion, or offer any evidence to prove, that the drive time for ambulances transporting patients to area hospitals is unreasonable or contrary to any standard for reasonable emergency access.

       Instead, Lee County EMS recently opposed an application for a certificate of public convenience and necessity by the Bonita Springs Fire District to provide emergency ground transportation to hospitals, because Lee County EMS believed then, and believes now, that it is providing efficient and effective emergency transport services to the Bonita Springs area residents.

   23. At hearing, LMHS tried a different approach by attempting to prove an emergency access problem during season, not because of the ambulance drive times, but because of delays at the emergency departments themselves after patients are transported

       
       

       there. The new focus at hearing was on EMS “offload” times, described as the time between ambulance arrival at the hospital and the time the ambulance crews hand over responsibility for a patient to the emergency department staff.

   24. According to Deputy Chief Panem, Lee County hospitals rarely go on “bypass,” a status that informs EMS providers not to transport patients to a hospital because additional emergency patients cannot be accommodated. No “bypass” evidence was offered, suggesting that “bypass” status is not a problem in Lee County and that Lee County emergency departments are available to EMS providers. Deputy Chief Panem also confirmed that North Naples does not go on bypass. The North Naples emergency department consistently has been available to receive patients transported by Lee County EMS ambulances, during seasonal and off- season months.

   25. Offload times are a function of a variety of factors.

       
       

       Reasons for delays in offloading patients can include inadequate capacity or functionality of the emergency department, or inadequate staffing in the emergency department such that there may be empty treatment bays, but the bays cannot be filled with patients because there is no staff to tend to the patients.

       Individual instances of offload delays can occur when emergency department personnel prioritize incoming cases, and less-emergent

       
       

       cases might have to wait while more-emergent cases are taken first, even if they arrived later.

   26. Offload times are also a function of “throughput” issues. Approximately 20 to 25 percent of emergency department patients require admission to the hospital, but there can be delays in the admission process, causing the patient to be held in a treatment bay that could otherwise be filled by the next emergency patient. There can be many reasons for throughput delays, including the lack of an available acute care bed, or inadequate staffing that prevents available acute care beds from being filled.

   27. No evidence was offered to prove the actual causes of any offload delays. Moreover, the evidence failed to establish that offload times were unreasonable or excessive. Deputy Chief Panem offered offload time data summaries that reflect very good performance by LMHS hospitals and by North Naples.

   28. Deputy Chief Panem understandably advocates the shortest possible offload time, so that Lee County EMS ambulances are back in service more quickly. Lee County EMS persuaded the LMHS emergency departments to agree to a goal for offload times of 30 minutes or less 90 percent of the time, and that is the goal he tracks. Both Lee Memorial and North Naples have consistently met or exceeded that goal in almost every month over the last five years, including during peak seasonal months. Cape Coral and Gulf

       
       

       Coast sometimes fall below the goal in peak seasonal months, but the evidence did not establish offload times that are excessive or unreasonable during peak months.

   29. HealthPark is the one LMHS hospital that appears to consistently fall below Lee County EMS’s offload time goal; in peak seasonal months, HealthPark’s offload times were less than 30 minutes in approximately 70 percent of the cases. No evidence was offered to prove the extent of offload delays at HealthPark for the other 30 percent of emergency cases, nor was evidence offered to prove the extent of offload delays at any other hospital. Deputy Chief Panem referred anecdotally to offload times that can sometimes reach as high as two to three hours during season, but he did not provide specifics. Without documentation of the extent and magnitude of offload delays, it is impossible to conclude that they are unreasonable or excessive.

   30. There is no persuasive evidence suggesting that this facet of emergency care would be helped by approval of the proposed new hospital, especially given the complicated array of possible reasons for each case in which there was a delayed offload.13/ Staffing/professional coverage issues likely would be exacerbated by approving another hospital venue for LMHS. Pure physical plant issues, such as emergency department capacity and acute care bed availability, might be helped to some degree, at

       
       

       least in theory, by a new hospital, but to a lesser degree than directly addressing any capacity issues at the existing hospitals.

   31. For example, HealthPark’s emergency department has served as a combined destination for a wide array of adult and pediatric emergencies. However, HealthPark is about to break ground on a new on-campus children’s hospital with its own dedicated emergency department. There will be substantially expanded capacity both within the new dedicated pediatric emergency department, and in the existing emergency department, where vacated space used for pediatric patients will be freed up for adults. Beyond the emergency departments themselves, there will be substantial additional acute care bed capacity, with space built to accommodate 160 dedicated pediatric beds in the new children’s hospital. The existing hospital will have the ability to add more than the 80 acute care beds proposed for the new hospital. This additional bed capacity could be in place within roughly the same timeframe projected for opening the proposed new hospital.

   32. To the extent additional capacity would improve emergency department performance, Cape Coral is completing an expansion project that increases its treatment bays from 24 to 42, and Lee Memorial is adding nine observation beds to its emergency department. No current expansion projects were identified for Gulf Coast, which just began operations in 2009, but LMHS has

       
       

       already invested in design and construction features to enable that facility to expand by an additional 252 beds. In

       Mr. Kistel’s words, Gulf Coast has a “tremendous platform for growth[.]” (Tr. 259).

   33. Mr. Gregg summarized AHCA’s perspective in considering the applicant’s arguments of geographic and emergency access enhancement, as follows:

       [I]n our view, this community is already well served by existing hospitals, either within the applicant’s system or from the competing Naples system, and we don’t think that the situation would be improved by adding another very small, extremely basic hospital. And to the extent that that would mislead people into thinking that it’s a full-service hospital that handles time-sensitive emergencies in the way that the larger hospitals do, that’s another concern. (Tr.

       1425).

       
       

       * * *

       
       

       The fact that this hospital does not plan to offer those most time-sensitive services means that any – on the surface, as I said earlier, the possible improvement in emergency access offered by any new hospital is at least partially negated in this case because it has been proposed as such a basic hospital, when the more sophisticated services are located not far away. (Tr. 1431).

       
       

       Mr. Gregg’s opinion is reasonable and is credited.

       
       

       1. Economic Access

       
       

   34. The Estero/Bonita Springs community is a very affluent area, known for its golf courses and gated communities.

       
       

   35. As a result of the demographics of the proposed hospital’s projected service area, LMHS’s application offers to accept as a CON condition a commitment to provide 10 percent of the total annual patient days to a combination of Medicaid, charity, and self-pay patients. This commitment is less than the 2011-2012 experience for the primary service area, where patient days attributable to residents in these three payer classes was a combined 16.3 percent; and the commitment is less than the 2011- 2012 experience for the total proposed service area, where patient days in these three categories was a combined 14.4 percent. Nonetheless, LMHS’s experts reasonably explained that the commitment was established on the low side, taking into account the uncertainties of changes in the health care environment, to ensure that the commitment could be achieved.

   36. In contrast with the 10 percent commitment and the historic level of Medicaid/charity/self-pay patient days in the proposed service area, Lee Memorial historically has provided the highest combined level of Medicaid and charity patient days in district 8. According to LMHS’s financial expert, in 2012, Lee Memorial downtown and HealthPark, combined for reporting purposes under the same license, provided 31.5 percent of their patient days to Medicaid and charity patients--a percentage that would be even higher, it is safe to assume, if patient days in the “self- pay/other” payer category were added.

       
       

   37. At hearing, Mr. Gregg reasonably expressed concern with LMHS shifting its resources from the low-income downtown area where there is great need for economic access to a very affluent area where comparable levels of service to the medically needy would be impossible to achieve.

   38. Mr. Gregg acknowledged that AHCA has approved proposals in the past that help systems with safety-net hospitals achieve balance by moving some of the safety net’s resources to an affluent area. As previously noted, that sort of rationale was at play in the LMHS project to establish HealthPark, and again in the acquisitions of Cape Coral and Gulf Coast. However, LMHS now has three of its four hospitals thriving in relatively affluent areas. To move more LMHS resources from the downtown safety-net hospital to another affluent area would not be a move towards system balance, but rather, system imbalance, and would be contrary to the economic access CON review criteria in statute and rule.

8. Missing Needs Assessment Factor: Medical Treatment Trends

   
   

   1. The consistent testimony of all witnesses with expertise to address this subject was that the trend in medical treatment continues to be in the direction of outpatient care in lieu of inpatient hospital care. The expected result will be that inpatient hospital usage will narrow to the most highly specialized services provided to patients with more serious conditions requiring more complex, specialized treatments.

      
      

      Mr. Gregg described this trend as follows: “[O]nly those services that are very expensive, operated by very extensive personnel” will be offered to inpatients in the future. (Tr. 1412). A basic acute care hospital without planned specialty or tertiary services is inconsistent with the type of hospital dictated by this medical treatment trend. Mr. Gregg reasonably opined that “the ability of a hospital system to sprinkle about small little satellite facilities is drawing to a close.” (Tr. 1413). Small hospitals will no longer be able to add specialized and tertiary services, because these will be concentrated in fewer hospitals. LMHS’s move to clinical specialization at its hospitals bears this out.

   2. Another trend expected to impact services within the timeframe at issue is the development of telemedicine as an alternative to inpatient hospital care. For patients who cannot be treated in an outpatient setting and released, an option will be for patients to recover at home in their own beds, with close monitoring options such as visual monitoring by video linking the patient with medical professionals, and use of devices to constantly measure and report vital signs monitored by a practitioner at a remote location. Telemedicine offers advantages over inpatient hospitalization with regard to infection control and patient comfort, as well as overall health care cost control by reducing the need for capital-intensive traditional bricks-and- mortar hospitals.

      
      

   3. A medical treatment trend being actively pursued by both LMHS and NCH is for better, more efficient management of inpatient care so as to reduce the average length of patient stays. A ten-year master planning process recently undertaken by LMHS included a goal to further reduce average lengths of stay by

      0.65 days by 2021, and thereby reduce the number of hospital beds needed system-wide by 128 beds.

   4. LMHS did not address the subject of medical treatment trends as part of its needs assessment. The persuasive evidence demonstrated that medical treatment trends do not support the need for the proposed new facility; consideration of these trends weighs against approval.

9. Competition; Market Conditions

   
   

   1. The proposed new hospital will not foster competition; it will diminish competition by expanding LMHS’s market dominance of acute care services in Lee County. AHCA voiced its reasonable concerns about Lee Memorial’s “unprecedented” market dominance of acute care services in a county as large as Lee, which recently ranked as the eighth most populous county in Florida.

   2. LMHS already provides a majority of hospital care being obtained by residents of the primary service area. LMHS will increase its market share if the proposed new hospital is approved. This increase will come both directly, via basic medical-surgical services provided to patients at the new

      
      

      hospital, and indirectly, via LMHS’s plan for the proposed new hospital to serve as a feeder system to direct patients to other LMHS hospitals for more specialized care.14/

   3. The evidence did not establish that LMHS historically has used its market power as leverage to demand higher charges from private insurers. However, as LMHS’s financial expert acknowledged, the health care environment is undergoing changes, making the past less predictive of the future. The changing environment was cited as the reason for LMHS’s low commitment to Medicaid and charity care for the proposed project.

   4. There is evidence of LMHS’s market power in its high operating margin, more than six percent higher than NCH’s operating margin between 2009 and 2012. LMHS’s financial expert’s opinion that total margin should be considered instead of operating margin when looking at market power was not persuasive. Of concern is the market power in the field of hospital operations, making operating margin the appropriate measure.

   5. Overall, Mr. Gregg reasonably explained the lack of competitive benefit from the proposed project:

      I think that this proposal does less for competition than virtually any acute care hospital proposal that we’ve seen. As I said, it led the Agency to somewhat scratch [its] head in disbelief. There is no other situation like it. . . . This is the most basic of satellites. This hospital will be referring patients to the rest of the Lee Memorial system in diverse abundance because

      
      

      they are not going to be able to offer specialized services. And economies of scale are not going to allow it in the future.

      People will not be able to duplicate the expensive services that hospitals offer. So we do not see this as enhancing competition in any way at all. (Tr. 1416-1417).

      
      

   6. The proposed hospital’s inclusion of outpatient services, community education, and chronic care management presents an awkward dimension of direct competition with adjacent BCHC, the joint venture between LMHS and NCH. BCHC has been a money-losing proposition in a direct sense, but both systems remain committed to the venture, in part because of the indirect benefit they now share in the form of referrals of patients to both systems’ hospitals. Duplication of BCHC’s services, which are already struggling financially, would not appear to be beneficial competition. While this is not a significant factor, to the extent LMHS makes a point of the non-hospital outpatient services that will be available at the proposed new hospital, it must be noted that that dimension of the project does nothing to enhance beneficial competition.

10. Adverse Impact

    
    

    1. NCH would suffer a substantial adverse financial impact caused by the establishment of the proposed hospital, if approved. A large part of the adverse financial impact would be attributable to lost patient volume at North Naples, an established hospital which is not well-utilized now, without a new hospital targeting

       
       

       residents of North Naples’ home zip code. The expected adverse financial impact of the proposed new hospital was reasonably estimated to be $6.4 million annually.

    2. Just as LMHS cited concerns about the unpredictability of the health care environment as a reason to lower its Medicaid/charity commitment for the proposed project, NCH has concerns with whether the substantial adverse impact from the proposed hospital will do serious harm to NCH’s viability, when added to the uncertain impacts of the Affordable Care Act, sequestration, Medicaid reimbursement, and other changes.

    3. LMHS counters with the view that if the proposed hospital is approved, in time population growth will offset the proposed hospital’s adverse impact.

    4. While consideration of medical treatment trends may dictate that an increasing amount of future population growth will be treated in settings other than a traditional hospital,

       Mr. Gregg opined that over time, the area’s population growth will still tend to drive hospital usage up. However, future hospital usage will be by a narrower class of more complex patients.

    5. Considering all of the competing factors established in this record, the likely adverse impact that NCH would experience if the proposed hospital is established, though substantial enough to support the standing of Petitioner North Naples, is not viewed as extreme enough to pose a threat to NCH’s viability.

       
       

11. Institution/System-Specific Interests

    
    

    1. LMHS’s proposed condition to transfer 80 beds from Lee Memorial downtown is not a factor weighing in favor of approval of its proposed hospital.

    2. At hearing, LMHS defended the proposed CON condition as a helpful way to allow LMHS to address facility challenges at Lee Memorial. The evidence showed that to some extent, this issue is overstated in that, by all accounts, Lee Memorial provides excellent, award-winning care that meets all credentialing requirements for full accreditation.

    3. The evidence also suggested that to some extent, there are serious system issues facing LMHS that will need to be confronted at some point to answer the unanswered question posed by Mr. Gregg: What will become of Lee Memorial? Recognizing this, LMHS began a ten-year master planning process in 2011, to take a look at LMHS’s four hospitals in the context of the needs of Lee County over a ten-year horizon, and determine how LMHS could meet those needs.

    4. A team of outside and in-house experts were involved in the ten-year master planning process. LMHS’s strategic planning team looked at projected volumes and population information for all of Lee County over the next ten years and determined the number of beds needed to address projected needs. Recommendations were then developed regarding how LMHS would meet the needs

       
       

       identified for Lee County through 2021 by rearranging, adding, and subtracting beds among the four existing hospital campuses.

    5. A cornerstone of the master plan assessment by numerous outside experts and LMHS experts was that Lee Memorial’s existing physical plant was approaching the end of its useful life. Options considered were: replace the hospital building on the existing campus; downsize the hospital and relocate some of the beds and services to Gulf Coast; and the favored option, discontinue operations of Lee Memorial as an acute care hospital, removing all acute care beds and reestablishing those beds and services primarily at the Gulf Coast campus, with some beds possibly placed at Cape Coral. All of these options addressed the projected needs for Lee County through 2021 within the existing expansion capabilities of Gulf Coast and Cape Coral, and the expansion capabilities that HealthPark will have with the addition of its new on-campus children’s hospital.

    6. Somewhat confusingly, the CON application referred several times to LMHS’s “ten-year master plan for our long-term facility needs, which considers the changing geographic population trends of our region, the need for additional capacity during the seasonal months, and facility challenges at Lee Memorial[.]” (LMHS Exh. 3, pp. 12, 57). The implication given by these references was that the new hospital project was being proposed in furtherance of the ten-year master plan, as the product of

       
       

       careful, studied consideration in a long-range planning process to address the future needs of Lee County. To the contrary, although the referenced ten-year master plan process was, indeed, a long- range deliberative planning process to assess and plan for the future needs of Lee County, the ten-year master plan did not contemplate the proposed new hospital as a way to meet the needs in Lee County identified through 2021.15/

    7. The ten-year master planning process was halted because of concerns about the options identified for Lee Memorial.

       Further investigation was to be undertaken for Lee Memorial and what services needed to be maintained there. No evidence was presented to suggest that this investigation had taken place as of the final hearing.

    8. The proposed CON condition to transfer 80 beds from Lee Memorial does nothing to address the big picture issues that LMHS faces regarding the Lee Memorial campus. According to different LMHS witnesses, either some or nearly all of those licensed beds are not operational or available to be put in service, so the license is meaningless and delicensing them would accomplish nothing. To the extent any of those beds are operational, delicensing them might cause Lee Memorial to suddenly have throughput problems and drop below the EMS offload time goal, when it has been one of the system’s best performers.

       
       

    9. The proposed piecemeal dismantling of Lee Memorial, without a plan to address the bigger picture, reasonably causes AHCA great concern. As Mr. Gregg explained, “[I]t raises a fundamental concern for us, in that the area around Lee Memorial, the area of downtown Fort Myers is the lower income area of Lee County. The area around the proposed facility, Estero, Bonita, is one of the upper income areas of Lee County.” (Tr. 1410). The plan to shift resources away from downtown caused Mr. Gregg to pose the unanswered question: “[W]hat is to become of Lee Memorial?” Id. Recognizing the physical plant challenges faced

       there, nonetheless AHCA was left to ask, “[W]hat about that population and how does [the proposed new hospital] relate? How does this proposed facility fit into the multihospital system that might exist in the future?” (Tr. 1410-1411).

    10. These are not only reasonable, unanswered questions, they are the same questions left hanging when LMHS interrupted the ten-year master planning process to react to HMA’s LOI with the CON application at issue here.

12. Balanced Review of Pertinent Criteria

1. In AHCA’s initial review, when it came time to weigh and balance the pertinent criteria, “It was difficult for us to come up with the positive about this proposal.” (Tr. 1432).

2. In this case, AHCA’s initial review assessment was borne out by the evidence at hearing. The undersigned must agree

   
   

   with AHCA that the balance of factors weighs heavily, if not entirely, against approval of the application.

   CONCLUSIONS OF LAW

   
   

3. The Division of Administrative Hearings has jurisdiction over the parties to and subject matter of this proceeding. §§ 120.569, 120.57(1), and 408.039(5), Fla. Stat.

4. Petitioner LMHS has standing, as the applicant for a CON to establish an additional health care facility. LMHS is the party whose substantial interests are subject to determination in this proceeding. §§ 120.52(13)(a), 408.039(5)(c), Fla. Stat.

5. Petitioner North Naples has standing, as an existing acute care hospital in district 8 with established programs that will be substantially affected by the proposed new hospital, if approved. North Naples also met the condition precedent to participating as a party in this administrative proceeding by stating the grounds for its opposition in a detailed and timely submittal to AHCA. §§ 120.52(13)(b), 408.039(5)(c), Fla. Stat.

6. As the applicant, LMHS has the burden of proving its entitlement to a CON by a preponderance of the evidence. Boca

   Raton Art. Kidney Ctr., Inc. v. Dep’t of Health & Rehab. Servs.,

   
   

   475 So. 2d 260 (Fla. 1st DCA 1985); § 120.57(1)(j), Fla. Stat.

   
   

7. When evaluating a CON application, a balanced review of all relevant statutory and rule criteria must be made. Dep’t of Health & Rehab. Servs. v. Johnson & Johnson Home Health Care,

   
   

   Inc., 447 So. 2d 361, 363 (Fla. 1st DCA 1984). The appropriate

   
   

   weight to be given to each criterion is not fixed, but varies from case to case depending upon the facts and circumstances. Collier

   Med. Ctr., Inc. v. Dep’t of Health & Rehab. Servs., 462 So. 2d 83, 84 (Fla. 1st DCA 1985).

8. Proposals such as LMHS’s to establish a new general hospital used to be evaluated, in part, by reference to a rule methodology that calculated the need for additional acute care hospital beds. In 2004, however, the Legislature deregulated acute care beds from CON review, while retaining CON regulation for the addition of new hospital facilities. See ch. 2004-383,

   § 6, Laws of Fla. Since that time, existing hospitals are free to add or subtract licensed acute care beds without first undergoing CON review and obtaining a CON. However, to establish a new hospital in which to operate acute care beds, a CON is required.

9. AHCA’s acute care bed need rule was repealed following the deregulation of beds from CON review. Under the old bed need rule, a net numeric need for acute care beds created a rebuttable presumption of need. If the calculated net bed need was zero, there was a rebuttable presumption that no beds were needed.

10. AHCA has not developed a numeric need methodology for additional hospital facilities. Thus, there is no presumption one way or the other regarding need or the absence of need for an additional hospital in district 8, or in Lee County, sub-district

    
    

    8-5. Instead, the issue of overall need is considered pursuant to the applicable statutory review criteria, as well as the applicable rule criteria in rules 59C-1.008(2)(e) and 59C-1.030.

11. The 2008 changes to the CON laws for general hospital applications were recently reviewed in two CON final orders decided under the amended laws. See Memorial Healthcare Grp. v.

    Ag. For Health Care Admin., et al., Case No. 12-0429CON (Fla. DOAH Dec. 7, 2012; Fla. AHCA Apr. 10, 2013) (Memorial Healthcare Final Order); Columbia Hosp. Palm Beaches L.P. etc., et al. v. Fla.

    Regional Med. Ctr. and Ag. for Health Care Admin., Case Nos. 12-

    
    

    0428CON and 12-0496CON (Fla. DOAH Apr. 30, 2013; Fla. AHCA June 6,

    
    

    2013) (Florida Regional Final Order). As observed in the Memorial Healthcare and Florida Regional Final Orders, the 2008 changes to the CON laws streamlined the application and review process for new general hospitals. As part of the changes, several previously applicable CON review criteria were eliminated, including quality of care, availability of resources, financial feasibility, and the costs and methods of proposed construction. Significantly, however, “need” was not eliminated as a review criterion.

    Conclusions of law regarding the pertinent criteria follow.

    
    

    Section 408.035(1)(a): The need for the health care facilities and health services being proposed; and rule 59C-1.008(2)(e): applicant’s needs assessment methodology.

    
    

12. Based on the findings of fact above, LMHS did not meet its burden of proving that there is a need for the proposed new

    
    

    hospital, pursuant to section 408.035(1)(a) and rule 59C- 1.008(2)(e). Instead, consideration of the appropriate need assessment factors, including medical treatment trends and market conditions, weighs against approving the proposed hospital.

    Section 408.035(1)(b): The availability, accessibility, and extent of utilization of existing health care facilities and health services in the service district of the applicant.

    
    

13. Based on the findings of fact above, LMHS did not meet its burden of proving that consideration of the availability, accessibility, and utilization of existing hospitals weigh in favor of the proposed new hospital, pursuant to section 408.035(1)(b). Instead, a preponderance of the evidence establishes that North Naples, Gulf Coast, and HealthPark are available to residents of the proposed service area, are accessible within very reasonable travel times, and are not highly utilized to a level that would make them practically unavailable. North Naples, in particular, is underutilized. At times during peak season, Gulf Coast is well-utilized, but still does not lack for available beds. If that condition changes in time, then Gulf Coast is well situated to add capacity, with LMHS having already invested in the design and construction that provide Gulf Coast with a “tremendous platform for growth.” (Tr. 259). And at the time of hearing, HealthPark was about to break ground on a new on- campus children’s hospital, which will greatly expand its emergency department capacity for adults and children, and

    
    

    significantly increase its acute care bed capacity. This substantial expansion project will be operational by about the same time as the proposed hospital would come on line.

    Section 408.035(1)(e): The extent to which the proposed services will enhance access to health care for residents of the service district.

    
    

14. LMHS did not prove that access to acute care services would be enhanced for anyone other than residents of the three-ZIP code Estero/Bonita Springs community. Even for these residents, LMHS did not prove that drive times would be shortened by more than an insignificant extent, when there is already very reasonable access to one or more existing hospitals in 20 minutes or less. This insignificant enhancement of access to residents who already have very reasonable access does not weigh in favor of approving the LMHS application, pursuant to section 408.035(1)(e).

15. With regard to LMHS’s emergency access argument, as found above, the more persuasive evidence did not establish that there is an emergency access problem for residents of the proposed service area, or that approving the proposed project would increase emergency access to any appreciable degree.

    Section 408.035(1)(g): The extent to which the proposal will foster competition that promotes quality and cost-effectiveness.

    
    

16. Based on the findings of fact above, LMHS did not meet its burden of proving that its proposed new hospital would foster competition for acute care services, or that the proposed new

    
    

    hospital would foster competition that would promote quality and cost-effectiveness for the non-hospital services that are part of its proposal. Under the CON laws (unlike the antitrust laws at issue when LMHS was attempting to acquire Cape Coral), LMHS is not exempt from the competition criterion in section 408.035(1)(g), and its market position is relevant. This criterion does not favor the LMHS proposed project.

    Section 408.035(i): The applicant’s past and proposed provision of health care services to Medicaid patients and the medically indigent; and rule 59C-1.030(2): health care access for the medically underserved.

    
    

17. Consideration of the first part of section 408.035(1)(i), which addresses the applicant’s past provision of services to Medicaid and indigent patients, is a factor weighing in LMHS’s favor. However, the proposal falters under the second part of this criterion, along with the criteria in rule 59C- 1.030(2), which together consider the applicant’s proposed provision of services to Medicaid and indigent patients. This factor raises the specter of AHCA’s legitimate concerns about the piecemeal shifting of LMHS resources away from the low-income downtown area to the affluent Estero/Bonita Springs area, without addressing the bigger-picture unanswered questions about what is to become of Lee Memorial. These economic access criteria weigh against approving the proposed new hospital.

    
    

18. “Not every city, town or hamlet can or should have its own hospital.” Columbia Hosp. Corp. of South Broward v. Ag. For Health Care Admin., Case Nos. 01-2891CON and 01-2892CON (Fla. DOAH

    July 3, 2002; Fla. AHCA Sept. 30, 2002), RO at ¶ 62 (application to establish a new 100-bed hospital in Broward County), aff’d, 883

    So. 2d 283 (Fla. 1st DCA 2004). Similarly, “[a] community’s desire for a new hospital does not mean there is a ‘need’ for a new hospital. Under the CON program, the determination of need for a new hospital must be based upon sound health planning principles, not the desires of a particular local government or its citizens.” Manatee Memorial Hospital, L.P. v. Ag. for Health

    Care Admin., et al., Case Nos. 04-2723CON, 04-3027CON, and 04- 3147CON (Fla. DOAH Dec. 15, 2005; Fla. AHCA Apr. 11, 2006), RO at

    ¶ 104; accord Osceolasc, LLC, d/b/a St. Cloud Reg’l Med. Ctr. v. Ag. For Health Care Admin. and Osceola Reg’l Hosp., Inc., d/b/a

    Osceola Reg’l Med. Ctr., Case No. 08-0612CON (Fla. DOAH Dec. 31,

    
    

    2008; Fla. AHCA Mar. 3, 2009), RO at ¶ 275.

    
    

19. In addition, as recently observed in the Memorial Healthcare and Florida Regional Final Orders: “Just as the desires of local government or citizens may not dictate the approval of a new hospital, neither should the motivations of a particular health system, no matter how noble, trump the statutory requirement that ‘need’ for the proposal be demonstrated.”

    
    

    Memorial Healthcare Final Order, RO at ¶ 137; Florida Regional Final Order, RO at ¶ 104. These comments apply here.

20. The pertinent statutory and rule criteria weigh heavily against approving LMHS’s application. A balanced consideration of all applicable criteria compels the conclusion that LMHS’s CON application should be denied.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration issue a Final Order denying CON application no. 10185.

DONE AND ENTERED this 28th day of March, 2014, in Tallahassee, Leon County, Florida.

S

ELIZABETH W. MCARTHUR

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675

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

Filed with the Clerk of the Division of Administrative Hearings this 28th day of March, 2014.

ENDNOTES

1/ Table 4 of the CON application (LMHS Exh. 3, p. 19) shows the sub-county descriptors adopted by the applicant’s health planning consultant. All ZIP codes in Lee County are set forth and grouped into the following sub-county areas: central county; northeast county, islands; northwest county; and south county.

These descriptors were used by the applicant to advance its arguments for approval of the proposed new hospital. Thus, for consistency, the same descriptors will be used here.

2/ A “tertiary health service” is defined in section 408.032(17) and Florida Administrative Code Rule 59C-1.002(41) as a health service which, due to its high level of intensity, complexity, specialized or limited applicability, and cost, should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost-effectiveness of the service.

3/ “STEMI” is an acronym for ST elevation myocardial infarction.

4/ The acquisition of Cape Coral was delayed by the Federal Trade Commission because of antitrust concerns; in particular, the concern was that LMHS would have too much market share in the community if it acquired Cape Coral. The inquiry was resolved, not because the market-share concern was alleviated, but because LMHS, as a public hospital system, was entitled to state action immunity from antitrust laws. Accordingly, for purposes of the antitrust laws, LMHS was “allowed to have that kind of market position.” (Tr. 562).

5/ Before Gulf Coast Medical Center was built in 2007-2008, there were two hospitals owned and operated by for-profit hospital corporation HCA: Southwest Florida Regional Medical Center, with

400 licensed beds, and a hospital referred to as Gulf Coast Hospital-Estero (Tr. 287), with 120 licensed beds. HCA had plans to merge the two hospitals and construct a new replacement hospital with 349 licensed beds at the Gulf Coast-Estero location. LMHS acquired the two HCA hospitals and completed the plan to combine the hospitals and build a new replacement hospital with 349 licensed beds at the Gulf Coast location.

6/ The CON application includes a map identifying the proposed new hospital’s service area. (LMHS Exh. 3, p. 13) The map shows ZIP code boundaries in the vicinity and portrays locations of existing hospitals and the proposed new hospital. However, despite the fact that the map includes a portion of Collier County, and identifies north Collier County ZIP code 34110 as

part of the proposed hospital’s service area, the map fails to identify the presence of North Naples in ZIP code 34110.

7/ All references herein to statutes are to the Florida Statutes (2013), the law in effect as of the final hearing, unless otherwise specified. The undersigned notes that there were no changes in 2013 to the CON statutory provisions that are pertinent to this proceeding.

8/ The record is somewhat unclear as to the actual home ZIP code of the proposed hospital. For example, according to some questions by LMHS counsel and answers by Mr. Davidson, the hospital will be located in Estero ZIP code 33928. However, in the CON application, LMHS committed to the specific site for the proposed hospital, identified as the southeast corner of Highway

41 and Coconut Road in Bonita Springs. According to LMHS Exhibit 8, a color-coded Lee County ZIP code map that also shows the pertinent roadways, the southeast corner of Highway 41 and Coconut Road is in Bonita Springs ZIP code 34135.

9/ In defense of his large proposed primary service area,

Mr. Davidson noted that three other small hospitals in district 8, Lehigh Regional in Lee County, and two Physicians Regional Medical Centers in Collier County, have more than six ZIP codes in their primary service areas. However, a comparison of the number of ZIP codes, without more, is superficial and not meaningful. There is insufficient evidence to support service area comparisons with the two Physicians hospitals, but the record evidence confirms the unreasonableness of comparing service areas with Lehigh Regional. Mr. Davidson described Lehigh Regional’s northeast part of the county as “bounded by . . . wetlands and by the river, . . . a pretty evident separate area.” Significantly, there are no other existing hospitals in Lehigh’s primary service area, nor are there any existing hospitals in the ZIP codes adjacent to Lehigh’s primary service area. In contrast, there is one existing hospital (Gulf Coast) in the proposed new hospital’s primary service area, and two more existing hospitals, HealthPark and North Naples, are in ZIP codes adjacent to the primary service area ZIP codes.

10/ Mr. Davidson acknowledged that obstetric cases were included in the base historic data used to project use of the new proposed hospital. For the year 2018, 867 patient days were included that should not have been. When asked about obstetrics, Mr. Davidson’s testimony was vague, seeming to suggest that perhaps he was told by one of the CON attorneys that obstetrics would be provided at the proposed hospital. Mr. Davidson never spoke with anyone from LMHS regarding whether obstetrics (or any other service line) was

or was not a planned service. Mr. Kistel, LMHS’s Vice President for Facilities Management and Support Services, testified that obstetrics was not a planned program for the proposed hospital as far as he knows. Since Mr. Kistel was the one who gave the architect information about the hospital programs to develop architectural plans for the CON application, there is no obstetrics unit shown on the plans. Perhaps of equal importance, NCH’s health planner credibly demonstrated that obstetrics would not be a reasonable program for the proposed hospital as a matter of sound health planning: the projected utilization would result in slightly less than one delivery per day, and an average daily census of just over 2 patients--not enough to sustain an obstetrics unit. LMHS did not effectively refute NCH’s analysis in this regard. To the contrary, any suggestion that obstetrics would be a reasonable service for the proposed new hospital was impeached by LMHS’s ten-year master planning process, discussed below, in which LMHS’s strategic planning team provided their projections that declining need for obstetrics beds in Lee County would mean that by 2021, LMHS would need 51 fewer obstetrics beds than are in service now at HealthPark and Gulf Coast (78 needed, compared to 129 currently licensed obstetrics beds).

11/ For example, it seems unreasonable to project that in Gulf Coast’s home zip code, the proposed new hospital would achieve a

10 percent market share of non-tertiary, non-specialty admissions in its first year of operations, increasing to 20 percent by the third year of the proposed hospital’s operations. The travel time information developed by Mr. Davidson indicates that ZIP code 33912 is closer to three existing LMHS hospitals than to the proposed new hospital.

Likewise, it seems unreasonable to project that in its first year, the proposed new hospital would achieve a 15 percent market share of admissions by residents of ZIP code 33913, to the east of Gulf Coast’s home ZIP code, or a 32.5 percent market share by the third year of the proposed hospital’s operations. According to the LMHS application, the drive time from ZIP code 33913 to Gulf Coast is only 11 minutes, and only 20 minutes to HealthPark, compared to a drive time of 21 minutes to the proposed hospital.

As another example, it seems unreasonable to project that in year one, the proposed new hospital would achieve a 25 percent market share of admissions by residents of ZIP code 33967, or that the market share will grow to 40 percent by year three. ZIP code 33967 is just south of Gulf Coast’s home ZIP code, 33912.

According to the LMHS application, ZIP code 33967 is closer to

Gulf Coast (12 minutes) than to the proposed new hospital (13 minutes), and almost as close to HealthPark (17 minutes).

One might expect the highest market shares projected for the proposed hospital’s home ZIP code, 34135, yet that is not the case. The applicant projects a 10 percent market share from each of the two Bonita Springs ZIP codes (34134 and 34135)--the same market share the proposed hospital projects from Gulf Coast’s home ZIP code of 33912. While one might call the projections for Bonita Springs “conservative,” there is no patterned conservatism in the projections. Instead, the market share assignments appear random. No credible explanation was offered to support the differences in market share assumptions by ZIP code.

12/ Even if there had been proof of an emergency access problem, that would not establish need for the proposed new hospital. Any such emergency access issue could be addressed by establishing a freestanding emergency department, as LMHS and NCH have considered and were willing to do with financial contributions by the Estero/Bonita Springs community.

13/ At hearing, Mr. Davidson took yet another approach in an attempt to establish an emergency access problem for the local residents of Estero/Bonita Springs. He melded together the time segments on the Lee County EMS transport logs, from ambulance dispatch through patient offload, and prepared bar charts depicting in graphic form this total time (which he mislabeled as “Dispatch to Destination”). His bar charts compared the total time when ambulances are dispatched to Estero and Bonita Springs to the total time when ambulances are dispatched to the remainder of Lee County. This comparison was provided for a full year, as well as for a strange combination of March 2012 plus January and February 2013, purportedly representing a seasonal quarter.

Mr. Davidson’s opinion that this data comparison evidences a pattern of longer total time for Estero/Bonita Springs residents, which in turn is evidence of an emergency access problem, is not persuasive. Instead, the comparison compounds the flaws with drawing conclusions from the ambulance transport times, discussed above, and from the offload times, discussed above, while adding a host of new variables unrelated to an emergency access problem that would be helped by the proposed new hospital. For example, the total time includes time the ambulance crew spends on scene, diagnosing and perhaps treating or stabilizing patients. It may be that this time component is higher in Estero/Bonita Springs because of the requirement that 911 calls be responded to both by the Estero or Bonita Springs Fire District first responders and by Lee County EMS. This admittedly inefficient duplication of on-

scene responders may be a factor, as may be the dynamics between these particular competing emergency service providers.

14/ “The Lee Memorial project will offer non-tertiary acute care services to the residents of its service area, and will coordinate with the other hospitals and programs in the Lee Memorial Health System to provide more advanced and specialized services to its patients on a referral basis.” LMHS Exh. 3, p.

10.

15/ LMHS’s attempt to portray the ten-year master planning process as narrowly confined to a facility review of the four LMHS hospitals was not credible, in light of the described purpose of the ten-year planning process as being to identify the needs county-wide, upon consideration of population projections, expected patient volumes, and hospital bed need, and to plan for how LMHS could meet those needs.

COPIES FURNISHED:

Seann M. Frazier, Esquire

Parker, Hudson, Rainer and Dobbs, LLP

215 South Monroe Street, Suite 750 Tallahassee, Florida 32301

Karl David Acuff, Esquire

Law Office of Karl David Acuff, P.A. 1615 Village Square Boulevard, Suite 2

Tallahassee, Florida 32309-2770

Jonathan L. Rue, Esquire

Parker, Hudson, Rainer and Dobbs, LLP

285 Peachtree Center Avenue, Suite 1500 Atlanta, Georgia 30303

R. Terry Rigsby, Esquire Pennington, Moore, Wilkinson,

Bell and Dunbar, P.A. Post Office Box 10095

Tallahassee, Florida 32302-2095

Michael J. Hardy, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Richard J. Shoop, Agency Clerk

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Elizabeth Dudek, Secretary

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 1

Tallahassee, Florida 32308

Stuart Williams, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

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.

Docket for Case No: 13-002508CON

Orders for Case No: 13-002508CON