Findings Of Fact Respondent St. Augustine Artificial Kidney Center, Inc. (AKC) filed an application for a certificate of need with Respondent Department of Health and Rehabilitative Services (HRS) on June 2, 1980, to construct and operate an eight-station outpatient free standing hemodialysis center at St. Augustine, Florida, for an estimated capital expenditure of $144,650. Petitioner University Hospital Academic Fund, Inc. (Academic Fund) also filed an application with Respondent on June 16, 1980, to construct a similar facility at St. Augustine, with a proposed project cost of $138,131.64. The Academic Fund application stated that it was in the process of incorporating a separate entity to operate the proposed facility. By letter of July 28, 1980, the Academic Fund informed HRS that it planned to form a new corporation named St. Johns Renal Services, Inc. to operate the facility and that any certificate of need which might be granted should be issued in the name of that corporation. However, no such corporation has yet been formed. (Testimony of Goldberg, Exhibits 1-2) The two applications were comparatively reviewed by the Health Systems Agency of Northeast Florida, Area 3, Inc. (HSA) during July 1980. The review consisted of evaluation at various agency levels and culminated in a determination by the HSA Board of Directors on July 24, 1980, that the application of the Academic Fund should be recommended to HRS for approval. The HSA reports on the two applications were transmitted to HRS by a letter of Fred J. Huerkamp, Executive Director of the HSA, dated August 7, 1980. Although the HSA Board of Directors did not specifically vote to deny the application of AKC, the HSA report on the AKC application stated that inasmuch as the Board of Directors had adopted the recommendations of its Health Needs and Priorities Committee recommendations to approve the Academic Fund application, it had also adopted the implicit denial of the AKC application by the committee. The HSA report itself recommended denial of the AKC application. The HSA found that there was a need for an eight-station dialysis facility in St. Augustine under its Health Systems Plan because only three such dialysis facilities are located in the applicants' proposed service areas, two of which are in Jacksonville and one in Daytona Beach, thus necessitating considerable present travel to prospective patients residing in St. Johns County and contiguous portions of adjacent counties. One of the Jacksonville facilities is an inpatient unit at University Hospital. The HSA also found that the two applicants were virtually equal with respect to probable quality of service, financial resources, and costs of operation. The HSA decided that the Academic Fund application should be approved because funds received for operation of the facility could, in part, be utilized to enhance the overall patient care capabilities of University Hospital, particularly with medical staff teaching expenses. The Academic Fund is a nonprofit corporation which provides a billing service for professional fees of the physicians who are salaried employees of University Hospital and who participate in a University of Florida teaching program there. The organization is comprised of these physicians and operates in a manner similar to a medical group practice plan. A percentage of fund assets are donated to University Hospital to support its teaching program. The hospital is a tax-supported indigent care facility. (Testimony of Dewberry, Goldberg, Huerkamp, Exhibits 1- 3) The two competing applications also were reviewed by the Florida End Stage Renal Disease Network 19, Inc., (Network 19) , a federally funded organization under the Department of Health and Human Services which performs a planning function to determine the need for new or expanded services with respect to dialysis and kidney transplants in Florida. It makes recommendations to the federal Health Care Finance Administration in such matters for determination of eligibility of a provider for participation in the Medicare and Medicaid reimbursement programs. By agreement with HRS, Network 19 also provides review and recommendations as to certificate of need applications submitted by proposed dialysis facilities. HRS considers such recommendations during its certificate of need review process as "other pertinent data" under Rule 10-5.10(5), F.A.C. On July 29, 1980, Network 19 transmitted its recommendation to HRS which stated that although it had found both applications to be essentially equal under the Network's review criteria and standards, AKC was chosen over the Academic Fund in light of the fact that it had submitted the first application and because of its expected greater cost efficiency of operation. The organization projected a need for eight dialysis stations in St. Augustine by mid-1982. The basis for the finding that AKC would be more cost efficient was that the AKC application projected a profit during the first year of operation whereas the Academic Fund application indicated a deficit for the initial year. (Testimony of Moutsatsos, Hudson, Exhibit 4) HRS reviewed the two applications, together with the recommendations of Network 19 and the HSA, and determined that the AKC application should be approved. By a letter of October 3, 1980, the Administrator of HRS' Office of Community Medical Facilities transmitted a certificate of need to AKC, subject to any request for a hearing filed pursuant to Chapter 10-5, F.A.C. By letter of the same date, the Administrator advised the Academic Fund that its application had not been favorably considered because the proposed project did not demonstrate "favorable feasibility" when compared with the financial aspects of the AKC proposal, and that it presented a less favorable alternative method of providing services in St. Augustine. The Administrator also informed the HSA by letter of the same date that the HSA recommendation had been rejected for reasons contained in an attached "State Agency Report." Both the Academic Fund and HSA thereafter filed appeals of the HRS decision. (Exhibits 1-3) The HRS medical facilities consultant, Nancy E. Hudson, who reviewed the applications and made the initial staff recommendation, favored the AKC proposal as being more financially feasible in that it planned to charge the Medicare "screen" or maximum of $138 per treatment, as opposed to the Academic Fund's plan to charge $133, plus a $5 laboratory fee. She was of the opinion that the Fund's proposed charges would be less cost effective because experience showed that laboratory fees would normally exceed $5, and thus require either an additional charge to patients or obtaining an exception to the Medicare "screen." She further found that AKC had considerable experience in the field of free standing dialysis facilities since its principals operated several other facilities in Florida, whereas the Academic Fund had not involved itself in such an enterprise apart from its members' participation in the dialysis unit at University Hospital. Although Hudson recognized that the Academic Fund's proposal stated overall lesser project costs, she testified that she could not adequately assess the resources of the applicant, particularly due to the fact that it had indicated its intention to form a new corporation to operate the facility. She also felt that competition in the area would be adversely affected if the Academic Fund, which was affiliated with University Hospital, was granted approval to set up the facility at St. Augustine. The Administrator of HRS' Office of Community Medical Facilities accepted the staff recommendations and approved the AKC application. He, too, was of the opinion that the AKC experience factor was important and placed reliance on the recommendations of Network 19, even though he did not view the fact that AKC had filed its application first to constitute a valid reason for preference. (Testimony of Hudson, Forehand, Exhibits 1-3) AKC plans to spend $144,650 to establish its proposed facility and begin operations, whereas the Academic Fund intends to allocate $138,131.64 for its project. AKC estimates a first-year net income of $16,476, while the Academic Fund estimates a first year net loss of some $42,000. Financial statements submitted by both applicants show that they will have sufficient financial resources to meet the projected initial costs of establishment and operation of the planned facility. AKC shows a proposed cost of $35 for supplies per treatment and the Academic Fund estimates a $50 per treatment cost of supplies. The difference in expected costs is explained by the fact that AKC intends to obtain bulk negotiated discount prices from various manufacturers as its principals have done in past operations, compared to the Academic Fund's plan to seek out the "best list" prices it can obtain. AKC plans to purchase necessary equipment in the amount of an estimated $115,350, but the Academic Fund plans to expend only $96,105. The discrepancy between these figures is, in part, based upon the fact that AKC plans to install individual television sets at each dialysis station which it considers essential for the comfort of patients. Additionally, the Academic Fund plans to purchase generally less expensive equipment for its facility than does AKC. AKC believes that for essentially the same treatment costs, it will offer a better center for patients, and that efficiency in controlling costs will maintain a high quality of care. The Academic Fund is somewhat pessimistic concerning the number of patients who will use its services during the first year, thus providing a basis for the anticipated first-year loss in revenues. Approximately fifteen patients in the proposed service area reasonably can be expected to transfer to a facility in St. Augustine. However, the Academic Fund expects to gradually acquire about three to twelve patients during its first year of operation, whereas AKC estimates that it will have some twelve patients at the outset, primarily due to the accessibility of the new facility. (Testimony of Levy, Dewberry, Anderson, Cunio, Exhibits 1-4) The applicants have made satisfactory arrangements for ancillary services, including acute backup, kidney transplant, and home training services with qualified medical facilities. Both plan to use University Hospital at Jacksonville as a backup hospital and Shands Teaching Hospital at Gainesville for any necessary transplant services. The Academic Fund intends to use University Hospital for home training services and AKC will utilize Dialysis Clinics, Inc. of Jacksonville. Both applicants plan to have a nephrologist available at the facility and other personnel staffing proposed is sufficient for proper operation. AKC plans to utilize a smaller staff than the Academic Fund, thus reducing expenses. (Testimony of Levy, Dewberry, Anderson, Cunio, Exhibits 1-3) Both of the applicants reasonably can be expected to offer a satisfactory quality of care in the operation of a dialysis facility. Academic Fund will draw upon its staff of experienced physicians who operate the 24- station unit at University Hospital. Their association with the Hospital assures ready access to that "backup" facility in the event of acute need. Both applicants plan to use the two local St. Augustine hospitals for routine hospitalization requirements. AKC's principals, Doctors Cunio and Anderson, have had extensive experience in the ownership of free standing dialysis facilities. Dr. Cunio is the Director of the Mercy Hospital Dialysis Unit in Miami and has had a close affiliation with the South Florida Artificial Kidney Center and Dade Dialysis Center in Miami. Dr. Anderson is the Medical Director of the South Florida AKC and its satellite unit in Fort Myers. He has been affiliated in the management and direction of the Dade Dialysis Center, Hialeah Dialysis Center and Indian River Artificial Kidney Center in Stuart. He is also the operator and owner of Suncoast Artificial Kidney Center in Naples. The South Florida Artificial Kidney Center was commended by the Mayor of Metropolitan Dade County, Florida, in 1977, in a proclamation that November 7th of that year would be "South Florida Artificial Kidney Center Day," in recognition of its ten years of success in the treatment of patients. Although the University Hospital dialysis unit received an unfavorable report as the result of a state Medicare survey in 1980, the deficiencies were primarily housekeeping in nature and did not directly reflect unfavorably upon the quality of medical services provided to patients. (Testimony of Dewberry, Cunio, Anderson, Exhibits 1-2, 5-0)
Recommendation Case No. 80-2137: That the petition of the Health Systems Agency of Northeast Florida, Area 3, Inc. be DISMISSED. Case No. 80-2138: That the application of St. Augustine Artificial Kidney Center, Inc. for a certificate of need to establish an eight-station free standing dialysis center in St. Augustine, Florida be APPROVED, and that the competing application of the University Hospital Academic Fund, Inc. for a similar facility be DENIED. DONE and ENTERED this 14th day of July, 1981, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of July, 1981. COPIES FURNISHED: Honorable Alvin J. Taylor, Secretary Department of HRS 1317 Winewood Boulevard Tallahassee, Florida 32301 Eric J. Haugdahl, Esquire Assistant General Counsel Department of HRS 1317 Winewood Boulevard Tallahassee, Florida 32301 Eleanor Hunter, Esquire 702 Lewis State Bank Bldg. Post Office Box 471 Tallahassee, Florida 32301 E. G. Boone and Richard Whitton, Esquires 1001 Avenida del Circo Post Office Box 1596 Venice, Florida 33595 Health Systems Agency of Northeast Florida, Area 3, Inc. 1045 Riverside Avenue, Suite 260 Jacksonville, Florida 32204
The Issue The issues for determination are whether Petitioner should have changed the status of Respondent's license from standard to conditional; and whether Petitioner should impose administrative fines of $7,500 and recover costs for alleged deficiencies in the care of four residents of a nursing home.
Findings Of Fact Petitioner is the state agency responsible for licensing and regulating nursing homes in Florida pursuant to Section 400.23(7), Florida Statutes (2003). Respondent is licensed to operate a 150-bed nursing home located at 2916 Habana Way, Tampa, Florida 33614 (the facility). Respondent admitted Resident 1 to the facility on March 9, 2001. The admitting diagnoses included tracheal bronchitis, diabetes mellitus, morbid obesity, and acute respiratory failure. From the time Resident 1 entered the facility until her death, Resident 1 lived with a tracheal tube in place. Resident 1 died on March 4, 2003, at 10:20 a.m. in the emergency room at St. Joseph's Hospital in Tampa, Florida. The tracheal tube of Resident 1 was completely occluded with hardened secretions when Resident 1 arrived at the hospital. The emergency room (ER) physician that treated Resident 1 testified by deposition. The ER physician diagnosed Resident 1 with respiratory arrest and death. However, the diagnosis is merely a clinical impression and is not a medical determination of the cause of death. No certain cause of death could be determined without an autopsy, and no one performed an autopsy on Resident 1. The diagnosis made by the ER physician is a clinical impression that is an educated guess. The respiratory arrest suffered by Resident 1 could have been precipitated by various causes including an occluded tracheal tube, a heart attack, or acute respiratory failure. The ER physician did not determine that the facility committed any negligence and found no evidence of negligence. The ER nurse who assisted the ER physician believed that the facility had been negligent in clearing the tracheal tube of Resident 1. The ER nurse suspected that secretions had been accumulating in the tracheal tube for several days and that the facility did not monitor or clean the tube because the tube was completely occluded when Resident 1 arrived at the hospital. The ER nurse notified Petitioner of her suspicions. On March 11, 2003, Petitioner conducted a complaint investigation of the facility in connection with the death of Resident 1. Petitioner determined that Respondent either had not assessed whether Resident 1 was capable of performing her own tracheal tube care; or had not monitored the respiratory status of Resident 1 between March 2 and March 4, 2003; or both. Petitioner determined that the alleged failure to assess and monitor Resident 1 violated 42 CFR Section 483.25(k)(4) and (5). Florida Administrative Code Rule 59A- 4.1288 applies the federal standard to nursing homes in Florida. 42 CFR Section 483.25(k)(4) and (5) requires Respondent to "ensure that residents receive proper treatment and care for . . . tracheostomy care (sic) . . . [and] tracheal suctioning." Petitioner assigned the charged deficiency a severity rating of class "II." In relevant part, Section 400.23(8)(b), Florida Statutes (2003), defines a Class II deficiency as one that has: compromised the resident's ability to maintain or reach his or her highest practicable physical, mental and psychosocial well-being, as defined by an accurate and comprehensive assessment, plan of care, and provision of services. Petitioner determined that a Class II rating was appropriate because the facility's alleged failure to provide Resident 1 with appropriate tracheal tube care harmed Resident 1. Petitioner changed the license rating for the facility from Standard to Conditional within the meaning of Section 400.23(7), Florida Statutes (2003). The change in license rating was effective March 11, 2003, when Petitioner completed the complaint survey of the facility. The Conditional rating continued until April 10, 2003, when Petitioner changed the rating to Standard. Petitioner also proposed an administrative fine of $2500 pursuant to Section 400.23(8)(b), Florida Statutes (2003). The preponderance of evidence shows, by various measures, that Respondent provided Resident 1 with proper treatment and care for her tracheotomy tube within the meaning of 42 CFR Section 483.25(k)(4) and (5). First, it is uncommon for a person to cough up material in a tracheal tube and have the material gradually accumulate until the tube closes. It is more likely that secretions coughed up will block the tracheal tube immediately. Second, the emergency medical team (EMT) that treated Resident 1 in the facility did not find it necessary to remove or replace the existing tracheal tube in order to obtain an open airway. Rather, EMT personnel administered oxygen through the existing tube. Third, Resident 1 had normal oxygen saturation levels on March 2, 2003. Finally, Resident 1 was experienced in maintaining her tracheal tube, was capable of clearing her own tube, and asked members of the nursing staff to clear the tube whenever Resident 1 needed assistance. On March 4, 2003, Resident 1 complained of shortness of breath rather than a blocked tracheal tube. The ER physician's testimony shows it is uncommon for a person to cough up material in a tracheal tube and have the material gradually accumulate until the tube closes. The ER nurse that suspected secretions had been accumulating in the tracheal tube of Resident 1 for several days had no experience caring for nursing home residents with tracheal tubes. Gradual accumulations of secretions in a tracheal tube are generally associated with a productive cough from causes such as infiltrated pneumonia. There is no evidence that Resident 1 had such a condition. It is more likely that any material Resident 1 coughed up would have occluded the tracheal tube immediately rather than accumulating over time. EMT personnel that treated Resident 1 in the facility did not find it necessary to remove or replace the existing tracheal tube in order to obtain an open airway. When EMT personnel arrived at the facility, Resident 1 was non- responsive. When confronted with a non-responsive patient, standard protocol requires EMT personnel to ensure an open airway. EMT personnel placed an oxygen "bag" over the existing tube to provide Resident 1 with oxygen. EMT personnel then transported Resident 1 to the hospital emergency room. In the emergency room, the ER physician found the tracheal tube of Resident 1 to be completely blocked with hardened secretions. He removed the tube, replaced it with an open tube, and unsuccessfully attempted to ventilate Resident 1. It is likely the hardened secretions found in the tracheal tube at the emergency room blocked the tube between the time EMT personnel administered oxygen to Resident 1 at the facility and the time the treating physician removed the tracheal tube in the emergency room. A contrary finding would require the trier of fact to speculate that EMT personnel found the tracheal tube to be blocked and administered oxygen to a closed tube; or incorrectly diagnosed Resident 1 with a clear tracheal tube before administering oxygen. There is less than a preponderance of evidence to support either finding. Sudden deposits of hardened secretions in the tracheal tube of Resident 1 are consistent with medical experience. A person with a tracheal tube may develop calcified secretions in their lung known as concretions that can be coughed into the tube and cause it to become instantly blocked. It is unlikely that the hardened secretions found in the tracheal tube at the emergency room were present before Resident 1 collapsed in the facility. Hardened secretions can be cleared with a suctioning device or by coughing them through the tube and out of the opening near the neck if the resident has sufficient muscle strength. Resident 1 was a cognitively alert, 40-year-old, and physically capable of cleaning her own tracheal tube with a suctioning device. Resident 1 also had sufficient muscle strength to cough some secretions through the opening in her tube. Whenever Resident 1 was unable to clear her tube through the suctioning device or by coughing, she became anxious and immediately notified a nurse, who would then suction the tube and clear it for her. On March 2, 2003, Resident 1 complained to a nurse that she was experiencing shortness of breath. Significantly, Resident 1 did not complain that her tracheal tube was blocked. The nurse on duty at the facility notified the treating physician of Resident 1's complaints, and the physician ordered the nurse to measure the oxygen saturation levels of Resident 1. The oxygen saturation levels were within normal range, at 97 percent. The treating physician then ordered bed rest for Resident 1 and ordered the nurse to give Resident 1 a breathing treatment. Resident 1 had no further problems on March 2, 2003. On March 4, 2003, at approximately 9:30 a.m., Resident 1 summoned a nurse to come to her bedside and told the nurse that she did not feel well. Resident 1 did not complain that her tracheal tube was blocked. Her skin color was gray. She then passed out and fell to the floor. Nursing staff immediately called for EMT assistance, and EMT personnel arrived at the facility at approximately 9:32 a.m. EMT personnel transported Resident 1 to the emergency room at approximately 9:52 a.m. Between March 2 and March 4, 2003, the preponderance of evidence shows that the tracheal tube of Resident 1 was clear. Nursing staff at the facility monitored Resident 1 three times on March 3, 2003. Resident 1 had no breathing difficulties and did not express any complaints or discomfort. Resident 1 took her scheduled medications and meals on March 3, 2003. The nurse on duty during the 11 p.m. to 7 a.m. shift for March 4, 2003, provided oxygen and suctioning, "as needed," to Resident 1. This action would have cleared secretions, if any, that would have been "accumulating" in the tracheal tube of Resident 1. Resident 1 placed her finger over the opening to her tracheal tube when she spoke to the nurse about not feeling well on March 4, 2003. Resident 1 covered her tracheal tube to force air around her vocal cords so that the nurse could hear Resident 1. It would not have been necessary for Resident 1 to cover her tracheal tube if the tube were occluded. The findings in paragraphs 25 through 27 are based on notes prepared by the unit manager on March 4, 2003, in response to the directive of the facility's risk manager. The risk manager was responsible for investigating the incident and required all nurses who had contact with Resident 1 on March 3 and 4, 2003, to document their experiences with Resident 1. The unit manager then placed the accounts in the medical record. Petitioner questions the credibility of the unit manager notes because they are late-filed entries in the medical records. The trier of fact finds the unit manager and her notes to be credible and persuasive. The testimony and notes of the unit manager are consistent with the apparent determination by EMT personnel that the tracheal tube was clear. In addition, the Medication Administration Record for March 4, 2003, indicates that Resident 1 received a dose of an ordered medication at 6:00 a.m. and did not complain of not feeling well until some time later. If the notes and testimony of the unit manager were disregarded, the trier of fact cannot ignore the administration of oxygen by EMT personnel. The preponderance of evidence shows that the tracheal tube of Resident 1 was clear when EMT personnel administered oxygen. If it were determined that the tracheal tube of Resident 1 were fully occluded at the facility before Resident 1 collapsed on March 4, 2003, such a finding would alter the outcome of this case. Petitioner failed to show by a preponderance of evidence that an occlusion occurred as a consequence of inadequate assessment or monitoring. Resident 1 had normal oxygen saturation levels on March 2, 2003. The preponderance of evidence does not show that facility staff had reason to believe that the tracheal tube of Resident 1 was occluded after March 2, 2003, and failed to take action to clean the tube prior to the time Resident 1 collapsed on March 4, 2003. There is no preprinted or accepted assessment form for nursing homes to use to assess and monitor the ability of Resident 1 to clean her own tracheal tube. The parties agree that the process involves nothing more than a simple observation of Resident 1 to confirm that she understood and could clean the tracheal tube either by suctioning or coughing. Resident 1 was capable of cleaning her tracheal tube. Relevant orders from the treating physician did not require cleaning to be performed by facility staff. One physician's order indicated that Resident 1 could participate in her own self-care. Another physician's order indicated that Resident 1 was to have "trach care" three times a day, but did not describe the nature and scope of the care or designate who was to provide such care. Another physician's order indicated that Resident 1 was to receive oxygen through her tracheal collar while in bed and "suction trach as needed." However, nothing in the order indicated who was to provide those services. Resident 1 had her tracheal tube for more than a year prior to March 4, 2003. Facility staff routinely observed Resident 1 successfully suctioning and otherwise cleaning her own tracheal tube. Resident 1 also routinely notified staff when she could not remove a blockage in her tube. Facility staff appropriately determined that Resident 1 was capable of performing self-care on her tracheal tube. It was appropriate for facility staff to rely on Resident 1 to inform them if Resident 1 were unable to clean the tube. Her transfer to the hospital on March 4th and her subsequent death were not the product of any inadequate or erroneous assessment or monitoring of Resident 1. On May 12, 2003, Petitioner conducted another complaint investigation of the facility. Petitioner determined that Respondent failed to provide adequate care for pressure sores for three residents identified in the record as Residents 1A, 4, and 5, in violation of 42 CFR Section 483.25(c). Florida Administrative Code Rule 59A-4.1288 applies the federal requirements for pressure sore care to nursing homes in Florida. Petitioner assigned the charged deficiency a class II rating. Petitioner determined that a Class II rating was appropriate because actual harm or a negative outcome allegedly occurred with each of the residents cited in the deficiency. Petitioner changed the license rating for the facility from Standard to Conditional within the meaning of Section 400.23(7), Florida Statutes (2003). The change in license rating was effective May 12, 2003, and continued until June 16, 2003, when Petitioner changed the rating to Standard. Petitioner also proposes a $5,000 fine against Respondent. The fine is calculated by doubling the prescribed fine of $2,500, based on the alleged deficiency in the survey conducted on March 11, 2003, in accordance with Section 400.23(8)(b), Florida Statutes (2003). For reasons stated in previous findings, Respondent committed no violation in connection with the survey conducted on March 11, 2003. The fine for the alleged deficiency found on May 12, 2003, cannot exceed $2,500. Petitioner alleges that the pressure sore care provided by Respondent for Residents 1A, 4, and 5 violated 42 CFR Section 483.25(c). In relevant part, 42 CFR Section 483.25(c) requires a nursing home to ensure that: resident who enters the facility without pressure sores does not develop pressure sores unless the individual's clinical condition demonstrates that they were unavoidable; and a resident having pressure sores receives necessary treatment and services to promote healing, prevent infection, and prevent new sores from developing. 42 CFR Section 483.25(c) Petitioner alleges that Respondent failed to provide Resident 1A with necessary treatment and services to promote healing of an existing pressure sore on the coccyx of Resident 1A. Resident 1A acquired the pressure sore before Respondent admitted Resident 1A to the facility. In April 2003, Resident 1A had surgery to cover the pressure sore with a skin graft taken from her thigh. The surgery required approximately sixty staples to secure the graft. The alleged improper care of Resident 1A is based on several observations made by the surveyor on May 12, 2003. The surveyor observed that the staples used in the surgical process had not been removed even though a physician's order dated April 16, 2003, directed staff to set up an appointment with the plastic surgeon within two weeks of the date of the order. The surveyor found no evidence that staff had scheduled an appointment or taken any other steps to remove the staples. The surveyor observed that the skin was reddened and growing over some of the areas around the staples. The surveyor also observed Resident 1A positioned on her back in bed in such a manner that her weight was on her coccyx area. The area in question was not a pressure sore. Petitioner has adopted a written definition of a pressure sore in the guidelines that Petitioner requires its surveyors to use in interpreting the federal regulation at issue. In relevant part, the guidelines define a pressure sore as: . . . ischemic ulceration and/or necrosis of tissues overlying a bony prominence that has been subjected to pressure, friction or sheer. If the area of concern were the area over the coccyx of Resident 1A, that area would have been over a "bony prominence" within the meaning of definition of a pressure sore. However, it is undisputed that the area of concern for Resident 1A was located in the fleshy part of the buttocks where staples were used to secure the skin flap to the skin. The area of concern was a surgical wound site, rather than a pressure sore because of its origin and location. The preponderance of evidence shows that the area of concern failed to satisfy the definition of a pressure sore adopted by Petitioner. Section 120.68(7)(e), Florida Statutes (2003), prohibits Petitioner from deviating from its officially stated policy unless Petitioner explains the deviation. Petitioner failed to provide any evidence to explicate legitimate reasons for deviating from its written definition of a pressure sore in this case. Assuming arguendo the staples around the wound site were a pressure sore, the preponderance of evidence shows that Respondent provided necessary treatment to promote healing. Respondent turned and repositioned Resident 1A every two hours in accordance with standard protocol. That schedule included a period during which Resident 1A was on her back in bed, with the head of her bed elevated. The single observation by the surveyor of Resident 1A on her back in bed did not show that Respondent failed to properly turn and reposition Resident 1A. The failure to timely comply with the physician's order for Resident 1A to consult with a plastic surgeon did not deprive Resident 1A of the care necessary to promote healing of a pressure sore. The removal of staples from a skin flap is not an element of required care for a pressure sore. Rather, removal of staples is part of the established care for a surgical wound site. The failure to timely provide a consult was not a violation of the requirements for care of pressure sores. If the removal of staples were required for treatment of pressure sores, the failure to timely obtain a consult and the failure to timely remove the staples did not cause harm to Resident 1A. The undisputed purpose of the physician's order to see a plastic surgeon was to evaluate whether the staples should be removed from the wound site. Respondent removed the staples from the wound site shortly after the survey with no complications to the resident. The surgical wound site healed in a timely and complete manner. The absence of harm to Resident 1A precludes a rating as a Class II deficiency. Petitioner alleges that Respondent allowed avoidable pressure sores to develop on Resident 4 and failed to provide necessary treatment after the pressure sores developed. During the survey, the surveyor and a nurse, who was a clinical consultant to the facility, twice observed Resident 4 lying on a special air mattress that was not inflated. After the second observation, the surveyor and consultant examined Resident 4 and observed what each determined to be two stage II pressure sores on each of the outer heels of Resident 4, a stage IV pressure sore on the right toe, two stage II areas on her left side above her rib cage, and a stage II area under her left breast. The surveyor and the nurse-consultant found nothing in the medical record to indicate that these areas had been previously identified by facility staff. Nor did they find any treatment orders for the areas of concern. The areas of concern were not pressure sores. It is undisputed that pressure sores involve deep tissue damage, do not heal quickly, and would have been present a few days later during examination. The director of nursing and the wound care nurse for the facility examined Resident 4 on May 13, 2003, and found no evidence of the areas that caused concern to the surveyor and nurse-consultant on May 12, 2003. The director of nursing asked the treating physician to examine Resident 4 to confirm the director's observations. On May 19, 2003, the treating physician examined Resident 4 and found no areas of concern on Resident 4. Resident 4 had no conditions that placed her at risk for developing pressure sores. The failure to inflate the special air mattress under Resident 4 did not create any risk for pressure sores. The mattress had not been ordered for Resident 4 and was not necessary for her care because Resident 4 was not at risk for developing pressure sores. Resident 4 was on the mattress because she had moved into a new room, and facility staff had not yet removed the mattress from the bed in the room that was used by the previous occupant. Petitioner alleges that Respondent failed to provide necessary treatment to promote healing of existing pressure sores on Resident 5. Resident 5 had three open areas on his skin: one on each hip and one over the coccyx. The areas on each hip were surgical wounds from hip surgeries prior to admission to the facility. For reasons stated in previous findings, these areas were surgical wound sites and were not pressure sores. It is undisputed that the remaining area on Resident 5 was a stage II pressure sore over the coccyx that was present upon admission to the facility. During the survey, the surveyor and the nurse-consultant observed Resident 5 on a specialty air mattress that contained a number of air chambers. Two of the chambers were not inflated. The surveyor and nurse-consultant determined that the area over the coccyx had worsened to a stage IV pressure sore. Petitioner alleges that Respondent failed to provide necessary care to Resident 5 by failing to properly inflate his specialty air mattress during the survey. Respondent did not fail to properly inflate the air mattress for Resident 5. The level of inflation of that mattress is not determined or set by the facility. Rather, the manufacturer calculates and sets the level of inflation for the mattress. The alleged failure to properly inflate the air mattress did not cause harm to Resident 5. The director of nursing observed the area of concern the day after the survey and determined it to be a stage II, rather than a stage IV, pressure sore. The clinical records that charted the size and stage of the pressure sore for the month after the survey show that the area was never more than a stage II pressure sore. A stage IV pressure sore would not have improved to a stage II sore within a month. Petitioner failed to show by a preponderance of the evidence that the alleged improper inflation of an air mattress caused the pressure sore on Resident 5 to worsen from a Stage II to a Stage IV pressure sore.
Recommendation Based on the foregoing findings of fact and conclusions of law, It is RECOMMENDED that Petitioner enter a Final Order deleting the disputed deficiencies from the survey reports for March 11 and May 12, 2003; replacing the Conditional ratings with Standard ratings; and dismissing the proposed fines and investigative costs with prejudice. DONE AND ENTERED this 2nd day of March, 2004, in Tallahassee, Leon County, Florida. S DANIEL MANRY 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 2nd day of March, 2004. COPIES FURNISHED: Gerald L. Pickett, Esquire Agency for Health Care Administration Sebring Building, Suite 330K 525 Mirror Lake Drive, North St. Petersburg, Florida 33701 Donna Holshouser Stinson, Esquire Broad and Cassel 215 South Monroe Street, Suite 400 Post Office Drawer 11300 Tallahassee, Florida 32302-1300 R. Davis Thomas, Jr. Broad and Cassel 215 South Monroe Street, Suite 400 Post Office Box 11300 Tallahassee, Florida 32302-1300 Rhonda M. Medows, M.D., Secretary Agency for Health Care Administration Fort Knox Building, Suite 3116 2727 Mahan Drive Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration Fort Knox Building, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308
The Issue Whether the Agency for Health Care Administration (AHCA or the Agency) should approve the application for certificate of need (CON) 7700 filed by Miami Beach Healthcare Group, LTD. d/b/a Miami Heart Institute (Miami Heart or MH).
Findings Of Fact The Agency is the state agency charged with the responsibility of reviewing and taking action on CON applications pursuant to Chapter 408, Florida Statutes. The applicant, Miami Heart, operates a hospital facility known as Miami Heart Institute which, at the time of hearing, was comprised of a north campus (consisting of 273 licensed beds) and a south campus (consisting of 258 beds) in Miami, Florida. The two campuses operate under a single license which consolidated the operation of the two facilities. The consolidation of the license was approved by CON 7399 which was issued by the Agency prior to the hearing of this case. The Petitioner, Mount Sinai, is an existing health care facility doing business in the same service district. On February 4, 1994, AHCA published a fixed need pool of zero adult inpatient psychiatric beds for the planning horizon applicable to this batching cycle. The fixed need pool was not challenged. On February 18, 1994, Miami Heart submitted its letter of intent for the first hospital batching cycle of 1994, and sought to add twenty adult general inpatient psychiatric beds at the Miami Heart Institute south campus. Such facility is located in the Agency's district 11 and is approximately two (2) miles from the north campus. Notice of that letter was published in the March 11, 1994, Florida Administrative Weekly. Miami Heart's letter of intent provided, in pertinent part: By this letter, Miami Beach Healthcare Group, Ltd., d/b/a Miami Heart Institute announces its intent to file a Certificate of Need Application on or before March 23, 1994 for approval to establish 20 hospital inpatient general psychiatric beds for adults at Miami Heart Institute. Thus, the applicant seeks approval for this project pursuant to Sections 408.036(1)(h), Florida Statutes. The proposed capital expenditure for this project shall not exceed $1,000,000 and will include new construction and the renovation of existing space. Miami Heart Institute is located in Local Health Council District 11. There are no subsdistricts for Hospital Inpatient General Psychiatric Beds for Adults in District 11. The applicable need formula for Hospital General Psychiatric Beds for Adults is contained within Rule 59C-1.040(4)(c), F.A.C. The Agency published a fixed need of "0" for Hospital General Psychiatric Beds for Adults in District 11 for this batching cycle. However, "not normal" circumstances exist within District which justify approval of this project. These circumstances are that Miami Beach Community Hospital, which is also owned by Miami Beach Healthcare Group, Ltd., and which has an approved Certificate of Need Application to consol- idate its license with that of the Miami Heart Institute, has pending a Certificate of Need Application to delicense up to 20 hospital inpatient general psychiatric beds for adults. The effect of the application, which is the subject of this Letter of Intent, will be to relocate 20 of the delicensed adult psychiatric beds to the Miami Heart Institute. Because of the "not normal" circumstances alleged in the Miami Heart letter of intent, the Agency extended a grace period to allow competing letters of intent to be filed. No additional letters of intent were submitted during the grace period. On March 23, 1994, Miami Heart timely submitted its CON application for the project at issue, CON no. 7700. Notice of the application was published in the April 8, 1994, Florida Administrative Weekly. Such application was deemed complete by the Agency and was considered to be a companion to the delicensure of the north campus beds. On July 22, 1994, the Agency published in the Florida Administrative Weekly its preliminary decision to approve CON no. 7700. In the same batch as the instant case, Cedars Healthcare Group (Cedars), also in district 11, applied to add adult psychiatric beds to Cedars Medical Center through the delicensure of an equal number of adult psychiatric beds at Victoria Pavilion. Cedars holds a single license for the operation of both Cedars Medical Center and Victoria Pavilion. As in this case, the Agency gave notice of its intent to grant the CON application. Although this "transfer" was initially challenged, it was subsequently dismissed. Although filed at the same time (and, therefore, theoretically within the same batch), the Cedars CON application and the Miami Heart CON application were not comparatively reviewed by the Agency. The Agency determined the applicants were merely seeking to relocate their own licensed beds. Based upon that determination, MH's application was evaluated in the context of the statutory criteria, the adult psychiatric beds and services rule (Rule 59C-1.040, Florida Administrative Code), the district 11 local health plan, and the 1993 state health plan. Ms. Dudek also considered the utilization data for district 11 facilities. Mount Sinai timely filed a petition challenging the proposed approval of CON 7700 and, for purposes of this proceeding only, the parties stipulated that MS has standing to raise the issues remaining in this cause. Mount Sinai's existing psychiatric unit utilization is presently at or near full capacity, and MS' existing unit would not provide an adequate, available, or accessible alternative to Miami Heart's proposal, unless additional bed capacity were available to MS in the future through approval of additional beds or changes in existing utilization. Miami Heart's proposal to establish twenty adult general inpatient psychiatric beds at its Miami Heart Institute south campus was made in connection with its application to delicense twenty adult general inpatient psychiatric beds at its north campus. The Agency advised MH to submit two CON applications: one for the delicensure (CON no. 7474) and one for the establishment of the twenty beds at the south campus (CON no. 7700). The application to delicense the north campus beds was expeditiously approved and has not been challenged. As to the application to establish the twenty beds at the south campus, the following statutory criteria are not at issue: Section 408.035(1)(c), (e), (f), (g), (h), (i), (j), (k), (m), (n), (o) and (2)(b) and (e), Florida Statutes. The parties have stipulated that Miami Heart meets, at least minimally, those criteria. During 1993, Miami Heart made the business decision to cease operations at its north campus and to seek the Agency's approval to relocate beds and services from that facility to other facilities owned by MH, including the south campus. Miami Heart does not intend to delicense the twenty beds at the north campus until the twenty beds are licensed at the south campus. The goal is merely to transfer the existing program with its services to the south campus. Miami Heart did not seek beds from a fixed need pool. Since approximately April, 1993, the Miami Heart north campus has operated with the twenty bed adult psychiatric unit and with a limited number of obstetrical beds. The approval of CON no. 7700 will not change the overall total number of adult general inpatient psychiatric beds within the district. The adult psychiatric program at MH experiences the highest utilization of any program in district 11, with an average length of stay that is consistent with other adult programs around the state. Miami Heart's existing psychiatric program was instituted in 1978. Since 1984, there has been little change in nursing and other staff. The program provides a full continuum of care, with outpatient programs, aftercare, and support programs. Nearly ninety-nine percent of the program's inpatient patient days are attributable to patients diagnosed with serious mental disorders. The Miami Heart program specializes in a biological approach to psychiatric cases in the diagnosis and treatment of affective disorders, including a variety of mood disorders and related conditions. The Miami Heart program is distinctive from other psychiatric programs in the district. If the MH program were discontinued, the patients would have limited alternatives for access to the same diagnostic and treatment services in the district. There are no statutes or rules promulgated which specifically address the transfer of psychiatric beds or services from one facility owned by a health care entity to another facility also owned by the same entity. In reviewing the instant CON application, the Agency determined it has the discretion to evaluate each transfer case based upon the review criteria and to consider the appropriate weight factors should be given. Factors which may affect the review include the change of location, the utilization of the existing services, the quality of the existing programs and services, the financial feasibility, architectural issues, and any other factor critical to the review process. In this case, the weight given to the numeric need criteria was not significant. The Agency determined that because the transfer would not result in a change to the overall bed inventory, the calculated fixed need pool did not apply to the instant application. In effect, because the calculation of numeric need was inapplicable, this case must be considered "not normal" pursuant to Rule 59C-1.040(4)(a), Florida Administrative Code. The Agency determined that other criteria were to be given greater consideration. Such factors were the reasonableness of the proposal, the ability to afford access, the applicant's ability to provide a quality program, and the project's financial feasibility. The Agency determined that, on balance, this application should be approved as the statutory and other review criteria were met. Although put on notice of the other CON applications, Mount Sinai did not file an application for psychiatric beds at the same time as Miami Heart or Cedars. Mount Sinai did not claim that the proposed delicensures and transfers made beds available for competitive review. The Agency has interpreted Rule 59C-1.040, Florida Administrative Code, to mean that it will not normally approve an application for beds or services unless the statutory and rule criteria are met, including the need determination criteria. There is no list of circumstances which are routinely considered "not normal" by the Agency. In this case, the proposed transfer of beds was, in itself, considered "not normal." The approval of Miami Heart's application would allow an existing program to continue. As a result, the overhead to maintain two campuses would be reduced. Further, the relocation would allow the program to continue to provide access, both geographically and financially, to the same patient service area. And, since the program has the highest utilization rate of any adult program in the district, its continuation would be beneficial to the area. The program has an established referral base for admissions to the facility. The transfer is reasonable for providing access to the medically under-served. The quality of care, while not in issue, would be expected to continue at its existing level or improve. The transfer would allow better access to ancillary hospital departments and consulting specialists who may be needed even though the primary diagnosis is psychiatric. The cost of the transfer when compared to the costs to be incurred if the transfer is not approved make the approval a benefit to the service area. If the program is not relocated, Medicaid access could change if the hospital is reclassified from a general facility to a specialty facility. The proposed cost for the project does not exceed one million dollars. If the north campus must be renovated, a greater capital expenditure would be expected. The expected impact on competition for other providers is limited due to the high utilization for all programs in the vicinity. The subject proposal is consistent with the district and state health care plans and the need for health care facilities and services. The services being transferred is an existing program which is highly utilized and which is not creating "new beds." As such, the proposal complies with Section 408.035(1)(a), Florida Statutes. The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing services in the district will not be adversely affected by the approval of the subject application. The proposed transfer is consistent with, and appropriate, in light of these criteria. Therefore, the proposal complies with Section 408.035(1)(b), Florida Statutes. The subject application demonstrates a full continuum of care with safeguards to assure that alternatives to inpatient care are fully utilized when appropriate. Therefore, the availability and adequacy of other services, such as outpatient care, has been demonstrated and would deter unnecessary utilization. Thus, Miami Heart has shown its application complies with Section 408.035(1)(d), Florida Statutes. Miami Heart has also demonstrated that the probable impact of its proposal is in compliance with Section 408.035(1)(l), Florida Statutes. The proposed transfer will not adversely impact the costs of providing services, the competition on the supply of services, or the improvements or innovations in the financing and delivery of services which foster competition, promote quality assurance, and cost-effectiveness. Miami Heart has taken an innovative approach to promote quality assurance and cost effectiveness. Its purpose, to close a facility and relocate beds (removing unnecessary acute care beds in the process), represents a departure from the traditional approach to providing health care services. By approving Miami Heart's application, overhead costs associated with the unnecessary facility will be eliminated. There is no less costly, more efficient alternative which would allow the continuation of the services and program Miami Heart has established at the north campus than the approval of transfer to the south campus. The MH proposal is most practical and readily available solution which will allow the north campus to close and the beds and services to remain available and accessible. The renovation of the medical surgical space at the south campus to afford a location for the psychiatric unit is the most practical and readily available solution which will allow the north campus to close and the beds and services to remain available and accessible. In totality, the circumstances of this case make the approval of Miami Heart's application for CON no. 7700 the most reasonable and practical solution given the "not normal" conditions of this application.
Recommendation Based on the foregoing, it is, hereby, RECOMMENDED: That the Agency for Health Care Administration enter a final order approving CON 7700 as recommended in the SAAR. DONE AND RECOMMENDED this 5th day of April, 1995, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of April, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-4755 Note: Proposed findings of fact are to contain one essential fact per numbered paragraph. Proposed findings of fact paragraphs containing multiple sentences with more than one statement of fact are difficult to review. In reviewing for this case, where all sentences were accurate and supported by the recorded cited, the paragraph has been accepted. If the paragraph contained mixed statements where one sentence was an accurate statement of fact but the others were not, the paragraph has been rejected. Similarly, if one sentence was editorial comment, argument, or an unsupported statement to a statement of fact, the paragraph has been rejected. Proposed findings of fact should not include argument, editorial comments, or statements of fact mixed with such comments. Rulings on the proposed findings of fact submitted by Petitioner, Mount Sinai: Paragraphs 1 through 13 were cited as stipulated facts. Paragraph 14 is rejected as irrelevant. With regard to paragraph 15 it is accepted that Miami Heart made the business decision to move the psychiatric beds beds from the north campus to the south campus. Any inference created by the remainder of the paragraph is rejected as irrelevant. Paragraph 16 is rejected as irrelevant. Paragraph 17 is rejected as irrelevant. Paragraph 18 is accepted. Paragraph 19 is rejected as irrelevant. Paragraph 20 is rejected as contrary to the weight of the credible evidence. Paragraph 21 is rejected as contrary to the weight of the credible evidence. Paragraph 22 is accepted. Paragraph 23 is rejected as irrelevant. Paragraph 24 is accepted. Paragraph 25 is rejected as repetitive, or immaterial, unnecessary to the resolution of the issues. Paragraph 26 is rejected as irrelevant or contrary to the weight of the credible evidence. Paragraph 27 is rejected as comment or conclusion of law, not fact. Paragraph 28 is accepted but not relevant. Paragraphs 29 and 30 are accepted. Paragraphs 31 through 33 are rejected as argument, comment or irrelevant. Paragraph 34 is rejected as comment or conclusion of law, not fact. Paragraph 35 is rejected as comment or conclusion of law, not fact, or irrelevant as the FNP was not in dispute. Paragraph 36 is rejected as irrelevant. Paragraph 37 is rejected as repetitive, or comment. Paragraph 38 is rejected as repetitive, comment or conclusion of law, not fact, or irrelevant. Paragraph 39 is rejected as argument or contrary to the weight of credible evidence. Paragraph 40 is accepted. Paragraph 41, 42, and 43 are rejected as contrary to the weight of the credible evidence and/or argument. Paragraph 44 is rejected as argument and comment on the testimony. Paragraph 45 is rejected as argument, irrelevant, and/or not supported by the weight of the credible evidence. Paragraph 46 is rejected as argument. Paragraph 47 is rejected as comment or conclusion of law, not fact. Paragraph 48 is rejected as comment, argument or irrelevant. Paragraph 49 is rejected as comment on testimony. It is accepted that the proposed relocation or transfer of beds is a "not normal" circumstance. Paragraph 50 is rejected as argument or irrelevant. Paragraph 51 is rejected as argument or contrary to the weight of credible evidence. Paragraph 52 is rejected as argument or contrary to the weight of credible evidence. Paragraph 53 is rejected as argument, comment or recitation of testimony, or contrary to the weight of credible evidence. Paragraph 54 is rejected as irrelevant or contrary to the weight of credible evidence. Paragraph 55 is rejected as irrelevant, comment, or contrary to the weight of credible evidence. Paragraph 56 is rejected as irrelevant or argument. Paragraph 57 is rejected as irrelevant or argument. Paragraph 58 is rejected as contrary to the weight of credible evidence. Paragraph 59 is rejected as irrelevant. Paragraph 60 is rejected as contrary to the weight of credible evidence. Paragraph 61 is rejected as argument or contrary to the weight of credible evidence. Paragraph 62 is rejected as argument or contrary to the weight of credible evidence. Paragraph 63 is accepted. Paragraph 64 is rejected as irrelevant. Mount Sinai could have filed in this batch given the not normal circumstances disclosed in the Miami Heart notice. Paragraph 65 is rejected as irrelevant. Paragraph 66 is rejected as comment or irrelevant. Paragraph 67 is rejected as argument or contrary to the weight of credible evidence. Paragraph 68 is rejected as argument or irrelevant. Paragraph 69 is rejected as argument, comment or irrelevant. Paragraph 70 is rejected as argument or contrary to the weight of credible evidence. Rulings on the proposed findings of fact submitted by the Respondent, Agency: Paragraphs 1 through 6 are accepted. With the deletion of the words "cardiac catheterization" and the inclusion of the word "psychiatric beds" in place, paragraph 7 is accepted. Cardiac catheterization is rejected as irrelevant. Paragraph 8 is accepted. The second sentence of paragraph 9 is rejected as contrary to the weight of credible evidence or an error of law, otherwise, the paragraph is accepted. Paragraph 10 is accepted. Paragraphs 11 through 17 are accepted. Paragraph 18 is rejected as conclusion of law, not fact. Paragraphs 19 and 20 are accepted. The first two sentences of paragraph 21 are accepted; the remainder rejected as conclusion of law, not fact. Paragraph 22 is rejected as comment or argument. Paragraph 23 is accepted. Paragraph 24 is rejected as argument, speculation, or irrelevant. Paragraph 25 is accepted. Rulings on the proposed findings of fact submitted by the Respondent, Miami Heart: Paragraphs 1 through 13 are accepted. The first sentence of paragraph 14 is accepted; the remainder is rejected as contrary to law or irrelevant since MS did not file in the batch when it could have. Paragraph 15 is accepted. Paragraph 16 is accepted as the Agency's statement of its authority or policy in this case, not fact. Paragraphs 17 through 20 are accepted. Paragraph 21 is rejected as irrelevant. Paragraph 22 is rejected as irrelevant. Paragraphs 23 through 35 are accepted. Paragraph 36 is rejected as repetitive. Paragraphs 37 through 40 are accepted. Paragraph 41 is rejected as contrary to the weight of the credible evidence to the extent that it concludes the distance to be one mile; evidence deemed credible placed the distance at two miles. Paragraphs 42 through 47 are accepted. Paragraph 48 is rejected as comment. Paragraphs 49 through 57 are accepted. COPIES FURNISHED: Tom Wallace, Assistant Director Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 R. Terry Rigsby Geoffrey D. Smith Wendy Delvecchio Blank, Rigsby & Meenan, P.A. 204 S. Monroe Street Tallahassee, Florida 32302 Lesley Mendelson Senior Attorney Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 Stephen Ecenia Rutledge, Ecenia, Underwood, Purnell & Hoffman, P.A. 215 South Monroe Street Suite 420 Tallahassee, Florida 32302-0551
The Issue Whether the application of Delray Community Hospital for a certificate of need to add 24 acute care beds meets, on balance, the applicable criteria for approval.
Findings Of Fact The Agency For Health Care Administration ("AHCA") administers the state certificate of need ("CON") program for health care services and facilities. In August 1994, AHCA published a numeric need of zero for additional acute care beds in District 9, Subdistrict 5, for southern Palm Beach County. In September 1994, NME Hospitals, Inc. d/b/a Delay Community Hospital, Inc. ("Delray") applied for a certificate of need ("CON") to add 24 acute care beds in District 9, Subdistrict 5, for a total construction cost of $4,608,260. AHCA published its intent to approve the application and to issue CON No. 7872 to Delray, on January 20, 1995, in Volume 21, No. 3 of the Florida Administrative Weekly. By timely filing a petition, Bethesda Memorial Hospital, Inc. ("Bethesda"), which is located in the same acute care subdistrict, challenged AHCA's preliminary decision. Bethesda also filed a petition challenging Rule 59C-1.038, Florida Administrative Code, the acute care bed need rule, which resulted in a determination that the need methodology in the rule is invalid. Bethesda Memorial Hospital, Inc. v. AHCA and NME Hospital, Inc., DOAH Case No. 95-2649RX (F.O. 8/16/95). Delray and Bethesda are in a subdistrict which includes five other hospitals, Wellington Regional Medical Center ("Wellingon"), West Boca Medical Center ("West Boca"), Palm Beach Regional Medical Center ("Palm Beach Regional"), J. F. Kennedy Medical Center ("JFK"), and Boca Raton Community Hospital ("BRCH"). The hospitals range in size from 104 to approximately 400 beds. Wellington, West Boca, and Palm Beach Regional have fewer, and Bethesda, JFK and BRCH have more than Delray's 211 beds. Bethesda, located in Boynton Beach, is accredited by the Joint Commission for the Accreditation of Hospital Organizations ("JCAHO") for the maximum time available, 3 years. Bethesda has 330 beds, and offers obstetrics, pediatrics, and emergency room services. An average of 10 patients a month are transferred, after their condition is stabilized, from the emergency room at Bethesda to other hospitals, and most are participants in the Humana health maintenance organization ("HMO"), which requires their transfer to an Humana- affiliated hospital. Approximately one patient a month is transferred for open heart surgery or angioplasty after stabilization with thrombolitic therapy at Bethesda. Bethesda has a 12-bed critical care unit, a 12-bed surgical intensive care unit, and a telemetry or progressive care unit. From October to April, Bethesda also opens a 10-bed medical intensive care unit. Even during this "season," when south Florida experiences an influx of temporary winter residents, Bethesda's critical care beds are very rarely full. Only one time during the 1994-1995 season was a patient held overnight in the emergency room waiting for a bed at Bethesda. Only diagnostic cardiac caths are performed at Bethesda due to the absence of back-up open heart surgery. Delray is located on a medical campus with Fair Oaks Hospital, a 102 bed psychiatric facility, and Hillhaven Convalescent Center, which has 108 beds. Delray is physically connected to Pinecrest Rehabilitation Hospital, which has 90 beds. The campus also includes a medical mall, with outpatient services, a home health agency, and medical office buildings. Delray has a medical staff of 430 physicians. Delray is a for-profit hospital owned and operated by NME Hospitals, Inc., a wholly owned subsidiary of National Medical Enterprises, which after merging with American Medical International, does business as Tenet Health Care Corporation ("Tenet"). Tenet owns, operates, or manages 103 facilities, including Fair Oaks and Pinecrest Rehabilitation Hospital. Delray owns Hillhaven Convalescent Center, but it is managed by the Hillhaven nursing home management company. NME Hospitals, Inc., also owns West Boca Medical Center, which is approximately 10 to 12 miles from Delray. South Florida Tenet Health System is an alliance of the Tenet facilities, which has successfully negotiated managed care contracts offering the continuum of care of various levels of providers within one company. AHCA published a numeric need of zero for additional acute care beds in the southern Palm Beach County subdistrict, for July 1999, the applicable planning horizon. Delray's application asserts that special circumstances exist for the approval of its application despite the absence of numeric need. AHCA accepted and reviewed Delray's application pursuant to the following section of the acute care bed need rule: (e) Approval Under Special Circumstances. Regardless of the subdistrict's average annual occupancy rate, need for additional acute care beds at an existing hospital is demonstrated if a net need for beds is shown based on the formula described in paragraphs (5)(b), (7)(a), (b), (c), and (8)(a), (b), (c), and provided that the hospital's average occupancy rate for all licensed acute care beds is at or exceeds 75 percent. The deter- mination of the average occupancy rate shall be made based on the average 12 months occupancy rate made available by the local health council two months prior to the begining of the respective acute care hospital batching cycle. The need methodology referred to in the special circumstances rule indicated a net need for 1442 additional beds in District 9. All parties to the proceeding agree that the net need number is unrealistic, irrational, and/or wrong. That methodology was invalidated in the previously consolidated rule challenge case. Delray also met the requirement of exceeding 75 percent occupancy, with 75.63 percent from January through December 1993. In 1994, Delray's occupancy rate increased to 83 percent. In 1993, occupancy rates were 55.6 percent in District 9 and 52.5 percent in subdistrict 5. At individual hospitals, other than Delray, occupancy rates ranged from lows of 25.5 percent at Wellington and 35 percent at Palm Beach Regional to highs of 58 percent at BRCH and JFK. A study of four year trends shows declining acute care occupancy at every subdistrict hospital except Delray. Delray points to occupancy levels in intensive care units as another special circumstance for adding new beds. Currently, Delray has 8 beds in a trauma intensive care unit ("TICU"), 8 in a surgical intensive care unit ("SICU"), 7 in a critical or coronary care unit ("CCU"), 7 in a medical intensive care unit ("MICU"), and 67 beds in a telemetry or progressive care unit ("PCU"). For the fiscal year ending May 31, 1994, occupancy rates were 80 percent in the PCU, 91 percent in CCU, and 128 percent in SICU. If the CON is approved, Delray plans to allocate the 24 additional beds to increase the PCU by 10, CCU by 7, and the SICU by 7 beds. Expert testimony established 75 percent to 80 percent as a range of reasonable occupancy levels for intensive care units. A PCU, telemetry, or step down unit serves as a transition for patients leaving ICUs who require continued heart rate monitoring. PCU staffing ratios are typically 1 nurse to every 4 patients. CCU is used for patients who have had heart attacks or other serious cardiac problems and continue to need closer personal monitoring. SICU is used primarily for post-surgery open heart patients. The TICU is used for patients with neurological injuries and those in need of neurosurgery. When the ICUs are full, overflow patients are placed in holding areas of the ICU, the emergency room ("ER"), telemetry unit, or in a medical holding unit behind the emergency room. During the season, from November to April, from 20 to 55 patients are in holding areas, most of whom would otherwise be in an ICU or PCU bed. Critical care nurses are moved to the holding areas to care for critical patients. Additional staffing requirements are met, in part, by using contract nurses from an agency owned by Tenet, called Ready Staff. Other temporary or traveling nurses go through a three day orientation and are paired with regular staff mentors. Traveling nurses have three to six month contracts to work at various hospitals throughout the county, as needed. Intensive care nurses are cross-trained to work in any of the ICUs, but the same nurses usually are assigned to open heart and trauma patients. Since May 1991, Delray has been the state-designated level II trauma center for southern Palm Beach County, as is St. Mary's Hospital for the northern areas of the County. Trauma patients are transported by ambulance or helicopter, and treated in two designated trauma rooms in the emergency department. The state designation requires Delray to have one of its eight trauma surgeons, trauma nurses, anesthesiologists, and certain other ancillary services available in the hospital at all times. Delray also must have a bed available in its TICU. CON Review Criteria By supplemental prehearing stipulation, the parties agreed that Delray's CON application includes the information and documents required in Section 408.037, Florida Statutes. The parties also stipulated that the project is financially feasible in the short term, and that proposed construction costs and methods, and equipment costs are reasonable. Based on prehearing stipulations, the statutory review criteria in dispute are as follows: 408.035(1)(a) - need in relation to district and state health plans; 408.035(1)(b) and (1)(d) - availability, accessibility, efficiency, and adequacy of other hospitals; 408.035(1)(b) and (1)(c) - quality of care at other hospitals and the applicant's ability to provide and record of providing quality of care; 408.035(1)(h) - availability of critical care nurses; and 408.035(1)(i) - long term financial feasibility. State and District Health Plans The 1993 Florida State Health Plan has a preference for approving additional acute care beds in subdistricts with at least 75 percent occupancy, and at facilities equal to or in excess of 85 percent occupancy. Subdistrict 5 and Delray do not meet the preference. See, Finding of Facts 9 and 10. The state health plan also includes a preference for hospitals which are disproportionate share Medicaid providers. Delray does not meet the preference, and notes that 70 percent of its patients are over 65 years old and entitled to Medicare reimbursement. In fact, there are no disproportionate share providers in the subdistrict. Delray meets the state plan preference for proposing a project which will not adversely affect the financial viability of an existing, disproportionate share provider. The state health plan also has four preferences related to emergency services, for accepting indigent patients in ER, for a trauma center, for a full range of ER services, and for not having been fined for ER services violations. Delray meets all four preferences related to emergency services. The 1990 District 9 Health Plan, with a 1993 CON Allocation Factors Report, favors applicants who serve Medicaid/Indigent, handicapped, and underserved population groups. In 1992 and 1993, approximately 2.5 percent of the patients at Delray were in the Medicaid program. Delray also provided 3 percent indigent and charity care for 1993. The hospital's 1992 financial reports do not indicate that it provided any indigent or charity care. In 1993- 1994, Delray had the lowest percentage of Medicaid and charity patients at a state designated level II trauma center. AHCA proposes to condition approval of CON 7872 on Delray's providing 2.4 percent of total annual patient days to Medicaid and 1 percent of total annual patient days to charity care, as projected by Delray in Table 7 of the application. Under the district health plan, priority is given for applicants who document cost containment. One example of cost containment, according to the plan, is sharing services with other area hospitals to enhance efficient resource utilization and avoid duplication. Delray describes its patient- focused care model as an example of cost containment. In response to rising labor cost, the underutilization of certain required categories of employees, and the large number of staff interacting with each patient, Delray created the model which emphasizes cross-training of staff to work in teams led by a registered nurse. Delray has not proposed sharing services with other hospitals, and has not documented cost containment as that is described in the district health plan. Availability, Accessibility, Efficiency and Adequacy of Other Hospitals Additional acute care beds at Delray will not meet any demonstrated numeric, geographic, or financial need. Acute care beds are available in adequate numbers in the subdistrict. Roughly half, or 800, of the subdistrict's 1700 beds were empty most days in 1993 and 1994. Bethesda's expert in health care planning and financial feasibility testified that some available, more appropriate alternatives to the approval of additional beds at Delray are the transfer of patients to other subdistrict hospitals, including Tenet's West Boca, the transfer of unused bed capacity from one area of the hospital to another, or the transfer of unused bed capacity from West Boca to Delray. Bethesda also contends that Delray could find alternatives to placing outpatient surgery and outpatient cardiac cath patients in inpatient beds from four to twenty-three hours for observation and care. In support of Delray, AHCA's expert testified that institution-specific demand, in Delray's case, has reached the level of community need, because other subdistrict hospitals are not adequate or available to treat the type of patients treated at Delray. All of Delray's patients come from areas of the county which overlap the service areas of other hospitals, which shows the absence of any geographic access barriers. A diagnostic related group, or DRG, analysis shows that most of the categories of diagnosed illnesses or injuries treated at Delray are also treated at other subdistrict hospitals. The DRGs exclusively treated at Delray are related to trauma. Others treated in the subdistrict only at Delray and JFK are related to angioplasty and open heart surgery. Of the state level II trauma centers, Delray reported the highest percentage, 96.5 percent, of discharges of all patients were urgent or emergent cases. By comparison, the lowest were 65.6 percent at St. Joseph's Hospital in Tampa and 66 percent at West Florida Regional Medical Center, and the next highest was 94.2 percent at Bayfront Medical Center. Bethesda's expert suggested that the number was too high and could result from miscoding. Approximately 70 to 90 trauma patients are treated each month at Delray and approximately 50 percent of those are admitted to the hospital. One Bethesda witness, a doctor on the staff at both Bethesda and Delray, testified that he was called in once when Delray refused to go on "by-pass status," to send an incoming trauma patient to St. Mary's, knowing the patient was likely to need a CT scan. At the time, Delray's main scanner inside the hospital was inoperable or undergoing repairs. The patient who arrived by helicopter was taken by ambulance to another scanner on the campus, approximately 1000 yards away from the hospital. The same doctor also complained that ER patients who are upgraded to trauma status cannot be downgraded by trauma surgeons. There was no evidence how often the inside CT scan is unavailable and, consequently, no showing that altering this practice would result in an appreciable decline in the demand for trauma services at Delray. Similarly, there was no evidence of any impact on hospital admissions resulting from upgrading emergency patients to trauma patients. Trauma victims seldom require open heart surgery. Therefore, a different category of patients served only in the subdistrict at JFK and Delray is open heart surgery patients. Because of its location in an area with a large population over age 65 and due to the services it provides, one Delray witness described Delay, as a "cardiac" hospital. Delray has no pediatric or obstetric services. The percentage of residents over 65 in Delray's service area is about 35 percent, in contrast to a statewide level approaching 20 percent. Delray began an open heart surgery program in August, 1986. There are now approximately 50 cardiologists on staff, 19 performing cardiac catheterizations ("caths") and angioplasties, and three performing open heart surgeries. In fiscal year 1993, approximately 1900 cardiac caths, and 450 open heart surgeries were performed at Delray. In fiscal year 1994, that increased to approximately 2100 patients cathed and 540 open heart surgeries. Through April 1995, or 11 months into the fiscal year, there were approximately 2300 caths and 526 open heart surgeries. The cath labs are available twenty-four hours a day, seven days a week, within forty-five minutes notice. By comparison, the cath lab at Bethesda operates on weekdays until 3:30 p.m. Ten to twelve physicians use Delray's two cardiac cath labs and a third overflow lab, if needed. The cath labs at Delray and Bethesda are considered "open" because any qualified staff physician is eligible to receive privileges to use the lab. A backlog occurs in the Delray cath lab when critical care beds are not available for patients following caths. Delray has three open heart surgery operating rooms and three open heart surgeons, with the capacity to perform 1000 open heart surgeries a year. Within the subdistrict, approximately 11 miles from Delray, JFK also provides cardiac cath, angioplasty, and open heart surgery services. JFK has 369 beds and is equipped with two cardiac cath labs, each with the capacity to accommodate 2000 procedures a year. In fiscal year 1994, approximately 3200 caths were performed at JFK. The cath lab is "closed," meaning JFK has entered into an exclusive contract for services with one group of invasive cardiologists. JFK's medical staff has relatively little overlap, approximately 10 to 15 percent, with the medical staff at Delray. Across all patients and all diagnoses, there is also relatively little geographic overlap. JFK, by and large, serves the central area and Delray serves the southern area of Palm Beach County. The average census in thirty critical care beds at JFK was 16.5 patients in 1994, and 18.4 in the first six months of 1995. A high range of 70 percent to 80 percent occupancy in JFK's critical care beds is reached during the peak season. Although JFK's thirty critical care beds are not officially divided into different types of intensive care services, a de facto designation has developed. Depending on the patient mix, the same 16 beds are generally used for cardiac critical care. The average daily census for cardiac critical care was 13.4 in March 1994 and 23.4 in February 1995. Overall, there is no excess capacity in the district in critical care beds during the height of the season. The average occupancy of all critical care beds in southern Palm Beach County was 104 percent in February 1992, 98 percent in February 1993, and 93.5 percent in February 1994. Open heart surgery and angioplasty are more frequently than not scheduled up to a week ahead of time. Most cardiac patients can be admitted to any emergency room and stabilized with thrombolytic therapy before transfer to another hospital for an angioplasty or open heart surgery, without compromising their conditions. However, at Delray, cardiac patients are more likely to be emergent or urgent cases, remaining in the hospital for stabilization, scheduled for surgery within 24 hours, and remaining in SICU an average of forty-eight hours following surgery. The older patients are more difficult to transfer because they tend to have more consulting specialists on the staff of the hospital in the service area where they reside. Transferring open heart surgery patients from Delray to JFK is not beneficial as a health planning objective during the season, when JFK operates at reasonable levels of 70 percent to 80 percent occupancy in critical care beds and exceeds the capacity of its de facto cardiac critical care beds. Delray's emergency department can accommodate 23 patients at one time. Over the past three years, ER visits have increased by approximately 1,000 each year. Approximately 20 percent to 25 percent of patients treated in its emergency room, excluding trauma patients, are admitted to Delray. During the winter season, there are also more emergency room patients who do not have local physicians, most complaining of cardiac and respiratory problems. By federal law, certain priority categories of emergency patients must be taken to the nearest hospital. Federal law also prohibits patient transfers to a different hospital unless a patient's medical condition is stable, the patient consents, and the other hospital has an available bed and a staff doctor willing to take the patient. Patient condition and consent are major factors preventing transfers of elderly residents of the Delray service area to other hospitals. Delray also reasonably expects an increase in patients due to an increase in its market share, managed care contracts, and population in its service area. Managed care contracts, usually for 3 year terms, are not alone a reliable basis for making long term community health planning decisions. Combining trends in growth, population aging, declining lengths of stays in hospitals, market share and the greater consumption of inpatient services by people over 65, however, Delray reasonably expects an incremental increase of 1667 discharges by 1999. At 80 percent occupancy, the incremental patients attributable to population growth alone, according to Delray's expert, justifies an additional 34 beds. For a substantial part of 1994, ICU, CCU and medical/surgical beds at Delray exceeded reasonable occupancy standards. In the first four months of 1995, medical/surgical occupancy levels ranged from 96.7 percent to 119.4 percent. Given those levels and the projected growth, transfer of beds from medical/surgical units is not a reasonable option for increasing the supply of critical care beds. Delray is small when compared to all other high volume open heart surgery and level II trauma hospitals in Florida. Another option suggested by Bethesda's expert was the transfer of beds from West Boca to Delray. Because the beds have already been built, a transfer would not reduce capital or fixed costs at West Boca. The only effect that was apparent from the evidence in this case would be a statistical increase in subdistrict utilization. In addition, with 171 beds, West Boca is relatively small and in a growing area of Palm Beach County. Bethesda's contention that Delray could stop using inpatient beds for the four to twenty-three hour outpatients was not supported by the evidence. There was no showing that the physical plant or space exists for the construction of observation beds near an ambulatory surgery center. Given the testimony that all hospitals use inpatient beds for certain outpatients, and that Delray averages five to seven outpatients in inpatient medical/surgical beds at any time, there is no evidence of a practical alternative with any significant impact on the overcrowding at Delray. Bethesda also challenged the need for critical care for fractures, cellulitis, and fever of unknown origin, which were among the diagnoses listed for patients in the ER hold. However, Bethesda's expert also acknowledged that some patients in ER hold at Delray were waiting for medical/surgical beds not only ICU beds. Patients are placed in holding areas whenever assignment to an appropriate bed is not possible within thirty minutes of the issuance of orders to admit the patient. Delray proved that it is unique in the subdistrict in treating trauma patients and cardiac patients in a service area with minimal geographic and medical staff overlap with that of JFK. The transfer of such patients to other hospitals in the subdistrict is often not practical or possible. Delray also demonstrated that other subdistrict hospitals are not available alternative intensive care providers when their ICUs are also full or over optimal levels of occupancy, during the season. In addition, the demographic characteristics of Delay's service area support projected increases in inpatient days due to increased market share, population aging and growth. All of these factors indicate that Delray cannot, as Bethesda suggests, control its own growth, transfer, or redirect patients. Quality of Care and Availability of Critical Case Nurses Delray is JCAHO accredited. There is no evidence that quality of care affects hospital utilization in southern Palm Beach County. Open heart surgery mortality rates from 1990 to 1994 were 1.9 percent at JFK and 3 percent at Delray, but the data is not adjusted to take into consideration "case-mix," meaning the severity of illnesses, and is, therefore, meaningless as a comparison. A 1994 Medicare case mix index report shows Delray treating the sickest patients followed by JFK, then Bethesda. The sicker, older patients, exert more pressure on ICUs. Because ICU nursing ratios are one-nurse-to-one-patient or, more typically, one-to-two and PCU ratios are one-to-four, PCUs provide a step down from ICUs. PCU beds are used for patients who no longer need ICU care, but require more intense monitoring than that provided on the medical/surgical floors with nurse/patient ratios of one-to-twelve or one-to-twenty. In PCU or telemetry beds, radio signals transmit data to heart monitors. However, if PCU beds are not available, patients are left in the ICUs longer than necessary, aggravating the backlog cause by crowded ICUs. Critical care is a resource-intensive service, and Bethesda argues that Delray cannot increase the service because of the shortage of critical care nurses in Palm Beach County. However, the testimony presented by Bethesda is not consistent. Bethesda's expert in critical care nursing and critical care unit management testified that vacancies are difficult to fill, that there is a shortage of critical care nurses, but that Bethesda does not experience a shortage of critical care staff. There is no explanation why Bethesda has no shortage, but Delray would if its CON is approved. Delray's director of neuroscience and critical care testified that she maintains a file of available critical care nurses and can recruit the additional staff needed due to Delray's competitive salaries and benefits. Long Term Financial Feasibility There are no revenues or expenses during construction of the 24 beds, just construction costs. After the beds are in service, Delray projects net income of $1,951,164 in 1997 and $2,003,769 in 1998. In projecting revenues and expenses for the beds, Delray used its historical percentages of patients in each unit receiving a particular type of care and the historical cost of that care, and assumed that the same breakdown in the 24 new beds. Using the historical financial experience, Delray constructed a pro forma for the 24 beds, with an expected average daily census of 21.6 patients. If the 24 new beds are used only for existing holding area patients then, as Bethesda contends, Delray's pro forma should show a shift of revenues and expenses to the new beds, and the same amounts deducted from the remainder of the hospital. Delray already charges holding area patients based on the intensity of nursing care provided, even though the patients are not physically located in an ICU. The ER hold patients accounted for 2,210 patient days in 1994, which are reallocated to ICU beds in the pro forma. However, Delray also projected an incremental increase of 7,865 patient days which, contrary to Bethesda's claim, does not include or double- count the ER hold patient days. Of these, 54 percent of incremental patient days are projected to be in the ICUs or PCU. The additional patients will, therefore, spend 46 percent of total patient days in medical/surgical beds. Routine revenue estimates of $492 a day in year one were criticized as too low for the projected 54 percent ICU/46 percent medical/surgical mix. However, $492 a day is a reasonable estimate of incremental routine revenues for the hospital as a whole. In 1994, patients at Delray spent 44 percent of total days in medical/surgical beds as compared to the projection of 46 percent for new patients. There is no material variation from 44 percent to 46 percent, therefore $492 a day is a reasonable projected incremental routine revenue. Delray has demonstrated, in an incremental analysis, the financial feasibility of adding 24 critical care beds for existing and additional patients. Delray has also considered the financial impact of additional patients in all categories of beds. Although criticized by Bethesda for this approach, Delray explained that a critical care bed generates revenues from a medical/surgical bed when patient's condition is downgraded. The financial analysis is reasonable, particularly since Medicare pays a flat rate by DRG regardless of how a patient's total days are divided between ICUs and medical/surgical beds. Bethesda questioned whether the use of new beds for new patients will eliminate the use of holding areas. The movement of patients in and out of ICUs will be enhanced by having more ICU and PCU beds, even if the additional beds do not eliminate entirely the use of holding areas during the peak season. Projected average occupancies are expected to reach 98 percent in March 1997 and 1998. Delray also demonstrated that the share of its projected increased admissions which would have otherwise gone to Bethesda is approximately 150 patients, representing a net decline in revenue to Bethesda of approximately $257,000, in comparison to Bethesda's net income of $9 million in 1994. Bethesda also will no longer receive a county tax subsidy of $1 million in income and $3.5 million in restricted funds, after 1994.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered issuing Certificate of Need 7872, approving the addition of 24 acute care beds, to NME Hospital, Inc., d/b/a Delray Community Hospital, conditioned on the provision 2.4 percent of total annual patient days to Medicaid and 1 percent of total annual patient days to charity care. DONE AND ENTERED this 7th day of November, 1995, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of November, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 95-0730 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner, Bethesda Memorial, Proposed Findings of Fact. Accepted in Findings of Fact 14. Accepted in or subordinate to Findings of Fact 2, 7, and 10. Accepted in or subordinate to Findings of Fact 23 and 27. Accepted in or subordinate to Findings of Fact 21 and 23. Accepted in Findings of Fact 22. 21. 43. Accepted in or subordinate to Findings of Fact 21. Accepted in Findings of Fact 23. 8,9. Accepted in Findings of Fact 19 and 20. 10. Accepted except first sentence in Findings of Fact 15. 11-12. Accepted in Findings of Fact 16. Accepted in Findings of Fact 18. Rejected in Findings of Fact 15-18. 15-17. Accepted in or subordinate to Findings of Fact 21 and 22. Accepted in Findings of Fact 35. Rejected first sentence in Findings of Fact 30. Accepted in part and rejected in part in Findings of Fact 23-29. Accepted in or subordinate to Findings of Fact 14. Subordinate to Findings of Fact 14 and accepted in Findings of Fact 23-25. Accepted in or subordinate to Findings of Fact 4. 26. Rejected in Findings of Fact 27. 27-28. Accepted in Findings of Fact 30. Accepted in Findings of Fact 21. Rejected first sentence in Findings of Fact 38-43. 31-32. Rejected in or subordinate to Finding of Fact 43. 33. Accepted in Findings of Fact 40. 34-35. Accepted in or subordinate to Findings of Fact 39-41. 36. Accepted in Findings of Fact 37. 37(1). Accepted in Findings of Fact 40 and 41. 37(2). Accepted in Findings of Fact 11. 37(3). Accepted in Findings of Fact 39 and 43. 38-39. Accepted in part and rejected in part in Findings of Fact 40 and 40-48. Rejected in part in Findings of Fact 40 and 41. 49-51. Rejected in Findings of Fact 41. Subordinate to Findings of Fact 41. Rejected in Findings of Fact 38-42. 54(A). Rejected in Findings of Fact 33. 54(B). Accepted in or subordinate to Findings of Fact 33. 54(C). Rejected 54(D-E). Subordinate to Findings of Fact 34. 54(F). Accepted in Findings of Fact 19. 54(G). Subordinate to Findings of Fact 38. 54(H). Accepted in Findings of Fact 22. 54(I). Subordinate to Findings of Fact 34. 54(J). Subordinate to Findings of Fact 30. 54(K). Subordinate to Findings of Fact 28. 54(L). Rejected as speculative in Findings of Fact 35. 54(M). Subordinate to Findings of Fact 7 and 34. 54(N). Conclusions rejected. See Findings of Fact 16. 54(O-P). Conclusions rejected. See Findings of Fact 24. 54(Q). Accepted in Findings of Fact 21. 54(R). Conclusions rejected. See Findings of Fact 24. Accepted in Findings of Fact 12. Accepted in Findings of Fact 21 and 23. Accepted in preliminary statement. Accepted in Findings of Fact 12. Accepted in relevant part in Findings of Fact 29. Accepted in Findings of Fact 35. Accepted in or subordinate to Findings of Fact 26. 62-63. Accepted in part in Findings of Fact 27-29. Accepted in Findings of Fact 23, 27 and 28. Subordinate to Findings of Fact 26. Subordinate to Findings of Fact 30 Subordinate to Findings of Fact 26. Subordinate to Findings of Fact 30. Subordinate to Findings of Fact 26. Subordinate to Findings of Fact 27. Subordinate to Findings of Fact 27. Subordinate to Findings of Fact 26 and 27. Accepted in part in Findings of Fact 28. Accepted in Findings of Fact 23. Accepted in or subordinate to Findings of Fact 6. Accepted in Findings of Fact 26. Accepted in Findings of Fact 35-37. Accepted in Findings of Fact 27. 79-81. Accepted in or subordinate to Findings of Fact 27 and 28. 82-85. Accepted in or subordinate to Findings of Fact 28. Accepted in Findings of Fact 10. Accepted in or subordinate to Findings of Fact 27. Subordinate to Findings of Fact 28 and rejected in Findings of Fact 35. Rejected in general in Findings of Fact 27 and 28. Subordinate to Findings of Fact 27. Subordinate to Findings of Fact 28. Rejected in Findings of Fact 35. Accepted in Findings of Fact 30. 94-98. Accepted in part or subordinate to Findings of Fact 28 and 29. 99-100. Rejected in or subordinate to Finding of Fact 28 and 29. 101. Subordinate to Findings of Fact 35. 102-104. Subordinate to Findings of Fact 27, 28 and 35. 105. Accepted in Findings of Fact 28. 106-107. Subordinate to Findings of Fact 35. 108-111. Accepted in or subordinate to Findings of Fact 27. Subordinate to Findings of Fact 26. Subordinate to Findings of Fact 27. Accepted in Findings of Fact 35. Accepted in Findings of Fact 27. Subordinate to Findings of Fact 16. 117-122. Accepted in Findings of Fact 5 and 35. Rejected in Findings of Fact 37. Accepted in part and rejected in part in Findings of Fact 44. Respondent, AHCA, Proposed Findings of Fact. Accepted in or subordinate to preliminary statement. Accepted in or subordinate to Findings of Fact 1. Accepted in Findings of Fact 4. Accepted in Findings of Fact 13 and 25. 5-6. Accepted in or subordinate to Findings of Fact 1 and 8-10. Accepted in Findings of Fact 4 and 26. Accepted in or subordinate to Findings of Fact 24 and 31. Accepted in or subordinate to Findings of Fact 35. Subordinate to Findings of Fact 22. Accepted in Findings of Fact 21. Accepted in Findings of Fact 22. Accepted in part and rejected in part in Findings of Fact 8, 9 and 34. Respondent, NME, Proposed Findings of Fact. Accepted in Findings of Fact 2. Accepted in Findings of Fact 11. Accepted in Findings of Fact 4 and 6. Accepted in or subordinate to Findings of Fact 26. Accepted in Findings of Fact 6. 6-10. Accepted in or subordinate to Findings of Fact 24-26. Accepted in Findings of Fact 35. Subordinate to Findings of Fact 16. 13-14. Accepted in or subordinate to Findings of Fact 8-13 and 23-34. Accepted in Findings of Fact 9 and 10. Accepted in Findings of Fact 10. Accepted in Findings of Fact 5, 12 and 34. Accepted in Findings of Fact 9 and 10. Accepted in Findings of Fact 30. Subordinate to Findings of Fact 9. Accepted in or subordinate to Findings of Fact 13, 23 and 35. Accepted in or subordinate to Findings of Fact 11-12 and 28. Accepted in Findings of Fact 11. Accepted in or subordinate to Findings of Fact 11. Accepted in Findings of Fact 14 and 34. Accepted in or subordinate to Findings of Fact 25. Rejected. Accepted in Findings of Fact 35. Accepted in Findings of Fact 13 and 31. Accepted in Findings of Fact 24. Accepted in Findings of Fact 13. Accepted in Findings of Fact 36. Subordinate to Findings of Fact 12 and 13. Accepted in Findings of Fact 23 and 29. Accepted in Findings of Fact 29. 36-43. Accepted in or subordinate to Findings of Fact 11 and 12. 44-50. Accepted in or subordinate to Findings of Fact 22 and 23-29. Subordinate to Findings of Fact 6. Accepted in or subordinate to Findings of Fact 34. Accepted in or subordinate to Findings of Fact 28. Accepted except last sentence in Findings of Fact 24. 55-56. Accepted in or subordinate to Findings of Fact 22 and 33. Accepted in or subordinate to Findings of Fact 27 and 28. Accepted in Findings of Fact 22. Accepted in Findings of Fact 24. Accepted in Findings of Fact 26. Accepted in or subordinate to Findings of Fact 35. Accepted in Findings of Fact 23. 63-65. Accepted in or subordinate to Findings of Fact 30. 66-67. Accepted in or subordinate to Findings of Fact 31. 68-72. Accepted in or subordinate to Findings of Fact 7 and 30. 73-76. Accepted in or subordinate to Findings of Fact 8 and 9. Accepted in Findings of Fact 34. Accepted, except last phrase in Findings of Fact 15-20. Accepted in or subordinate to Findings of Fact 21-22. Accepted in or subordinate to Findings of Fact 22. Accepted in or subordinate to Findings of Fact 22-34. Subordinate to Findings of Fact 22. 83-86. Accepted in Findings of Fact 12 and 35-37. 87-89. Accepted in Findings of Fact 35-37. Accepted in Findings of Fact 30. Accepted in Findings of Fact 38 and 39. Accepted in Findings of Fact 38. Accepted in Findings of Fact 41. Subordinate to Findings of Fact 38. 95-99. Accepted in or subordinate to Findings of Fact 38-42. Accepted, except first sentence, in or subordinate to Findings of Fact 44. Subordinate to Findings of Fact 22. 102-104. Accepted in or subordinate to Findings of Fact 16 and 19. 105-106. Accepted in or subordinate to Findings of Fact 7. 107-108. Issue not reached. See Findings of Fact 14. 109-114. Accepted in or subordinate to Findings of Fact 44. COPIES FURNISHED: John Gilroy, Esquire Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308-5403 Kenneth Hoffman, Esquire W. David Watkins, Esquire OERTEL, HOFFMAN, FERNANDEZ & COLE 2700 Blair Stone Road Tallahassee, Florida 32301 Michael J. Glazer, Esquire C. Gary Williams, Esquire MACFARLANE, AUSLEY, FERGUSON & MCMULLEN Post Office Box 391 Tallahassee, Florida 32302 R. S. Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308-5403 Tom Wallace Assistant Director Agency For Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308-5403
The Issue Whether, under Section 381.494-381.499, Florida Statutes, Humana, Inc., d/b/a Kendall Community Hospital, is entitled to a Certificate of Need to construct a 150-bed acute care hospital in the west Kendall area of south Dade County, Florida.
Findings Of Fact HUMANA is an investor-owned, multi-institutional hospital system which owns and operates more than 90 hospitals, most of which are medical/surgical facilities. (DHRS Ex.1, p.10). HUMANA applied for a Certificate of Need from DHRS to construct a 150- bed acute care community hospital in the west Kendall area of south Dade County, Florida. The specific area to be served is bounded on Miller Drive to the north, southwest 177th Avenue to the west, Coral Reef Drive to the south, and Calloway Road to the east. The proposed 150-bed hospital includes 100 medical/surgical beds, 20 pediatric beds, 20 Level II obstetric beds, 10 intensive care/critical beds, and a Level II nursery in conjunction with the obstetric unit. (TR 277). The proposal includes a 24-hour, physician-staffed emergency room and a "dedicated" outpatient surgery department, with separate recovery room. Surgery suites are specifically designed and reserved only for outpatient surgery, thereby facilitating outpatient scheduling and efficient operations. (TR 279). The outpatient surgery unit is intended to reduce the costs of health care by providing a cost-effective alternative modality of health care delivery. (TR 278). Finally, the proposal contemplates a full-body CT Scanner, digital radiography and general state-of-the-art ancillary equipment. (TR 278). If built, it would be the westernmost hospital in south Dade County. It is a "community" hospital, designed to provide hospital care to the rapidly growing population of the west Kendall area, but not serve as a major referral center for patients living elsewhere. (DHRS Ex. 1, pp. 32-34; TR 250, 280). The local health planning agency, then the Health Systems Agency ("HSA") of South Florida, Inc., 1/ reviewed HUMANA's application for a Certificate of Need, along with four other similar applications, and recommended that all five be denied because of asserted inconsistency with the HSA's Health System Plan. ("HSP") 2/ (DHRS Ex. 1, TR 77). The applications were then submitted to DHRS, the single state agency empowered to issue or deny Certificates of Need. 381.493(3)(a) and 381.494(8), Fla.Stat. (Supp. 1982). DHRS reviewed the HSA recommendation, conducted its own evaluation, and then denied all five applications, including HUMANA's. DHRS concluded: None of the five proposed projects are in compliance with the adopted Goals, Criteria, Standards and Policies of the Health Systems Agency of South Florida, as stated in the Health Systems Plan (HSP) and Annual Implementation Plan (AIP). A need to add acute care hospital beds to Dade County does not exist at the present time. The proposed projects would add to excess capacity and underutilization of hospital beds that now exist in Dade County. There are only five hospitals in Dade County that are at the recommended occupancy level of 80 percent based on licensed beds (none of which are located in South Dade), and the number of beds per 1000 population. The primary alternative would be not to construct any of the proposed projects. While all of the proposed projects represent some degree of financial feasibility, none are felt to be cost effective because increased bed capacity would result in costs and revenue higher than those projected for existing "High Cost" hospitals in 1984 as determined by the Hospital Cost Containment Board. (DHRS Ex. 1, p. 404) Thereafter, HUMANA timely instituted Section 120.57(1) proceedings challenging DHRS's denial; HUMANA's standing to do so is uncontested. HUMANA's position, maintained throughout, is that its proposed 150-bed hospital satisfies every legal criterion for the issuance of the applied-for Certificate of Need. Intervenor Baptist Hospital Intervenor BAPTIST HOSPITAL will be substantially affected if HUMANA is granted a Certificate of Need. BAPTIST is a fully licensed and accredited 513- bed, general acute care hospital located within HUMANA's proposed service area, at 8900 North Kendall Drive, Miami, Florida. (STIP-para. 8). If the proposed hospital is built, it would significantly and adversely affect the patient census and revenues of BAPTIST HOSPITAL. (TR 16, VOL 4). In 1982, BAPTIST drew 36.7 percent of its patients from HUMANA's proposed service area. (TR 15, 16, VOL 4). Fifty percent of the residents of the proposed service area (who were admitted to hospitals in Dade County) were admitted to BAPTIST HOSPITAL. (TR-440). It is estimated that BAPTIST would lose 15,047 patient days to the new HUMANA hospital and would experience significant adverse economic impacts. (TR 88-89, VOL 5). The proposed hospital would also adversely impact BAPTIST's ability to hire and retain nursing and technical personnel. BAPTIST has experienced difficulty in hiring and retaining these personnel. (TR 18, 60-73, VOL 4). Historically, the opening of a new hospital has adversely affected the hiring and retention of such personnel in nearby hospitals. (TR 72-73, VOL 4). Here, approximately 84 percent of BAPTIST's nurses live near HUMANA's proposed cite, thus increasing the likelihood that BAPTIST will be adversely affected in this manner. (TR 135, VOL 5). BAPTIST opposes the issuance of a Certificate of Need for HUMANA's proposed hospital, and supports DHRS's initial denial. Intervenor American Hospital Similarly, intervenor AMERICAN HOSPITAL would be significantly affected if the proposed HUMANA hospital is built. AMERICAN is a fully licensed and accredited 513-bed, general acute care hospital located and operated within HUMANA's proposed service area, at 11750 Bird Road, Miami, Florida, (STIP-para 8). AMERICAN currently draws 41 percent of its patients from HUMANA's proposed service area. The proposed hospital will cause AMERICAN to lose an estimated 5,300 patient days. (TR 76, VOL 5). This translates into an approximate loss of $4.1 million in potential revenues, based upon HUMANA's achieving a 75 percent occupancy rate and 41,000 patient days. (TR 75-76, VOL 5). Such a revenue loss may result in higher costs, which in the health care system, are normally translated into higher patient charges. (TR 86, VOL 5) HUMANA's proposed hospital would also aggravate AMERICAN's continuing shortage in nursing personnel. (Currently AMERICAN has approximately 50 full- time registered nurse vacancies.) (TR 134, VOL 5). It is reasonable to expect that HUMANA will hire a significant number of its nurses away from nearby hospitals. Over a six-month period, HUMANA's four existing hospitals in south Florida hired 112 registered nurses, 32.1 percent of whom were hired away from other hospitals in the area. (TR 783). AMERICAN, likewise, opposes the issuance of a Certificate of Need to HUMANA, and supports DHRS's initial denial. II. STATUTORY CRITERIA FOR CERTIFICATES OF NEED Section 381.494(6)(c) and (d), Florida Statutes (Supp. 1982), prescribes standards for evaluating applications for Certificates of Need. Those standards pertinent to HUMANA's application include: The need for the health care facilities and services . . . being proposed in relation to the applicable district plan, annual implementation plan, and state health plan adopted pursuant to Title XV of the Public Health Service Act, except in emergency circumstances which pose a threat to the public health. The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services . . . in the applicant's health service area. 7. The availability of resources, including health manpower, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation; the effects the project will have on clinical needs of health professional training programs in the service area; the extent to which the services will be accessible to schools for health professions in the service area for training purposes if such services are available in a limited number of facilities; the availability of alternative uses of such resources for the provision of other health services; and the extent to which the proposed services will be accessible to all residents of the service area. 11. The probable impact of the proposed project on the costs of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and cost-effectiveness. In considering HUMANA's application, specific consideration must also be given to whether: . . .less costly, more efficient, or more appropriate alternatives to such inpatient services are . . . available and the development of such alternatives has been studied and found not practicable. . . . existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner. . . . alternatives to new construction, for example, modernization or sharing arrangements, have been considered and have been implemented to the maximum extent practicable. . . . patients will experience serious problems in obtaining inpatient care of the type proposed, in the absence of the proposed new service. 381.494(6)(d) Fla.Stat. (Supp. 1982). The controversy here is whether in 1988 (using a five-year planning horizon) there will be a need for HUMANA's proposed 150-bed hospital in the west Kendall area of south Dade County. DHRS, BAPTIST, and AMERICAN say that there will be no need: that existing hospitals serving the area have excess capacity and are underutilized--and that this condition will persist through 1988. HUMANA contends otherwise. As the applicant for a license, the burden of proving entitlement rests squarely upon HUMANA. 3/ The most accurate and reliable method for determining bed-need in this case, the historical demand-based method, requires the following: (1) identify planning area boundaries; (2) from historical population data, project population for the planning area using the five-year horizon for hospital services; (3) calculate a hospital use rate or the rate at which patients in the service area have used hospitals in terms of patient days per thousand; (4) project patient days by multiplying the use rate times the area population, and divide by 365 to yield a projected bed need; (5) compare projected bed-need with the licensed bed capacity of area hospitals and, using an appropriate occupancy standard, determine whether there will be an excess or shortage of hospital beds in the proposed planning area. (TR 55, VOL 5). Selecting a Health Planning Area The first step in determining whether a new hospital will be needed is selection of the appropriate health planning area. In 1982, the now-defunct HSA of South Florida adopted a Regionalization Plan for south Florida dividing HSA IX, a region, into five districts. (AM Ex. 4). Although not specifically mentioning hospitals, this plan implies that hospital bed-need determinations should be made on a district basis. The Kendall area, extending east and west, generally is denominated as "District D," and is, in turn, subdivided into three subdistricts. "D-1" encompasses Coral Gables and South Miami; "D-2" and "D-3" include Weschester, Kendall, Killian, and the west central Dade areas, the boundaries of which are U.S. 1 and the Palmetto Expressway on the east, Coral Reef Drive and Eureka Drive on the south, conservation area on the west, and the East-West Expressway, and Tamiami Trail on the north. (HU Ex. 4). HUMANA chose "D-2" and "D-3" as the appropriate health care planning area for determining need for its proposed hospital. District "D," however, is a more appropriate and reasonable area to use in determining need for the proposed HUMANA hospital. (TR 203, 258; 145-146, VOL 4; 56-57, VOL 5). The entire area of District "D" may be traversed, by car, in approximately 30 minutes, the roads are adequate, and there are numerous hospitals in the district which are easily accessible to its residents. (TR 57-58, 66, 77-78, VOL 5). Hospitals located in one part of District "D" are readily accessible to patients who reside in other areas of the District. HUMANA's bed-need analysis fails to adequately take into account hospitals within "D-1" or which are outside the District but are readily accessible (within 30-minutes driving time) to the majority of residents in "D- 2" and "D-3." (TR 145-146, VOL 4). Existing hospitals which are readily accessible to residents of a proposed service area cannot be reasonably excluded merely because they are located outside a theoretical boundary line. (TR 145- 146, VOL 4). A health planning area should be the area where most of the residents seek health care. (TR 615; 78-79, VOL. 5). Hence, a proposed health planning area should be tested against the actual hospital use of its residents and the accessibility of existing hospitals to those residents. The residents of District "D" travel freely within District "D" in seeking hospital care. South Florida Hospital Association Utilization and Patient Origin Program ("HUPOP") data show that approximately 60 percent of the patients residing in subdistricts "D-2" and "D-3" seek inpatient hospital care elsewhere. (TR 72, VOL 5; 616; AM Ex. 7 p. 19). 4/ There is a corresponding inflow of residents from outside "D- 2" and "D-3" who seek hospital care within "D-2" and "D-3". (TR 72, VOL 5). In comparison, approximately 70 percent of the residents of District "D" seek hospital care within the boundaries of the District and--of all the districts within the region-- District "D" has the highest percentage of residents who seek in-district hospital care. (TR 72-73, 79, VOL 5; AM Ex. 7, p. 19). In actual practice, then, the residents of District "D" heed the District boundaries but largely disregard subdistrict "D-2" and "D-3" boundaries. The residents of "D-2" and "D-3" have ready access to numerous hospitals providing a broad range of medical services. (TR 78, VOL 5). BAPTIST is a large general hospital with tertiary, secondary, and primary care services. With the exceptions of a burn center and a Level III neotology unit, virtually all health care services are provided. BAPTIST, AMERICAN, Coral Reef, South Miami, and Larkin hospitals provide health care services to residents of "D-2" and "D-3," within a 20-minute travel time. (BH Ex. 10, p. 1-13-19; BH Ex. 5 and 7). The few specialized services not available at these hospitals are provided at Jackson Memorial Hospital, within a 30-minute travel time. (BH Ex. 10, p. 1- 13). Accessibility of Existing Acute Care Hospitals Section 381.494(6)(c)(2), Florida Statutes (Supp. 1982), requires examination of the accessibility of existing health care facilities providing similar services to the same health service. The generally accepted standard for determining accessibility, found appropriate here, is whether general hospital beds are available to the service area's population within 30-minutes travel time by automobile, under average traffic conditions and for non- emergency purposes. This standard is used by HSAs and DHRS is used by federal health care planners, and is widely used by professional health care planners. (DHRS Ex. 1; BH Ex. 10, p. 1-10-13; TR 90, 123, 144, 166, 193; 85, 133-134, VOL 4; 58, 77, VOL 5). Applying this standard, seven hospitals are reasonably accessible to residents of HUMANA's proposed service area: AMERICAN, BAPTIST, Coral Reef Hospital, South Miami Hospital, Larkin Hospital, Doctors' Hospital, and Jackson Memorial Hospital. District "D" contains eleven hospitals, with a total of 2,882 licensed beds. (AM 3, p. 41; 4, p. D-3). Moreover, five of these, AMERICAN, BAPTIST, Coral Reef, Larkin, and South Miami, are even closer, within 20-minutes average travel time. (BH 5, p. 11). There is no evidence that the residents of "D-2/D-3", or District "D," as a whole, have any difficulty using or gaining access to these hospitals. Beds are available. The five hospitals closest to HUMANA's proposed service area, AMERICAN, BAPTIST, Coral Reef, South Miami, and Larkin, have a total of 1,825 licensed beds, 326 of which are not in service; of the 1,499 beds in service, 109 are not used. So there are 435 licensed beds, within 20-minutes of "D-2/D-3," not in service or not in use due to lack of demand. (BH Ex.10, p. I- 26, 5, 7, 10, p. I-26-28). Occupancy Standard for Determining Need The generally accepted occupancy standard for hospitals, used in deciding if additional beds are needed, is the 80 percent average annual occupancy rate. This standard is included in the 1981 Florida State Health Plan, is used by DHRS and HSAs, and is widely used by professional health care planners. Its use is appropriate here. (AM 135, VOL 2; TR 90-91; 95-97, 118, 132, 140, 165, 172, 313, 469; 141, VOL 4). In application, it means that additional hospitals should not be built until existing hospitals providing acceptable care to the proposed service area are operating at or above an 80 percent occupancy rate--the level at which hospitals, generally, operate most efficiently. In 1982, none of the eleven hospitals in District "D" met the 80 percent occupancy standard. (DHRS Ex. 1, AM Ex. 3, p. 7). In 1981, the five hospitals closest to HUMANA's proposed site had an average annual occupancy rate of 60.9 percent. (BH Ex. 10, p. I-24). Moreover, this excess is sufficient to meet the future health care needs of residents of "D-2/D-3" and District "D," as a whole. BAPTIST and AMERICAN will not achieve 80 percent occupancy until after 1988; AMERICAN is projected to have an occupancy of only 63.61 percent in 1990. (AM Ex. 3, p. 8; BH Ex. 10, p. 10, I-24). Availability of Resources to Build and Support Proposed Hospital Section 381.494(6)(c)(7) also requires consideration of whether there will be available adequate resources to support a new hospital, including manpower and financial resources. The evidence establishes, without contradiction, that HUMANA has sufficient funds to construct and operate its proposed hospital. The projected cost of the hospital, including equipment, is $29,175,500--70 percent to be funded by debt, the remainder by equity funds. HUMANA has, on hand, approximately $225 million in cash and cash equivalents. (TR 709, HU Ex. 2). The design of the proposed hospital will be based on HUMANA's "prototype" 150-bed facility, developed from years of experience in hospital design construction, and operation. The design is efficient and economical, and will permit a 50-bed expansion without further construction. (TR 714-716, 720, 719, HU Ex. 9). The parties agree that HUMANA has the ability to enlist or employ sufficient physicians and management personnel to staff the proposed hospital. (STIP, para. 3). HUMANA also has the ability to hire and retain an adequate nursing and technical staff. It recruits such personnel, routinely, on a national basis and transfers employees within its hospital system. Moreover, it has a mobile nurse corps, a group of nurses which are available on an as-needed basis, to help staff its south Florida hospitals during peak winter months. Historically, HUMANA has successfully recruited and retained nurses in its south Florida hospitals. (TR 772, 776-777, 781-782, 801-802, VOL 4). Projected Population of Service Area As already mentioned, under the preferred demand-based bed-need methodology, population is projected over a five-year planning horizon, for hospital facilities. This is because an increase in a service area's population will generate a need for more beds. The population of the Kendall area of south Dade County has been growing rapidly, and is expected to continue to do so through 1990. This population is younger than the population of Dade County or HSA IX, as a whole. The population projections for District "D" (the appropriate health planning area for the proposed hospital) by age groups are: District D 1987 1990 Under 15 92,301 96,506 15 to 64 357,567 327,652 65 and over 52,188 55,822 TOTAL (AM 3; TR 59-61, VOL 5; 488 VOL 3) 502,056 529,980 I. Hospital Use Rate Under the demand-based methodology, found acceptable here, once the planning area is designated and the population projected over a five-year planning horizon, a hospital "use rate" is calculated. The "use rate" is the rate at which people use hospitals, expressed in terms of the number of patient days per thousand residents residing in the health service area. This rate can be derived using various factors. Those factors most appropriate for use in this case are "age" and "service-specific" uses. (TR 66 VOL 5; 497-498 VOL 3). "Age-specific" use rates, reflecting historic hospital use rates by age group, are applied to the projected population to determine total patient days. This factor takes into account the fact that people 65 or older utilize hospitals at a rate three to four times that of people under 65. This is particularly significant here since the Kendall area population is younger than the population of Dade County, HSA IX, or the state, as a whole. (TR 58-59, VOL 5; AM 3, p. 12). In 1981, the age-specific use rate for HSA IX reflects a use rate of 1,524.6 patient days per thousand population. (AM 3, p. 63). "Service-specific" use rates are derived from historical use of particular hospital services, such as psychiatry, obstetrics, pediatrics, and medical-surgical. (AM 3, pp. 14-15, 70-72). The 1981 service-specific use rate, covering all services, for HSA IX was 1,524.6 patient days per thousand--a figure equal to the age-specific use rate. (AM 3, p. 14-15, 71). J. Calculation of Future Bed Need for District "D" In 1982, there were 2,882 licensed non-federal beds in District "D." Taking into account an 80 percent occupancy rate, and applying the HSA age- specific use rate to the projected population of District "D" yields a need for only 2,282 beds per day in 1987, and 2,419 beds per day in 1990. Hence, there will be an excess of 600 beds in District "D" in 1987; 554 in 1988; and 463 in 1990. (AM 3, p. 41, 69; TR 63, VOL 5). Similarly, applying the HSA IX service- specific use rate to the projected District "D" population results in a bed excess of 232 beds in 1987 and 87 in 1990. (AM 3, p. 74). Significantly, these projected bed excesses are, if anything, understated. This is because the HSA IX hospital use rate was utilized. Hospital use is greater in HSA IX, with its older population, than in District "D," where the population is younger and less likely to be hospitalized. (TR 61-62, VOL 5). HUMANA, in its analysis, applied age and service-specific use rates to the projected population of "D-2/D-3," concluding that there would be a need for 238 additional beds in 1988. This conclusion, however, is unconvincing since "D-2/D-3" is unduly restrictive and the 235 unused beds of South Miami and Larkin Hospitals, both located in "D-1," are not fully considered. (DHRS 1, p. 370; AM 3, p. 18). (Both hospitals are within a 20-minute average travel time from selected points in "D-2/D-3.") (TR 544, VOL 3; 612, VOL 4). By failing to properly account for empty beds at nearby hospitals, and by unreasonably limiting its planning area, HUMANA overstates the need for additional hospital beds in District "D." Moreover, even assuming the propriety of "D-2/ D-3," HUMANA failed to properly take into account the 260 beds of Coral Reef Hospital, a "D-2" hospital. If Coral Reef Hospital beds are correctly included within "D-2/D-3," HUMANA's projected bed-need decreases from 238 to 129 beds in 1988. (TR 80, VOL 5). Finally, Thomas W. Schultz, HUMANA's health care planning expert, admitted that a figure of 1,038 patient days per thousand patients would be "useful" in establishing bed-need for "D-2/D-3." (TR 501, VOL 3). Applying that use rate, and correctly including Coral Reef Hospital, results in a projected "D-2/D-3" need of 36 additional beds in 1988. (TR 83-84, VOL 5). HUMANA does not propose to construct a 36-bed hospital and such a hospital has not been shown to be feasible.
Recommendation Based on the foregoing, it is RECOMMENDED: That HUMANA's application for a Certificate of Need to construct a hospital in the west Kendall area of Dade County, Florida, be denied. DONE and ENTERED this 25th day of May, 1983, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of May 1983.
The Issue Was Petitioner properly cited for a Class III deficiency.
Findings Of Fact Horizon Healthcare & Specialty Center (Horizon), is an 84-bed nursing home located at 1350 South Nova Road, Daytona Beach, Florida. It is licensed under Chapter 400, Part II, Florida Statutes. The Agency for Health Care Administration (AHCA) is the state agency charged with licensing and regulating nursing homes in Florida. On August 14, 2000, AHCA conducted a survey of Horizon. This was accomplished in part by Rose Dalton, a nurse. At the hearing Ms. Dalton was determined to be an expert in nursing care. A report on a nursing home survey is made on a Form 2567-L which is approved by the U.S. Department of Health and Human Services, Health Care Financing Administration. A Form 2567-L was generated as a result of Ms. Dalton's survey. It was reported under the category Tag 327. Resident 7. Ms. Dalton, in conjunction with the survey team accompanying her, determined on August 17, 2000, that Resident 7 was dehydrated. This conclusion was reached because facility records indicated that Patient 7 had a blood urea nitrogen (BUN) of 57 on August 7, 2000, with normal being 6-26, and a high normal creatinine of 1.6. Another factor used in concluding that Resident 7 was dehydrated was a report dated August 8, 2000, which revealed a BUN of 34. On August 12, 2000, a report indicated a BUN of 43 and a creatinine of 1.9. The survey team was also aware that Resident 7 was ingesting Levaquin, a powerful antibiotic which requires that a patient remain well-hydrated. Ms. Dalton and the survey team cited the facility with a Class III deficiency, for state purposes, and a "G" on the federal scale. The federal scale goes from "A", which is a deficiency which causes no harm, to "J", which is harm which may cause death. The "G" level meant that it was the team's opinion that there was great potential for actual harm. Resident 7 was admitted on August 3, 2000. Among other ailments, Resident 7 was suffering from a femoral neck fracture and renal insufficiency when admitted. The resident contracted a urinary tract infection (UTI), and was being administered Levaquin, an antibiotic appropriate for UTI treatment. On August 8, 2000, a physician's order requested that the patient be encouraged to consume fluids. It is Ms. Dalton's opinion that Resident 7 was not provided proper fluid intake by the facility which could have caused serious health consequences for Resident 7. When Resident 7 was in the hospital, prior to being admitted to Horizon, his BUN was 41 and his creatinine was 2.3, which is consistent with Resident 7's chronic renal insufficiency. The BUN of 43 and creatinine of 1.9 observed in the facility on August 12, 2000, did not indicate Resident 7's condition was worsening, and in fact, it was improving marginally. The values for a normal BUN might vary from laboratory to laboratory but generally a normal BUN would be around 25 or less. Because of Resident 7's underlying renal disease and ischemic cardiomyopathy, it was unlikely that Resident 7 would ever manifest a BUN which would be considered normal. Dr. Elizabeth Ann Eads, D.O., an expert in the field of geriatric medicine, reviewed the laboratory values and the nursing notes in the case of Resident 7. It is her opinion, based on that review, that the facility provided appropriate care, that the patient improved during the stay at the facility, and that there was nothing in the record which suggested any actual harm to Resident 7. This opinion was accepted. Resident 8. Ms. Dalton opined that, based on her personal observation and a review of Resident 8's medical records, that the facility failed to respond to the hydration needs of Resident 8 and did not follow the care plan which was developed for Resident 8. Ms. Kala Fuhrmann was determined to be an expert in the field of long-term care nursing. She noted that Resident 8 was admitted to the facility on August 1, 2000. Resident 8's hospital records indicated that Resident 8 might be developing a UTI based on a urinalysis performed on July 31, 2000, which revealed blood and protein in the urine. On August 3, 2000, Resident 8's doctor started an antibiotic, Levaquin, and ordered another urinalysis. On August 4, 2000, a culture determined that Resident 8 was positive for a UTI, so the antibiotic treatment was continued. On August 15, 2000, it was determined the UTI had been cured. During the course of the UTI, Resident 8 was incontinent, which is often the case when elderly patients are afflicted with UTI. By August 18, 2000, Resident 8 was continent. It is Ms. Fuhrmann's opinion that the care provided to Resident 8 was appropriate and that there is nothing in the record which demonstrates that anything less than adequate hydration was provided to this resident. This opinion was accepted.
Recommendation Based upon the Findings of Fact and Conclusions of Law, RECOMMENDED: That the Agency for Health Care Administration enter a final order dismissing the allegations set forth in relation to the TAG 327. DONE AND ENTERED this 12th day of June, 2001, in Tallahassee, Leon County, Florida. 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 12th day of June, 2001. COPIES FURNISHED: Karen L. Goldsmith, Esquire Goldsmith & Grout, P.A. 2180 North Park Avenue, Suite 100 Post Office Box 2011 Winter Park, Florida 32790-2011 Michael O. Mathis, Esquire Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308-5403 Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308 Julie Gallagher, General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308
The Issue The issue in this case is whether the Agency for Health Care Administration (AHCA) should grant the application of Wuesthoff Memorial Hospital, Inc. (WUESTHOFF), for a Certificate of Need (CON) (CON 8597) to establish a new 50-bed general acute care hospital in South Brevard County, District 7.
Findings Of Fact WUESTHOFF is a 303-bed, acute care hospital in Brevard County, Florida. In addition to its hospital, WUESTHOFF has three home health locations, eight or nine walk-in clinics, a hospice, a durable medical equipment business, an ambulatory surgery center, two freestanding diagnostic centers, and outpatient labs throughout Brevard County. HRMC is a JCAHO accredited, 528-bed, regional, not-for- profit community hospital based in Melbourne, Brevard County, Florida. HRMC is comprised of two acute care campuses: a 468- bed tertiary hospital in Melbourne, and a 60-bed, general acute care hospital in Palm Bay. The Melbourne campus operates a 10-bed, Level II, neonatal, intensive care unit, and 428 general medical and pediatric beds. The Proposed Project WUESTHOFF chose to establish a satellite hospital complex in South Brevard County by applying separately for: (1) a certificate of need (CON) to decertify and de-license 100 general acute care hospital beds and undertake certain renovations and improvements at its existing Rockledge hospital facility; (2) a CON for a medical office building (MOB); (3) a non-reviewability letter for a $35 million diagnostic and treatment center (DTC), which would provide all of the ancillary services for the new satellite hospital; and (4) the CON to establish the 50-bed hospital (CON 8597) which is at issue in this case. In CON 8597, WUESTHOFF has asked AHCA to treat the $35 million DTC as the “sunk” costs of an existing facility, and to review the CON application at issue in this case incrementally— i.e., as consisting of only the inpatient tower and the additional ancillary activities that would take place at the complex, over and above those that would take place at the DTC without the inpatient tower. Viewing CON 8597 in this way, WUESTHOFF presented total project costs of only $13 million. In preparing the financial schedules for CON 8597, WUESTHOFF presented the revenues and expenses of the entire hospital operation (including the DTC), except for the additional activities (inpatient and ancillary) that would result from the addition of the inpatient tower, and the revenues and expenses of the entire hospital operation, including the additional activities (inpatient and ancillary) that would result from the addition of the inpatient tower. By presenting the financial schedules in this manner, WUESTHOFF never presented the revenues and expenses of the entirety of the new satellite hospital it is proposing to establish, and AHCA has not had the opportunity to review those revenues and expenses. WUESTHOFF planned to build the MOB, the DTC and the inpatient tower in one continual course of construction and to open the entire complex at the same time; the complex, when completed, was planned to function as a single, integrated hospital facility. AHCA granted the first three applications comprising WUESTHOFF’s project but denied CON 8597. In a subsequent batch, WUESTHOFF filed a letter of intent for a single CON application that the combined the DTC and inpatient tower projects at a total cost of approximately $50,000,000. Need In Relation To State And District Health Plans: Section 408.035(1)(a) Florida Statutes State Health Plan The first State Health Plan preference favors applicants who demonstrate that the subdistrict occupancy rate is at or exceeds 75 percent, or in the case of existing facilities, where the occupancy rate for the most recent 12 months is at or exceeds 85 percent. WUESTHOFF failed to meet this preference. For the applicable period, the subdistrict occupancy was approximately 53 percent; however, more recent data shows that occupancy is below 53 percent, which suggests a continuing decline in inpatient occupancy rates in the subdistrict. During the applicable period, the occupancy rate at WUESTHOFF’s Rockledge facility was only slightly more than 45 percent. The second State Health Plan preference favors an applicant with a history of providing a disproportionate share of the subdistrict’s acute care and Medicaid patient days, and further meets the Medicaid disproportionate share hospital criteria. WUESTHOFF failed to meet this preference, as it is not a disproportionate share provider. The third State Health Plan preference favors an applicant that provides or proposes to provide disproportionate share of Medicaid and charity care patient days in relation to other hospitals within the district or subdistrict. WUESTHOFF’s existing facility is not a disproportionate share hospital. (Although WUESTHOFF’s CON application proposes to condition award of the CON setting aside 15 percent of its discharges for Medicaid, charity, and indigent patients, its application does not provide percentages for each category.) The fourth State Health Plan preference considers the current and projected indigent inpatient case load, the proposed facility size, and the case and service mix, WUESTHOFF’s application partially complies with the preference in that it proposes to provide some indigent care. The fifth State Health Plan preference favors proposals that would not negatively affect the financial viability of an existing, disproportionate share hospital. This preference is not applicable in this case. The sixth State Health Plan preference favors applicants with a record of accepting indigent patients for emergency care. WUESTHOFF meets this preference. The seventh State Health Plan preference favors applicants for any type of hospital project if the facility is verified as a trauma center. WUESTHOFF does not meet this preference. WUESTHOFF claims that it operate the emergency room at the proposed facility with “the same level of services as WUESTHOFF’s existing emergency room.” WUESTHOFF does not currently operate a Level II trauma center at its Rockledge campus. The eighth State Health Plan preference favors applicants who can document that they provide a full range of emergency services. WUESTHOFF’s Rockledge facility offers a range of emergency services, but the emergency department at the proposed facility will necessarily offer a limited range of services, as the proposed facility will not be a tertiary care hospital, and emergency patients in need of those services will have to be transferred. The ninth State Health Plan preference favors applicants who can document that it has not been fined by HRS for any violation of the emergency services statutes. WUESTHOFF meets this preference. Local Health Plan Preferences The District 7 Local Health Plan sets forth five preferences to be used in evaluating CON applications for the transfer/relocation/delicensure of acute care beds. The health plan provides that “[p]reference shall be given to applications for transfer of existing acute care beds, delicensure/conversion of existing acute care beds and/or relocation of an entire facility if the applicant can provide substantial documentation of: The need for acute care beds or specialty beds in the service area proposed to receive the beds. Need should address specific populations, access consideration, etc. The impact of the proposed project on the parent facility including projected occupancy declines, curtailing of service effect on operating cost, use of vacated space at the main campus and charge changes. The proposed service improving access by at least 25 minutes to at least 10 percent of the population or a minimum of at least 35,000 people. This should be substantiated by analyses of patient origin to existing providers, physician referral practices and location of physician offices. Commitment to provision of care to both no-pay and low-pay medically indigent patients and Medicaid patients at a minimum of no more than 2 percent below the most recent HCB publication for the District of the charity/uncompensated care percentage of net revenues. Agreement to participate in any indigent care programs which exist in the county or counties proposed to be served. Participation should be at a rate equal to or greater than the average for the general hospitals also serving that area. As to the first preference, WUESTHOFF failed to demonstrate a need for the proposed 50-bed general acute care hospital. Even with the delicensure of 100 acute care beds as a result of WUESTHOFF’s companion application, there still is an oversupply of 215 acute care beds in the county. The evidence presented at the final hearing failed to demonstrate any geographic or other barriers to accessing acute care services that would warrant the expenditure proposed by WUESTHOFF to construct the proposed project. Indeed, WUESTHOFF’s own evidence was clear that every resident of Brevard County has access to a general acute care hospital within a maximum drive time of 30-40 minutes and, in almost all instances, to two different acute care facilities within a 30-40 minute drive time. WUESTHOFF contends that its proposed 50-bed general acute care hospital is needed for four reasons: (1) to provide a high quality alternative inpatient health care provider in south Brevard County; (2) to introduce competition into the south Brevard area; (3) to enhance access to care to Medicaid, charity, and indigent population, as well as to enhance access for the managed care segment of the population; and (4) to enable WUESTHOFF to remain competitive in the marketplace. The evidence is clear that HRMC provides high quality inpatient health care in south Brevard County. See Findings 30- 44, infra. In addition, WUESTHOFF already serves some patients, residing in south Brevard County, and so does Sebastian River Medical Center, located in the adjacent county to the south. The evidence also is clear that there already is competition for inpatient hospital services in south Brevard County. HRMC serves a much greater percentage of those patients primarily due to its location and the high quality and low costs of HRMC’s services. In view of the excess capacity of hospital beds in the county, it does not make sense to add a satellite WUESTHOFF hospital in south Brevard County that would duplicate the services of the existing providers. WUESTHOFF also attempted to show that its proposed acute care hospital was needed in order to provide services for managed care participants. However, WUESTHOFF failed to offer any competent evidence to show that participants in managed care programs are a traditionally underserved population group and did not prove that WUESTHOFF’s ability to participate in managed care networks is a valid basis for determining the need of additional acute care services in south Brevard County. To the contrary, the evidence tended to show that the expansion of managed care programs would result in a decrease in the utilization of inpatient acute care services. Furthermore, there is no barrier to WUESTHOFF’s participating in managed care programs with one or more facilities in the southern portion of Brevard County, and in fact WUESTHOFF has aligned itself with Sebastian River Medical Center in a number of managed care contracts serving residents of southern Brevard County. While WUESTHOFF is offering a larger discount to managed care payers, its charges are higher, resulting in net revenue per managed care case that is still higher than HRMC’s. The price the managed care providers pay to HRMC is actually 14 percent lower than what they pay to WUESTHOFF. Not only does HRMC provide a better “deal” to managed care payers, but HRMC’s managed care volume is also greater than WUESTHOFF’s, indicating HRMC’s willingness to negotiate and work with managed care companies. At the time WUESTHOFF submitted its CON application, the penetration of managed care in Brevard County was approximately 8.6 percent. However, more recent data from 1996 shows a significant increase in the penetration of managed care to 15 percent, without the allegedly needed new hospital. A primary thrust of WUESTHOFF’s case for the need for its proposed project was that patients in the southern portion of Brevard County cannot be admitted into HRMC’s Palm Bay facility because its physicians do not enjoy staff privileges at that facility. Each hospital establishes criterion for staff privileges. In order to be eligible for staff privileges, it is normally required that the physician reside or have his or her office within certain geographic boundaries surrounding the hospital. The primary reason for such requirement is to ensure that the physician is capable of responding to patient needs within a time certain and that the physician will be able to provide coverage for his or her patients admitted into a facility. Dr. Arnold, a physician with staff privileges at WUESTHOFF who operates an office in West Melbourne, conceded that if his physician group associated with a physician living within HRMC’s geographic boundaries who was able to meet response time criteria, the physician group could admit patients into HRMC. Dr. Arnold also conceded that his physician group is not eligible for staff privileges at other Brevard hospitals, based on geographic considerations. The Availability, Quality Of Care, Efficiency, Appropriateness, Accessibility, Extent Of Utilization, And Adequacy Of Like And Existing Health Care Services In The Service District: Section 408.035(1)(b), Florida Statutes. There is no need for another hospital in South Brevard County. The county already has more than enough hospitals. Even in light of a 27-29 percent increase in population, utilization of Brevard County hospitals has dropped 10 percent in the last five years. There has been a marked shift in the Brevard County area away from inpatient services toward outpatient services. That shift is still growing. HRMC is the only hospital in Brevard County which has been nationally recognized for quality care by the National Research Corporation. According to AHCA’s hospital report card, HRMC was shown to be a consistent, low-charge provider, operating within the expected range of outcomes. According to a study done by AHCA, HRMC performs as one of the top five hospitals in Florida for reducing overall C-section births and increasing vaginal births after Cesarean (“VBAC”). This is important because vaginal births are safer for both mother and baby and save approximately $3,000 per delivery when compared with Cesarean births. HRMC has the lowest Cesarean Section rate and the highest VBAC rate in Brevard County and is one of the five lowest charging hospitals in the State for these services. Wuesthoff, on the other hand, has some of the highest costs in the county for these services. HRMC is providing efficient hospital services when compared with WUESTHOFF and other markets where competition is a factor. Of the zip codes addressed in WUESTHOFF’s travel study, there is no zip code in Brevard County that is more than 30 minutes from an existing hospital. Of the fourteen intersections tested, the addition of the proposed project would decrease travel times from only three intersections, with the greatest decrease in travel time being only nine minutes. Thus, the construction of WUESTHOFF’s proposed facility would not significantly increase access for Brevard County patients. HRMC delivers the majority of Medicaid babies in the county and is also a contract provider for Children’s Medical Services. HRMC worked with the Public Health Department to develop a better system for giving prenatal care and delivery to Medicaid and indigent mothers. HRMC offered to subsidize the salary of a doctor, and eventually two midwives, to work with the Public Health Department for this purpose. HRMC’s HOPE programs provides access to Medicaid and indigent patients. HOPE clinic and HOPE van expenses are direct expenses of HRMC. In addition to medical care, the HOPE program also provides free medication to those who cannot afford it. HRMC’s HOPE van provides services to the homeless every Tuesday, seeing as many as 40 patients each visit. Patients are provided with an examination, medications, and referrals to specialists or the hospital, if necessary. This care is provided at no charge to the patient. HRMC’s HOPE program was given the Nova award by the American Hospital Association for its ground-breaking effort in community health improvement. It is the only program in Florida which has been so recognized. The HOPE program has also received the Heartland Award from Governor Chiles for its work at improving the status of life in Florida. HRMC supports a variety of agencies to provide care to indigent AIDS patients. HRMC provides services to a nonprofit outpatient AIDS services organization, which offers reduced-rate and free lab services. HRMC, along with the Public Health Unit, funded a dental clinic for the AIDS organization. The hospitals in Brevard County do a good job in regard to taking care of the patients who are incapable of paying, with HRMC going the extra mile to provide services to the poor. There was no evidence that persons in need of quality, general acute care services are not able to access those services at any existing provider in Brevard County. There is no lack of availability or access to general acute care services based on either geographic or financial grounds. WUESTHOFF’s proposed 50- bed general acute care hospital is not needed to accomplish this. The Ability Of The Applicant To Provide Quality Of Care And The Applicant’s Record Of Providing Quality Of Care: Section 408.035(1)(c), Florida Statutes. It is clear that WUESTHOFF is capable of providing quality inpatient health care services. However, it is found that HRMC is providing higher quality services (and at a lower cost). As shown in AHCA’s hospital report card, WUESTHOFF performed in the lowest 15 percent in the State in 5 of 6 serviced lines where mortality was measured. On the other hand, HRMC was indicated to be consistently a low-charge provider, operating within expected outcomes. HRMC’s C-section rate is significantly lower than WUESTHOFF’s, and its VBAC rate much higher. The results of a low C-section rate are lower lengths of stay and less risk to both mom and baby. The Availability And Adequacy Of Other Health Care Facilities And Services In The District Which May Serve As Alternatives For The Services To Be Provided By The Applicant: Section 408.035(1)(d), Florida Statutes. WUESTHOFF already has three home health locations, 8 or walk-in clinics, a hospice, a durable medical equipment business, an ambulatory surgery center, 2 freestanding diagnostic centers, and outpatient labs in Brevard County. In addition, WUESTHOFF plans to construct a new outpatient and diagnostic center in south Brevard County. In addition, inpatient surgeries have shifted to private, for-profit outpatient centers and ambulatory surgery centers that have opened in the last five years in Brevard County. The competent, substantial evidence presented at the final hearing demonstrates that within Brevard County, there are available and adequate alternatives to the inpatient services proposed by WUESTHOFF. First, as discussed above, the existing providers of acute inpatient health care services have capacity to absorb any increase in the utilization of acute care services in the County. Second, data introduced at the final hearing demonstrate that overall utilization for the types of services WUESTHOFF proposes to offer are declining and demonstrate that residents are seeking out alternatives to inpatient hospital services. For example, from 1993-1996, inpatient surgery services in Brevard County showed a marked decline of approximately 20 percent, both in number of patients and procedures. This trend is not unique to Brevard County, but is occurring throughout the state. Health care providers are seeking alternatives to hospitalization, with procedures being performed in physician offices and ambulatory surgical centers. Likewise, there has been a decline in utilization of several other services WUESTHOFF is proposing for its 50-bed hospital. During the period 1993-1996, while the population of Brevard County was growing at a rate of approximately 2.4 percent per year, the rate of obstetric admissions as a percentage of admissions to Brevard hospitals declined. There is excess capacity for pediatric and obstetrical services in Brevard County. The average daily census in obstetrical beds has dropped from approximately 34 patients per day to approximately 29 per day. With 66 reported available obstetrical beds in Brevard County, that means that on any day only 44 percent of the available capacity is being utilized. Likewise, pediatric census has gone from approximately 32 patients per day to only about 25. With 78 reported pediatrics beds, a demand for only 25 beds means that approximately 32 percent of available capacity is utilized. Probable Economies And Improvements In Service That May Be Derived From Operation Of Joint, Cooperative, Or Shared Health Care Resources: Section 408.035(1)(e), Florida Statutes. WUESTHOFF does not propose the operation of a joint, cooperative, or shared program with any other entity. WUESTHOFF contends that its application is consistent with this criterion because it proposes the sharing of certain resources with its main facility. But the construction of a satellite facility will result in the duplication of certain services. It is actually less efficient for a hospital to operate two campuses. The Need in the Service District for Special Equipment and Services Which Are Not Reasonably and Economically Accessible in Adjoining Areas: Section 408.035(1)(f), Florida Statutes. WUESTHOFF’s CON application does not propose to provide special equipment. This criterion is not met. The Need For Research And Educational Facilities, Health Care Practitioners, And Doctors Of Osteopathy And Medicine At The Student, Internship, And Residency Training Levels: Section 408.035(1)(g), Florida Statutes. This need is already being met in the community. WUESTHOFF, HRMC, and other Brevard County hospitals are already active in community training programs through their links with Brevard Community College and the University of Central Florida. HRMC has institutional training programs with the University of Florida, all Children’s Hospital, the local vo- tech, and University of Central Florida, in addition to other community programs. The Immediate And Long-Term Financial Feasibility Of The Proposal: Section 408.035(1)(i), Florida Statutes. The immediate financial feasibility of a proposed project is satisfied by showing that the applicant has adequate financial resources to fund the capital costs of the project and the financial ability to fund short-term operating losses. WUESTHOFF has demonstrated that its proposed project is financially feasible in the short-term. Long-term financial feasibility is established by demonstrating that projected revenues can be attained in light of the projected utilization of the proposed service and average length of stay. WUESTHOFF has not demonstrated that it can achieve its projected revenues by the second year of operation and has, therefore, failed to demonstrate long-term financial feasibility. It is impossible to tell from the information contained in WUESTHOFF’s CON application 8597 what the revenues and expenses of the new hospital will be. Staffing and supply costs associated with the ancillary building, but which will be used by the hospital when constructed and which amount to millions of dollars, are not broken out in the application. The application also does not show the totality of the costs associated with the 50-bed hospital WUESTHOFF seeks to establish. For example, provision for bad debt expense does not appear in the application, nor does the indigent care tax expense. Furthermore, the application does not provide for any administrative staff for the new hospital, nor has all other necessary staff been provided for. If these positions are included under “other,” then the salary expense projected is not enough. Also, the salaries listed on Schedule 6 do not include benefits. The preopening expenses figure shown in WUESTHOFF’s application is reasonable only if the entire facility, the ancillary, outpatient, and inpatient tower would open all at the same time. It is very difficult to analyze the reasonableness of the financial projections because the revenues and expenses do not match. All the revenue from the proposed new facility appears to be included, but not all of the expenses. Schedule 8A shows that daily ancillary expenses are $470 at WUESTHOFF’s existing hospital but only $82 at the new, proposed hospital. It is implausible that the new hospital would have costs this much lower than the existing hospital. WUESTHOFF’s staffing projections do not account for a significant number of nursing and other staff necessary for the operation of the facility as a hospital. The projections only address nursing positions for the 50-bed, inpatient tower. The schedule fails to show those nurses assigned to the ancillary services areas in the outpatient diagnostic center who will be working with inpatients. For example, the scrub nurses in the emergency department who will be working on inpatients are not included in the schedule, and the nurses working in radiology who will be caring for inpatients are not shown. The schedule fails to include a director of nursing at the proposed hospital facility. Although WUESTHOFF claimed that it will assign a director of nursing when patient volumes reach 50%, it failed to include projections for that position in this second year projections, even though patient volumes are projected to reach 50% in the second year. Wuesthoff also failed to include benefits in its computation of salaries on Schedule 6, even though it expects to pay benefits at a rate of 20% of salary. Interest expenses are also significantly understated. The project is financed with 100 percent debt, which should amount to an interest expense of approximately $850,000.00 per year. However, the application shows interest in year one as $197,000.00 and for year two, $393,000.00. It is unusual that interest would be higher in year two than year one. There is no way to tell from looking at the schedules or assumptions in the application what the utilization of the new hospital will be, or how the patient days break out by payor. Therefore, reasonableness of the financial projections cannot be tested. Without additional information, one cannot determine if the average charges projected are reasonable. There are unusual projections, such as the charges during construction, year one, and year two, in the application which without explanation are not reasonable. The financial projections as to the whole facility are unreasonable. They show that WUESTHOFF, which currently makes $7 or $8 million dollars each year, will lose money once the new facility is open but that, in its second year, the new facility will make $6.9 million. Such a projection is unreasonable. By focusing only on the incremental effect of adding an inpatient tower to a presumed existing DTC, WUESTHOFF’s financial projections are not sufficient to allow a conclusion to be drawn as to the financial feasibility of the new 50-bed hospital. However, it would appear that, if those schedules had been presented, they would have shown the new satellite hospital, taken in its entirety, not to be financially feasible in the long term. The Special Needs Of Health Maintenance Organizations: Section 408.035(1)(j), Florida Statutes. The application is not made on behalf of an HMO, and this criterion is not applicable. The Needs And Circumstances Of Those Entities Which Provide A Substantial Portion Of Their Services Or Resources, Or Both, To Individuals Not Residing In The District: Section 408.035(1)(k), Florida Statutes. The CON application does not address serving a substantial number of persons or providing a substantial portion of services to individuals residing outside the district, and this criterion is not applicable. The Probable Impact Of The Proposed Project On The Costs Of Providing Health Services Proposed By The Applicant, Including The Effect On Competition: Section 408.035(1)(l), Florida Statutes. There is significant competition for managed care services in Brevard County. HRMC seeks and desires to enter into managed care contracts and is as competitive in the managed care arena as WUESTHOFF is. In fact, HRMC’s managed-care, patient volume is higher than WUESTHOFF’s. Managed care penetration in Brevard County has increased over the last five years and especially in the last two years. One particular HMO in Brevard County that is just getting started has received an acceptable managed care offer from HRMC. If they did not receive an acceptable offer from WUESTHOFF. Brevard County does not need another inpatient facility to allow the County to achieve higher levels of managed care penetration. There are no barriers in Brevard County to increasing HMO and other managed care penetration. Even though HRMC has an 82 percent market share in South Brevard County, that by itself does not indicate HRMC is charging non-competitive prices. In fact, HRMC’s charges are much lower than WUESTHOFF’s. Both the State of Florida and the FTC found that HRMC’s merger with Cape Canaveral when Health First was formed did not create an adverse, competitive effect on the marketplace. Because HRMC’s charges are so much lower than WUESTHOFF’s, the addition of the proposed hospital would not introduce price competition into the market. The majority of the proposed hospital’s patients are likely to come from South Brevard County-–an area where HRMC has an 82.5 percent market share. Thus, the bulk of the proposed hospital’s patients will come from HRMC. If the proposed hospital meets its projected utilization, HRMC stands to lose somewhere between $4 and $5 million a year. While that loss may not put HRMC into bankruptcy, it will have a significant adverse effect. The Costs And Methods Of The Proposed Construction And The Availability Of Alternative, Less Costly, Or More Effective Methods Of Construction: Section 408.035(1)(m), Florida Statutes. WUESTHOFF’s proposal to establish a 50-bed, general, acute care hospital entails the construction of a 3-story, 50-bed patient tower adjoining an outpatient diagnostic center. The outpatient diagnostic center, and not the inpatient tower, will encompass virtually all of the ancillary services necessary for WUESTHOFF to obtain a license to operate its facility as a hospital. As more fully discussed below, WUESTHOFF’s proposed 50- bed inpatient hospital will require substantial design modification and increased square footage in order to obtain licensure as a general, acute care hospital. The Applicant’s Past And Proposed Provision Of Health Care Services To Medicaid Patients And The Medically Indigent: Section 408.035(1)(n), Florida Statutes. The evidence showed that all acute care hospitals in Brevard County provide a fair level of Medicaid and indigent care in comparison to the remainder of the state. In its CON application, WUESTHOFF proposes to condition approval of its 50- bed, general, acute care hospital on providing 15 percent Medicaid and charity care, but did not provide a breakdown of each. There was no documented access problems for Medicaid or indigent patients that would warrant a new health care facility. Because indigent care is reported to the State based on a hospital’s charges, WUESTHOFF and HRMC could be doing the same amount of indigent care, but WUESTHOFF could appear to be doing more because its charges are higher. Whether Less Costly, More Efficient, Or More Appropriate Alternatives To The Proposed Inpatient Services Are Available: Section 408.035(2)(a), Florida Statutes. HRMC’s average charges are significantly lower than WUESTHOFF’s on both a per case and per patient day basis. HRMC’s costs are also lower, indicating it is more efficient. Therefore, the addition of another less-efficient, higher- charging WUESTHOFF hospital into the market would be more costly and less efficient than what it is there now. The greater weight of the evidence establishes that denial of WUESTHOFF’s proposed 50-bed, general acute care hospital is the least costly, more efficient, and appropriate alternative. The existing providers of acute care services in Brevard County are operating efficiently and have unused capacity that is available to serve Brevard residents. Data suggests that while the population of Brevard County is growing, there is no corresponding increase in utilization of general, acute care services. While Brevard enjoys a proportionately higher growth rate than the rest of the State, the growth does not translate into higher utilization of general acute care services. Further, the age 65+ population, those most likely to use hospital services, has experienced an annual growth of approximately 3.7 percent between 1990-1996, which is higher than the overall rate of growth for Brevard. While there has been a significant growth in the number of elderly and Medicaid eligible population, only approximately percent of those eligible for Medicaid in the 14 zip codes targeted as the service area of WUESTHOFF’s proposed hospital actually use hospital services. In 1993, the last year of available data, the actual county-wide use rate for Medicaid eligible residents was only 8.4 percent. This is expected to remain constant in subsequent years, as the demand for inpatient acute care services has not increased, but has in fact decreased. There is insufficient utilization of the inpatient acute care services which already exist in Brevard County, with approximately 50 percent of the available beds unoccupied. The addition of another health care facility will not improve access, improve delivery of services, or make services available to a population that is not presently being adequately and appropriately served by existing providers. In a market where inpatient volume is going down, length of stay is going down, and utilization is going down, it does not make sense to spend scarce dollars on new inpatient services. Whether The Existing Facilities Providing Similar Inpatient Services Are Being Used In An Appropriate And Efficient Manner: Section 408.035(2)(b), Florida Statutes. The greater weight of the evidence established that there is available capacity for inpatient services like those proposed by WUESTHOFF at the existing, general, acute care facilities in Brevard County. WUESTHOFF did not demonstrate that any provider is suffering from over utilization or that any patient has not been able to access general acute care services when such services were necessary. On the contrary, there was a consensus among the experts, even WUESTHOFF’s experts, that there is no problem with geographic or financial access to existing providers. Between 1993 and 1996, hospital utilization dropped from 63 percent to 52 percent. AT WUESTHOFF’s Rockledge campus, utilization fell from a high of 63 percent in 1993, to approximately 46 percent in 1996. During this same period, the population of Brevard County grew at a rate of approximately 2.4 percent per year, which was proportionately higher than for the rest of the state. At HRMC, its occupancy dropped, but not quite as dramatically. Between 1993 and 1996, HRMC’s occupancy went from 67 percent to approximately 62 percent. The satellite facility, operated by HRMC in Palm Bay and located in the same service area where WUESTHOFF proposes to construct its 50-bed general acute care hospital, has never experienced occupancy above 31 percent. That Patients Will Experience Serious Problems In Obtaining Inpatient Care Of The Type Proposed, In The Absence Of The Proposed New Service: Section 408.035(2)(d), Florida Statutes. There was no evidence to show that any population group in Brevard County is unable to access quality health care services at any of the subdistrict’s existing facilities. Further, WUESTHOFF failed to establish that its proposed facility was needed to provide general acute care services not currently provided or currently accessible to residents of south Brevard County. WUESTHOFF maintains that participants in managed care contracts may not be able to access WUESTHOFF’s general acute care services without approval of the proposed project, but there was not demonstration that those individuals would not otherwise have access to quality affordable health care in Brevard County. WUESTHOFF also failed to demonstrate that participants in managed care programs are a “traditionally underserved” population group for a determination of need under not normal circumstances. CON Application Content And Procedures: Section 408.037, Florida Statutes And Rule 59C-1.008, Florida Administrative Code. The parties stipulated as to the timeliness of the submission of WUESTHOFF’s Letter of Intent, initial CON application and response to omissions. However, the board resolution required by Section 408.037, Florida Statutes, and Rule 59C-1.008, Florida Administrative Code, is fatally defective. The applicant is required to provide certification that its governing board enacted a resolution to license and operate the proposed facility. In this case, the proposed 50- bed, inpatient tower cannot be licensed by the applicant as a hospital. In order to obtain hospital licensure, the proposed project would necessarily include the $35+ million that WUESTHOFF proposes to spend on its outpatient diagnostic center. WUESTHOFF’s CON application also fails to comply with Section 408.037(2)(c), which requires detailed financial projection including a statement of the revenues and expense for the period of construction and the first two years of operation after completion of the project. The proposed project is a “hospital.” The hospital will report all of the revenues and expenses of the inpatient and outpatients to the state in its actual report, and those same projected revenues and expenses should be in the pro forma of a certificate of need application for a new hospital project. Instead, the projected revenues and expenses in the pro formas take an “incremental” approach and focus only on the 50-bed tower and an unspecified portion of the diagnostic center. WUESTHOFF’s own financial expert admitted that one cannot determine the revenues and expenses of the new hospital from the information contained in the application. AHCA does not have sufficient information with respect to revenues and expenditures in the pro formas to determine the financial feasibility of the hospital project. The pro formas do not meet the statutory requirement contained in 408.037(2)(c), Florida Statutes, and are fatally defective. Neither AHCA nor its predecessor agency ever have approved a CON to establish a hospital without ever seeing projections of the revenues and expenses of the hospital as a whole. Additions to hospitals have been approved on a strictly incremental basis; but, in those cases, the revenues and expenses of the hospital as a whole already had been reviewed and approved. Inpatient cardiac catheterization programs also have been approved, based on a strictly incremental review of the financial impact of converting from an existing outpatient to an inpatient program. But there is a meaningful difference between the approval of a program in a hospital facility that already has been reviewed and approved as a whole and what WUESTHOFF is seeking to have done in this case. There also is a difference between treating the costs of an existing and operating facility or program as being “sunk” and treating the $35 million capital cost and additional operating costs of the proposed DTC in this case as being “sunk.” In the former, the costs have been or are being spent and truly are “sunk”; in the latter, despite WUESTHOFF’s assurances, the DTC money has not been spent, and the DTC has not been established. Indeed, the decision properly before AHCA in this case is whether those expenditures should be made for purposes of establishing a hospital. If not, the hospital should not be approved. If WUESTHOFF still wants to build and operate its proposed $35 million anyway, as it has assured AHCA that it will do, it is free to do so. Criteria Used In Evaluation Of CON Applications: Rule 59C-1.030, Florida Administrative Code. AHCA’s rules set forth additional criteria used to evaluate CON applications which focus on whether there is a need for the proposed service in the population to be served and whether the proposed project is accessible to those in need of the service. The evidence in this case showed that there was no unmet need in Brevard County for inpatient, general, acute care services and that the target population is adequately served by the existing providers of general acute care services. Furthermore, the evidenced showed that the anticipated population growth in Brevard County is not likely to generate additional numbers of inpatient admissions, based on the decline in utilization during a period when Brevard County was experiencing unprecedented annual growth at a rate of 2.4 percent overall and 3.7 percent in the 65+ population. Any attendant increase in demand for inpatient general acute care services can be easily accommodated by the existing providers in Brevard County. The rule also examines the extent to which an applicant provides services to Medicare, Medicaid, and the medically indigent patients. The evidence showed that WUESTHOFF provides a fair amount of general acute care services to Medicare, Medicaid, and charity patients, as do the other existing providers in Brevard County. Hospital Physical Plant Requirements For Licensure: Rule 59A-3, Florida Administrative Code. WUESTHOFF’s 50-bed, general, acute care hospital, as proposed, cannot meet licensure standards without significant adjustment to the design to bring it into compliance with the licensure rules. Rule 59A-3.081(4)(c), Florida Administrative Code, specifically requires that the critical care nurse’s station be situated so that nurses have visual control of each patient from common spaces. The schematics provided by WUESTHOFF indicate that there is no visual control of two patient rooms located in the northwest end of the unit. As to functionality of the space, there is no observation from the nurses station to trauma rooms located at the end of the unit and inadequate proximity to support spaces, such as soiled and clean utility and med prep, to the trauma rooms. Seriously injured patients would necessarily be transported up to surgery through what would be public corridor spaces in order to access elevators and then through additional public spaces on the second floor. Inpatient access to the CT scan room and MRI room appears to be made through a narrow, 5-foot wide corridor. Hospital licensure regulations require inpatient access through an 8-foot corridor. The only 8-foot corridors available for inpatient use, the service corridor off the housekeeping and staff facilities area to the rear of the unit and the corridor located between radiology and dietary, do not appear to be appropriate means for inpatients to access these rooms. On the third floor of the facility, WUESTHOFF proposes to locate an aerobics and exercise room, directly above the second floor patient recovery area and two of the operating rooms. With an exercise area located above such critical areas, there is the possibility that vibrations would transmit to operating room lights, ceiling mounted microscopes, and other instruments. It would be costly to sufficiently stiffen the structure to minimize vibrations. In order to bring the proposed project into compliance with hospital licensure regulations, material changes to the plans must be made, which will necessarily increase the square footage of the facility. The square footage of the facility would likely be increased by approximately 5,000 square feet, and many of the areas would have to be significantly redesigned to accommodate concerns with compliance to ADA and hospital licensure regulations.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter the final order denying WUESTHOFF’s CON 8597. RECOMMENDED this 18th day of July, 1997, in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax FILING (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 18th day of July, 1997. COPIES FURNISHED: David C. Ashburn, Esquire Gunster, Yoakley, Valdes-Fauli and Stewart, P.A. 215 South Monroe Street, Suite 830 Tallahassee, Florida 32301 Mark Thomas, Esquire Agency for Health Care Administration Office of the General Counsel 2727 Mahan Drive Tallahassee, Florida 32308 Stephen K. Boone, Esquire Boone, Boone, Boone and Hines, P.A. Post Office Box 1596 Venice, Florida 34284 R. Terry Rigsby, Esquire Blank, Rigsby & Meenan 204 South Monroe Street Tallahassee, Florida 32301 Douglas M. Cook, Director Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308 Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308 Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308
The Issue Whether Rule 59C-1.038, the acute care bed need rule, is an invalid exercise of delegated legislative authority. Whether this rule challenge should be dismissed as an untimely attack on a published fixed need pool.
Findings Of Fact In August 1994, the Agency for Health Care Administration ("AHCA") published a numeric need of zero for additional acute care beds in AHCA District 9, Subdistrict 5, for southern Palm Beach County. Pursuant to Subsection 408.034(3), Florida Statutes, AHCA is the state agency responsible for establishing, by rule, uniform need methodologies for health services and facilities. In September 1994, NME Hospitals, Inc. d/b/a Delray Community Hospital, Inc. ("Delray") applied for a certificate of need ("CON") to add 24 acute care beds for a total construction cost of $4,608,260. AHCA published its intent to approve the application on January 20, 1995, in Volume 21, No. 3 of the Florida Administrative Weekly. By timely filing a petition, Bethesda Memorial Hospital, Inc. ("Bethesda") challenged AHCA's preliminary decision in DOAH Case No. 95-0730. Bethesda is also located in AHCA District 9, Subdistrict 5. On May 24, 1995, Bethesda also filed the petition in this case challenging Rule 59C-1.038, Florida Administrative Code, the acute care bed need rule. Pursuant to the acute care bed need rule, AHCA's August 1994 notice published its finding that zero additional acute care beds will be needed in the southern Palm Beach County subdistrict by July, 1999. The data, formulas, and calculations used in arriving at the number zero were not published. AHCA and Delray argue that the publication put persons on notice to inquire into the population data, occupancy rates, or the calculations leading to the published need number. An AHCA rule bars a person from seeking, and AHCA from making, any adjustments to the fixed need pool number if the person failed to notify AHCA of errors within ten days of publication. Still another rule defines "fixed need pool" as the " . . . numerical number, as published. " Bethesda is not contesting and, in fact, agrees that the fixed need pool number as published, zero, is correct. Using AHCA's definition of the fixed need pool, Bethesda's challenge is not barred because it failed to notify AHCA of an error in the fixed need pool number within 10 days of publication. Bethesda is challenging as irrational and invalid subsections (5), (6), and (7) of the acute care bed need rule. Subsection (5) directs the local health councils to determine subdistrict bed need consistent with the methodology for determining district bed need. Under that provision, total projected patient days of acute care needed in a district is calculated by adding together the projected patient care days needed in medical/surgical, intensive care, coronary care, obstetric, and pediatric beds. Each of these separate bed need projections is computed, in general, by multiplying projected population in the district for the appropriate age or gender group times a factor which is the product of the statewide discharge rate and the average length of stay for that particular type of care. After the total projected acute care patient days for district residents is computed, the number is adjusted to reflect historical patient flow patterns for acute care services, for out-of-state residents served in the district, for residents of other districts served in the district, and for residents of the district served outside the district. The rule includes specific percentages to apply for each patient flow group for each of the eleven districts. After the total number of beds needed in the district is derived, that number is decreased by the number of existing licensed or approved beds to get the number of additional acute care beds needed in the district, if any. Bethesda is challenging subsections (7)(a), (b), and (c) of the acute care rule, which authorize adjustments to the calculations from subsections (5) and (6) to achieve desired occupancy levels, based on historic utilization of acute care beds in a district. Bethesda is also seeking a determination that subsections 7(d) and (e) are invalid. Each of those subsections of the rule refer to (5)(b), although AHCA's expert witness testified that they should refer to (6)(b). Subsection (7)(d) requires at least 75 percent occupancy in all hospitals in the district before new acute care beds normally are approved, regardless of the net need projected by the formulas. Subsection (7)(e) allows approvals under special circumstances if net need is projected by the formulas and the applicant facility's occupancy rate equals or exceeds 75 percent. Subsection (7)(e), the provision directly related to the Delray application, is as follows: (e) Approval Under Special Circumstances. Regardless of the subdistrict's average annual occupancy rate, need for additional acute care beds at an existing hospital is demonstrated if a net need for beds is shown based on the formula described in paragraphs (5)(b), (7)(a), (b), (c), and (8)(a), (b), (c), and provided that the hospital's average occupancy rate for all licensed acute care beds is at or exceeds 75 percent. The determination of the average occupancy rate shall be made based on the average 12 months occupancy rate made available by the local health council two months prior to the beginning of the respective acute care hospital batching cycle. Phillip C. Rond, III, Ph.D., was the primary architect of the rule, beginning in 1981. The rule was initially published in 1982, and adopted in 1983. Constants in the rule formulas, including use rates, average lengths of stay, occupancy standards and patient flow patterns were taken from a 1979 survey of some state hospitals. Because data used for the constants in the formulas was expected to change, subsection (6) also provides, in pertinent part, that: Periodic updating of the statewide discharge rates, average lengths of stay and patient flow factors will be done as data becomes available through the institution of statewide utilization reporting mechanisms. Patient flow factors were updated in March 1984 to reflect a change in the realignment of counties in Districts 5 and 8. No other constants have been updated since the rule was adopted in June 1983. More current data is available. The Hospital Cost Containment Board ("HCCB") began collecting statewide hospital inpatient discharge data in the fourth quarter of 1987, which became available by the fall of 1988. AHCA now collects the data. Using the rule, the projected net need for acute care beds in 1999 in District 9 is 1,442 additional beds. By contrast, with the factors updated by Dr. Rond, the projected net need is a negative 723 or, in other words, District 9 has 723 more acute care beds than it will need in 1999. The updated formulas show a need for a total of 3,676 beds in District 9, which already has 4,399 licensed or approved acute care beds. Since 1983, hospital utilization has declined in both rates of admissions or discharges, and in average lengths of stay. Although the occupancy goals in the rule are 75 to 80 percent, depending on the type of hospital service, the occupancy rate achieved by using the number of beds projected by the rule methodology is 45 to 52 percent. The statewide occupancy rate in acute beds is approximately 50 percent in 49,215 licensed beds. The formulas in the rule show a statewide net need for 6,000 more beds in 1999, but updated constants in the same formulas result in a total statewide need for approximately 36,000 acute care beds in 1999, or 13,000 fewer beds than currently exist. Statewide utilization of acute care hospital beds declined from 1187.2 days per 1000 population in 1983 to 730.5 days per 1,000 in 1993, despite increases in the percentage of the elderly population. By 1987, AHCA's predecessor realized that the need methodology in the rule was grossly overestimating need and inconsistent with its health planning objectives. Subsection (7)(d) was added to the rule to avoid having a published fixed need based on the outdated methodology in subsections (5), (6) and 7(a)- (c). The occupancy data is also, as the 1987 amendment requires, that reported for the most recent 12 months, available 2 months before the scheduled application cycle. In August 1994, AHCA published a numeric need of zero for District 9, Subdistrict 5, rather than 1,442, the calculated net need predicted by the formulas in the rule, because all subdistrict hospital occupancy rates did not equal or exceed 75 percent. Elfie Stamm of AHCA, who is responsible for the publication of fixed need pools, confirmed that the 1987 amendment to the rule was an efficient and cost-effective way to avoid publishing need where there was no actual need. She confirmed Dr. Rond's conclusions that the formulas are no longer valid and produce excessive need numbers, as in projecting a need for 6,000 or 7,000 more acute care beds in the state. She also confirmed that none of the constants in the formula have been updated as required by subsection 6. Ms. Stamm claims that the information needed to update the formulas cannot be obtained easily from any statewide utilization reporting mechanism. One problem, according to Ms. Stamm, is the possibility of including patients in acute care beds with comprehensive rehabilitation, psychiatric, or substance abuse problems, although it is not lawful for acute care providers to place patients with these primary diagnoses in licensed acute care beds and all data bases have some miscoding of diagnoses. She also testified that some factors required in the formulas are not included in HCCB data base. In addition, she testified that AHCA is in the process of filing a notice to repeal the acute care bed need rule. The filing of the notice of repeal, published in Volume 21, Florida Administrative Week, pp. 4179-4180 (6/23/95) was confirmed by Bethesda's Request For Official Recognition, which was filed on July 20, 1995, and is granted. Ms. Stamm also noted that rules for other need-based health services have facility-specific special circumstances provisions, which are not tied to numerical need, otherwise the special circumstances are not really facility- specific. Need rules make no sense, according to Ms. Stamm, without an exception in the absence of a determination of need. Subsection (7)(e) of the acute care rule requires a finding of numeric need and a 75 percent occupancy rate at the applicant facility. Ms. Stamm's records indicate that AHCA's predecessor adopted the facility-specific provisions tied to net need at the same time it adopted the 75 percent average district occupancy standard to overcome the problems with the net need formula. AHCA asserts that the admittedly irrational need methodology when combined with the 1987 amendment achieves a rational result. Because the need methodology always over estimates numeric need, facilities exceeding 75 percent occupancy have an opportunity to demonstrate special circumstances. Daniel Sullivan, Delray's expert, also testified that problems exist in extracting acute care bed from specialty bed utilization data, in hospitals which have both. He also agreed with Ms. Stamm that the 1987 amendment corrects the erroneous projections of the formula to give a rational outcome from the rule as a whole when not all hospitals in a subdistrict equal or exceed 75 percent occupancy and when one hospital, over 75 percent occupancy, attempts to establish a special circumstance, despite the fact that the need methodology itself is always wrong in projecting numeric need. Ms. Stamm testified that one district is approaching 75 percent occupancy in all hospitals. Mr. Sullivan testified that, if and when that occurs, then the formula is intended to, but does not, reflect the number of additional beds needed. An alternative methodology is required to determine bed need. AHCA, with its responsibility for the data base formerly collected by the HCCB, receives discharge data and financial worksheets from every hospital in the state. The claim that AHCA cannot update the formulas because its data may be unreliable is rejected as not credible. The data now available is more reliable than the 1979 data used in developing the rule, which was not collected from a formalized statewide reporting system, but from a sample of hospitals. The claim that AHCA cannot use its data base from mandatory statewide reporting mechanisms to extract the data needed to update the formulas is also rejected. The rule contemplated ". . .the institution of statewide utilization reporting mechanisms." Dr. Rond's work to update the formulas before the final hearing began on May 23, 1995. Dr. Rond used a total of approximately 1.5 million acute care discharges from the AHCA (formerly, HCCB) data base for the 1992 calendar year. At the time of the final hearing, Dr. Rond had not separated days of care for medical/surgical, intensive and coronary care. The data can be taken from hospital financial data, including detailed budget worksheets which are submitted to AHCA. Separate data are anticipated in the formula because the computation of need for the different bed categories is based on different occupancy goals. For medical/surgical and intensive care beds, the goal is 80 percent occupancy, but it is 75 percent for coronary care for persons age 0 to 64. For persons 65 and older, the rule applies a combined occupancy standard of 79.7 percent for all three bed categories, which assumes that approximately 4 percent of the combined days of older patients will be spent in coronary care. Dr. Rond reasonably applied the 79.7 percent occupancy standard to the combined days for persons under 65, in arriving at the total district bed need for 3,676 beds. To check these results and to assume a worse case scenario of all patient days attributable to coronary care beds, for which more beds are needed to maintain a lower occupancy, Dr. Rond worked the formula using 75 percent occupancy as the goal for medical/surgical, intensive and care coronary care beds combined. Although the base number increased by 100, the calculations and adjustments in the rule yielded the same number of total acute care beds needed in the district, 3,676. That reliably confirms that the maximum number of acute care beds needed in District 9 is 3,676 by 1999. AHCA could use its data base to update formulas and achieve rational results in the rule by using the hospital financial data to distinguish coronary care days for patients 0-64 to include in the formula, or by using a rational blended occupancy standard in a rule amending the existing methodology. AHCA demonstrated that the 1987 amendment overrides the exaggerated numeric need number to yield a rational published fixed need pool in the absence of 75 percent occupancy in all acute care beds in a subdistrict. AHCA also demonstrated that because the projected need is always excessive under the formula, hospitals are allowed to demonstrate special circumstances, although it is absurd to include a requirement of numeric need in a provision for special circumstances. AHCA's claim that the excessive need projection is, therefore, irrelevant is rejected. Net need under the rule formula fails to give any rational indication of the number of beds needed when all hospitals in a subdistrict reach 75 percent occupancy.
The Issue The issue presented is whether the application of Respondent Adventist Health System/Sunbelt, Inc. d/b/a East Pasco Medical Center for a certificate of need to add 24 acute care beds to its existing facility should be approved.
Findings Of Fact The Seventh Day Adventist Church owns Respondent Advent-ist Health System/Sunbelt, Inc. That corporation, which occupies a strong financial position, operates not-for-profit hospitals in several states, including Florida. One of the Florida hospitals is East Pasco Medical Center (East Pasco), located in Zephyrhills. Zephyrhills is in eastern Pasco County, which, for health planning purposes, is known as Subdistrict 2 of District 5. East Pasco is an 85-bed acute care hospital which provides most of the common services found in a community hospital. In addition to providing general acute care and obstetrics (OB), it has an intensive care unit (ICU) and offers neurosurgery and kidney dialysis services. East Pasco also has completed but not yet opened an 11-bed skilled nursing unit (SNU) and a 10-bed observation unit. The 11 beds in the SNU and the 10 beds in the observation unit are in addition to the 85 acute care beds for which East Pasco is licensed. For licensure purposes, acute care beds are not divided into types of service. East Pasco's current configuration for its 85 acute care beds is as follows: 68 medical-surgical beds, 8 ICU beds, and 9 OB beds. East Pasco has an active emergency room which experiences up to 30,000 visits per year. East Pasco obtains approximately 55 percent of its in-patient admissions through its emergency room. East Pasco is accredited by the Joint Commission for the Accreditation of Healthcare Organizations (JCAHO). Petitioner Humana of Florida, Inc. d/b/a Humana Hospital Pasco (Humana) is an existing 120-bed acute care hospital in Dade City. It is situated approximately 10 minutes away from East Pasco. Humana provides the same services that East Pasco provides, including medical-surgical, ICU/CCU, OB, kidney dialysis, and neurosurgery. Like East Pasco, Humana is accredited by the JCAHO. However, Humana's accreditation is "with commendation", the highest rating given by the JCAHO. Like East Pasco, Humana has a large medical staff, primarily consisting of physicians who have their offices located in Zephyrhills or Dade City. The medical staff rosters of Humana and East Pasco are virtually identical. Dade City is also located in east Pasco County, and the primary service areas of Humana and East Pasco are virtually identical. Like East Pasco, Humana serves the Medicaid and indigent patient populations. In its fiscal year 1991, Humana provided 6 percent of its patient days to Medicaid patients. In fiscal year 1992, that increased to 8.8 percent, the same as East Pasco. Humana's Medicaid patient days increased substantially with the introduction of OB services at Humana since Medicaid patients receive primarily OB services. East Pasco has been designated as a disproportionate share provider under the State's program to give economic incentives to hospitals serving a certain percentage of Medicaid patients. East Pasco also serves the indigent patient population pursuant to a contract between it and Pasco County. In September, 1991, East Pasco filed its application for a certificate of need (CON) requesting approval for 24 additional medical-surgical beds (acute care beds) for the July, 1996, planning horizon. In January, 1992, the Agency notified East Pasco of its intent to approve the application and issue to East Pasco CON No. 6783. Humana filed this challenge to the Agency's intent to grant the application, and this proceeding ensued. All parties subsequently stipulated that Humana has standing to initiate and maintain this proceeding and that Humana was not obligated to present evidence of its standing. East Pasco has proposed a new unit to house the 24 additional medical- surgical beds to be located on the third floor of a new three-story tower. That third floor would consist of 13,000 gross square feet (GSF), would cost $4,087,810, and would consist of only private rooms with three nurse stations. East Pasco proposes no new services, only additional beds. Construction of the three-story tower has not yet commenced but is awaiting the outcome of this proceeding. The first floor of the new tower will be a wellness center, a project which did not require CON review. The second floor will house a new ICU. East Pasco presented conflicting evidence as to the size of that new ICU. The Agency approved East Pasco's second floor ICU as a 12-bed ICU with a cost below the threshold cost which would have required CON review. In spite of the exemption from review obtained by East Pasco, it is specifically found that East Pasco intends to place a 16-bed ICU on the second floor of the yet-to-be-constructed tower. Thus, East Pasco would achieve its 16-bed ICU by relocating its existing 8-bed ICU and converting other beds to ICU beds. Thus, if the 24 new beds sought are approved they will produce 16 additional medical-surgical beds and 8 additional ICU beds. Resolution of the number of beds proposed for the second floor of the new tower is required in this proceeding for two reasons. First, the cost of this project is impacted. If 8 of the new beds are to be used as ICU beds rather than as medical-surgical beds, they will be more expensive to construct and equip. Second, corporate approval of corporate projects is a prerequisite in Florida's CON process. East Pasco's Board of Directors met on August 14, 1991, to authorize the filing of this application. This application proposes 24 medical-surgical beds, the corporate resolution filed with the Agency authorized 24 acute care beds, but the minutes of the Board's meeting reflect that the Board itself approved 24 beds for ICU and PCU services. Although ICU, PCU, and medical-surgical beds are all acute care beds, they are constructed, equipped, and staffed differently. For the reasons described below, there is no need in District 5 or in the east Pasco County Subdistrict for East Pasco's proposed 24 additional medical-surgical beds. Rule 59C-1.038, Florida Administrative Code, includes the numeric need methodology for projecting acute care bed need. Under that Rule, applications for acute care beds will "not normally" be approved unless there is numeric need. For the September, 1991, application batching cycle, the Agency published a fixed need of zero acute care beds needed in District 5, Subdistrict 2, which is composed of only East Pasco and Humana hospitals. This fixed and published need of zero was not challenged. Per paragraph (7)(d) of the Rule, additional acute care beds will "not normally" be approved unless the subdistrict occupancy is at or exceeds 75 percent. All parties agree that calendar year 1990 is the proper period to ascertain whether this standard is met. In 1990, the acute care bed occupancy rate in the Subdistrict was 55.33 percent. The parties agree that the Rule's occupancy standard is not met. Therefore, no additional beds should normally be approved. There is ample unused capacity in District 5 and in the Subdistrict to meet acute care demand. Humana's occupancy is well below 50 percent. In years and 2 for the proposed unit, East Pasco projects 1,042 and 1,760 patient days, respectively. Humana has sufficient unused capacity to accommodate that projected demand. Utilization trends support the lack of need shown by the need methodology and the occupancy standard. Acute care utilization in the Subdistrict has decreased since 1986. In 1986, the two Subdistrict hospitals generated 42,830 patient days, a 57.2 percent occupancy. In 1991, notwithstanding population growth in the Subdistrict, the two Subdistrict hospitals generated 41,756 patient days, a 55.8 percent occupancy. Clearly, then, there is no increased demand for acute care services, but only a reshuffling of market share between the two hospitals. Contrary to East Pasco's suggestion, first quarter utilization does not show need and has, in fact, been decreasing. For example, the first quarter (January-March) of 1986 generated 13,572 patient days in the Subdistrict, a 73.6 percent occupancy; in the first quarter of 1992, there were 12,482 patient days, a 66.9 percent occupancy, the lowest first quarter utilization in the last 6 years in the Subdistrict. Additionally, the average length of stay (ALOS) in the Subdistrict continues to decline. In the first quarter of 1991, the ALOS was 5.4 days; in the first quarter of 1992, the ALOS was 5.1 days. Accordingly, although East Pasco shows an increased number of admissions over the last several years, the continued decline in the ALOS has resulted in a decreasing number of patient days. The population growth in the Subdistrict is not so substantial as to demonstrate need. Humana relied upon population projections produced by a national firm specializing in demographic analyses. Such a population data source is generally more reliable than a county's own projections, relied upon by East Pasco. The Subdistrict is growing but not at an extraordinary pace. In comparison, the West Pasco Subdistrict is growing faster. There are no geographic access problems to receiving acute care services which would support a finding of need. There are many hospitals available and accessible to residents of the Subdistrict within 30 minutes travel time or less. The entire Subdistrict is within a 30-minute travel time of Humana and of East Pasco. Most of the Subdistrict is also within 30 minutes travel time to other acute care hospitals, including University Community Hospital in Tampa, Lakeland Regional Medical Center in Lakeland, and South Florida Baptist Hospital in Plant City. The Zephyrhills area in particular is within 30 minutes travel time to those other facilities. Humana is an available alternative to the proposed project. Humana is geographically accessible to the entire Subdistrict, provides all the services that East Pasco provides, and provides good quality of care. Humana's medical staff roster includes the same physicians that practice at East Pasco. Humana already serves the same geographic service area that East Pasco serves. Indeed, several East Pasco witnesses testified that patients are transferred to Humana when East Pasco is full, thereby acknowledging Humana as an alternative for Subdistrict residents. Hospitals situated outside the Subdistrict are also available and appropriate alternatives to the proposed project. These hospitals have unused capacity to accommodate the projected demand from the Subdistrict. Notably, residents of the Subdistrict have historically greatly utilized hospitals located outside the Subdistrict. In 1990, 63.7 percent of the Subdistrict's residents went to a hospital other than Humana or East Pasco. Thus, physicians and residents regard hospitals situated outside the Subdistrict as appropriate and viable alternatives. Since East Pasco does not propose to offer any new service, and since there is accessible unused capacity at Humana and these other facilities, there are better alternatives to adding new beds at East Pasco. In addition, although approving more beds at East Pasco would improve availability of services at East Pasco, such is not a planning consideration or a review criterion. East Pasco and Humana provide similar levels of Medicaid care. In calendar year 1991, Medicaid comprised 8.8 percent of all patient days at East Pasco, less than in 1990. From September, 1991, to August, 1992, 8.8 percent of all patient days at Humana were Medicaid days. The two hospitals also provide similar amounts of indigent care. Therefore, Humana is economically accessible to all residents of the Subdistrict. Facilities located outside the Subdistrict also are economically accessible. Physician preferences are not significant in formulating conclusions of need on a District or Subdistrict basis. Physicians may well have their own reasons for doing things which may be contrary to sound health care planning principles. Further, physicians' personal preferences are not relevant to ascertaining how existing resources can be best and most efficiently used. The acute care bed Rule provides that additional beds "may" be approved at a specific facility if its occupancy exceeds 75 percent even though no beds can be authorized pursuant to the mathematical calculations established by the Rule. While East Pasco achieved an occupancy rate of 78.78 percent in calendar year 1990, that statistic merely "opens the door" for an evaluation of whether there are compelling circumstances to justify the approval of beds at a specific facility despite the absence of need demonstrated by the acute bed methodology. There are no factors or circumstances which would justify the approval of 24 additional medical-surgical beds at East Pasco pursuant to the specific facility provision. First, there are accessible and available alternatives for meeting projected demand. The majority of east Pasco County residents outmigrate even when beds are available at East Pasco. There is an excess capacity in the Subdistrict and in the District. Second, East Pasco's application discusses seasonal overcrowding due, in large part, to using in-patient beds for "observation" patients. Observation patients are those with a hospital stay of less than 24 hours. East Pasco has recently completed a new 10-bed observation unit. In 1991, East Pasco averaged observation patients per day; therefore, this new 10-bed unit will ease the strain on East Pasco's in-patient beds. Third, East Pasco's application relies on the "overflow" of patients in the winter season to justify its proposed bed addition. The actual amount of "overflow" is reflected in East Pasco's transfer log, which shows that there were not that many patients transferred in 1991. In fact, there were several months in which there were zero transfers. Fourth, the proposed beds are only intended to handle "seasonal" population demands. The proposed unit would not be open year-round. East Pasco was below 75 percent occupancy from May to October, 1991. East Pasco acknowledges that the proposed beds are only for part of the year and are intended to accommodate the demands of the seasonal population, who are not necessarily residents of the Subdistrict. East Pasco's application in reality requests approval for adding 24 beds at a cost of over $4,000,000 to accommodate, by East Pasco's own projections, an average daily census of three patients the first year and five patients the second year in a unit that would be closed at least six months out of each year. That is an excessive expenditure to provide access to relatively few people, where access to nearby facilities exists. Although East Pasco has shown that on certain days it has exceeded its OB capacity, and although East Pasco maintains that its most common capacity problem is the lack of available ICU beds, East Pasco's application itself does not suggest that it intends to increase the number of OB or ICU beds. Further, although on certain days East Pasco has experienced over 100 percent occupancy and has placed patients in the hallways, that situation can be obviated by referring patients to other hospitals, and the situation will be alleviated when East Pasco soon opens its additional 10-bed observation unit and 11-bed SNU. East Pasco has, therefore, shown that it has an occupancy rate sufficient to entitle it to review despite the lack of need under the acute care bed Rule, but it has shown no other reasons why its application should be approved. The Florida State Health Plan includes various preferences for reviewing CON applications. On balance, the East Pasco application is not consistent with that Plan. The first group of preferences relates to the addition of hospital beds. The first item in that group provides that no additional beds should generally be approved unless the subdistrict occupancy is at or exceeds 75 percent or unless the applicant-facility is at 80 percent. Since calendar year 1990 data was used to calculate the need formula and Subdistrict occupancy standard, it is appropriate to use that same data to determine East Pasco's occupancy for evaluating this preference, rather than using two different time periods as the Agency did. In 1990, the Subdistrict was below 75 percent, and East Pasco's occupancy was below 80 percent. Therefore, this preference is not met. The second item under this group provides that "in the event that acute care bed need is shown", preference shall be given to an applicant who provides a disproportionate share of Medicaid and indigent services in the Subdistrict. This preference is not met since no "acute care bed need is shown". The next group of preferences is entitled "transfer and conversion of acute care beds". Because East Pasco does not propose to transfer or convert acute care beds, East Pasco does not satisfy any of the preferences included under this grouping. The next group of preferences is entitled "indigent care". The first item provides that preference shall be given to an applicant who provides a disproportionate share of Medicaid and charity care in relation to other hospitals in the District or Subdistrict. This preference is not met. Although East Pasco has historically provided more Medicaid and indigent care than Humana, there is no showing that East Pasco will provide disproportionately more Medicaid and indigent care for medical-surgical services specifically. Most of East Pasco's Medicaid participation is for OB and newborn services, not medical- surgical services. Both Humana and East Pasco provide less than 1 percent of their gross revenues for indigent care. Given that most of the Subdistrict population is elderly, indigent care is not a major issue. Also, it was stipulated that East Pasco does not know how much indigent care it provides for medical-surgical services only. The second item under this group relates to whether CON approval would negatively affect the financial viability of a disproportionate share hospital. This preference is not relevant to East Pasco's application. The third group of preferences is entitled "emergency services". The first item relates to the applicant's record of accepting indigent patients for emergency care. East Pasco presented no information on this in its application except for its proof that it has a contractual obligation to do so. The second item relates to whether the facility/applicant is a trauma center. East Pasco is not a designated trauma center. The third item relates to whether the applicant demonstrates a full range of emergency services. East Pasco did not address this in its application. The fourth item addresses whether the facility has ever been fined by HRS for violations of emergency services statutes. East Pasco did not address this item in its application. Therefore, East Pasco does not meet the preferences in this group. The fourth group of preferences is entitled "teaching, research, and referral hospitals". The application does not address these particular preferences, and East Pasco does not hold itself out as a teaching, research or referral hospital. Therefore, East Pasco does not satisfy the items under this grouping. The fifth group of preferences is entitled "specialized services". East Pasco does not propose to provide any specialized services and, therefore, items under this grouping are not satisfied. The District 5 Local Health Plan includes recommendations for reviewing CON applications. On balance, the East Pasco application does not satisfy that plan. The first preference relates to whether the applicant provides a disproportionate share of Medicaid and charity care. For the reasons indicated above regarding the State Health Plan, this preference is not met. Further, East Pasco's application does not suggest that the 24 medical-surgical beds sought will enhance its Medicaid or indigent participation. The second recommendation provides that "if a numeric bed need exists as shown by the state bed methodology", preference is given to an applicant who has generated certain occupancy levels. Because no numeric bed need was shown per the Rule methodology, this recommendation is not met. The third recommendation relates to the transfer of existing acute care beds. Because East Pasco does not propose a transfer of beds, its application is not consistent with this recommendation. The fourth recommendation gives preference to applicants who document the cost-effectiveness and efficiency of their project. East Pasco does not satisfy this preference. East Pasco failed to show any cost efficiencies for its project. East Pasco proposes to spend over $4 million to serve, on the average, 3 to 5 patients per day in years 1 and 2. That is cost-inefficient. East Pasco did not prove that the charges or costs of providing medical-surgical services would be any less than what it currently charges. East Pasco's application includes two pro formas: a hospital-wide pro forma and an incremental pro forma for the proposed 24-bed unit. The person who prepared those pro formas did not testify, and the person who did testify did not participate in preparing the pro formas. Further, the witness only testified to the reasonableness of the incremental pro forma; he did not testify, directly or indirectly, regarding the hospital-wide pro forma. An incremental pro forma alone does not demonstrate long-term financial feasibility, even if the incremental pro forma were reasonable. An incremental pro forma alone does not reflect the project as a whole. At East Pasco, there are several projects and activities on-going or planned that must be evaluated. In addition to the existing 85 beds, East Pasco has underway: (1) opening a 10-bed observation unit; (2) opening an 11-bed SNU; (3) a planned wellness center on the first floor of the proposed 3-story tower; and (4) the planned relocation and enlargement of its ICU to the second floor of the proposed tower. Those projects add expenses, put strains on cash, and require debt. Without considering all the activity at the hospital, one cannot reasonably ascertain whether the proposed $4.1 Million third-floor project is financially feasible. For example, a small project could show an incremental profit but the hospital as a whole could lose money. East Pasco simply assumes that its 24-bed unit will be financially feasible in 1994 and 1995, years 1 and 2 of the project. The health care field is too dynamic and volatile for such assumptions. For example, East Pasco had an operating loss in 1990 but did well in 1991. By not analyzing the hospital-wide pro forma and proving its reasonableness, East Pasco did not show the required financial feasibility. It only demonstrated the results of one component of an entire operation. East Pasco has left unanswered the question of whether the facility as a whole will be able to finance this project in conjunction with all its other requirements. Further, the application lacked sufficient and clear presentation of the assumptions underlying the hospital-wide pro forma. Restated, the hospital-wide pro forma is not self-explanatory. The incremental pro forma, showing the proposed revenues and expenses for the 24-bed medical-surgical unit for years 1994 and 1995, is not reasonable. The projected revenues are overstated, and the projected expenses are understated. The assumptions underlying the financial projections are unreasonable. Further, the profit projections are unrealistic; in year two, East Pasco projects a profit of about $615,000 on an average daily census of less than 5 patients per day. On its face, that is unrealistic. In 1991, East Pasco generated 24,517 patient days, which was virtually the same as its 1990 utilization. In 1993, East Pasco projects 26,220 days. In year 1 of this project (1994), East Pasco projects 27,262 days hospital-wide, including the 1,042 incremental days associated with this project. Thus, in just a 3-year period, East Pasco projects almost 3,000 additional patient days, and even more for year 2 (1995). It is not reasonable to assume such an increase in utilization since utilization during the first quarter of 1992 declined from first quarter 1991. Therefore, patient day projections are overstated, thereby causing overstated projected gross revenue. East Pasco's projected daily charge is based on the hospital-wide average charge. It is not based on historical charges for medical-surgical services specifically. It is unreasonable to use charges for hospital services as a whole when the proposed project is for medical-surgical services only. Because the underlying assumption is invalid, projected revenues lack credibility. In calculating deductions from gross revenues, East Pasco assumed the hospital-wide payor mix and did not specifically ascertain the payor mix (and, therefore, the deductions) for medical-surgical services specifically. Again, this is an unreasonable assumption. Deductions from gross revenue should have been analyzed for medical-surgical services specifically. Due to the invalid assumption, the deductions from revenue figures lack credibility. East Pasco projects 5.8 FTEs for year 1 and 6.0 FTEs for year 2. East Pasco proposes to operate the 24-bed unit as an independent unit. These staffing levels are insufficient. East Pasco's proposed utilization equates to a 4.8 average daily census, which requires two nurses at all times. By East Pasco's admission, to staff a unit with two persons at all times throughout the year requires 9.2 paid nursing FTEs in addition to ward clerks and other support personnel. If the volume fluctuated and the census exceeded 7 or 8, more than two nurses would be needed. Thus, the 5.8 and the 6.0 FTE numbers are too low. The proposed staffing does not allow one RN to be on the floor at all times. To maintain one RN on the floor at all times throughout the year requires 4.2 FTEs; East Pasco budgeted for one. East Pasco does not have excess RNs available from its existing staff to cover the proposed addition. The supplies expense shown on the incremental pro forma was based on a hospital-wide average. The proposed project is for a specific service, and one cannot reasonably use a hospital-wide average instead. Accordingly, the calculation of expense for supplies is not reasonable. The pro forma includes an expense item entitled "other". East Pasco offered no explanation for that expense. Also, the pro forma did not include a line-item for the HCCCB indigent care tax, which is 1.5 percent of net revenue. East Pasco's proposed 24-bed medical-surgical unit will cover 13,000 GSF and will cost more than $4.1 million. All rooms will be private. The unit will have three nurse stations. According to East Pasco, the unit is to be a basic medical-surgical floor and is not intended to be a progressive care unit (PCU). This proposed design is not reasonable and is excessively large by at least 30 percent. This design is inefficient and, in reality, is not the design of a basic medical-surgical unit, but is instead the design of a PCU. There are three main reasons why the design is excessive. First, it is not necessary or reasonable to have all private rooms. A regular medical- surgical unit should have about an equal split of semi-private rooms. Notably, East Pasco's new 11-bed SNU has 5 private and 3 semi-private rooms for patients who will require hospitalization for up to 90 days. Second, these private rooms are almost twice the minimum size required by state licensure regulations. Third, three nurse stations are unnecessary; only one nurse station is needed for a basic 24-bed medial-surgical unit. East Pasco currently has 68 medical- surgical beds on 2 units, and each such unit has only 1 nurse station. The existing 68 medical-surgical beds at East Pasco average about 360 GSF per bed. The proposed 24 beds will average 542 GSF per bed. All private rooms and 3 nurse stations are, clearly, the design for a PCU. A PCU is a step- down unit from an ICU, which has high staff-to-patient ratios thereby requiring more nurse stations. East Pasco's projected construction cost for the 24-bed medical- surgical unit is $142.91 per GSF. This is unreasonably understated. It is uncontroverted that an SNU is less costly to construct than a medical-surgical unit. According to its projections, East Pasco's 11-bed SNU cost $171 per GSF in 1992. Clearly, that SNU cost is substantially greater than East Pasco's projected construction cost at issue. This inconsistency was never explained by competent evidence. In evaluating East Pasco's estimates, the Agency's architect relied upon 1991 Means construction cost data. He averaged the Means' medium figure ($123 per GSF) with the high figure ($172 per GSF) to derive a 1991 estimate of $147.50 per GSF. To that, one must add a 10 percent contingency factor, inflation, and an architectural fee. That totals $187.69 per GSF. The $187.69 projected figure is consistent with the 1992 SNU cost figure of $171. Thus, for construction costs alone, East Pasco underestimated by $44.77 per square foot, which is about $582,000. East Pasco proposed to construct a three-story tower; the third floor will house the proposed 24 medical-surgical beds. The second floor will house a 16-bed ICU, comprised of relocating the existing 8 ICU beds and converting 8 other acute care beds. East Pasco's application project costs only cover the third floor; East Pasco maintains the second floor is exempt from CON review and thus its cost is not relevant. As described below, East Pasco unreasonably failed to include costs of the second floor in its application. A hospital project costing $1,000,000 or more (other than an out- patient project) requires CON review. In its letter for exemption East Pasco states that the second floor would contain 12 ICU beds and cost $975,000 (calculated by multiplying 6,500 GSF by $150/foot). That letter is erroneous for several reasons: (1) the $150/foot is in 1992 dollars and does not include inflation; (2) the $150/foot does not include a 10 percent construction contingency fee, which is necessary and reasonable; (3) the $150/foot does not include an 8.4 percent architectural/engineering fee, which is necessary and reasonable; and (4) the $150/foot does not include any debt or financing fee. Including these necessary amounts alone shows that the second floor, in truth, exceeds the $1,000,000 threshold. Also, the cost for equipping an ICU bed is $45,000 per bed; for 16 beds, that is $720,000 for equipment. Surely the size and cost of a 16-bed ICU is different from and greater than a 12-bed ICU. East Pasco stated in its exemption request letter that the second floor would have 12 beds even though East Pasco intends 16 beds. East Pasco and the Agency correctly argue that the exemption given to East Pasco by the Agency for its second-floor ICU project is not part of the instant application and cannot be considered in this proceeding. However, the accuracy and reasonableness of the costs projected by East Pasco attendant to the 24 additional beds it seeks are an integral part of this proceeding, as is the scope of the project being reviewed and challenged. The second and third floor projects are, in truth, one project. It is East Pasco's intention to add 16 medical-surgical beds and 8 ICU beds to its facility. To establish the 16-bed ICU unit, East Pasco needs additional acute care beds; East Pasco does not have 8 available beds among its existing bed complement to convert to ICU purposes. The OB beds often run at 100 percent occupancy and, during the peak season, the medical-surgical beds run high occupancy. Thus, East Pasco cannot fully implement the second floor without approval of the proposed 24 new beds. There will be no community benefits in terms of charges if this application is approved. "Net revenues" must be the basis for comparing charges between facilities. Net revenues refers to what third party payors (such as Medicare, Medicaid, HMO/PPOs and most insurors) actually pay for hospital services as opposed to what hospitals charge. Few patients ever pay gross charges, particularly in the elderly East Pasco Subdistrict. In 1991, Humana's average net revenue per day was lower than East Pasco's. Humana's actual net revenue per admission in its fiscal year 1992 was $4,180. East Pasco's projected 1992 net revenue per admission is $5,301. Thus, for 1992, third party payors paid, on behalf of their patients, less per admission at Humana than at East Pasco. In its application, East Pasco projects an 8 percent per year increase in charges. An annual increase of 8 percent is not promoting charge-efficiency. East Pasco's application did not demonstrate cost-efficiencies resulting from approval, but rather, cost-inefficiencies. First, Humana would lose patient volume should East Pasco be approved. Humana currently receives transfers and direct admissions when East Pasco is full. Loss of patient volume would increase operating costs per patient day at Humana. Second, there is no need for additional beds in the Subdistrict. There is already excess capacity in the Subdistrict. Exacerbating excess capacity promotes cost-inefficiency. East Pasco admits the unit will not even be open six months out of the year because there is no need for it then. Third, East Pasco projects very low census in years 1 and 2, about 3 patients per day in year 1 and less than 5 patients per day in year 2. Spending over $4,000,000 to accommodate such low utilization is inefficient and unreasonable. Approval of East Pasco's application would not promote positive competition. There is competition now in the Subdistrict between Humana and East Pasco. East Pasco already captures a larger market share of the Subdistrict than Humana. Approving this application would only tip the scales more in favor of East Pasco and would adversely impact Humana's already poor financial condition. The quality of care delivered at Humana is very good. The JCAHO rates all acute care hospitals, and its rating is widely recognized in the hospital industry. The JCAHO evaluates many factors and components of a hospital. Humana is accredited "with commendation", the highest rating given. Only 5-6 percent of all acute care hospital in the country receive that highest ranking. Humana maintains a good utilization management program. Humana implements an excellent quality improvement plan, including soliciting and reviewing patient satisfaction comments. Mortality statistics cannot, by themselves, meaningfully measure the quality of care delivered at a hospital. Although the Health Care Finance Administration (HCFA) produces such a report for Medicare patients, the report itself represents that it is not intended to measure quality of care, and the American Hospital Association does not view HCFA mortality statistics as a measure of quality of care. There are many factors which influence mortality statistics at a hospital and, even more importantly, mortality is only one clinical outcome resulting from a hospital admission. When East Pasco is full, there is no medical problem or complication resulting from transferring patients to Humana or from directly admitting patients at Humana. There is no diminution of care or loss of continuity of care in transferring to or directly admitting to Humana. Emergency medical services are available in the Subdistrict, and, therefore, transfer is not a problem. Also, driving to Humana or to a hospital outside the Subdistrict is neither a problem nor an unusual circumstance. The large seasonal population drive to Florida in the winter, and, therefore, it is a mobile patient population. Most of its residents seeking hospital services receive them outside the Subdistrict. Subdistrict residents currently leave the Subdistrict to receive a variety of hospital services, including: in-patient cardiac cath, open heart surgery, Level II NICU, psychiatric services, substance abuse services, and comprehensive rehabilitation services. Thus, there is no merit to the suggestion that transferring patients from East Pasco to Humana or elsewhere is problematic. There would not be community benefits regarding Medicaid/indigent care by approving this application. As indicated, for all hospital services, Humana and East Pasco provide similar amounts of Medicaid and indigent care, although indigent care at both facilities is relatively insignificant. Therefore, access to Medicaid and indigent care does not provide a basis for approving East Pasco's application. Also, East Pasco's payor mix in its application was based on hospital-wide averages. East Pasco has not shown the amount of Medicaid or indigent care which would be specifically provided to, or which is needed for, medical-surgical patients. Finally, East Pasco's Policy and Procedure Manual includes several provisions requiring deposits upon in-patient admission absent verification of third party payor coverage. Such provisions are inconsistent with the proposition that East Pasco accepts all patients regardless of ability to pay. In Florida, an application for a CON must include a certified copy of an authorizing resolution of the applicant's Board of Directors. East Pasco included its corporate resolution in its CON application, that resolution being adopted at an August 14, 1991, meeting. That resolution clearly states, among other things, authorization to file an application for up to 24 additional acute care beds. The minutes of that meeting clearly reflect the Board's approval for 24 beds for ICU and PCU. The application itself requests approval of 24 medical-surgical beds. PCU, ICU, and medical-surgical beds are all types of acute care beds. Accordingly, East Pasco did file a proper corporate resolution consistent with the minutes and consistent with the application. The minutes and the application, however, are inconsistent. Although the corporation resolution is technically correct and fulfills the requirements for a CON application, the inconsistency among the corporate resolution, the minutes, and the application raised questions about the actual intent of East Pasco. The intent became more questionable during the final hearing when East Pasco's witnesses contradicted each other as to the number of beds to be placed in the to-be-constructed ICU on the second floor of the to-be-constructed 3-story tower. It is clear that the Agency only approved the construction of a 12-bed ICU on the second floor. It is also clear that East Pasco in fact intends to construct a 16-bed ICU on that second floor. It is also clear that East Pasco intends to construct a "medical-surgical" unit on the third floor in accordance with a design for a PCU. While the corporate resolution technically complies with the requirements for a CON application, the questionable nature of its accuracy, when considered in conjunction with the conflicting evidence of the scope of this project, raises concern as to East Pasco's projections regarding revenue, expenses, staffing, and the actual services to be made available in the Subdistrict. The lack of clarity as to East Pasco's proposal is a compelling reason to deny East Pasco's application. East Pasco's occupancy rate is quite high. It is higher even during the "peak season," i.e., November through April. The projections contained in East Pasco's application are based upon the historic high occupancy rate experienced at East Pasco. Those projections, however, do not take into account, nor did the Agency consider in reviewing East Pasco's application, the fact that East Pasco now has more than the 85 beds which formed the basis for its historic occupancy rate and its projections related to this project. Construction has been completed on the 10-bed observation unit and the 11-bed SNU. East Pasco already has an expanded capacity in place which should alleviate some of its occupancy problems. For example, East Pasco has experienced an increased number of out-patient observation days. With its new observation unit, the beds previously used for observation days are now available for in-patients which, in turn, will likely alleviate East Pasco's most common capacity problem-the lack of available ICU beds. Similarly, the SNU beds will also be available for in-patients.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED that a Final Order be entered denying East Pasco's application for Certificate of Need No. 6783. DONE and ENTERED this 9th day of February, 1993, at Tallahassee, Florida. LINDA M. RIGOT Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of February, 1993. APPENDIX TO RECOMMENDED ORDER DOAH CASE NO. 92-1497 Petitioner's proposed findings of fact numbered 1-32, 34-82, and 84-96 have been adopted either verbatim or in substance in this Recommended Order. Petitioner's proposed finding of fact numbered 83 has been rejected as being unnecessary for determination of the issues herein. Petitioner's proposed findings of fact numbered 33 and 97 have been rejected as not constituting findings of fact but rather as constituting recitation of the testimony, argument of counsel, or conclusions of law. The Agency's proposed findings of fact numbered 2-6, 8, 13, 14, 27, 28, 31-33, 37, 40, 41, 43, 44, 47, 49, 51, and 90 have been adopted either verbatim or in substance in this Recommended Order. The Agency's proposed findings of fact numbered 20, 21, 34, 45, 52, 54, 56-58, 68, 71, 73, 82, and 89 have been rejected as being unnecessary for determination of the issues herein. The Agency's proposed finding of fact numbered 1 has been rejected as not constituting a finding of fact but rather as constituting recitation of the testimony, argument of counsel, or a conclusion of law. The Agency's proposed findings of fact numbered 7, 9, 19, 26, 48, 59, 61, 62, and 64 have been rejected as being irrelevant to the issues under consideration herein. The Agency's proposed finding of fact numbered 46 has been rejected as being subordinate to the issues involved in this proceeding. The Agency's proposed findings of fact numbered 10-12, 15-18, 22-25, 29, 30, 35, 36, 38, 39, 42, 50, 53, 55, 60, 63, 65-67, 69, 70, 72, 74-81, 83-88, and 91-93 have been rejected as not being supported by the weight of the credible, competent evidence in this cause. East Pasco's proposed findings of fact numbered 1-3, 5-7, 10, 13, 16- 18, 20, 22-24, 37, 38, 40, 45, 46, 48, 62, 63, 66-69, 73, 78, 79, 81, 82, 85, 89, 118, 119, 131, 135, 140, 174, 178-180, and 192 have been adopted either verbatim or in substance in this Recommended Order. East Pasco's proposed findings of fact numbered 15, 25, 26, 55, 56, 70, 83, 90, 92, 94, 95, 100, 121, 127-129, 145, 146, 163, 164, 171-173, 176, 177, 184-189, 191, and 194 have been rejected as being unnecessary for determination of the issues herein. East Pasco's proposed findings of fact numbered 19, 87, and 88 have been rejected as not constituting findings of fact but rather as constituting recitation of the testimony, argument of counsel, or conclusions of law. East Pasco's proposed findings of fact numbered 4, 8, 9, 11, 12, 14, 21, 30, 31, 33-36, 39, 41, 51, 61, 86, 96-98, 102, 103, 105, and 154 have been rejected as being irrelevant to the issues under consideration herein. East Pasco's proposed finding of fact numbered 84 has been rejected as being subordinate to the issues involved in this proceeding. East Pasco's proposed findings of fact numbered 27-29, 32, 42-44, 47, 49, 50, 52-54, 57-60, 64, 65, 71, 72, 74-77, 80, 91, 93, 99, 101, 104, 106-117, 120, 122-126, 130, 132-134, 136-139, 141-144, 147-153, 155-162, 165-170, 175, 181-183, 190, and 193 have been rejected as not being supported by the weight of the credible, competent evidence in this cause. COPIES FURNISHED: Edward G. Labrador, Esquire Agency for Health Care Administration 2727 Mahan Drive, Suite 103 Tallahassee, Florida 32308 James C. Hauser, Esquire Messer, Vickers, Caparello, Madsen, Lewis, Goldman & Metz Post Office Box 1876 Tallahassee, Florida 32302-1876 Darrell White, Esquire William Wiley, Esquire McFarlain, Wiley, Cassedy & Jones 215 South Monroe Street Suite 600 Tallahassee, Florida 32301 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
