The Issue Whether there is need for a new hospital in AHCA Acute Care Subdistrict 5-2 (eastern Pasco County)? If so, whether AHCA should approve either CON 9975 or CON 9977?
Findings Of Fact The Applicants and Background Pasco-Pinellas Pasco-Pinellas, the applicant for CON 9975, is a joint venture between two nonprofit healthcare organizations: University Community Hospital, Inc. (UCH) and Adventist Health System Sunbelt Healthcare Corporation (Adventist). A not-for-profit healthcare system, UCH has served the Tampa Bay area for the last 40 years. It owns and operates two hospitals in Hillsborough County and one in Pinellas County. UCH has approximately $100 million available for capital expenditures to fund the hospital proposed by CON 9975. One of its Hillsborough County facilities, University Community Hospital, is located on Fletcher Avenue in northern Hillsborough County, AHCA Health Planning District VI. Across the street from the main campus of the University of South Florida (USF) and its College of Medicine, University Community Hospital has an agreement with USF for GME. University Community Hospital at present serves the Wesley Chapel area in eastern Pasco County. The other member of the joint venture, Adventist, is a financially successful not-for-profit healthcare organization. It operates 17 hospitals in the state of Florida. As of December 31, 2007, Adventist's cash on hand, including investments, exceeded $3.6 billion and net revenue for 2007 was approximately $368 million. The joint venture between UCH and Adventist was formed to establish a hospital to serve the Wesley Chapel area of Pasco County and to provide other healthcare services in the county. At present, the two members of the joint venture compete to serve the Wesley Chapel area through University Community Hospital and Adventist's Florida Hospital Zephyrhills (FHZ), a 154-bed general acute care hospital in Pasco County. The collaboration of competing hospitals in seeking approval for a new hospital through Florida's CON process is unusual. But by bringing the similar missions, strength in community interests and capable leadership of UCH and Adventist together, the Pasco Pinellas joint venture poses potential healthcare benefits to eastern Pasco County. BayCare The Applicant for CON 9977, BayCare of Southeast Pasco, Inc., is a not-for-profit corporation formed to develop the hospital proposed in the application. The sole member of BayCare is BayCare Health System, Inc. ("BayCare System"). BayCare System is the largest full-service community- based health care system in the Tampa Bay area. It operates 9 nonprofit hospitals and 11 ambulatory/outpatient centers in Hillsborough, Pasco and Pinellas counties. Initially organized in 1997 under a joint operating agreement between several hospitals, BayCare System's purpose has been to compete effectively in managed care operations in order to reduce the expenses of the individual organizations that are its members. In the first 5 years of operation, BayCare System saved its members a total of $90 million because of the enhanced cost efficiencies it achieved through business function consolidations and group purchasing. Its members are all not-for-profit hospitals. BayCare System's focus is on the treatment of one patient at a time. Its mission is to improve the lives of people in the community it serves, to operate effectively as a group of not-for-profit hospitals, and to provide high quality, compassionate healthcare. BayCare's application, because it provides potential for its proposal with its teaching aspects, draws significant and considerable support from USF, a national research university. USF has a College of Medicine, a College of Nursing, and a College of Public Health, collectively "USF Health." USF Health will collaborate with BayCare in the development of the hospital BayCare proposes, should it be approved and should its teaching functions come to fruition. The Agency The Agency for Health Care Administration is the state agency that administers the CON program pursuant to Section 408.034, Florida Statutes. It will make the final decisions to approve or deny the two CON applications at issue in this proceeding. Community Community Hospital is a general acute care for profit hospital with 386 beds. It is located within the City of New Port Richey in western Pasco County, Acute Care Subdistrict 5-1. With the exception of neonatal intensive care, open heart surgery and organ transplantation, Community is a full- service community hospital. It provides OB services. It is licensed for 46 adult psychiatric beds. It offers a variety of outpatient services including outpatient surgery, endoscopy, and outpatient procedures and lab testing. Its medical staff consists of approximately 400 physicians. Community serves patients without regard to ability to pay, and does not discriminate in any manner. Accredited by the Joint Commission on Accreditation of Hospital Organizations, it has received numerous awards and recognition for the quality of its health care services. Community's hospital facility is over 30 years old. Access to the campus from US 19, the closest major thoroughfare approximately 1.5 miles away, is gained via a two-lane street through a residential area. Land-locked but for the two-lane street, the campus is sandwiched between the residences and a high school. There are no medical office buildings ("MOB") owned by Community on the campus; less than 20 acres in size, it is completely built out. Community's Replacement Hospital Community has a replacement hospital facility currently under construction in Acute Care Subdistrict 5-2. Approximately five miles southeast of Community's New Port Richey location, the replacement facility is located at the intersection of Little Road and State Road 54. Expected to open in late 2010 at a cost in excess of $200 million, it is to be known as Medical Center of Trinity ("Trinity"). All current Community services will be offered at Trinity. At the same time, the new hospital will offer many advantages over the old facility. Trinity will initially be five stories in height, with fewer licensed beds, but constructed with the ability to expand. It will offer new medical equipment with the latest technology. Situated on 52 acres, with a new three-story MOB adjacent to the hospital, Trinity has plans to add a second MOB at some time in the future. Unlike existing Community Hospital, Trinity will have all private rooms. Its more efficient layout among service areas will improve efficiencies and patient satisfaction. Trinity's location is more accessible than Community's current location in New Port Richey. It is on State Road 54 (SR 54), a six-lane highway that runs east/west through Pasco County. The road has recently undergone major construction and expansion which was nearly complete at the time of hearing. Suncoast Parkway (a/k/a Veterans Expressway), furthermore, is an expressway toll road system that runs north/south from Hernando County through Pasco County to Tampa airport. From the intersection of Suncoast Parkway and SR 54, it takes approximately seven minutes to reach Trinity. Little Road runs north/south along the Trinity site, and north through Pasco County to Regional Medical Center Bayonet Point ("Bayonet Point"). Community's poor financial performance in recent years is expected to improve after the opening of Trinity. The Proposals Although both applicants propose a new hospital in roughly the same location in Subdistrict 5-2, the two are different both in scope and approach. Pasco-Pinellas' Proposal Pasco-Pinellas proposes to build an 80-bed acute care hospital on Bruce B. Downs Boulevard in the area known as Wesley Chapel in eastern Pasco County. If approved and constructed, the hospital will include 36 medical/surgical beds, 8 labor/delivery/recovery/post partum beds, 12 critical care beds, and 24 progressive care beds. The project would involve 184,000 gross square feet of new construction, at a total estimated cost of $121 million. Pasco-Pinellas proposes a typical primary service area (PSA). Five and one-half zip codes comprise the PSA; Pinellas- Pasco reasonably projects 82% of its admissions will come from the PSA. Two and one-half zip codes comprise the secondary service area (SSA). The zip code that is shared by the PSA and the SSA (33559) is split roughly in half between Pasco County and Hillsborough County. The half that is in Pasco County is in Pasco-Pinellas' PSA. The five full zip codes in the PSA are 33541, 33543, 33544, 34639, and 33576. The two full zip codes in the SSA are 33549 and 33647. Pasco-Pinellas' in-migration from outside its proposed service area (the PSA and the SSA) is forecast by Pasco- Pinellas's health planner at 12%. For a community hospital in the Wesley Chapel area without tertiary services, the in- migration percentage projected by Pasco-Pinellas is reasonable. BayCare's Proposal BayCare proposes to establish a general acute care hospital with 130 beds. The application proposes that it be collaboratively developed by BayCare System and USF Health so as to provide teaching functions associated with the USF College of Medicine and other health-related university components of USF Health. Consisting of approximately 476,000 square feet of new construction at an estimated total project cost of approximately $308 million, the hospital will have 92 medical/surgical beds, 24 critical care beds, and 14 post-partum beds. Like Pasco-Pinellas' proposal, BayCare's proposed hospital will be located on Bruce B. Downs Boulevard in the Wesley Chapel area of southeastern Pasco County. BayCare's proposed PSA is circular. The center point of the PSA is the proposed BayCare hospital site in the Wesley Chapel area. The circumference is along a series of seven-mile radii so that the diameter of the circular PSA is 14 miles. The seven-mile radius was chosen to approximate a fifteen-minute travel time by automobile from the outer edge of the circular PSA to the hospital site. BayCare's PSA includes some part of seven zip codes. Two are Wesley Chapel zip codes: 33543 and 33544. Two are Lutz area zip codes: 33549 and 33559. Two are Land O'Lakes zip codes: 34639 and 34638, and one is a zip code in Hillsborough County: 33647. Relative to typical PSAs for most proposed hospitals, the PSA proposed by BayCare's application was described at hearing by BayCare's health planner as "small." See Tr. 1855. For calendar years 2013 and 2014, BayCare projects that 19,0976 and 20,008 patient days, respectively, will be generated from within the PSA. These projections constitute a projection of 60% of all patient days projected for the two years, a percentage substantially lower than would be generated from a typical PSA. The remaining 40% of projected patient days is roughly double what would be expected from beyond a PSA under a more typical proposal. The high number of projected patient days for patients originating outside the PSA was explained at hearing by BayCare's health planner. The involvement of the USF Physician's Group and the "teaching" nature of the proposal "pumps up and provides an additive level of in-migration that would not be experienced without the USF combination with BayCare in [the] project." Tr. 1856-7. Pasco County Hospitals There are five hospitals in Pasco County. Two in western Pasco County will continue to remain in Subdistrict 5-1 in the near future: Regional Medical Center Bayonet Point, located in northwest Pasco County and Morton Plant North Bay Hospital, located in New Port Richey. Two are in eastern Pasco County, Subdistrict 5-2: Pasco Regional Medical Center in east central Pasco County, and FHZ, located in southeast Pasco. The fifth is Community/Trinity. No Need for Both Hospitals None of the parties contends there is need for both hospitals. Nor would such a contention be reasonable. Indeed, the record does not demonstrate need for both a new 80-bed community hospital as proposed by Pinellas-Pasco and a new 130- bed hospital that BayCare denominates a "teaching" hospital, each with an intended location on Bruce B. Downs Boulevard in the Wesley Chapel area of southeastern Pasco County in Subdistrict 5-2. The question remains: is there a need for one new hospital? If so, which of the two applications, if either, should be approved? Need for a New Hospital; Access Enhancement Among the counties in the Tampa Bay area, Pasco County has been the fastest growing in recent years. From 1990 to 2000, its population grew 22.6%. Three times higher than the state average, this represents tremendous growth for any locale. The Wesley Chapel area of south Pasco County roughly coincides with the PSAs of the two applicants. Dramatic growth over the last 20 years has marked the Wesley Chapel area's transformation from an agricultural area to a suburban community. North of Hillsborough County and its largest city, Tampa, improvements in the transportation network has made south Pasco County and in particular, the Wesley Chapel area, a bedroom community for workers commuting to Tampa. Claritas, a national demographic data service, is a generally accepted population projection source for CON applications. Claritas projects the growth in Pasco County to continue. For example, the projected population for Pasco- Pinellas' proposed PSA, which substantially overlaps with BayCare's proposed PSA, is 113,397 in 2011 and 118,505 in 2012. The Claritas projections are based on the most recent decennial U.S. Census, that is, 2000, and do not take into account data of impending population growth, such as new housing starts and new schools. Claritas, therefore, may understate projections in areas that have experienced more recent, rapid growth. The University of Florida Bureau of Economic and Business Research ("BEBR") also provides reliable population data by county. In the year 2000, the census for the Pasco County population was 344,765. By 2030, that population is projected by BEBR to grow to 526,100 based on low projections, 681,100 based on medium projections, and 876,900 based on high projections. For the high projection rate, this would constitute a 154% increase in population. Even assuming the low growth rate, the population would increase by 53%. According to BEBR data, the county can be expected to grow at a rate of 4.71% per year. Another source of population data relied upon by population experts is Demographics USA. The Demographics USA data shows a substantial growth in population for Pasco County. According to Demographics USA, the population for Pasco County can be expected to grow from 343,795 in the year 2000 to 440,527 in the year 2010 and then to 504,277 by the year 2015. Based on the Demographics USA data, the county can be expected to grow at a rate of 3.11% per year. The Wesley Chapel area is considered to be the area of Pasco County with the most development and development potential now and in the future. Of 175 major projects actively undergoing development in Pasco County, 76 are in the Wesley Chapel area. Between 2010 and 2012, the population in the area is projected to grow by 5,000 persons per year. With the increase in the general population in the area comes an expected increase in the need for schools. Of 37 schools identified by the Pasco County School Board to be built in the near future, 19 are to be located in the Wesley Chapel area. Whether the historic growth rate of the last few decades will continue for sure is an open question with the downturn in the economy and the housing market that commenced in Pasco County in mid-2007. Absent a major recession, however, it is reasonable to expect growth in the Wesley Chapel area to continue even if not at a rate as rapid as in the recent past. Whatever the future holds for Wesley Chapel's growth rate, there is clearly a demand for inpatient general acute care services in the Wesley Chapel area. The total non-tertiary discharges from the Pasco-Pinellas service area was 15,777, excluding newborns, for the 12-month period ending June 30, 2006. As a result, AHCA found the existing and growing population in the Wesley Chapel area warranted a new hospital. Along with significant growth in the Wesley Chapel area comes resulting traffic and healthcare and hospital access issues. Drive time analysis shows the average drive time from each of the Pasco-Pinellas PSA six area zip codes to the eight area hospitals in 2007 to be 46.11 minutes. The analysis shows that future drive time is expected to be lengthier, strengthening the need for a hospital in the Wesley Chapel area. In 2012, the average time increase is expected to 57.68 minutes. A Drive Time Study Report prepared by Diaz Pearson & Associates compared drive times to the proposed site for Pasco- Pinellas hospital to eight existing hospitals: UCH, Pasco Regional, FHZ, Tampa General, University Community Hospital on Dale Mabry in Tampa, St. Joseph's North, St. Joseph's in Tampa, and the site for Community's replacement hospital. The study concluded: The results of this travel study demonstrate that the vehicular travel times for access to the proposed PPHCHS Hospital [Pasco- Pinellas' Hospital] are consistently LESS for residents within the six Zip codes of the Primary Service Area for years 2007, 2011, and 2012 than for comparable trips to any of the eight area hospitals for alternate choice. Pasco-Pinellas 36, p. 27. Of particular note are the travel times from each of the six zip codes in Pasco-Pinellas' PSA to UCH, FHZ, and Tampa General. For example, a patient driving from the centroid point in zip code 33559 to UCH would take 24.28 minutes and to FHZ would take 37.97 minutes in 2007. This increases to 29.55 minutes and 50.94 minutes in 2012. Another example, the time it takes a patient to travel from zip code 33541 to Tampa General was 75.51 minutes in 2007. In 2012, the travel time is projected to increase approximately 20 minutes to 95.33 minutes. In contrast, a new hospital in the Wesley Chapel area would decrease travel times significantly for patients in the six zip code areas of the Pasco-Pinellas PSA. For example, in 2007, it would only take a zip code 33559 patient 11.41 minutes to reach the proposed site for Pasco-Pinellas. This represents a time savings of 12.87 minutes compared to the average driving time to UCH and 26.56 minutes compared to the average driving time to FHZ. In 2012, the reduction in time to drive to Pasco- Pinellas' proposed hospital site instead of UCH is 18.34 minutes and for FHZ, it is 39.53 minutes. The time savings for patients from the 33541 zip code traveling to Tampa General for non- tertiary services is even greater. Using Pasco-Pinellas' site in the Wesley Chapel area would save the patient 52.67 minutes in 2007 and is projected to save 63.88 minutes in 2012. Anecdotal evidence supports the need for a new hospital in the Wesley Chapel area. Dr. Niraj Patel practices obstetrics and gynecology in the Wesley Chapel area. A drive for him in good traffic is typically 20 minutes to UCH (the only hospital at which he practices because the distance between area hospitals is too great). In morning traffic during "rush" periods, the drive can exceed 40 minutes. Caught in such a drive in January of 2008, Dr. Patel missed the delivery of a patient's baby. He was required to appear before the UCH Medical Staff's credentials committee to "explain the situation . . . [because it] was the third or fourth [such] episode." Pasco-Pinellas 47, p. 11. As Dr. Patel explained in a pre- hearing deposition, "it doesn't fare well for me . . . credential and requirement wise but it doesn't fare well for the patient [who] had to be delivered by the nursing staff which [without a physician present] increases patient risk and [the chance] of complication[s]." Id. A new hospital in the Wesley Chapel area will provide residents of the Pasco-Pinellas PSA or the BayCare PSA with shorter travel time to a hospital compared to the time necessary to reach one of the eight existing hospitals in the region. In 2007, residents of the six zip codes in the Pasco-Pinellas' PSA could be expected to access Pasco-Pinellas' proposed hospital in a range of 10.9 to 21.8 minutes. For the year 2012, the time can be reasonably predicted to range from 17 to 31.4 minutes. In comparison the drive times to the eight hospitals in the region for residents of Pasco-Pinellas' PSA are significantly longer. In 2007, it took a resident in zip code 34639 approximately 55 minutes to get to UCH and 73 minutes to get to St. Joseph's Tampa. By 2012, those drive times are reasonably projected to increase to 64 minutes and 83 minutes, respectively. Simply put, travel times are expected to increase as the population increases in coming years. The site of Pasco-Pinellas' hospital is approximately one mile from the site of the proposed BayCare hospital. The travel times suggested for the residents of the Pasco-Pinellas PSA to the proposed Pasco-Pinellas hospital can be expected to be similar to travel times to the proposed BayCare hospital. Given the proximity of the two proposed sites, either will significantly reduce travel time to hospitals for patients in the Wesley Chapel area. The existence in the Wesley Chapel area of a community hospital with an emergency room and primary inpatient services will benefit doctors, patients and their families. Heightened driving concerns among elderly patients and traffic congestion and inadequate roadways that delay Emergency Medical services support the need for a Wesley Chapel area hospital. The support is based not only on 2007 travel times but also on the reasonable expectation that travel time will be greater in the future. Existing hospitals are capable of absorbing the increased need for acute care hospital services that result from the increased growth that is reasonably projected to occur in Subdistrict 5-2. If there is to be a new hospital in the subdistrict, the Wesley Chapel area is the best location for it. A new hospital in the Wesley Chapel area will enhance access to acute care services for residents of Subdistrict 5-2. Preliminary Agency Action; the SAAR The Agency determined that there is a need for a new hospital in the Wesley Chapel Area when it issued its State Agency Action Report on CONs 9975 and 9977. The Agency also determined that between the two applications, Pasco-Pinellas was superior and should therefore be approved over BayCare's. This determination was founded primarily on Pasco-Pinellas' application being more reasonable in terms of size and impacts on existing providers. The Agency maintained at hearing the position it took in it preliminary action memorialized by the SAAR. Jeffrey Gregg, Chief of AHCA's Bureau of Health Facility Regulation received in this proceeding as an expert in health planning and CON Review explained when called to the stand to testify: The proposal by [Pasco-Pinellas] was on the smaller side and gave us more comfort [than BayCare's] . . . [W]hile we . . . agree with these applicants that there is a hospital in the future of [the Wesley Chapel area], we are more comfortable with the conservative approach, the smaller approach [of Pasco- Pinellas], particularly given that should it be necessary in the future, any hospital can add beds, acute care beds, merely by notifying us. And we were more comfortable that [Pasco-Pinellas'] approach would be able to expand access and improve services for people in this area while at the same time minimally impacting all of the competitors. Tr. 1995. As detailed below, AHCA's determination that the Pasco-Pinellas application is superior to BayCare's is supported by the record even if the basis for the determination made on the state of the record is not quite the same as the basis advanced at hearing by AHCA. Size and Cost Pasco-Pinellas proposed hospital involves about 184,000 square feet of new construction at a cost of approximately $121 million dollars. It is much smaller and less costly than BayCare's proposed hospital of 476,000 square feet of new construction for about $308 million. The Pasco-Pinellas proposal is more reasonably sized to meet the needs of the Wesley Chapel area and, in turn, Subdistrict 5-2. The difference in size and cost of the two proposals, however, is a function of a major difference in approach in the applications. Pasco-Pinellas' proposal is for a typical community hospital that would start out with a bed size within a range that includes 80 beds. BayCare, on the other hand, proposes to serve not only the Wesley Chapel area and Subdistrict 5-2, but also a substantial population of patients to be drawn to the subdistrict particularly from Hillsborough County. Patients migrating to the hospital from outside the subdistrict will for the most part be the product of BayCare's affiliation with USF Health and its service to the USF College of Medicine in its proposal denominated in the application as a "teaching hospital." Need for a New Teaching Hospital "Teaching hospital" is a term defined in the Health Facility and Services Development Act, sections 408.031-408.045, Florida Statutes: "Teaching hospital" means any Florida hospital officially affiliated with an accredited Florida medical school which exhibits activity in the area of graduate medical education as reflected by at least seven different graduate medical education programs accredited by the Accreditation Council for Graduate Medical Education or the Council of Postdoctoral Training of the American Osteopathic Association and the presence of 100 or more full-time equivalent resident physicians. The Director of the Agency for Health Care Administration shall be responsible for determining which hospital meets this definition. § 408.07(45), Fla. Stat. The Agency has not determined that BayCare's proposal meets the statutory definition as directed by the statute for it to qualify as a "teaching hospital." The record indicates that the proposal is not a typical teaching hospital. For example, teaching hospitals in the United States are usually located near indigent populations to achieve the efficiency of training future practitioners with treating people who otherwise could not afford services. BayCare's proposal in a small county with a more affluent population does not serve that purpose. BayCare contends neither that it is a "statutory" teaching hospital nor that it should be determined by the Agency to meet the statutory definition of "teaching hospital." Instead it grounds its case for need in the teaching functions its proposal would fulfill for USF Health and in particular for the GME needs of the students of the USF College of Medicine and the results those teaching functions would produce. Considerable testimony was offered by BayCare at hearing with regard to GME and the needs and aspirations of the USF College of Medicine. The Dean of the College, Stephen K. Klasko, M.D., spiritedly and eloquently related a narrative of need which was supported and amplified by other witnesses including faculty members at the college. There were many elements to the narrative. Highlights include the hybrid nature of the USF College of Medicine, "acting like a research intensive medical school . . . in a community-based body" (tr. 1132)," its on-going successful striving towards becoming an academic center for world class physicians as evidenced by this year's receipt of a research grant from the National Institute for Health, "the largest . . . given to a medical school in the last four or five years," id., and the GME challenges the college faces in the Tampa Bay area such as the recent loss of its anesthesiology residency program. BayCare's opponents point out the many ways in which the proposal is not only not a statutory teaching hospital but does not fit a nationwide model for teaching hospitals. BayCare counters that its model is one of many different models for a teaching facility. Whatever the merits of the various assertions of the parties on the point, USF's need for a teaching facility will be filled at least in part by the BayCare proposal. It is not an exaggeration, moreover, to call USF's need in this regard compelling. USF's institution-specific need, however, does not fall under any of the CON review criteria. See paragraphs 167- 8, below, in the Conclusions of Law. Perhaps not unmindful of the limits of the criteria, BayCare's presented other evidence that flows from the teaching function of the BayCare proposal. Relevant to the general criterion of "need" in subsection (1) of the Statutory CON Review Criteria, the evidence relates to physician shortages. The Physician Shortage There is a shortage of physicians in the district as there is in Pasco County. The problem has statewide dimensions. The state is not doing enough to replace aging doctors in Florida with younger doctors. Nor are aging doctors providing sufficient emergency room call coverage. The physician shortage both in general and in emergency rooms in the state is likely to increase. Residents are more likely to remain and practice in the community in which they train. Residents in the Tampa Bay area, in particular, are more likely to remain in the Tampa Bay area to practice. Even 20 residents per year in training at BayCare's proposed hospital would make a difference in existing physician shortages. Should BayCare's proposed hospital be built and operated as contemplated, the teaching functions that BayCare's application proposes to offer at the hospital would serve as a step, however small, toward meeting Florida's physician shortage as well as the shortage in District V, Pasco County, Subdistrict 5-2 and the Tampa Bay area. Nonetheless, there is a feature of this case that undermines BayCare's claim that the proposal will aid the physician shortage and its denomination in the application of the proposal as a "teaching hospital." The feature is present in the agreement between USF and BayCare (the "BayCare and USF Agreement) to make the BayCare proposed hospital a University Hospital. The BayCare and USF Agreement The BayCare and USF Agreement contains a section devoted to implementation and termination. The following is excerpted from the section's six separately numbered paragraphs: The Parties [the University of South Florida Board of Trustees or USF and BayCare Health System, Inc.] shall negotiate in good faith all other terms and conditions relating to the execution and implementation of this Agreement, including, without limitation, any revisions to the provisions of the Articles of Incorporation and Bylaws of the Hospital Corporation, the terms and conditions of the Health Affiliation Agreement, the design and layout of the University Hospital . . . [etc.] and such other documents and instruments as the Parties may find necessary or desirable to implement the terms of this Agreement. In the event the Parties are unable to agree on all such terms and conditions and all such documents required to implement the terms and provisions of this Agreement despite their good faith efforts to do so, either Party shall have the option after a period of at least twenty four months from the Effective Date or six months after the final approval of the Certificate of Need for the University Hospital is received, whichever is longer, to terminate this Agreement on the terms described in this [s]ection . . . . BayCare 2, Appendix C, BayCare and USF Agreement, Section G, p. 8. (Emphasis supplied.) For USF to terminate, the terms include payment to BayCare of $500,000 and agreement that for five years after termination it will not enter into an affiliation or other agreement with any other provider for the establishment of a university hospital in Pasco County. See id. The ability of USF to terminate the agreement is not "at will." It requires good faith efforts to have been made at implementations that fail to work. Furthermore, termination is not without consequences. But the termination provision in the agreement is consistent with the lack of a condition in BayCare's application that the BayCare proposal be a teaching hospital, "one more detail that made [AHCA officials] scratch our heads about the characterization of this hospital as a teaching hospital." Tr. 2011. It is also consistent with USF's support for "legislation that would be statewide that would allow state medical schools at some point, if they chose to, to make it easier . . . to have a hospital or research hospital on campus . . . [of which] USF would be one . . . " Tr. 1190-91. Adverse Impact Providers Outside the District Evidence was produced at hearing about the adverse impact of approval of either of the two applications on providers outside the district. Objections to the evidence were taken under advisement pending consideration of post-hearing memoranda submitted by the parties. Upon consideration of the memoranda, the objections are sustained. See paragraphs 159-66, below, in the Conclusions of Law. Providers Within the District The Pasco-Pinellas proposal will have minimal impact on Community/Trinity Medical Center. Its impact on other hospitals will be minimal with the exception of its two partner hospitals--UCH and FHZ--and of those two, only FHZ is in the District. There will be no adverse impact on Community as a result of the BayCare proposal. There is little patient flow from eastern Pasco to the western Pasco hospitals. Only about 1% of the patients in eastern Pasco travel west for services at Community, Morton Plant or Bayonet Point. It is reasonable to project that there will be no material change in Community's patient draw as a result of the new Trinity Medical Center. The projections by Community's health care and financial experts of patient days that would be lost and adverse financial impact to Community/Trinity should the BayCare proposal be approved were based on faulty assumptions. The majority of the adverse impact from BayCare's proposal, as in the case of Pasco-Pinellas' proposal, will be on UCH and FHZ. Availability of Resources Nursing and Non-Nursing Staff Pasco-Pinellas should be able to recruit and retain nursing and other staff for its hospital based on the Adventist experience at FHZ. The nursing vacancy at FHZ is 1% lower than the vacancy rate reported by the Florida Hospital Association (7.5% and 8.5%, respectively.) The turn-over rate for nurses at FHZ is 12%, significantly lower than the national rate in the 18-19% range. Recruitment of nurses has been successful at FHZ particularly in the last few years. In 2007, FHZ hired 100 nurses and reduced its use of agency nursing staff by roughly 75%. Among its different recruitment tactics have been a foreign nursing program, education and training incentives, scholarships at local colleges and specialty pay programs. Pasco-Pinellas will use many of the same recruiting techniques that have been successful at FHZ. It is reasonably anticipated that the same recruitment practices employed by FHZ will work for Pasco-Pinellas. Many members of the current nursing staff at FHZ, moreover, live in the Wesley Chapel area and have expressed an interest in working at Pasco-Pinellas. Retention programs at FHZ have been aimed at retaining better nurses. These include the magnet concept and a self- governance program with "a unit based council and nursing council so nurses . . . practicing . . . at the bedside have the opportunity to help govern the practice of nursing." Tr. 225-6. Retention programs similar to those used at FHZ will be implemented at Pasco-Pinellas. Schedule 6 in Pasco-Pinellas application reflects anticipated staffing for its new hospital. The staffing model is consistent with staffing at other Adventist facilities, specifically FHZ. The average salaries and wages are based on actual salaries inflated forward to the projected date of opening. The FTEs per adjusted occupied bed are adequate and consistent with the staffing patterns at FHZ. All necessary staffing positions are accounted for and the number of FTEs and salaries are sufficient for the hospital to operate and provide high quality of care. The registered nurse FTEs, as opposed to LPNs and lower-level nursing care, in Schedule 6 offer optimal staffing to provide high quality care and positive patient safety. The nursing salaries are adequate for the time frame in which Pasco-Pinellas will open with a one-time 5% increase and a 4% increase per year from present until opening. Schedule 6 supports the reasonable expectation that Pasco-Pinellas will be able to recruit and hire nursing staff and retain an adequate staff. The proposed staffing pattern in Schedule 6 of the Pasco-Pinellas application, which includes nursing staff, moreover, is reasonable. BayCare has a comprehensive recruitment program for recruiting and retaining nursing personnel as well. The strategies include a partnership with the nursing programs at USF and St. Petersburg College. BayCare System provides additional training to its nurses and with regard to salaries has committed to remaining competitive in the market. BayCare's recruitment and retention initiatives have been successful. In the 2008 year to date at the time of hearing, BayCare System had been able to hire more experienced nurses that it did in 2007 for the same time period. Overall, the BayCare System has a turnover rate of about 15%. The RN vacancy is 10% with a 13% turnover rate. These figures are comparable to state and national figures; in some cases they are lower. With regard to non-nursing employees or team members, BayCare System also had developed recruitment initiatives that are targeted toward those individuals. BayCare System has a positive reputation in the community as a good place to work. As an example, the three St. Joseph's hospitals (St. Joseph', Women's and Children's) and South Florida Baptist received recognition among the "Best Work Places in Health Care" for the years 2005 and 2006. The award recognizes outstanding practices related to employees. BayCare has the ability to recruit and retain the staff necessary to staff the proposed BayCare SE Pasco hospital. The staffing projections in Schedule 6 of BayCare's application, which includes nursing staff, are reasonable. Physician Support Despite the physician shortage, both applicants should be able to adequately staff their hospitals with physicians as shown by the evidence with regard to physician support for the hospitals. Florida Medical Clinic (FMC), a multi-specialty physician group practice with 85 physicians, is the primary physician group that serves the Wesley Chapel area. Thirty percent of its members are family practitioners or specialists in internal medicine. The remainder of the members cover 20 or so specialties that include both secondary and tertiary specialties. FMC has determined that it will support the Pasco- Pinellas proposal through its physicians, admissions and outpatients activity. Ninety percent or more of the clinic's patients use the UCH and FHZ facilities. FMC has a long- standing relationship with the administrators, personnel, and strategic issues of FHZ and UCH and is comfortable developing future plans for a hospital facility in Wesley Chapel with the two organizations FMC is able to meet the needs of the Wesley Chapel community both today and in the future. In addition, there are numerous other individual physicians who practice in the Wesley Chapel area who "predominantly support University Community Medical Center and Florida Hospital in Zephyrhills." Tr. 63. Having relationships with physicians already in a market when a hospital is being developed is advantageous to the new hospital. Among other advantages, it minimizes resources used to recruit and move new physicians into the area. In contrast to support for the Pasco-Pinellas proposal, FMC has not made a commitment to BayCare as to its proposal because of lack of knowledge about the structure of the facility, its strategic plans and whether or not FMC's interests align with the BayCare proposal but it has not foreclosed such a commitment. The USF physicians group will be a source of many of the physicians who will staff the BayCare proposed hospital, a likely reason for FMC's lukewarm to non-existing support for BayCare's proposal. USF emergency physicians will staff the Emergency Department. The BayCare System has approximately 28 physicians with privileges at BayCare System facilities with offices in the Wesley Chapel area. The proposed BayCare hospital will be staffed by recruited physicians and USF faculty physicians. Other physicians from the Wesley Chapel area provided testimony of their support for the BayCare proposal. It is reasonable to anticipate that some local Wesley Chapel area physicians will join the medical staff of the proposed BayCare hospital. Despite the physician shortages in the subdistrict, District V and the Tampa Bay area, both Pasco-Pinellas and BayCare will be able to staff their hospitals adequately with physicians. Charity and Medicaid; Conditions Pasco-Pinellas committed to a number of conditions of its applications. These include a 12.6% commitment to charity and Medicaid; the establishment of funding for a clinic for the underserved, provision of educational programs for the community, and two neonatal transports and funding for local fire and rescue services. BayCare projects a 6.1% level of charity care, 2.4% higher than Pasco-Pinellas' charity care commitment. It projects 10.3% of its Medicaid and Medicaid HMO patients will be attributable to Medicaid and Medicaid HMO patients versus 8.9% at Pasco-Pinellas. BayCare System has a history of providing services to Medicaid and Charity Patients. In 2006, for example, as not- for-profit entities, BayCare System facilities and related entities provided a total community benefit of $135 million in uncompensated care. Approximately 50% was pure charity care. BayCare System facilities currently serve patients from the Wesley Chapel area, including, of course, Medicaid and charity patients. BayCare System facilities provide 57% of the charity care and 31% of the Medicaid in the market. St. Joseph's Children's Hospital and St. Joseph's Women's Hospital operate at approximately 50-to-60% Medicaid and un-reimbursed care. St. Joseph's Hospital currently serves approximately 20% of the patients from the Wesley Chapel area. St. Joseph's, however, provides 36% of the total charity, Medicaid, and Medicaid HMO care rendered to patients who reside in the Wesley Chapel area. Thus, the facilities within the BayCare System have a demonstrated track record of providing care without regard to a patient's resources. In light of the record, it is reasonable to expect BayCare to carry on in the same vein under the BayCare proposal. Utilization Schedule 5 relates to projected utilization after project completion. The projections in the schedule in Pasco- Pinellas' application were developed by looking at service area population, applying a use rate growth and taking a market share by individual zip code. They are based on the expectation that the hospital would be operating at approximately 70% occupancy in its third year of operation, which equates to an average census of approximately 56 patients. The assumptions contained in the schedule are reasonable. The utilization projections in Schedule 5 in Pasco- Pinellas' application are reasonable; they indicate that an 80- bed hospital is appropriate to meet the need for a new hospital in the Wesley Chapel area of the subdistrict. BayCare will able to achieve its projected utilization from its primary service area and from the 40% of its patients it expects to receive by way of in-migration. The population forecast and market share forecast for the primary service area are reasonable. While the support among local physicians is much stronger for the Pasco-Pinellas proposal, it is likely that they will admit patients to the BayCare proposed hospital since it will be in the Wesley Chapel area, the area of the subdistrict that is most suitable for a new hospital. The 40% projected in-migration from outside of the seven mile service area is a reasonable projection. It is reasonable to expect that the bulk of these admissions will come from USF physicians located at the USF north Hillsborough campus. Projected Revenues Schedule 7A governs projected revenues. The payor mix in Schedule 7A of Pasco-Pinellas' application is based on historic admission and patient days by payor class occurring in the proposed Pasco-Pinellas service area based on the most recent available AHCA data. Gross charges and net revenues were developed based on historical data from FHZ as reported to AHCA. These figures were inflated forward using a net increase over all in revenue payments of approximately 3%. The projected revenues including net revenues in Schedule 7A of Pasco- Pinellas' application are reasonable and consistent with the marketplace. The payor mix in BayCare's Schedule 7A was based on an analysis of patient discharge data from the proposed primary service area plus an analysis of the experience of other BayCare System facilities in the same market. It is a reasonable payor mix. It allows for consideration of the experience of BayCare System, including the high level of charity care and Medicaid and Medicaid HMO services and at the same time reflects that the Wesley Chapel area is more affluent and younger than other areas of Pasco and Hillsborough Counties. BayCare's revenue assumptions were based on an analysis of gross and net revenue per patient day from another BayCare System facility, South Florida Baptist. Financial class specific projected patient days were applied to derive a gross and net revenue number for each of the three pro forma years for the proposed project denominated by Schedule 7A as "Projected Operating Year 1, 2 and 3" and ending "12/31/11, 12/31/12 and 12/31/13" respectively as indicated by BayCare in the application. See BayCare 2, pp. 133-135. The 2006 South Florida Baptist gross and net revenue per patient day were trended forward for each of the three projected operating years to reach the projected revenue figures in Schedule 7A. The projected revenues in Schedule 7A of the BayCare application are reasonable. Projected Income and Expenses Schedule 8A in a CON application contains projected income and expenses for the proposal. Pasco-Pinellas' application used a methodology in Schedule 8 that its expert had used in other CON cases. The methodology is consistent with methodologies of other health care experts and has been accepted in recommended and final orders in CON cases. The projections in Schedule 8 of Pasco-Pinellas' application are appropriate and reasonable. BayCare's methodology used to project income and expenses in Schedule 8A is also appropriate and reasonable. BayCare's healthcare finance expert asked BayCare financial analysts to look at his initial projections. They recommended that expenses be increased in physical therapy, radiology lab and pharmacy and that expense be reduced in plant operations. The recommendations were accepted; the projections were adjusted. Medicare GME reimbursement in year 3 of operations was assumed to be $1.7 million. If no addition Medicare GME reimbursement were received, BayCare's proposal would still show a profit of $2.8 million by year 3. It is virtually certain, moreover, that some portion of the $1.7 million included in calculation of BayCare's income projections will be realized. However valid criticism of the inclusion of the $1.7 million, BayCare's proposal remains financially feasible in the long- term. Financial Feasibility Pasco-Pinellas proved the immediate and long-term financial feasibility of its proposal. The schedules in its application related to financial feasibility used reasonable methodologies that yielded reasonable projections. Analysis of capital costs and funding is contained in Schedules 1 through 3. Schedule 1 presents an accurate summation of total project cost. That figure, $121 million, is a reasonable and typical cost for a new 80-bed community hospital. The $149 million on Schedule 2 reflects an accurate summation of anticipated capital costs, including the hospital project and necessary capital expenditures for the first tow or three years of operation. Schedule 3 set forth the sources of funding, a combination of equity and debt financing, discussed below. Both UCH and Adventist are financially successful systems. They will have not difficulty funding the Pasco- Pinellas proposal. As of December 31, 2007, Adventist's net revenue was approximately $368 million. About $100 million in funds were available to UCH at the time of hearing to contribute to development of the project. Due to the financial strength of its members, Pasco- Pinellas will easily be able to fund the project through a combination of equity and debt. The equity, $45 million, will be provided equally by Adventist and UCH, $22.5 million each. The remaining $76 million will be financed through tax-free bonds issued by Ziegler Securities. The project is immediately financially feasible. The Pasco-Pinellas project is also financially feasible in the long-term. Schedule 8 in the application, year 3, shows the project will generate a return of approximately $5.3 million in revenue over expenses, an amount that "more than meet[s] the test for financial feasibility in the long-term." Id. Based on the sources of BayCare System, BayCare has access to the financial resources to implement its proposed hospital. Funding for the hospital will come from BayCare System on the basis of 50% debt and 50% equity investment. As of early 2008, BayCare System had approximately $1.2 billion in unrestricted cash on hand. BayCare System's financial strength will allow BayCare to obtain the financing it needs for the project. Schedule 3 of the BayCare application sets forth an accurate and reasonable statement of the sources of funds necessary to develop the project. The immediate financial feasibility of BayCare's proposal is demonstrated by the evidence presented by BayCare. By year three of the pro forma, the BayCare proposal is reasonably projected to generate a net income over expenses in the amount of $4,498,637. BayCare demonstrated that the proposal's long-term financial feasibility. Costs and Construction Methods The costs and methods of the proposed construction of the Pasco-Pinellas project are reasonable. The facility is adequately sized and programmed for the services included in the Pasco-Pinellas application. All of the departments, including central storage, fall within an appropriate benchmark range for community hospitals. The 2,300 square feet per bed is reasonable as are the construction costs when compared to similar community hospitals. The proposed Pasco-Pinellas facility meets the codes for all of the services included in the application. The design of the Pasco-Pinellas facility enable expansion. The designed expansion capabilities are reasonable, logical and appropriate to meet the needs of the Wesley Chapel community. The drawings contained in the CON application show an efficient community hospital. The departments allow for efficient intra-department circulation and department-to- department circulation. There are adequate separation of public and staff flow corridors. All of the areas and departments as shown in the Pasco-Pinellas plans are code compliant. The layout of the patient rooms is consistent with industry standards for the design of single patient rooms. The number and size of the operating rooms are adequate and appropriate for an 80-bed community hospital not offering tertiary services. The emergency department, including the trauma room, complies with code and its layout is adequate and appropriate for an 80-bed hospital. The ambulance entrance in relation to the trauma bay allows for efficient location of patients based on acuity level. The number of treatment beds, treatment bays, including observation areas, provide adequate emergency department capacity. The Schedule 1 costs set forth in the BayCare application are reasonable. These costs include projected costs associated with necessary medical equipment. The medical equipment costs set forth in Schedule 1 are reasonable and BayCare has properly accounted for the items and costs of equipment necessary to operate the hospital. The Schedule 9 construction costs of approximately $180 million are reasonable as are the construction costs per square foot ($347 versus $325 for Pasco-Pinellas). Contingencies and escalation factors have been built into the projected costs. Facilities, Sites, Related Costs At the time the UCH and Adventist joint venture was formed, UCH had a parcel of land under contract located on State Road 54 across from the Saddlebrook Resort (the "UCH Parcel"). When it filed its application, Pasco-Pinellas hoped the UCH Parcel would serve as the site of its hospital. In fact, Pasco- Pinellas touted the location of the parcel for meeting the need of the growing population in Pasco County when it represented in the application that the UCH Parcel is the center point of the Wesley Chapel area. Close to Interstate 75, the UCH Parcel is a good location for a hospital. Pasco-Pinellas' aspiration for the use of the parcel was defeated, however, when the Pasco County denied a request to re-zone the UCH Parcel for use as a hospital. After the inability to have the UCH Parcel re-zoned, Pasco-Pinellas changed the site for the hospital to a parcel owned by FHZ (the "Pasco-Pinellas Site"). Located on Bruce B. Downs Boulevard, a major north-south corridor in the Wesley Chapel area, the site is 51.5 acres. The Pasco-Pinellas Site had been purchased by FHZ in 2001 with the intention of using it for a hospital. Subject to a height variance to allow a seven-story building, the site is zoned for special use as a hospital and related medical uses. The site has good visibility and access from Bruce B. Downs Boulevard as evidenced by its compliance with the State Road 581 (Bruce B. Downs Boulevard) access management plan. It meets other regulatory requirements such as the minimum spacing criteria for Pasco County. The Pasco-Pinellas Site is governed by a development order associated with the Wiregrass Ranch Development of Regional Impact (the "Wiregrass DRI DO"). The Wiregrass DRI DO "indicates that the phasing schedule assumed 100 hospital beds would be developed within the building phase." Tr. 597. As explained at hearing by Lara Daly, Pasco-Pinellas' expert in civil engineering and property site development, there are other aspects of the Wiregrass DRI DO, "like trade-off matrices" and "entitlement advancements" that indicate "entitlements are not limited on a parcel-by-parcel basis." Tr. 598. The assumption, therefore, does not necessarily restrict the number of hospital beds on the Pasco-Pinellas Site; rather it allows impacts associated with 100 hospital beds. The number of allowable beds may be increased following action taken under other provisions of the Wiregrass DRI DO. A significant portion of the Pasco-Pinellas Site is wetlands: some of low quality, some of high quality. The higher quality wetlands, referred to in the record as "a high quality category 1 wetland as defined by Pasco County," tr. 552, (the "Category 1 Wetland") are on the north and east perimeter of the site. The project is designed so as to have no impacts on the Category 1 Wetland. The only potential impact to these high quality wetlands is if there were a county-mandated road to be built in their vicinity. The lesser quality wetlands located in the interior of the site are herbaceous in nature or an open water feature that is "an older borrow pit that naturalized over time." Tr. 552-53. These lower quality wetlands constitute roughly 11.5 acres of the site. They will be impacted by the project but it is reasonable to expect that the impacts will be permitted. As Ms. Daly put it at hearing, "[a]fter reviewing, running stormwater models, looking at the proposed wetland impacts, coming up with appropriate mitigation ratios based on our experience elsewhere on the Wiregrass site, the site will accommodate all the necessary wetland and floodplain historic basin compensation . . . ." Tr. 550. The costs contained in Schedule 1 of the application were arrived assuming the use of the UCH Parcel as the site for the Pasco-Pinellas project. The Pasco-Pinellas Site requires expenditures for site preparation and other expenditures, such as wetland mitigation, related to the site that were not required had the UCH Parcel been used. For example, three potential foundation systems have been suggested for the hospital because of the wetland and subsurface conditions on the Pasco-Pinellas Site had the UCH Parcel been the site. Using the most expensive of the three, however, would not cause Pasco- Pinellas to exceed the construction costs contained in Schedule 1 of the CON Application. The land acquisition costs were reasonably projected to be less for the Pinellas-Pasco Site than for the UCH Parcel as reflected in the application. All told, the estimated project cost using the Pasco-Pinellas site was not materially different from the cost projected in the application and presented the possibility of being less than the $121 million reflected in the application. Likewise, the equipment cost figure shown in Schedule 1 of the Pasco-Pinellas application is reasonable and achievable. The total of the costs for the project sited at the Pasco-Pinellas Site, despite the change of site that occurred after the filing of the application, should not exceed the total of the costs listed in the Pasco-Pinellas application. The preponderance of the evidence is that the Pasco- Pinellas Site should ultimately qualify as an appropriate, developable site for the Pasco-Pinellas project. The BayCare site, north of Highway 56 and bordering I-75, (the "BayCare Site") includes two parcels of 54 and 17 acres. The 54 contiguous acres will be used for the hospital, outpatient services, and a planned medical office building. The 17 acres will be used for research space, physician office space, and academic training space necessary for the research and education function at the project. BayCare has the appropriate zoning and approvals necessary to develop the hospital. The hospital will have all private beds. It will be fully digital and will rely on electronic medical records. The BayCare Site is well suited for construction of the hospital and related buildings. The available footprint and design of the hospital, which includes shelled-in space, will readily allow for future expansion of the hospital up to 300 beds. Design of the BayCare facility is based on principles of family-centered care, flexibility to allow for change and future growth, efficiency, a quality of environment for teaching, a sustainable, green building, and patient safety. A "health building" with improved environmental quality and energy efficiency, the facility will seek LEED certification given to facilities constructed to have minimal adverse environmental impact. In keeping with the teaching function intended by the application, the facility's design includes additional work space, reading areas, sleep areas and conference rooms to facilitate teaching. Overall, the BayCare facility is twice as large as the Pasco-Pinellas facility. Size has its advantages. For example, it allows for larger treatment patient areas. But the facility is much more expensive to build. It is reasonably projected to cost more than $180 million above the costs associated with the Pasco-Pinellas facility which is more than twice as much. The high expense associated with the BayCare facility is shown by its cost per bed: in excess of $2 million-- much more than the cost per bed of the Pasco-Pinellas facility.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Agency for Health Care Administration approve CON 9975, Pasco-Pinellas' application for a new hospital in AHCA Subdistrict 5-2, and deny CON 9977, BayCare's application for a new hospital in the same subdistrict. DONE AND ENTERED this 28th day of October, 2008, in Tallahassee, Leon County, Florida. S DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of October, 2008. COPIES FURNISHED: Richard J. Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Building 3 Mail Station 3 Tallahassee, Florida 32308 Craig H. Smith, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Building 3 Mail Station 3 Tallahassee, Florida 32308 Karin M. Byrne, Esquire Agency for Health Care Administration 2727 Mahan Drive, Building 3 Mail Station 3 Tallahassee, Florida 32308 Stephen K. Boone, Esquire Boone, Boone, Boone, Koda & Frook, P.A. 1001 Avenida Del Circo Post Office Box 1596 Venice, Florida 34284 Jonathan L. Rue, Esquire Parker, Hudson, Rainer & Dobbs, LLP 1500 Marquis Two Tower 285 Peachtree Center Avenue Northeast Atlanta, Georgia 30303 Robert A. Weiss, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 R. David Prescott, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551
Findings Of Fact Upon consideration of the oral and documentary evidence presented the following facts are found: Petitioners each made application for a certificate of need under the provisions of Sections 381.493 through 381.497, Florida Statutes, 1975, which applications were submitted to the Bureau of Community Medical Facilities and accepted as complete by the bureau. Each application seeks a certificate of need for a third generation computerized axial tomography scanner (whole body unit) hereinafter referred to as a CAT scanner. There is presently in Jacksonville a head scanner installed at St. Vincent Hospital in November, 1975, and a whole body scanner at St. Luke's Hospital which has been in full operation since January, 1976. All three Petitioners are located in Jacksonville, Florida. The applications were processed by the appropriate Health Systems Agency. After due consideration the Health Systems Agency recommended that each of the three applications be granted. At the request of the Bureau of Community Medical Facilities, Department of Health and Rehabilitative Services, the State Hospital Advisory Council reviewed the applications and upheld the Health Systems Agency's determination that the three applications should be granted certificates of need. After consideration of the applications, the Health Systems Agency's recommendation the State Hospital Advisory Council's recommendation, Mr. Art Forehand, Administrator, Office of Community Medical Facilities, Respondent herein, notified each of the three Petitioners that their applications were not favorably considered. Mr. Forehand's notification set forth three reasons for the unfavorable consideration. Those were (1) lack of demonstrated need for the requested scanner, (2) failure of each application to demonstrate positive action toward containment of cost for services rendered to the public, and (3) lack of demonstrated unavailability, unaccessability, and inadequacy of like services within the Jacksonville area. At the time of his decision Mr. Forehand had no material or information available to him which was not available to the Health Systems Agency or the State Hospital Advisory Council at the time of their decision. At the time the three applications were denied Mr. Forehand felt that there did exist a need for one additional scanner in the Jacksonville area but he did not feel that he should bear the burden of deciding which one of the three applications should be granted and therefore all three were denied. Except for those matters set forth in Mr. Forehand's denial and noted above, none of the parties to this proceeding disputed that the criteria for determining need found in Section 101-1.03(c), F.A.C., were met. A study of computerized axial tomography with suggested criteria for review of certificate of need applications was conducted by the staff of the Health Systems Agency of Northeast Florida relative to the Duval County area. This study was published in April of 1976 and its findings appear to have been accepted by the Health Systems Agency. As one of its suggested criteria for determining need it found that a hospital or applicant should have a potential case load of at least 1,000 CAT scans per year. The study went on to project a potential case load for the three Petitioners herein. That projection for Baptist Memorial Hospital shows a a potential case load of 2,512 scans per year. The study noted that Baptist Memorial projected 1,300 scans for the first year during start up operations and 2,080 scans during the second and third years of their forecast. The study found that Riverside Hospital has a potential case load of 1,196 scans per year compared to their own projections of 1,432 scans per year. The study finally found that the University Hospital has a potential case load of 1,558 scans per year compared to their projection of 2,904. Testimony on behalf of the Respondent shows that in the opinion of Respondent full use of a CAT scanner is 10 scans per day on a 20-day work month working five days a week. As shown by unrebutted testimony the existing scanner at St. Luke's Hospital in Jacksonville is presently averaging 10 scans per day, five-days a week. Further, according to the evidence presented by Respondent, the existing scanner at St. Vincent is being utilized to at least 85 percent of its capacity. Respondent took the position at the hearing that when existing scanners are being used to 85 percent or more of their capacity a need exists for more equipment. Thus, it appears that using the criteria of utilization adhered to by Respondent, the existing CAT scanners in Jacksonville are being utilized to the extent that there is a need for additional scanners. University Hospital has 310 licensed beds and is the community hospital in Duval County with the responsibility of serving the indigent on an emergency and short term basis. It is the trauma center of the city and has the most active emergency room. It is also the major teaching hospital in Duval County. Respondent agrees that it has the greatest need of any hospital in Duval County for a CAT scanner. The University Hospital has approximately 300 visits per month to its emergency room. In the four months prior to the date of final hearing the hospital did 586 skull x-rays due to trauma. In the case of acute trauma patients frequently may not be moved from one hospital to another for the purpose of a CAT scan nor, in some cases, should other dangerous invasive techniques be used for diagnosis. Baptist Hospital has 567 licensed beds and is a major oncology center or cancer center and does a large amount of surgical cancer work in additional to radiation therapy. With the possible exception of University Hospital, Baptist Hospital is the largest pediatric hospital in the area. According to the testimony of the administrator of the hospital it would take 14 to 18 months after receipt of a certificate of need to have a CAT scanner in service. Riverside Hospital has 183 licensed beds. The hospital has been a specialty hospital since its establishment in 1908 and serves the Riverside Clinic. The hospital has approximately 200 specialized physicians, all board certified, on-staff. Riverside is a unique hospital because of its degree of specialty and its relationship to Riverside Clinic. Riverside Hospital does 100 percent of the Riverside Clinic's radiology work. Riverside Hospital has been known as an established diagnostic center. Witnesses for Riverside Hospital testified that if they were not able to have a CAT scanner their reputation and ability to provide first class service would be seriously diminished. CAT scanners represent a significant development in diagnostic medicine. They reduce the need for many dangerous, painful and costly injections of dye, air and radioactive isotopes required by some of the more traditional diagnostic procedures. The three most common tests displaced by CAT scanners are pneumoencephalography, angiography and radioactive isotope scanning. The first two of the foregoing are particularly expensive procedures and require hospitalization. At present, patients at the three Petitioner hospitals have to be transported to another facility in order to use a scanner. The transfer of an inpatient to another hospital for a scan may effectively consume the better part of a patient's day and may require an extra day of hospitalization. The cost of transportation, increased hospital stay and ancillary matters increase the actual cost to the Patient. Patients suffering from severe trauma or otherwise in a critical state, may not be transported out of a hospital to a scanner. All three of the Petitioners have an active neurological and neurosurgical staff and qualified radiologists. The unrebutted testimony indicates that, although CAT scanners are a new development whose potential has not yet been fully explored and whose development may not yet be final, they nevertheless have become an essential diagnostic tool of regular use.
The Issue The issue is whether BayCare Long Term Acute Care Hospital, Inc.'s Certificate of Need Application No. 9753 and University Community Hospital's Certificate of Need Application No. 9754, both submitted to the Agency for Health Care Administration, should be approved.
Findings Of Fact LTCHs defined An LTCH is a medical facility which provides extended medical and rehabilitation care to patients with multiple, chronic, or clinically complex acute medical conditions. These conditions include, but are not limited to, ventilator dependency, tracheotomy care, total parenteral nutrition, long- term intravenous anti-biotic treatment, complex wound care, dialysis at bedside, and multiple systems failure. LTCHs provide an interdisciplinary team approach to the complex medical needs of the patient. LTCHs provide a continuum of care between short-term acute care hospitals and nursing homes, skilled nursing facilities (SNFs), or comprehensive medical rehabilitation facilities. Patients who have been treated in an intensive acute care unit at a short-term acute care hospital and who continue to require intensive care once stabilized, are excellent candidates for care at an LTCH. Included in the interdisciplinary approach is the desired involvement of the patient's family. A substantial number of the patients suitable for treatment in an LTCH are in excess of 65 years of age, and are eligible for Medicare. Licensure and Medicare requirements dictate that an LTCH have an average length of stay (ALOS) of 25 days. The Center for Medicare and Medicaid Services (CMS) reimburses for care received through the prospective payment system (PPS). Through this system, CMS reimburses the services of LTCHs separately from short-term acute care providers and other post acute care providers. The reimbursement rate for an LTCH under PPS exceeds that of other providers. The reimbursement rate for an LTCH is about twice that of a rehabilitation facility. The increased reimbursement rate indicates the increased cost due to the more intensive care required in an LTCH. The Agency The Agency is a state agency created pursuant to Section 20.42. It is the chief health policy and planning entity for the State of Florida. The Agency administers the Health Facility and Services Development Act found at Sections 408.031-408.045. Pursuant to Section 408.034, the Agency is designated as the single state Agency to issue, revoke, or deny certificates of need. The Agency has established 11 health service planning districts. The applications in this case are for facilities in District 5, which comprises Pinellas and Pasco counties. UCH UCH is a not-for-profit organization that owns and operates a 431-bed tertiary level general acute care hospital and a 120-bed acute care general hospital. Both are located in Hillsborough County. UCH also has management responsibilities and affiliations to operate Helen Ellis Hospital, a 300-bed hospital located in Tarpon Springs, and manages the 300-bed Suncoast Hospital. Both of these facilities are in Pinellas County. UCH also has an affiliation to manage the open heart surgery program at East Pasco Medical Center, a general acute care hospital located in Pasco County. As a not-for-profit organization, the mission of UCH is to provide quality health care services to meet the needs of the communities where it operates regardless of their patients' ability to pay. Baycare BayCare is a wholly-owned subsidiary of BayCare Healthsystems, Inc. (BayCare Systems). BayCare Systems is a not-for-profit entity comprising three members that operate Catholic Health East, Morton Plant Mease Healthcare, and South Florida Baptist. The facilities owned by these organizations are operated pursuant to a Joint Operating Agreement (JOA) entered into by each of the participants. BayCare Systems hospitals include Morton Plant Hospital, a 687-bed tertiary level facility located in Clearwater, Pinellas County; St. Joseph's Hospital, an 887-bed tertiary level general acute care hospital located in Tampa, Hillsborough County; St. Anthony's Hospital, a 407-bed general acute care hospital located in St. Petersburg, Pinellas County; and Morton Plant North Bay, a 120-bed hospital located in New Port Richey, Pasco County. Morton Plant Mease Health Care is a partnership between Morton Plant Hospital and Mease Hospital. Although Morton Plant Mease Healthcare is a part of the BayCare System, the hospitals that are owned by the Trustees of Mease Hospital, Mease Hospital Dunedin, and Mease Hospital Countryside, are not directly members of the BayCare System and are not signatories to the JOA. HealthSouth HealthSouth is a national company with the largest market share in inpatient rehabilitation. It is also a large provider of ambulatory services. HealthSouth has about 1,380 facilities across the nation. HealthSouth operates nine LTCHs. The facility that is the Intervenor in this case is a CMR located in Largo, Pinellas County. Kindred Kindred, through its parent company, operates LTCH facilities throughout Florida and is the predominant provider of LTCH services in the state. In the Tampa Bay area, Kindred operates three LTCHs. Two are located in Tampa and one is located in St. Petersburg, Pinellas County. The currently operating LTCH in District 5 that may be affected by the CON applications at issue is Kindred-St. Petersburg. Kindred-St. Petersburg is a licensed 82-bed LTCH with 52 private beds, 22 semi-private beds, and an 8-bed intensive care unit. It operates the array of services normally offered by an LTCH. It is important to note that Kindred-St. Petersburg is located in the far south of heavily populated District 5. The Applications UCH proposes a new freestanding LTCH which will consist of 50 private rooms and which will be located in Connerton, a new town being developed in Pasco County. UCH's proposal will cost approximately $16,982,715. By agreement of the parties, this cost is deemed reasonable. BayCare proposes a "hospital within a hospital" LTCH that will be located within Mease Hospital-Dunedin. The LTCH will be located in an area of the hospital currently used for obstetrics and women's services. The services currently provided in this area will be relocated to Mease Hospital- Countryside. BayCare proposes the establishment of 48 beds in private and semi-private rooms. Review criteria which was stipulated as satisfied by all parties Section 408.035(1)-(9) sets forth the standards for granting certificates of need. The parties stipulated to satisfying the requirements of subsections (3) through (9) as follows. With regard to subsection (3), 'The ability of the applicant to provide quality of care and the applicant's record of providing quality of care,' all parties stipulated that this statutory criterion is not in dispute and that both applicants may be deemed to have satisfied such criteria. With regard to subsection (4), 'The availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation,' it was stipulated that both applicants have all resources necessary in terms of both capital and staff to accomplish the proposed projects, and therefore, both applicants satisfy this requirement. With regard to subsection (5), 'The extent to which the proposed services will enhance access to health care for residents of the service district,' it was stipulated that both proposals will increase access. Currently there are geographic, financial and programmatic barriers to access in District 5. The only extant LTCH is located in the southernmost part of District 5. With regard to subsection (6), 'The immediate and long-term financial feasibility of the proposal,' the parties stipulated that UCH satisfied the criterion. With regard to BayCare, it was stipulated that its proposal satisfied the criterion so long as BayCare can achieve its utilization projections and obtain Medicare certification as an LTCH and thus demonstrate short-term and long-term feasibility. This issue will be addressed below. With regard to subsection (7), 'The extent to which the proposal will foster competition that promotes quality and cost- effectiveness,' the parties stipulated that approval of both applications will foster competition that will promote quality and cost effectiveness. The only currently available LTCH in District 5, unlike BayCare and UCH, is a for-profit establishment. With regard to subsection (8), 'The costs and methods of the proposed construction, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction,' the parties stipulated that the costs and methods of construction for both proposals are reasonable. With regard to subsection (9), 'the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent,' it was stipulated that both UCH and BayCare have a demonstrated history and a commitment to providing services to Medicaid, Medicaid HMO, self-pay, and underinsured payments. Technically, of course, BayCare has no history at all. However, its sponsors do, and it is they that will shape the mission for BayCare. BayCare's Medicare certification as an LTCH The evidence of record demonstrates that BayCare can comply with Medicare reimbursement regulations and therefore can achieve its utilization projections and obtain Medicare certification as an LTCH. Thus short-term and long-term feasibility is proven. Because BayCare will be situated as a hospital within a hospital, in Mease Hospital Dunedin, and because there is a relationship between that hospital and BayCare Systems, Medicare reimbursement regulations limit to 25 percent the number of patients that may be acquired from Mease Hospital Dunedin or from an organization that controls directly or indirectly the Mease Hospital Dunedin. Because of this limitation, it is, therefore, theoretically possible that the regulator of Medicare payments, CMS, would not allow payment where more than 25 percent of admissions were from the entire BayCare System. Should that occur it would present a serious but not insurmountable problem to BayCare. BayCare projects that 21 percent of its admissions will come from Mease Hospital Dunedin and the rest will come from other sources. BayCare is structured as an independent entity with an independent board of directors and has its own chief executive officer. The medical director and the medical staff will be employed by the independent board of directors. Upon the greater weight of the evidence, under this structure, BayCare is a separate corporate entity that neither controls, nor is controlled by, BayCare Systems or any of its entities or affiliates. One must bear in mind that because of the shifting paradigms of federal medical regulation, predictability in this regard is less than perfect. However, the evidence indicates that CMS will apply the 25 percent rule only in the case of patients transferring to BayCare from Mease Hospital Dunedin. Most of the Medicare-certified LTCHs in the United States operate as hospitals within hospitals. It is apparent, therefore, that adjusting to the CMS limitations is something that is typically accomplished. BayCare will lease space in Mease Hospital Dunedin which will be vacated by it current program. BayCare will contract with Mease Hospital Dunedin for services such as laboratory analysis and radiology. This arrangement will result in lower costs, both in the short term and in the long term, than would be experienced in a free-standing facility, and contributes to the likelihood that BayCare is feasible in the short term and long term. Criteria related to need The contested subsections of Section 408.035 not heretofore addressed, are (1) and (2). These subsections are illuminated by Florida Administrative Code Rule 59C- 1.008(2)(e)2., which provides standards when, as in this case, there is no fixed-need pool. Florida Administrative Code Rule 59C-1.008(2)(e)2., provides as follows: 2. If no agency policy exists, the applicant will be responsible for demonstrating need through a needs assessment methodology which must include, at a minimum, consideration of the following topics, except where they are inconsistent with the applicable statutory or rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, sub district or both; Medical treatment trends; and Market conditions. Population Demographics and Dynamics The applicants presented an analysis of the population demographics and dynamics in support of their applications in District 5. The evidence demonstrated that the population of District 5 was 1,335,021 in 2004. It is anticipated that it will grow to 1,406,990 by 2009. The projected growth rate is 5.4 percent. The elderly population in the district, which is defined as persons over the age of 65, is expected to grow from 314,623 in 2004, to 340,676, in 2009, which represents an 8.3 percent increase. BayCare BayCare's service area is defined generally by the geographic locations of Morton Plant Hospital, Morton Plant North Bay Hospital, St. Anthony's Hospital, Mease Hospital Dunedin, and Mease Hospital Countryside. These hospitals are geographically distributed throughout Pinellas County and southwest Pasco County and are expected to provide a base for referrals to BayCare. There is only one extant LTCH in Pinellas County, Kindred, and it is located in the very southernmost part of this densely populated county. Persons who become patients in an LTCH are almost always moved to the LTCH by ambulance, so their movement over a long distance through heavy traffic generates little or no problem for the patient. Accordingly, if patient transportation were the only consideration, movement from the north end of the county to Kindred in the far south, would present no problem. However, family involvement is a substantial factor in an interdisciplinary approach to addressing the needs of LTCH patients. The requirement of frequent movement of family members from northern Pinellas to Kindred through congested traffic will often result in the denial of LTCH services to patients residing in northern Pinellas County or, in the alternative, deny family involvement in the interdisciplinary treatment of LTCH patients. Approximately 70 letters requesting the establishment of an LTCH in northern Pinellas County were provided in BayCare's application. These letters were written by medical personnel, case managers and social workers, business persons, and government officials. The thread common to these letters was, with regard to LTCH services, that the population in northern Pinellas County is underserved. UCH Pasco County has experienced a rapid population growth. It is anticipated that the population will swell to 426,273, in 2009, which represents a 10.1 percent increase over the population in 2004. The elderly population accounts for 28 percent of the population. This is about 50 percent higher than Florida as a whole. Rapid population growth in Pasco County, and expected future growth, has resulted in numerous new housing developments including Developments of Regional Impact (DRI). Among the approved DRI's is the planned community of Connerton, which has been designated a "new town" in Pasco County's Comprehensive Plan. Connerton is a planned community of 8,600 residential units. The plan includes space for a hospital and UCH has negotiated for the purchase of a parcel for that purpose within Connerton. The rate of growth, and the elderly population percentages, will support the proposed UCH LTCH and this is so even if BayCare establishes an LTCH in northern Pinellas County. Availability, utilization, and quality of like services in the district, sub-district, or both The Agency has not established sub-districts for LTCHs. As previously noted, Kindred is the only LTCH extant in District 5. It is a for-profit facility. Kindred was well utilized when it had its pediatric unit and added 22 additional beds. Subsequently, in October 2002, some changes in Medicare reimbursement rules resulted in a reduction of the reimbursement rate. This affected Kindred's income because over 70 percent of its patients are Medicare recipients. Kindred now uses admission criteria that have resulted in a decline in patient admissions. From 1998, the year after Kindred was established, until 2002, annual utilization was in excess of 90 percent. Thereafter, utilization has declined, the 22-bed addition has been shut down, and Kindred projects an occupancy of 55 percent in 2005. Kindred must make a profit. Therefore, it denies access to a significant number of patients in District 5. It denies the admission of patients who have too few "Medicare- reimbursable days" or "Medicaid-reimbursable days" remaining. The record indicates that Kindred only incurs charity care or Medicaid patient days when a patient admitted to Kindred with seemingly adequate funding unexpectedly exhausts his or her funding prior to discharge. Because of the constraints of PPS, Kindred has established admission criteria that excludes certain patients with conditions whose prognosis is so uncertain that it cannot adequately predict how long they will require treatment. Kindred's availability to potential patients is thus constrained. HealthSouth, a licensed CMR, is not a substitute for an LTCH. Although it is clear that there is some overlap between a CMR and an LTCH, HealthSouth, for instance, does not provide inpatient dialysis, will not accept ventilator patients, and does not treat complex wound patients. The nurse staffing level at HealthSouth is inadequate to provide for the type of patient that is eligible for treatment in an LTCH. The fact that LTCHs are reimbursed by Medicare at approximately twice the rate that a CMR is reimbursed, demonstrates the higher acuity level of LTCH services when compared to a CMR. HealthSouth is a facility which consistently operates at high occupancy levels and even if it were capable of providing the services typical of an LTCH, it would not have sufficient capacity to provide for the need. A CMR is a facility to which persons who make progress in an LTCH might repair so that they can return to the activities of daily living. SNFs are not substitutes for LTCHs although there could be some limited overlap. SNFs are generally not appropriate for patients otherwise eligible for the type of care provided by an LTCH. They do not provide the range of services typically provided by an LTCH and do not maintain the registered nurse staffing levels required for delivering the types of services needed for patients appropriate for an LTCH. LTCHs are a stage in the continuum of care. Short- term acute care hospitals take in very sick or injured patients and treat them. Thereafter, the survivors are discharged to home, or to a CMR, or to a SNF, or, if the patients are still acutely ill but stable, and if an LTCH is available, to an LTCH. As noted above, currently in northern Pinellas County and in Pasco County, there is no reasonable access to an LTCH. An intensive care unit (ICU) is, ideally, a treatment phase that is short. If treatment has been provided in an ICU and the patient remains acutely ill but stable, and is required to remain in the ICU because there is no alternative, greater than necessary costs are incurred. Staff in an ICU are not trained or disposed to provide the extensive therapy and nursing required by patients suitable for an LTCH and are not trained to provide support and training to members of the patient's family in preparation for the patient's return home. The majority of patients suitable for an LTCH have some potential for recovery. This potential is not realized in an ICU, which is often counterproductive for patients who are stabilized but who require specialized long-term acute care. Patients who remain in an ICU beyond five to seven days have an increased morbidity/mortality rate. Maintaining patients suitable for an LTCH in an ICU also results in over-utilization of ICU services and can cause congestion when ICU beds are fully occupied. UCH in Pasco County, and to a lesser extent BayCare in northern Pinellas County, will bring to the northern part of District 5 services which heretofore have not been available in the district, or, at least, have not been readily available. Persons in Pasco County and northern Pinellas County, who would benefit from a stay in an LTCH, have often had to settle for some less appropriate care situation. Medical Treatment Trends LTCHs are relatively new cogs in the continuum of care and the evidence indicates that they will play an important role in that continuum in the future. The evidence of record demonstrates that the current trend in medical treatment is to find appropriate post acute placements in an LTCH setting for those patients in need of long-term acute care beyond the stay normally experienced in a short-term acute care hospital. Market conditions The federal government's development of the distinctive PPS for LTCHs has created a market condition which is favorable for the development of LTCH facilities. Although the Agency has not formally adopted by rule a need methodology specifically for LTCHs, by final order it has recently relied upon the "geometric mean length of stay + 7" (GMLOS +7) need methodology. The GMLOS +7 is a statistical calculation used by CMS in administering the PPS reimbursement system in determining an appropriate reimbursement for a particular "diagnostic related group" (DRG). Other need methodologies have been found to be unsatisfactory because they do not accurately reflect the need for LTCH services in areas where LTCH services are not available, or where the market for LTCH services is not competitive. GMLOS +7 is the best analysis the Agency has at this point. Because the population for whom an LTCH might be appropriate is unique, and because it overlaps with other populations, finding an algebraic need expression is difficult. An acuity measure would be the best marker of patient appropriateness, but insufficient data are available to calculate that. BayCare's proposal will provide beneficial competition for LTCH services in District 5 for the first time and will promote geographic, financial, and programmatic access to LTCH services. BayCare, in conducting its need calculations used a data pool from Morton Plant Hospital, Mease Dunedin Hospital, Mease Countryside Hospital, Morton Plant North Bay Hospital, and St. Anthony's Hospital for the 12 months ending September 2003. The hospitals included in the establishment of the pool are hospitals that would be important referral sources for BayCare. BayCare then identified 160 specific DRGs historically served by existing Florida LTCHs, or which could have been served by Florida LTCHs, and lengths of stay greater than the GMLOS for acute care patients, and compared them to the data pool. This resulted in a pool of 871 potential patients. The calculation did not factor in the certain growth in the population of the geographic area, and therefore the growth of potential LTCH patients. BayCare then applied assumptions based on the proximity of the referring hospitals to the proposed LTCH to project how many of the patients eligible for LTCH services would actually be referred and admitted to the proposed LTCH. That exercise resulted in a projected potential volume of 20,265 LTCH patient days originating just from the three District 5 BayCare hospitals and the two Mease hospitals. BayCare assumes, and the assumption is found to be reasonable, that 25 percent of their LTCH volume will originate from facilities other than BayCare or Mease hospitals. Adding this factor resulted in a total of 27,020 patient days for a total net need of 82 beds at 90 percent occupancy. BayCare's GMLOS +7 bed need methodology reasonably projects a bed need of 82 beds based on BayCare's analysis of the demand arising from the three District 5 BayCare hospitals and the two Mease hospitals. UCH provided both a GMLOS +7 and a use rate analysis. The use rate analysis is suspect in a noncompetitive environment and, obviously, in an environment where LTCHs do not exist. UCH's GMLOS +7 analyses resulted in the identification of a need for 159 additional LTCH beds in District 5. This was broken down into a need of 60 beds in Pasco County and 99 additional beds in Pinellas County. There is no not-for-profit LTCH provider in District The addition of BayCare and UCH LTCHs to the district will meet a need in the case of Medicaid, indigent, and underinsured patients. Both BayCare and UCH have agreed in their applications to address the needs of patients who depend on Medicaid, or who are indigent, or who have private insurance that is inadequate to cover the cost of their treatment. The statistical analyses provided by both applicants support the proposed projects of both applicants. Testimony from doctors who treat patients of the type who might benefit from an LTCH testified that those types of facilities would be utilized. Numerous letters from physicians, nurses, and case managers support the need for these facilities. Adverse impacts HealthSouth and Kindred failed to persuade that BayCare's proposal will adversely impact them. HealthSouth provides little of the type of care normally provided at an LTCH. Moreover, HealthSouth is currently operating near capacity. Kindred is geographically remote from BayCare's proposed facility, and, more importantly, remote in terms of travel time, which is a major consideration for the families of patients. Kindred did not demonstrate that it was currently receiving a large number of patients from the geographic vicinity of the proposed BayCare facility, although it did receive some patients from BayCare Systems facilities and would likely lose some admissions if BayCare's application is approved. The evidence did not establish that Kindred would suffer a material adverse impact should BayCare establish an LTCH in Mease Dunedin Hospital. HealthSouth and Kindred conceded that UCH's program would not adversely impact them. The Agency's Position The Agency denied the applications of BayCare and UCH in the SAARs. At the time of the hearing the Agency continued to maintain that granting the proposals was inappropriate. The Agency's basic concern with these proposals, and in fact, the establishments of LTCHs throughout the state, according to the Agency's representative Jeffrey N. Gregg, is the oversupply of beds. The Agency believes it will be a long time before it can see any measure of clinical efficiency and whether the LTCH route is the appropriate way to go. The Agency has approved a number of LTCHs in recent years and is studying them in order to get a better understanding of what the future might hold. The Agency noted that the establishment of an LTCH by ongoing providers, BayCare Systems and UCH, where there are extant built-in referring facilities, were more likely to be successful than an out-of-state provider having no prior relationships with short-term acute care hospitals in the geographic vicinity of the LTCH. The Agency noted that both a referring hospital and an LTCH could benefit financially by decompressing its intensive care unit, and thus maximizing their efficiency. The Agency did not explain how, if these LTCHs are established, a subsequent failure would negatively affect the delivery of health services in District 5. The Agency, when it issued its SAAR, did not have the additional information which became available during the hearing process.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED that UCH Certificate of Need Application No. 9754 and BayCare Certificate of Need Application No. 9753 satisfy the applicable criteria and both applications should be approved. DONE AND ENTERED this 29th day of November, 2005, in Tallahassee, Leon County, Florida. S HARRY L. HOOPER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of November, 2005. COPIES FURNISHED: Robert A. Weiss, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 J. Robert Griffin, Esquire J. Robert Griffin, P.A. 1342 Timberlane Road, Suite 102-A Tallahassee, Florida 32312-1762 Patricia A. Renovitch, Esquire Oertel, Hoffman, Fernandez, Cole, & Bryant P.A. Post Office Box 1110 Tallahassee, Florida 32302-1110 Geoffrey D. Smith, Esquire Blank, Meenan & Smith, P.A. 204 South Monroe Street Tallahassee, Florida 32301 Timothy Elliott, Esquire Agency for Health Care Administration 2727 Mahan Drive Building Three, Mail Station 3 Tallahassee, Florida 32308 Alan Levine, Secretary Agency for Health Care Administration Fort Knox Building, Suite 3116 2727 Mahan Drive Tallahassee, Florida 32308 Christa Calamas, General Counsel Agency for Health Care Administration Fort Knox Building, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308 Richard Shoop, Agency Clerk Agency for Health Care Administration Fort Knox Building, Mail Station 3 2727 Mahan Drive Tallahassee, Florida 32308
The Issue The issue for determination is whether the Petitioner is liable to the Agency for Health Care Administration ("Agency") for Medicaid reimbursement overpayments and related fines, costs, and interest.
Findings Of Fact The Agency is the single state agency charged with administration of the Medicaid program in Florida under Section 409.907, Florida Statutes. The Petitioner provides physician services to Medicaid beneficiaries pursuant to a contract with the Agency under provider number 037381800. The Agency sent the Petitioner a Preliminary Agency Audit report on June 30, 1998, notifying him of a preliminary determination of Medicaid overpayments in the total amount of $21,156.35. The Agency sent the Petitioner a Final Agency Audit Report on October 28, 1998, confirming the Agency's determination of Medicaid overpayments in the total amount of $21,156.35. The Agency's determination of overpayment was based upon findings that obstetrical echography services "were billed and paid in violation of Medicaid policy governing those services." The Agency performed an audit of the Petitioner for the period January 1, 1993, through October 31, 1996. According to the Agency audit report, the Petitioner's records contained violations of two billing policies outlined in the Medicaid Physician Provider Handbook. The first violation was that the Petitioner billed and received payment for more than one initial ultrasound procedure per pregnancy, and the second was that the Petitioner failed to submit documentation of medical necessity for additional procedures. During the years examined by the audit, Medicaid policy allowed providers to bill for more than one complete initial procedure per patient, so long as providers filed supporting documentation of medical necessity. However, the documentation submitted by the Petitioner indicated that the additional ultrasound procedures he conducted were mere follow-up procedures, instead of medically necessary complete procedures. According to the terms of the Medicaid Physician Provider Handbook, "[i]f more than two (or any combination of two) ultrasounds are performed during a pregnancy, they must be billed with modifier-22 and a report documenting the medical necessity for the procedure." The Petitioner submitted bills for more than two ultrasound treatments per recipient without explaining why the procedures were medically necessary. The Agency audit report established that the Petitioner has been overpaid as a result of the Petitioner's erroneous billings. The total overpayment to the Petitioner was calculated as "the difference between what he got paid for a complete procedure and the amount that he should have gotten paid for the follow-up." The Agency records received in evidence and the testimony of the Agency's witness establish that the amount overpaid to the Petitioner totaled $21,156.35. The Petitioner, as an authorized provider of Medicaid services, had signed a Medicaid Provider Agreement. That agreement states, among other things, that the "provider agrees to submit Medicaid claims in accordance with program policies." When the Petitioner became a certified Medicaid provider, he received a handbook outlining billing procedures for the performance of diagnostic ultrasounds. The Petitioner admitted that he knows "little about billing," that he "didn't involve [himself] in the billing at all," and that he has never read the Physicians' Current Procedural Terminology book, which sets forth the universally used billing codes.
Recommendation On the basis of all of the foregoing, it is RECOMMENDED that the Agency issue a final order requiring the Petitioner to reimburse the Agency for overpayments in the total amount of $21,156.35, plus such interest as may accrue as of the date on which payment is made. DONE AND ENTERED this 3rd day of January, 2001, in Tallahassee, Leon County, Florida. MICHAEL M. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of January, 2001.
Conclusions THIS CAUSE comes before the Agency For Health Care Administration (the "Agency") concerning Certificate of Need ("CON") Application No. 10131 filed by The Shores Behavioral Hospital, LLC (hereinafter “The Shores”) to establish a 60-bed adult psychiatric hospital and CON Application No. 10132 The entity is a limited liability company according to the Division of Corporations. Filed March 14, 2012 2:40 PM Division of Administrative Hearings to establish a 12-bed substance abuse program in addition to the 60 adult psychiatric beds pursuant to CON application No. 10131. The Agency preliminarily approved CON Application No. 10131 and preliminarily denied CON Application No. 10132. South Broward Hospital District d/b/a Memorial Regional Hospital (hereinafter “Memorial”) thereafter filed a Petition for Formal Administrative Hearing challenging the Agency’s preliminary approval of CON 10131, which the Agency Clerk forwarded to the Division of Administrative Hearings (“DOAH”). The Shores thereafter filed a Petition for Formal Administrative Hearing to challenge the Agency’s preliminary denial of CON 10132, which the Agency Clerk forwarded to the Division of Administrative Hearings (‘DOAH”). Upon receipt at DOAH, Memorial, CON 10131, was assigned DOAH Case No. 12-0424CON and The Shores, CON 10132, was assigned DOAH Case No. 12-0427CON. On February 16, 2012, the Administrative Law Judge issued an Order of Consolidation consolidating both cases. On February 24, 2012, the Administrative Law Judge issued an Order Closing File and Relinquishing Jurisdiction based on _ the _ parties’ representation they had reached a settlement. . The parties have entered into the attached Settlement Agreement (Exhibit 1). It is therefore ORDERED: 1. The attached Settlement Agreement is approved and adopted as part of this Final Order, and the parties are directed to comply with the terms of the Settlement Agreement. 2. The Agency will approve and issue CON 10131 and CON 10132 with the conditions: a. Approval of CON Application 10131 to establish a Class III specialty hospital with 60 adult psychiatric beds is concurrent with approval of the co-batched CON Application 10132 to establish a 12-bed adult substance abuse program in addition to the 60 adult psychiatric beds in one single hospital facility. b. Concurrent to the licensure and certification of 60 adult inpatient psychiatric beds, 12 adult substance abuse beds and 30 adolescent residential treatment (DCF) beds at The Shores, all 72 hospital beds and 30 adolescent residential beds at Atlantic Shores Hospital will be delicensed. c. The Shores will become a designated Baker Act receiving facility upon licensure and certification. d. The location of the hospital approved pursuant to CONs 10131 and 10132 will not be south of Los Olas Boulevard and The Shores agrees that it will not seek any modification of the CONs to locate the hospital farther south than Davie Boulevard (County Road 736). 3. Each party shall be responsible its own costs and fees. 4. The above-styled cases are hereby closed. DONE and ORDERED this 2. day of Meaich~ , 2012, in Tallahassee, Florida. ELIZABETH DEK, Secretary AGENCY FOR HEALTH CARE ADMINISTRATION
The Issue Whether Respondent committed the violations alleged in the Amended Administrative Complaint, and, if so, what disciplinary action should be taken against him.
Findings Of Fact Based upon the evidence adduced at the final hearing and the record as a whole, the following findings of fact are made: Respondent is now, and has been since October 17, 1996, a Florida-licensed registered nurse. He holds license number 3109442. From September 11, 2000, to March 28, 2001, Respondent was employed as a registered nurse by the North Broward Hospital District and assigned to the emergency room at Imperial Point Medical Center (IPMC) in Broward County, Florida. IPMC is a division of the North Broward Hospital District. It serves as a designated Baker Act receiving facility where persons are "brought involuntary[ily] for psychiatric evaluation" and referral. Some of these persons are "dangerous and violent" and have "cause[ed] injuries to the staff of the emergency room." In early 2001, Respondent was involved in two separate incidents in which he mistreated a patient in the emergency room at IPMC. The first incident occurred on or about February 23, 2001. On that day, K. N., a 21-year-old female, was admitted to the emergency room suffering from "acute intoxication." Pursuant to emergency room policy, upon her admittance to the emergency room, K. N. was "completely undressed . . . to make sure that [she was] not hiding any drugs, contraband, weapons, [or other] things of that nature." K. N. was lying, "passed out" and completely naked, on a stretcher in an examining room with Respondent by her side, when one of the hospital's emergency room technicians, Robert Russo, walked into the room to assist Respondent. Respondent greeted Mr. Russo by making the following comments about K. N.: "Look at those tits. Wouldn't you like to get a piece of that?" Mr. Russo left the room to get a hospital gown for Respondent to put on K. N., as Respondent was required to do, in accordance with hospital policy, so as "to preserve [K. N.'s] dignity." Mr. Russo returned with a gown and gave it to Respondent, but Respondent did not put it on K. N. or otherwise use it to try to cover K. N. Respondent, though, did continue making comments about K. N.'s body. Referring to K. N.'s genitals, he remarked to Mr. Russo, "That's sweet," or words to that effect. Feeling "uncomfortable," Mr. Russo left the room. By allowing K. N. to remain completely naked and by making the remarks he did to Mr. Russo about K. N.'s body, Respondent failed to conform to the minimal acceptable standards of prevailing nursing practice. The following month, Respondent was involved in another incident in which he acted inappropriately toward an IPMC emergency room patient. This second incident occurred on March 18, 2001. The patient Respondent mistreated on this day was F. L., a 17-year-old male with a history of drug abuse. F. L. was brought to the IPMC emergency room by the City of Pompano Beach Fire/Rescue at the request of F. L.'s mother, J. L., who accompanied him to the emergency room and remained there for the duration of F. L.'s stay. J. L. had "called 911" after F. L. had come home from a night of drinking and, in her presence, had had a seizure. By the time fire/rescue arrived at their home, F. L. was conscious, and he remained conscious during the ambulance ride to IPMC. J. L. wanted F. L. to be involuntarily committed under the Baker Act. She did not think she would be able to handle his coming back home because he "was on drugs at the time" and she thought that he would "go crazy" if he did not receive treatment. F. L. was aware of his mother's desire. In the past, he had attempted to "fight" (verbally, but not physically) efforts to have him "Baker Acted." F. L. was admitted to the IPMC emergency room at 3:49 a.m. on March 18, 2001. At the time of his admittance, F. L. was conscious, "somewhat calm," and able to stand up and walk "with a wobble" and to speak coherently (although his speech was slurred). He was asked to give a urine sample for a "urine screen," and with the help of his mother, who accompanied him to bathroom "[s]o he wouldn't fall or miss the cup," he complied. F. L. soon became upset and "verbally abusive to the staff" on duty, including Respondent. Respondent decided that F. L. needed to be restrained. With the help of others, including Mr. Russo, Respondent restrained F. L. "with Velcro restraints on the wrists and the ankles." Respondent then requested that F. L. give another urine sample. F. L., in turn, "asked for a urine bottle." Respondent refused F. L.'s request. Instead, he took out a Foley catheter. A Foley catheter is a thin, flexible rubber tube that is threaded through the urethra and into the bladder. It is used to drain urine from the bladder. It should be sterile and lubricated when inserted. F. L. went "totally beserk" when he saw the catheter, letting it be known in no uncertain terms that he did not want to be catherized and again requesting that he be given a "urine bottle." Respondent responded, inappropriately, by "hit[ting] [F. L.] in the face with the catheter numerous times," while telling F. L. two or three times, "I'm going to shove this hose down your dick." This caused F. L., understandably, to become even more loud and boisterous. Respondent enlisted the assistance of three or four others, including Mr. Russo and George Austin, a Wackenhut security officer on patrol at the hospital, to place F. L. in four-point leather restraints (one for each ankle and wrist) on a stretcher in Room 6. 1/ F. L. resisted, but was eventually subdued and restrained on the stretcher. Given F. L.'s out-of-control behavior, placing him in four-point restraints was warranted. After F. L. was restrained on the stretcher, Respondent, against F. L.'s will, inserted the Foley catheter (that he had used to hit F. L. and that was therefore not sterile) in F. L. 2/ Respondent did so in a rough and negligent manner, without using lubricating jelly or any other type of lubrication. Subsequently, while F. L. was still in four-point restraints on the stretcher, he became "more upset, more verbally abusive," and "tried to sit up." Respondent responded, inappropriately, by "grabb[ing] [F. L.] by the neck," "slapp[ing] him back down onto the stretcher," and "choking [F. L.] until [F. L.] was almost blue." Respondent "let go" of F. L. only after an observer intervened. After Respondent stopped choking him, F. L. "asked for his mother." 3/ Respondent responded, again inappropriately, by telling F. L. three times, "I got your mother right here," as he "grabbed his own testicles." 4/ As could be expected, this "further upset" F. L., and he again tried to sit up. Respondent's response was, again, an inappropriate one. He "climbed up on the stretcher," "put his right knee on [F. L.'s] chest," "cover[ed] F. L.'s face" with his left hand, and with his right hand "grabbed" F. L.'s penis and scrotum and "squeeze[d] and twist[ed]." Respondent, without any justification, "squeeze[d] and twist[ed]" F. L.'s penis and scrotum "two or three times" while F. L. was in four-point restraints on the stretcher. On one of these occasions, he told F. L. (as he was "squeeze[ing] and twist[ing]") "something like," "What are you going to do now?" During his encounter with F. L. on March 18, 2001, Respondent used more force against F. L. than was reasonably necessary to properly discharge his nursing duties and to protect himself and those around him. 5/ By physically, and also verbally, abusing F. L., Respondent failed to conform to the minimal acceptable standards of prevailing nursing practice. 6/ When J. L. was finally reunited with her son, she noticed that he had red marks on his face and "bruise[s]" on his extremities. The IPMC emergency room physician who evaluated F. L. determined that there was reason to believe that F. L. was "mentally ill as defined in Section 394.455(18), Florida Statutes" (based upon an "initial diagnosis" of "acute agitation"), and that F. L. otherwise met the "criteria for involuntary examination" under the Baker Act. At approximately 2:45 p.m. on March 18, 2001, F. L. was discharged from IPMC and transferred to Florida Medical Center. Sometime after the March 18, 2001, incident involving F. L., a security officer and nurse working at IPMC expressed to Beverly Gilberti, the nurse/manger of IPMC's emergency room, their "concerns" regarding Respondent's "practice." On March 26, 2001, Ms. Gilberti contacted Gayle Adams, IPMC's human resources specialist, and told her about the security officer's and nurse's "concerns." Ms. Adams began an investigation into the matter. Ms. Gilberti telephoned Respondent and advised him that he was being suspended pending the outcome of an investigation into alleged wrongdoing on his part. Respondent was given "very little information as to what type of complaint[s]" were being investigated. On March 28, 2001, before the investigation had been completed, Respondent telephoned Ms. Adams and "verbally resigned over the phone."
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Board issue a final order in which it dismisses Count Three of the Amended Administrative Complaint, finds Respondent guilty of the violations alleged in Counts One and Two of the Amended Administrative Complaint, and, as punishment for having committed these violations, permanently revokes Respondent's license and requires him to pay a fine in the amount of $1,000.00, as well as the "costs related to the investigation and prosecution of the case." 16/ DONE AND ENTERED this 4th day of November, 2002, in Tallahassee, Leon County, Florida. STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 4th day of November, 2002.
Conclusions THIS CAUSE comes before the Agency For Health Care Administration (“the Agency") concerning Certificate of Need ("CON") Application No. 10202, which was filed by East Florida Healthcare, LLC (“East Florida”), and preliminarily denied by the Agency. 1. East Florida filed Application No. 10202 seeking a CON to establish a 100-bed acute care hospital to be located in Broward County, District 10. 2. On December 10, 2013, the Agency published notice of its decision to preliminarily deny East Florida’s CON Application No. 10202. 3. On December 30, 2013, East Florida filed a Petition for Formal Administrative Proceeding contesting the Agency’s preliminary denial of its CON Application 10202, which was forwarded to the Division of Administrative Hearings (“DOAH”) and assigned DOAH Case No. 14-0126CON. 4. On December 31, 2013, South Broward Hospital District d/b/a Memorial Healthcare System (“MHS”) filed a Petition for Formal Administrative Proceeding in support of the Agency’s preliminary denial of East Florida’s CON Application 10202, which too was forwarded to the DOAH and assigned DOAH Case No. 14-0120CON. Filed February 18, 2014 10:39 AM Division of Administrative Hearings 5. On January 13, 2014, MHS then filed a motion to intervene in the East Florida case, DOAH Case No. 14-0126CON, in support of the Agency’s preliminary denial of East Florida’s CON Application No. 10202. 6. On January 24, 2014, the Administrative Law Judge entered an order in the East Florida case, DOAH Case No. 14-0126CON, granting the motion to intervene and permitting MHS to intervene in the East Florida case subject to the terms of the order. 7. On January 27, 2014, MHS filed its Notice of Voluntary Dismissal of its Petition for Formal Administrative Proceeding in this case. It is therefore ORDERED: 8. The Petition for Formal Administrative Proceeding filed by MHS in this case is dismissed. This Final Order does not affect the intervention of MHS granted in the East Florida case, DOAH Case No. 14-0126CON. ORDERED in Tallahassee, Florida, on this / 7 day of Pela auss} , 2014. Deectete_ Elizabeth DuWek, Secretary Agency for Health Care Administration
