Findings Of Fact MCH was constructed circa 1973 as an acute care hospital and before 1980 had 126 medical-surgical beds authorized including eight intensive care beds. MCH is a for-profit hospital owned by Hospital Corporation of America. It is financially able to fund the proposed addition. In 1980 it received a certificate of need (CON) to add 64 medical-surgical beds for a total bed capacity of 190 medical-surgical beds. These beds came on line in January 1982. MCH here proposes to add a 54-bed unit for oncology patients; to add six operating rooms to use primarily for eye, ear, nose and throat surgical procedures on an outpatient basis; and a new eight-bed surgical intensive care unit located on the first floor adjacent to the existing surgery department. Currently, the hospital has two oncologists on staff who use a 16-bed unit dedicated to the treatment of cancer. Space exists for the additional operating room so the net result is an application for an additional 62 beds. The application also included expansion of general stores and maintenance and the addition of a parking structure, which were granted, leaving only the issue of need for the 62 additional beds requested at a cost of $7 million. When constructed MCH had an eight-bed ICU primarily for coronary care patients located on the second floor of the hospital in the opposite wing from the surgery department on the first floor. It has added a four-bed ICU on the fourth floor by converting two semiprivate medical-surgical rooms. The ratio of ICU beds to total beds in 1973 was 8:126 which is nearly identical to the current ratio of 12:190. The evidence was unrebutted that the ICU at MCH is usually full, that on occasion patients have to wait in the emergency room until a less ill patient can be moved from a bed in ICU, and that the more ICU beds are available the more they will be used. This use was attributed to the doctors desiring their patients to be in an ICU and to testimony that current surgical procedures are more sophisticated than formerly and a greater need exists today for a surgery patient to go to an ICU than existed 15 years ago. In its application for a CON (Exhibit 18) MCH's estimated charge for a medical-surgical bed is $100-150 per day and its estimated charge for ICU beds and SICU beds is $350 per day. The primary service area for MCH is Marion County. Petitioner submitted evidence that nearly 20 percent of the cancer patients diagnosed in Marion County in 1981 came from the surrounding counties of Citrus, Lake, Sumter, and Levy. Accordingly, MCH contends that its primary service area for oncology patients should include these counties. Evidence was also submitted that MCH has been certified by medical associations as an approved cancer treatment hospital; that oncology service is a service generally provided in regional hospitals which provide Level III medical treatment; and, therefore, MCH should be considered on a different scale than Level II services. No evidence was presented that any health systems plan ever considered MCH as a regional cancer hospital or established any bed need for cancer patients at MCH. The evidence was also unrebutted that cancer patients at MCH are primarily treated by chemotherapy; that the drugs used in the treatment are extremely toxic, some have a short life span after being mixed and must be used almost immediately; that having a mini-pharmacy in the cancer ward is highly desirable; that special training of nurses is required to safely administer these drugs to patients; that patients develop nausea, ulcers in the mouth and throat, and present special feeding problems, and because of these special feeding problems it is advantageous to have some facilities in the cancer ward to prepare food at odd hours for patients; that cancer is a "personal" disease, patients desire more privacy, and should have private rooms; that an area away from the patient's room where the patient can visit with his or her family and the family can consult with the doctor in some privacy is desirable; that some newer drugs require hospitalization of the patient for treatment with these drugs, but the hospital stay is shorter and the drugs may be used over longer periods of time; and that the patient needs the security that comes from developing a feeling of trust by the patient of the nurses and doctors who are administering to his needs. MCH has no radiation treatment facilities in the hospital. However, the hospital staff has access to a Linear Accelerator which is located in a private physician's office on MCH's campus. Several witnesses testified to the need for additional beds for cancer patients at MCH; that patients have had to wait several days for a vacant bed; some oncology patients have had to be placed in other wards at MCH; and that special treatment and special training for nurses are required for oncology patients. Marion Regional Medical Center (MRMC) is a nonprofit hospital owned by the Marion County Hospital District, a public body established by statutes with taxing powers in Marion County. MRMC is currently expanding its facilities by 80 beds to the authorized 314-bed hospital pursuant to a CON approved in 1981. The $23 million for that project was financed by revenue bonds issued by Marion County Hospital District. Preliminary bids indicate the original project will be under the estimated cost resulting in a $2-3 million savings. If the additional beds here requested are approved and the construction associated therewith can be accomplished concurrently with the present construction, a saving of nearly $1 million can be obtained. MRMC is the only full service hospital in Marion County and provides medical, surgical, obstetrical, pediatric, psychiatric, intensive care, coronary care, and neurological/neurosurgical services. It has the third most active Emergency Room in the state and receives approximately 45 percent of its admissions through this service. MRMC's proposed project calls for the construction of a sixth floor on the hospital, construction of 66 inpatient beds, and the conversion of a 20-bed pediatric unit for use as a labor and delivery suite, a net gain of 46 beds. As initially proposed, this would provide for eight additional pediatric beds, four pediatric intensive care beds, and 34 medical-surgical beds to be used as a pulmonary medicine unit. Before the hearing the request for additional pediatric beds was withdrawn, leaving a request for 34 additional hospital beds and four pediatric intensive care beds, a total of 38 medical-surgical beds, at a cost of $2.8 million. It was stipulated that both MCH and MRMC provide an acceptable quality of care and operate efficiently. The application satisfied the criteria in Section 381.494(6)(c) with the possible exception of need, and need is the only issue in dispute in these proceedings. Both applicants submitted evidence that they accept all patients regardless of their ability to pay; however, MCH is a private for-profit hospital whose bad debt and charity care amounts to two percent of its gross revenues. MRMC's patient load is four percent indigent and bad debts, and charity care amounts to 12 percent of its gross revenues. Exhibit 18 shows MCH patient utilization to be 61 percent Medicare and one percent Medicaid, and MRMC patient utilization to be 51 percent Medicare and five percent Medicaid, in 1981. There is currently "applicable district plan" or "annual implementation" as provided for in Section 381.494(6)(c)1, Florida Statutes (1982). The implementation of this statute has been stayed by rule challenges. The North Central Florida Health Planning Council, Inc. (NCFHPC), was the Health Systems Agency (HSA) for what was formerly known as Health Service Region II which included only Marion County as a district sub-area. Prior to the July 1, 1982, amendment of Florida's CON law, the HSA reviewed applications and made recommendations with written findings of fact to DHRS. The 1982 CON law eliminated HSA, accordingly the NCFHPC no longer exists. The former HSA recommended approval of the applications of both MCH and MRMC; however, the staff of the HSA recommended disapproval of both applications. For the determination of need in these proceedings, a planning horizon of five years is acceptable and was used by all parties. Thus, the need for the requested CON is assessed for the year 1988. At this time the population of Marion County is forecast to be 165,880. The percentage of persons 65 and older in Marion County is increasing in proportion to the remainder of Marion County's population, and this increase will continue through 1988. This "aging" of the population is occurring throughout the United States as people live longer and demographics change with differing birth rates at differing periods. No evidence was submitted that the percentage of people over 65 is greater in Marion County than in other parts of Florida. MCH has 190 authorized medical-surgical beds and MRMC has 244 authorized medical-surgical beds, for a total of 434 such beds authorized in Marion County in two hospitals across the street from each other in Ocala, Florida. With the 1982 amendment to the CON statute the HSA in Marion County ceased to exist and has been replaced by a local health council. Rule challenges have stayed the promulgation of a comprehensive state health plan and the only Health Systems Plan in being for Marion County is the revised 1983 Health Systems Plan (HSP). This plan was approved by the HSA for Marion County in June of 1982 and contains goals, objectives and standards for planning for the health services required in Marion County. Standard 1-1 provides the need for medical-surgical beds within each Level II planning area (Marion County) should be based on the actual 1980 medical-surgical bed need per 1,000 population in this area. Standard 2-1 provides no additional beds should be added to a community's total bed supply until the occupancy rate of medical- surgical beds in the community exceeds 85 percent if more than 200 such beds are available in the community. The generally accepted standard for occupancy rate above which more beds may be needed is 80 percent. However, where beds are concentrated in one area, which is the case in Marion County where 434 medical- surgical beds are authorized, 85 percent occupancy leaves a reasonable surplus of beds to cover most emergencies or unusual situations that would cause the bed availability to be exceeded. The need for medical-surgical beds per 1,000 population (use rate) in Marion County in 1980 was 2.41. The HSP has a goal of 3.5 beds per 1,000 population and an objective of 4.0 beds per 1,000 population by 1987 in Region II. Applying the 1980 use rate to the 1988 forecast population of Marion County results in a need for 400 medical-surgical beds. The Health Systems Plan update for Marion County defines medical- surgical beds as all hospital beds which are not reserved solely for the use of pediatric, obstetrics, or psychiatric patients. At the time the revised Health Systems Plan for Marion County was promulgated, the two hospitals, MRMC and MCH, had been authorized an additional 80 and 65 beds, respectively, and these beds were being placed in service. By prescribing a use rate for 1980 as the standard to be used in considering applications for additional medical-surgical beds in 1983 and for a year or two thereafter, it would be reasonable to conclude the HSA expected the use rate for the years 1981 and 1982 to be influenced by the addition of the recently authorized 144 beds and to not accurately reflect a reliable use rate for planning purposes. MRMC and MCH presented expert witnesses who, by using different modalities, containing different assumptions, arrived at a need for additional beds in Marion County in 1988 ranging from 97 to 200. Most of these modalities used an occupancy rate of 3.5 beds per 1,000 population and 80 percent utilization of beds. All assume increasing usage of medical-surgical beds by the increasing and aging population. In their application MRMC and MCH planned to finance these projects with rate increases of 11 percent per year (to keep even with inflation) and a continuing increase in the number of patients handled at these higher rates. While inflation may again be up to 11 percent or higher, it is generally accepted today that the current inflation rate is five percent or less. More than 50 percent of both MRMC and MCH patients are presently covered by Medicare, which pays 80 percent of the charges generated by these patients. To assume that this situation will not only continue in the face of current federal deficits, but grow to cover the increased use of these facilities predicted in the assumptions used to show increased bed need for 1988, is not necessarily a valid assumption. Evidence was presented that the number of doctors in Marion County has doubled in the last five years. The ratio of doctors to the population of Marion County for 1977-78 and 1982-83 was not presented nor was the percent increase in the number of doctors in the United States over the past five years. Without some basis for comparison, the fact that the number of doctors in a particular community doubled over a five-year period has no relevancy.
Conclusions THIS CAUSE came before the Agency for Health Care Administration (“the Agency") concerning the denial of Certificate of Need (“CON”) Application No. 10187 submitted by Naples HMA, LLC d/b/a Physicians Regional Medical Center-Collier to establish a 17-bed comprehensive medical rehabilitation unit in District 8, Collier County. 1. On June 7, 2013, the Agency published its decision denying CON Application 10187 submitted by Naples HMA, LLC d/b/a Physicians Regional Medical Center-Collier (“Physicians Regional”) to establish a 17-bed comprehensive medical rehabilitation unit in District 8, Collier County. 2. On June 7, 2013, the Agency published its decision denying CON Application 10188 submitted by Venice HMA, LLC d/b/a Venice Regional Medical Center (“Venice Regional”) to establish a 22-bed comprehensive medical rehabilitation unit in District 8, Sarasota County. 3. On June 28, 2013, Physicians Regional filed a petition for formal administrative hearing challenging the Agency’s denial of CON Application No. 10187. 4. On June 28, 2013, Venice Regional filed a petition for formal administrative hearing challenging the Agency’s denial of CON Application No. 10188. 5. The petitions for formal administrative hearing were referred to the Division of Administrative Hearings (‘DOAH”). 6. Pursuant to the order of the Administrative Law Judge, the above-named intervenors were permitted to intervene in their respective actions and the matters were consolidated. 7. On July 7, 2014, Physicians Regional filed a Notice of Voluntary Dismissal. 8. On July 7, 2014, Venice filed a Notice of Voluntary Dismissal. It is therefore ORDERED: 1. The denial of Physicians Regional’s CON Application No. 10187 is upheld. 2. The denial of Venice Regional’s CON Application No. 10188 is upheld. ORDERED in Tallahassee, Florida, on this esi day of ‘uly Quand l gud fy ElizaMeth Dudek, Secretary / Agency for Health Care Administration
Other Judicial Opinions , 2014. A party who is adversely affected by this Final Order is entitled to judicial review, which shall be instituted by filing one copy of a notice of appeal with the Agency Clerk of AHCA, and a second copy, along with filing fee as prescribed by law, with the District Court of Appeal in the appellate district where the Agency maintains its headquarters or where a party resides. Review of proceedings shall be conducted in accordance with the Florida appellate rules. The Notice of Appeal must be filed within 30 days of rendition of the order to be reviewed. CERTIFICATE OF SERVICE I CERTIFY that a true and correct of this Final Order rved on the below-named persons by the method designated on this 772 day of f , 2014. Richard J. Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florida 32308 (850) 412-3630 James H. Peterson, III Administrative Law Judge Division of Administrative Hearings (Electronic Mail) Lorraine M. Novak, Esquire Office of the General Counsel Agency for Health Care Administration (Electronic Mail) Karen A. Putnal, Esquire Robert A. Weiss, Esquire Moyle Law Firm, P.A. 118 N. Gadsden Street Tallahassee, Florida 32301 Kputnal@moylelaw.com Rweiss@moylelaw.com (Electronic Mail) R. Terry Rigsby, Esquire Brian A. Newman, Esquire Pennington, P.A. 215 South Monroe Street, Second Floor Tallahassee, Florida 32301 Trigsby@penningtonlaw.com Brian@penningtonlaw.com (Electronic Mail) 3 James McLemore, Supervisor Certificate of Need Unit Agency for Health Care Administration (Electronic Mail) Marisol Fitch Health Services & Facilities Consultant Certificate of Need Unit Agency for Health Care Administration (Electronic Mail) | Susan C. Smith, Esquire Corinne T. Porcher, Esquire Geoffrey D. Smith, Esquire Smith and Associates 3301 Thomasville Road, Suite 201 Tallahassee, FL 32308 Susan@smithlawtth.com Corinne@smithlawtlh.com Geoft@smithlawtlh.com (Electronic Mail) Sabrina B. Dieguez, Esquire Smith & Associates 1499 S. Harbor City Blvd., Suite 202 Melbourne, Florida 32091 Sabrina@smithlawth.com (Electronic Mail)
The Issue The issue in this case is whether the methodology for grouping hospitals adopted by the HCCB pursuant to Sections 4D- 1.03, 4D-1.12(1) and 4D-1.12(2), F.A.C., constitutes an invalid exercise of delegated legislative authority as being arbitrary or capricious? Mercy has also raised one issue as to whether the grouping methodology is violative of constitutional guarantees of administrative equal protection and due process. This issue, however, is beyond the jurisdiction of the Division of Administrative Hearings.
Findings Of Fact Introduction. The HCCB and Its Hospital Grouping Function. The HCCB was formed pursuant to Part II of Chapter 395, Florida Statutes (1979). The HCCB was created pursuant to the specific authority of Section 395.503, Florida Statutes (1979), in order to further the accomplishment of legislative intent contained in Section 395.5025, Florida Statutes (1984 Suppl.): It is the intent of the Legislature to assure that adequate health care is affordable and accessible to all the citizens of this state. To further the accomplishment of this goal, the Hospital Cost Containment Board is created to advise the Legislature regarding health care costs; inflationary trends in health care costs; the impact of health care costs on the state budget; the impact of hospital charges and third-party reimbursement mechanisms on health care costs; and the education of consumers and providers of health care services in order to encourage price competition in the health care marketplace. The Legislature finds and declares that rising hospital costs and cost shifting are of vital concern to the people of this state because of the danger that hospital services are becoming unaffordable and thus inaccessible to residents of the state. It is further declared that hospital costs should be contained through improved competition between hospitals and improved competition between insurers, through financial incentives which foster efficiency instead of inefficiency, and through sincere initiatives on behalf of providers, insurers, and consumers to contain costs. As a safety net, it is the intent of the Legislature to establish a program of prospective budget review and approval in the event that competition-oriented methods do not adequately contain costs and the access of Floridians to adequate hospital care becomes jeopardized because of unaffordable costs. As a part of its responsibilities the HCCB is required, "after consulting with appropriate professional and governmental advisory bodies and holding public hearings, and considering existing and proposed systems of accounting and reporting utilized by hospitals," to specify a uniform system of financial reporting for hospitals. Section 395.507(1), Florida Statutes Suppl.) to: In order to allow "meaningful comparisons" of data reported by hospitals under the uniform system of financial reporting, the HCCB is required by Section 395.507(2), Florida Statutes (1984 Suppl.) to group hospitals according to characteristics, including, but not limited to, a measure of the nature and range of services provided, teaching hospital status, number of medical specialties represented on the hospital staff, percentage of Medicare inpatient days, average daily census, geographical differences, and, when available, case mix. In providing for grouping of hospital, the HCCB is required to establish ten general hospital groups and additional speciality groups "as needed." Section 395.507(2), Florida Statutes (1984 Suppl.). No hospital group can contain fewer than five hospitals, however. Id. Grouping is to be provided by rule. Id. Pursuant to Section 395.509(1), Florida Statutes (1984 Suppl.), every Florida hospital is required to file its budget with the HCCB for "approval." The budget is required to be filed on forms adopted by the HCCB and based on the uniform system of financial reporting. Section 395.507(6), Florida Statutes (1984 Suppl.). To determine whether a hospital's budget is to be approved, all hospitals in Florida are to be placed in groups. A hospital's budget is then compared to the budgets of the hospitals assigned to its group. Hospital groups for this purpose are established pursuant to Section 395.509(4)(a), Florida Statutes (1984 Suppl.). The provisions of Section 395.509(4)(a), Florida Statutes (1984 Suppl.), are identical to Section 395.507(2), Florida Statutes (1984 Suppl.). In determining whether a hospital's budget is to be approved, Section 305.509(2), Florida Statutes (1984 Suppl.), establishes two initial "screens" which a hospital must meet based upon the hospital's gross revenue per adjusted admission. The term "gross revenue" is defined as: the sum of daily hospital service charges, ambulatory service charges, ancillary service charges, and other operating revenue. Gross revenues do not include contributions, donations, legacies, or bequests made to a hospital without restriction by the donors. Section 395.502(11), Florida Statutes (1984 Suppl.). "Adjusted admission" is defined by Section 395.502(1), Florida Statutes (1984 Suppl.), as: the sum of acute admissions and intensive care admissions divided by the ratio of inpatient revenues generated from acute, intensive, ambulatory, and ancillary patient services to gross revenues. Gross revenues per adjusted admission (hereinafter referred to as "GRAA") is therefore the total hospital ambulatory and ancillary service charges and other operating revenue for all acute and intensive care admissions divided by the ratio of inpatient revenues from acute, intensive, ambulatory and ancillary patient services to gross revenue; or, stated more simply , inpatient revenue per admission. The "screens" which must be met in order for a hospital's budget to be approved upon initial determination are: (1) the hospital's GRAA must not be in the upper 20th percentile of the hospitals within its group; and (2) the rate of increase in a hospital's GRAA as contained in its current budget compared to the hospital's GRAA as reported in its most recently approved budget must not exceed a "maximum allowable rate of increase" if the hospital's GRAA is in the 50th to 79th percentile of the hospitals in its group. If a hospital's GRAA is in the 49th percentile or less of the hospitals in its group, its budget is automatically approved. In determining whether a hospital's GRAA fails the screens, Section 395.509(2), Florida Statutes (1984 Suppl.), provides: Percentile values for gross operating revenue per adjusted admission shall be determined monthly by the board for each group established pursuant to s. 395.507(2) by ranking projected gross operating revenues per adjusted admission contained in the most recently approved or submitted budgets for the hospitals in each group, including any hospital that is contesting its grouping assignment. In determining the applicability of paragraph (a) or paragraph (b), the board shall consider the basis of the projections by the hospital, including consideration of the following factors: any increase in patient admissions caused by the creation of preferred provider organizations or health maintenance organiza- tions, population increases, changes in the hospital case mix or in services offered, changes in technology, or other similar factors. If a hospital's GRAA fails either of the screens (its GRAA is in the upper 20th percentile of its group or its GRAA rate of increase is excessive and its GRAA is in the 50th to 79th percentile of its group) that hospital's budget must be reviewed by the HCCB "to determine whether the rate of increase contained in the budget is just, reasonable, and not excessive." Section 395.509(5), Florida Statutes (1984 Suppl.). Pursuant to Section 395.509(6), Florida Statutes (1984 Suppl.), the HCCB is authorized, if it first determines under Section 395.509(5), Florida Statutes (1984 Suppl.), that the hospital's rate of increase is not just, reasonable and not excessive, to amend or disapprove any hospital's budget which does not meet the two screens of Section 395.509(2), Florida Statutes (1984 Suppl.), to establish a rate of increase which is "just, reasonable, and not excessive." The HCCB's authority under Section 395.509(6), Florida Statutes (1984 Suppl.), applies only if the HCCB first complies with the following pertinent provisions of Section 395.509(5), Florida Statutes (1984 Suppl.): The board shall disapprove any budget, or part thereof, as excess that contains a rate of increase which is not necessary to maintain the existing level of services of the hospital or, if the hospital increases its existing level of services, any amount not necessary to accomplish that increase. In making such deterioration . . . the board shall consider the following criteria: The efficiency, sufficiency, and adequacy of the services and facilities provided by the hospital. The cost of providing services and the value of the services to the public. The ability of the hospital to improve services and facilities. The ability of the hospital to reduce the cost of services. The ability of the hospital to earn a reasonable rate of return. The accuracy of previous budget submissions by the hospital compared to the actual experience of the hospital the The number of patient days reimbursed by Medicare or Medicaid. The number of patient days attributable to the medically indigent. The research and educational services provided by the hospital if it is a teaching hospital. The projected expenditures or revenues for or from construction of facilities or new services which are subject to regulation under s. 381.494 may not be included in the budget of a hospital until the construction or services are approved or authorized by the state health planning agency. The cost of opening a new hospital, for first 3 years. The Challenged Rules. In carrying out its duty to establish a uniform system of financial reporting, the HCCB adopted Section 4D- 1.03, F.A.C., which provides: The Board, pursuant to Section 395.505, Florida Statutes, hereby adopts and establishes a uniform system for hospitals to file the prior year audited actual data report, the interim report of financial and statistical information. This system is described and the forms, instructions, and definitions therefor are contained in the Board's publication entitled Hospital Uniform Reporting System Manual. The Chart of Accounts adopted pursuant to Section 395.507(1), Florida Statutes, and this Chapter 4D-1, and as hereafter modified, shall be utilized by each hospital for submitting the prior year audited actual data report, the interim report and the budget report. In order to determine whether a hospital's budget should be automatically approved under Section 395.509(2), Florida Statutes (1984 Suppl.), the HCCB adopted Section 4D-1.12, F.A.C. Sections 4D-1.12(1) and (2), F.A.C., provide: The staff shall review the budget report based upon the hospital's ranking for gross revenue per adjusted admission within its group and upon its rate of change in gross revenue per adjusted admission in the proposed budget as required in Section 395.507(6), Florida Statutes, and the most recently Board approved budget. As part of the budget report review process, groupings of hospitals shall be established according to the characteristics and methodology as outlined in Chapter V, Section B, Hospital Unit Uniform Reporting System Manual and as outlined in Section 395.507(2), Florida Statutes. Percentile values for gross revenue per adjusted admission shall be determined monthly for each group by ranking projected gross revenue per adjusted admission contained in the most recently approved or submitted budgets for the hospitals in each group, including any hospital that is contesting its grouping assignment. 12. Sections 4D-1.03 and 4D-1.12(1) and (2), F.A.C., are the rules challenged by Mercy. These rules, as quoted herein, were effective as of November 5, 1984. The rules were originally adopted effective June 30, 1980. The rules were amended to their present wording in response to "major" legislation enacted in 1984 which amended Part II, Chapter 395, Florida Statutes (1983), and granted authority to the HCCB for the first time to approve, disapprove or amend hospital budgets under certain circumstances. Chapter 79-106, Laws of Florida. The challenged rules essentially provide that the HCCB, when grouping of hospitals for purposes of the uniform system of financial reporting and for purposes of reviewing and comparing budgets to determine if they should be automatically approved under Section 395.509(2), Florida Statutes (1984 Suppl.), will apply the grouping methodology outlined in Chapter V, Section B of the Hospital Uniform Reporting System Manual (hereinafter referred to as the "Manual"). Section 4D-1.18, F.A.C., also adopted effective November 5, 1984, incorporates by reference the Manual within each rule in Chapter 4D-1, F.A.C., which references the Manual. This rule has not been challenged in this proceeding. The Hospital Grouping Methodology and Its Development. Generally, Chapter V, Section B of the Manual, sets out the objective of the grouping methodology, the procedure for forming groups, a list of the variables considered in forming groups and the weight to be accorded each variable. The goals of the grouping methodology, as provided in the Manual, are to "facilitate comparison of hospitals with similar patient mix and market conditions" and to "develop groups of sufficient size . . . to assure statistically valid comparisons." Based upon the procedure for forming groups contained in the Manual, hospitals are grouped into nine, non-teaching, short-term hospital groups, one Major teaching hospital group and a number of specialty hospital groups. It is the method of grouping hospitals into nine short-term hospital groups which is at issue in this proceeding. Assignment of hospitals to the nine short-term hospital groups is accomplished through the use of the "McQueen's K-means clustering algorithm included in the cluster analysis t computer program package CLAN developed by T.D. Klastorin and Robert Ledingham (June, 1980 version)." A clustering analysis is a method of grouping a set of objects (in this case, hospitals) into relatively homogeneous groups. The goal of a clustering algorithm is to minimize the differences between the members of the group. The objects are grouped based upon a set of variables which are considered significant for purposes of comparing the objects. In order to account for the significance of each variable, the variables are weighted. The variables have a numerical score and after weighing, the weighted sum of the variables for each object is compared and the objects are grouped based upon their variable scores. There are a number of clustering algorithms which can be used to group hospitals. The HCCB chose to use the "McQueen's K-means" clustering algorithm. The use of McQueens K-means clustering algorithm has not bean challenged in this proceeding. Nor does the evidence establish that the selection of McQueen's K-means clustering algorithm is arbitrary and capricious. The clustering algorithm is performed by computer. The computer program utilized by the HCCB to perform the algorithm is called "CLAN" and was developed by T.D. Klastorin and Robert Ledingham. The evidence at the hearing supports a finding that the selection of this computer program is reasonable. Once hospitals are grouped, they are notified of their group designation and allowed to request reconsideration of their group assignment. The request must made within thirty days after notification. Following the creation of the HCCB in 1979, Price Waterhouse & Company was engaged by the HCCB as a consultant to assist in still establishing an appropriate hospital grouping methodology. The HCCB also created an advisory committee to assist the HCCB and Price Waterhouse & Company in developing the grouping methodology. This committee, designated as the Technical Advisory Committee (hereinafter referred to as the "TAC") was comprised of individuals from the hospital industry and academia and certified public accountants. The TAC worked with Price Waterhouse & Company in developing the grouping methodology and the uniform reporting system. Because of time constraints, the TAC's involvement with evaluating the methodology was limited. The HCCB ultimately decided to pattern the grouping methodology it adopted after the grouping methodology then being used by the State of Washington, as recommended by Price Waterhouse & Company. The Washington system was not adopted exactly; a number of changes to Washington's methodology were made to the grouping methodology adopted by the HCCB. Mercy has proposed several findings of fact beginning on page 35 and ending on page 38 of its proposed order concerning the "Differences in Washington Hospital Characteristics and Grouping Methodology Model." Those proposed findings of fact can be and are hereby disposed of by the following finding of fact: because of differences in the hospital industries of the States of Florida and Washington and other differences between the two States, Florida's grouping methodology cannot be justified solely on the basis that Washington's grouping methodology was used as a starting point in developing Florida's grouping methodology. Those differences, however, do not support a finding of fact that Florida's grouping methodology is arbitrary and capricious since the Washington system was not adopted without substantial modifications, including a reduction of Washington's eighteen variables initially to fourteen and ultimately to seven, and the use of unequal weighting of the variables. The TAC reviewed and discussed the grouping methodology initially approved by the HCCB prior to its approval. Some of Mercy's witnesses, who were members of the TAC, indicated during their testimony that the TAC never decided anything because no "vote" was ever taken of TAC members and that the TAC did not advise the HCCB but instead advised the staff of the HCCB. Their testimony in this regard has been given little weight. The fact that no formal "vote" was taken of TAC members does not mean that the TAC did not take a position on matters it discussed. The consensus of the TAC could be, and was, gleaned from its discussions. The staff of the HCCB in fact reported decisions of the TAC to the HCCB verbally and by minutes of TAC meetings. Although the accuracy of staff's reports was sometimes questioned, no question was raised about whether TAC had taken positions. The fact that the HCCB staff reported TAC actions to the HCCB also disputes the testimony to the effect that TAC did not advise the HCCB but instead advised the staff of the HCCB. While it may be true that TAC did not deal directly with the HCCB, its analysis was reported, to the HCCB. The HCCB ultimately adopted rules effective June 30, 1980, which incorporated by reference to the Manual, the general outline of the grouping methodology adopted by the HCCB. The TAC ceased to exist following adoption of the HCCB's initial rules. Two new advisory committees were formed: a Technical Advisory Panel (hereinafter referred to as "TAP") on grouping and a TAP for financial analysis. The grouping TAP was made up of individuals from the hospital industry. The grouping TAP met in November and December of 1980 and reviewed the results of test runs of the grouping methodology initially adopted by the HCCB. The results of the initial run were described as "bizarre." This run used equal weighting of the variables. Equal weighting was abandoned and three to four more test runs were made and reviewed by the grouping TAP. After each run the variable weights were adjusted until the results appeared to be "reasonable." The HCCB also established a committee consisting of members of the HCCB designated as the Research and Development Committee (hereinafter referred to as the "R & D Committee"). The R & D Committee reviewed the results of test runs and also found the final groups reasonable. The HCCB met in January, 1981, and adopted the grouping methodology with the adjusted variable weights arrived at as a result of the test runs for use in establishing hospital groups for use in 1981. The grouping methodology was reviewed every year after its initial adoption in 1980. The methodology was reviewed by the HCCB, HCCB's staff, the TAP's and the R & D Committee each year. Throughout the period from 1980 to the present, criticisms of the grouping methodology have been made. Some of these criticisms were agreed with and others were rejected by the HCCB or its staff. Following review of the grouping methodology by the TAP's and the R & D Committee in 1981, the original fourteen variables were reduced to eight. In January, 1982, the weight of one of the variables was changed and one variable was replaced by another variable. In December, 1982, a variable was deleted; seven variables remained. In 1983, clustering analysis was limited in its application to the formation of short-term acute care general hospital groups. In 1984, following the significant amendment of Chapter 395, Florida Statutes (1983), the HCCB adopted the present challenged rules. The rules were effective November 5, 1984. The only change in the grouping methodology approved by the HCCB was the substitution of the Florida price level index variable for percent of population over age 65. The weight assigned to the Florida price level index was the same as the weight that had been assigned to the percent of population over age 65. The changes made to the grouping methodology in 1984 were first suggested by the staff of the HCCB to the grouping TAP in June of 1984. The grouping TAP met on July 11, 1984 and considered and discussed the proposed changes. A number of problem areas were discussed. Although no test run results were presented at this TAP meeting, they were provided to TAP members before the HCCB adopted the grouping methodology changes. Concerns about the geographic or exogenous variables expressed at the grouping TAP meeting suggested a belief that too much or too little emphasis was being placed on geographic considerations. Mercy has proposed a number of findings of fact beginning on page 33 and ending on page 35 of its proposed order concerning the significance of the changes made by the Legislature in 1984 to Part II of Chapter 395, Florida Statutes (1983). Those proposed findings of fact essentially deal with the fact that the powers of the HCCB after the 1984 amendments may have a more significant impact on hospitals and that, therefore, the grouping methodology is of greater interest to hospitals. Mercy's proposed findings of fact are not, however, relevant in determining whether the challenged rules are arbitrary and capricious. The fact that the effect of the grouping methodology on a hospital may now be different does not mean that the use of the grouping methodology, as modified after the 1984 legislative changes to the law, which was developed when the purpose of grouping was different, is not an appropriate methodology. The evidence does not support such a conclusion. Therefore, to the extent that Mercy's proposed findings of fact under Section II, A, of its proposed order have not already been made, they are rejected as unnecessary. Mercy and the HCCB have proposed findings of fact as to whether Mercy has ever questioned the HCCB's grouping methodology since it was first adopted prior to instituting this proceeding. Those proposed findings of fact are not deemed relevant in determining whether the grouping methodology is arbitrary and capricious. If the grouping methodology is in fact arbitrary and capricious, the fact that Mercy did not challenge the methodology when it was first adopted will not make it any less arbitrary and capricious today. Mercy's Challenge. A. Introduction. Mercy is a not-for-profit, general acute care hospital with 550 licensed beds located in Dade County, Florida. Mercy has raised a number of points in this proceeding and its proposed order in challenging the rules in question. All of those points, according to Mercy, prove that the rules are an invalid exercise of delegated legislative authority. In determining whether the facts support such a conclusion, the following standard must be kept in mind: [I]n a 120.54 hearing, the hearing officer must look to the legislative authority for the rule and determine whether or not the proposed rule is encompassed within the grant. The burden is upon one who attacks the proposed rule to show that the agency, if it adopts the rule, would exceed its authority; that the requirements of the rule are not appropriate to the ends specified in the legislative act; that the requirements contained in the rule are not reasonably related to the purpose of the enabling legislation or that the proposed rule or the requirements thereof are arbitrary or capricious. A capricious action is one which is taken without thought or reason or irrationally. An arbitrary decision is one not supported by facts or logic or despotic. Administrative discretion must be reasoned and based upon competent substantial evidence. Competent substantial evidence has been described as such evidence as a reasonable person would accept as adequate to support a conclusion. Agrico Chemical Company v. State, Department of Environmental Regulation, 365 So.2d 759, 763 (Fla. 1st DCA 1978), cert. denied, 376 So.2d 74 (1979). Additionally, the following must be kept in mind: The well recognized general rule is that agencies are to be accorded wide discretion in the exercise of their lawful rulemaking authority, clearly conferred or fairly implied and consistent with the agencies' general statutory duties. . . . An agency's construction of the statute it administers is entitled to great weight and is not to be overturned unless clearly erroneous. . . . Where, as here, the agency's interpretation of a statute has been promulgated in rulemaking proceedings, the validity of such rule must be upheld if it is reasonably related to the purposes of the legislation interpreted and it is not arbitrary and capricious. The burden is upon petitioner in a rule challenge to show by a preponderance of the evidence that the rule or its requirements are arbitrary and capricious. . . . Moreover, the agency's interpretation of a statute need not be the sole possible interpretation or even the most desirable one; it need only be within the range of possible interpretations. Department of Professional Regulation v. Durrani, 455 So. 2d 515, 517 (Fla. 1st DCA 1984). The witnesses who testified in this proceeding who were accepted as experts were qualified in a number of different areas. Those witnesses qualified as experts in statistical analysis or related areas and health care finance rendered opinions as to the appropriateness of the HCCB's grouping methodology. The method of grouping hospitals adopted by the HCCB is a statistical method. Therefore, the determination of whether the HCCB's methodology is arbitrary and capricious depends largely upon whether the methodology is statistically sound. Mercy and the HCCB therefore presented the testimony of witnesses qualified in the area of statistics: Rick Zimmerman, Ph.D., an expert in statistical analysis and social science statistics (for Mercy), and Duane Meeter, Ph.D., an expert in economics and applied statistical analysis and Frank Fox, Jr., Ph.D., an expert in applied statistics (for the HCCB). All three witnesses were knowledgeable and credible. Dr. Zimmerman testified that the HCCB's grouping methodology was "clearly inappropriate." Dr. Zimmerman's opinion was based upon a three step analysis in which he determined: (1) whether the variables selected by the HCCB are appropriate; (2) whether the weights assigned to the variables by the HCCB are appropriate; and, (3) the effect changing the variables and/or weights would have on hospital groups. The results of Dr. Zimmerman's analysis, which formed the basis for his opinion that the HCCB's grouping methodology is not appropriate, are discussed, infra. Mercy has proposed a number of findings of fact in its proposed order concerning the credibility of Dr. Meeter's and Dr. Fox's testimony. Some of those proposed findings of fact have been considered in determining the weight given to their testimony. Both Dr. Meeter and Dr. Fox were, however, knowledgeable and credible. In addition to the opinion of its statistical expert, Mercy presented the testimony of three witnesses who were accepted as experts in health care finance: Messrs. Lawrence R. Murray, Jerry A. Mashburn and Anthony Krayer. All three are certified public accountants. All testified that it was his opinion that the HCCB's grouping methodology was arbitrary. The bases for their opinions are discussed, infra. Selection of "Seed" Hospitals. In order to use a clustering algorithm, a starting point is needed; the first object (hospital) to be placed in each group must be selected. The first objects selected are called "seed" objects. Mercy has attached the HCCB's method of selecting the nine "seed" hospitals in initially performing the McQueen's K-means clustering algorithm. Mercy has proposed the following findings of fact with regard to this point: While none of the parties challenged the use of McQueen's and the CLAN program, no support was offered during the hearing for the method by which the HCCB had selected the nine seed hospitals as initial clustering points. The HCCB's own statistician criticized the HCCB's selection method. The Rankis-Zimmerman report indicates that the final groupings based upon the HCCB's seed hospitals were vastly different than groupings based upon the utilization of seed hospitals selected on a statistical basis. Both the HCCB's and Mercy's statisticians proposed statistically sound methods for selecting seed hospitals, which had not been employed by the HCCB in the Grouping Methodology. [Citations omitted] These proposed findings of fact are not relevant to this proceeding. The burden is on Mercy to show that the selection of "seed" hospitals was arbitrary and capricious; the HCCB is not required to show "support" for its method of selecting the seed hospitals. Additionally, whether there are other methods of selecting seed hospitals is not the test. The HCCB's interpretation of the statute need not be the sole interpretation or even the most desirable one; it only needs to be within the range of possible interpretations. Durrani, supra. Therefore, even if the Rankis-Zimmerman report does indicate that the final groupings of hospitals of the HCCB were vastly different than groupings based upon other methods of selecting seed hospitals, it does not automatically follow that the HCCB's method of selecting seed hospitals was not "within the range of possible interpretations. The weight of the evidence does not prove that the HCCB's method of selecting seed hospitals was arbitrary and capricious. Selection of the Variables. In delegating legislative authority to the HCCB to establish a grouping methodology, the Legislature provided that the following relevant characteristics are to be taken into account: A measure of the nature and range of services provided; Number of medical specialties represented on the hospital staff; Percentage of Medicare inpatient days; Average daily census; Geographic differences; and Case mix, "when available." In response to the Legislature's mandate, the HCCB has adopted seven variables or characteristics. The variables selected by the HCCB include five hospital- specific (endogenous) variables and two geographic (exogenous variables). The variables are as follows: Endogenous Variables: Average occupied beds. Available services. Physician mix. Number of residents. Percent Medicare days. Exogenous Variables: Florida price level index. Personal income. The following findings of fact are made with regard to each of the specific characteristics required to be taken into account by the Legislature and the variables adopted by the HCCB: 1. A measure of the nature and range of services provided. The HCCB has provided in the Manual that "available services" or a service index will be considered. The specific services considered are listed on Table B, Chapter V, of the Manual. Table B also weights or provides a score for each of the various services listed. Each hospital gets the specified score if it has a particular service available. The available services listed are based upon a survey of hospital administrators and chief financial officers in New York, New York, made in the 1970's. Problems with the list of available services have been pointed out to the HCCB and its staff. The primary problem is that the volume of services provided is not taken into account. The problems with the service index, however, relate to the fact that the service index is a proxy for case mix. To date, there is no alternative available which would be a better proxy for case mix. The Legislature contemplated this fact by providing that a measure of the services provided by a hospital will be considered and that case mix will be taken into account "when available." Therefore, while there are "problems" with the service index, consideration of available services is mandated by the Legislature and there are no acceptable alternatives available use for by the HCCB. 2. Number of medical specialties represented on the hospital staff. 52. The HCCB has provided that a physician specialties mix be considered in grouping hospitals. This physician specialties mix is based upon a list of twenty- six specialties for which a hospital gets a single credit for each specialty available regardless of the number of physician specialists available in each specialty or the volume of patients admitted by a physician. 52. Like the service index, the physician specialties mix is a proxy for ease mix and has problems associated with its use. Also like the service index, consideration of this factor is mandated and there are no acceptable alternatives available for use by the HCCB. 3. Percentage of Medicare inpatient days. 53. The HCCB has provided that "percentage Medicare days be considered in grouping hospitals. Consideration of this variable has not been shown to be arbitrary and capricious. 4. Average daily census. 53. The HCCB has provided that "average occupied beds" is to be considered in grouping hospitals. It does not appear that this variable's use was proper, as discussed, infra. 5. Geographic differences. The HCCB has provided that geographic differences be considered in grouping hospitals by providing for the inclusion of the Florida price level index, by county, and median income, by county, as variables to be considered. The only thing that the evidence established with regard to these variables was that they are not "very good" predictors, that "if" they are intended as a measure of input prices they are "poor substitutes," and that there may be "better" measures of the cost of doing business. The evidence does not, however, show that the use of these variables is arbitrary and capricious. Mercy has proposed a number of findings of fact concerning geographic influences in part II, H of its proposed order. The proposed findings of fact begin on page 29 and end on page 33. Most of these proposed findings of fact are not made in this Final Order because they are not deemed relevant or material and are unnecessary to the resolution of this proceeding. The proposed findings of fact contained in part II, H of Mercy's proposed order purportedly show that the HCCB has inadequately accounted for geographic influences. The evidence does establish that the financial characteristics of Florida hospitals and GRAA are affected by the geographic location of a hospital. This is especially true in Florida because of the impact on parts of the State from tourism, language barriers, the number of elderly residents, the available labor markets, and competition. It is also true that the combined weights of the two geographic variables the HCCB has selected for consideration in the grouping methodology--the Florida price level index and median income--is only one-seventh of the combined weights of all the HCCB's variables. It is also true that the grouping methodology results in hospitals from different areas of the State being grouped together, i.e., Mercy's hospital group includes twenty- three hospitals, four of which are located in Dade County and three of which are located in Escambia County. It does not necessarily follow, however, that the HCCB has been arbitrary and capricious in designating only two variables to take into account geographic differences between hospitals. The evidence also does not support a conclusion that it was not proper for the HCCB to limit the weight of the geographic variables to one-seventh of the total weight of the variables. Nor does the evidence demonstrate that the inclusion of hospitals from different areas of the State in the same group is not a proper result just because geographic influences are important. The fact that a large percentage of Dade County and south Florida hospitals do not qualify for automatic approval of their budgets under Section 395.509(2), Florida Statutes (1984 Suppl.), because they are in the upper 20th and the upper 50th to 79th percentiles does not necessarily prove that geographic influences have not been adequately accounted for either, as suggested be Mercy on page 30 of its proposed order. The evidence simply does not support such a conclusion. Nor does it necessarily follow that because Dade County hospitals are "efficient" in the minds of some of Mercy's witnesses and yet are unable to achieve automatic approval of their budgets that the grouping methodology does not adequately account for geographic influences, as suggested by Mercy on pages 30 and 31 of its proposed order. First, the Legislature has provided that factors other than geographic differences are to be considered, which the HCCB has provided for. It may therefore be that some Dade County hospitals do not achieve automatic approval of their budgets because of the other variables. The fact that not all Dade County hospitals fail to achieve automatic approval of their budgets supports such a conclusion. Also, even though a hospital's budget is not automatically approved it does not necessarily mean that it is considered inefficient. If that were the case, its budget would probably be subject automatically to amendment or disapproval. That is not the case. If a hospital's budget is not automatically approved its budget is subject to further review under Section 395.509(5), Florida Statutes (1984 Suppl.). It may still be determined that the hospital is "efficient" based upon this review. The Legislature, in enacting Part II of Chapter 395, Florida Statutes, did indicate that it intended to promote competition and efficiency among hospitals in order to contain hospital costs. Section 395.5025, Florida Statutes (1984 Suppl.). The grouping methodology and, in particular, the comparison of hospitals' GRAA under Section 395.509(2), Florida Statutes (1984 Suppl.), does not alone achieve that intent. Therefore the opinion of several of Mercy's witnesses that Dade County hospitals and in particular, Mercy, are efficient does not support a conclusion that the methodology is arbitrary and capricious or that geographic influences are not adequately considered. On pages 31 and 32 of its proposed order, Mercy suggests that Dade County hospitals only compete with other Dade County hospitals and therefore grouping hospitals from all sections of the State is illogical. In support of this suggestion, Mercy proposes findings of fact to the effect that the HCCB has recognized that consumers are interested in comparing hospital charges on a regional basis and has provided information about hospital cost on a county-by- county basis in the past. Mercy's proposed findings of fact are not accepted for essentially the same reasons that its proposed findings of fact with regard to the efficiency of hospitals were rejected. These proposed findings of fact do not support a finding that the HCCB's grouping methodology is arbitrary and capricious or that geographic differences have not been adequately taken into account. Mercy's has also proposed findings of fact with regard to geographic differences to the effect that after the Legislature specifically required that "geographic differences" be considered in an amendment to Chapter 395, Florida Statutes (1981), in 1982, the HCCB has not added any additional geographic factors to be considered. Although no additional geographic variables have been added, geographic variables have been reviewed and have been changed since 1982. More importantly, these proposed findings of fact do not prove that the existing variables are not adequate. 6. Case Mix. 66. Case mix is to be taken into account "when available." The evidence does not establish that case mix is available at this time. 7. Other variables. The HCCB is not limited to a consideration of the factors which the Legislature specifically provided are to be considered. Sections 395.507(2) and 395.509(4)(a), Florida Statutes (1984 Suppl.). The only other variable the HCCB has provided for consideration is "number of residents." No evidence of significance concerning this variable was presented at the hearing. There was testimony at the hearing that there are other variables which would be appropriate for consideration in grouping hospitals. The evidence does not, however, establish that failure to consider other variables means that the grouping methodology adopted by the HCCB is arbitrary and capricious. Dr. Zimmerman opined that he had determined that the variables selected by the HCCB were not appropriate. Dr. Zimmerman based his opinion upon the fact that he had conducted a "multiple regression analysis." According to Dr. Zimmerman, a "multiple regression analysis is a statistical procedure used to evaluate the relationship of a given set of independent, predictor variables (the HCCB's seven variables) to a single dependent variable (GRAA)." Based upon his application of multiple regression analysis, Dr. Zimmerman concluded that three of the variables used in the HCCB's grouping methodology are not statistically significant predictors of GRAA: available services, average occupied beds and median income. Two of these variables (available services and average occupied beds) are required by Sections 395.507(2) and 395.509(4)(a), Florida Statutes (1984 Suppl.), to be taken into account in the grouping methodology. These Sections also require that geographic factors, which median income is, be taken into account. This does not, however, mean that median income must be included as a variable by the HCCB. Dr. Meeter testified that the statistical significance of the HCCB's variables can be determined by the use of "log transformation." Based upon Dr. Meeter's use of log transformation, median income and available services are statistically significant variables; average occupied beds is not statistically significant. Although the HCCB was required to include "average daily census" as a factor in grouping hospitals, the HCCB was not required to use "average occupied beds." Based upon Dr. Zimmerman's and Dr. Meeter's testimony, the use of average occupied beds as a variable was not proper. Whether the use of available services and median income as variables was proper depends upon whether log transformation is a proper method of determining the statistical significance of variables. Although the evidence on this question was in conflict, it appears that the use of log transformation was proper. The inclusion of available services and median income is therefore not arbitrary and capricious. A second problem with the variables used by the HCCB suggested by Dr. Zimmerman involves the correlation between the seven predictor variables or "multicollinearity." The existence of multicollinearity can invalidate a clustering program. Dr. Zimmerman determined that the correlation between the physician mix, available services and average occupied beds variables and between the Florida price level index and median income variables is large enough that there is a "potential" problem. Dr. Zimmerman's determination that there is a "potential" problem was made through two techniques. He first used "paired correlation." Based upon paired correlation, Dr. Zimmerman used a "rule of thumb" that a paired correlation of 0.7 or higher should be looked at closer. Finding a paired correlation between physician mix, available services and average occupied beds of .74 and between the Florida price level index and median income of .71, Dr. Zimmerman then calculated "R squared" to determine if a potential problem did in fact exist. Dr. Zimmerman indicated that the calculation of R squared is the most highly recommended method of determining if multicollinearity is a problem but agreed there are other methods of making such a determination. Dr. Meeter indicated that Dr. Zimmerman's rule of thumb that based upon paired correlations of 0.7 or higher indicates the problem should be looked at more closely is too strict. Other than Dr. Zimmerman's "experience" (which according to Dr. Zimmerman, consisted of a class he took), Dr. Zimmerman did not cite any authority which supported his rule of thumb. The only other source Dr. Zimmerman referred to--the "SPSS" manual--only indicates that the .82-1.0 range indicates that extreme collinearity exists. Another problem raised by Dr. Meeter with Dr. Zimmerman's conclusions as to multicollinearity, involves the use of "variance inflation factors" (hereinafter referred to as VIF is another technique used by statisticians to determine if multicollinearity is a problem. Dr. Zimmerman did not look at VIF. VIF can be determined by transforming R squared: VIF 1/1- R2. A VIF in excess of 5 or 10 is an indication that multicollinearity exists. One source quoted by Dr. Meeter even indicates that a much higher VIF is necessary to conclude that multicollinerity exists. Transforming Dr. Zimmerman's R squared calculations indicates that VIF is in excess of 5 in only one instance. As discussed more fully, infra, Dr. Zimmerman used a number of alternative methods of grouping hospitals which he designated as "Schemes." Based upon Dr. Zimmerman's "Scheme 3," Dr. Zimmerman found an R squared value of .819. The VIF for an R squared value of .819 is in excess of 5. Scheme 3, however, is not an application of the HCCB's grouping methodology; it is a grouping methodology in which the variables are assigned different weights. As indicated by Dr. Meeter, the weights used in grouping can effect the correlation of the variables. Therefore, the fact that Scheme 3 indicates a possible multicollinearity problem does not prove that multicollinearity is in fact a problem with the HCCB's grouping methodology. Based upon the foregoing it is found that multicollinearity does not exist sufficiently to conclude that the variables used by the HCCB are arbitrary and capricious. Dr. Zimmerman only testified that there was a "potential" problem. Additionally, although multicollinearity may invalidate a clustering program, the evidence does not prove that the HCCB's clustering program is in fact invalid because of any existing "potential" problem. In light of the foregoing findings of fact, it is clear that the HCCB's variables are appropriate with the exception of average occupied beds. The fact that this one variable is not statistically significant, however, does not by itself support a finding that the grouping methodology is inappropriate. The Lack of Testing of the Grouping Methodology. A third point raised by Mercy is entitled "Lack of Testing" in its proposed order and includes several proposed findings of fact on pages 17 and 18 of Mercy's proposed order. Mercy has essentially proposed findings of fact that: (1) it had been recommended to the HCCB when it originally adopted its grouping methodology in 1980 that a statistician be hired to test the grouping methodology; (2) that the failure to do so had been criticized in the past; that it had been recommended that the HCCB obtain assistance of individuals knowledgeable in Florida hospital characteristics to evaluate the grouping process but had failed to do so; (4) that the HCCB had not, until just prior to the hearing of this case, hired a statistician; (5) that the HCCB has not used multiple regression analysis or within-cluster co- variance weighting; and, (6) that the State of Washington's State Hospital Commission has employed a statistician to test its methodology and has effectively been advised by individuals knowledgeable with Washington's hospital characteristics. These proposed findings of fact do not establish that the grouping methodology adopted by the HCCB is arbitrary and capricious even if they were all correct findings of fact. All that these proposed findings of fact show is that the HCCB may not have gone about the adoption of its grouping methodology in the most appropriate manner. Any such shortcomings, based upon 20/20 hindsight, in the manner in which the methodology was adopted do not prove that the grouping methodology itself is not appropriate. Additionally, the evidence does not support all of these proposed findings. In particular, as was discussed, supra, the HCCB did in fact look to individuals knowledgeable in Florida hospital characteristics to evaluate its grouping methodology. The Weight of the Variables. The most significant and troublesome challenge made by Mercy to the HCCB's grouping methodology involves the weights assigned to the variables considered in grouping hospitals. The weights assigned by the HCCB to the seven HCCB variables are: Variable Weight Endogenous: Average occupied beds. 1.0 Available services. 2.0 Physician mix. 0.5 Number of residents. 0.5 Percent Medicare days. 2.0 Exogenous: Florida price level index. 0.5 Personal income. 0.5 The determination of whether the weights selected by the HCCB are arbitrary and capricious depends largely upon the evidence presented at the hearing by those witnesses knowledgeable in the field of statistics. Three witnesses were qualified as experts in statistically related fields. All three were well qualified in their fields and were credible and persuasive. According to Dr. Zimmerman, "the weights used currently by the HCCB are clearly inappropriate." In Mercy exhibit 17, Dr. Zimmerman reaches the following conclusion with regard to the HCCB's variable weights: These weights clearly do not reflect the relationship of the various variables to GRAA and thus appear as arbitrary and inappropriate for use in clustering hospitals on the basis of cost-related variables. Dr. Zimmerman's opinion is based upon the use of "multiple regression analysis," which, according to Mercy exhibit 17, "assesses the relationship of each of the predictor variables to the dependent measure (GRAA)." The evidence, however, does not support a finding of fact that multiple regression analysis is the only statistically valid method of establishing weights to be used in clustering analysis. In fact, there are a number of statistically valid methods of establishing variable weights. One of those acceptable methods is the "subjective" method which was used by the HCCB. Doctors Meeter and Fox substantiated this finding of fact. The use of the subjective method involves the participation of individuals knowledgable in the Florida hospital industry in reviewing and commenting on the weights used. The evidence clearly supports a finding that individuals with such knowledge participated in the process of developing the HCCB's grouping methodology including the selection of variable weights. Even one of Mercy's witnesses provided testimony which supports this conclusion: Mr. Kenneth G. McGee testified that "[i] t was just a trial and error process of changing weights until we ended up with something that people considered more reasonable than what had been produced in the past." Mercy has questioned Dr. Meeter's testimony with regard to the use of the subjective method of weighting variables based upon a number of proposed findings of fact. First, Mercy has proposed findings of fact to the effect that Dr. Meeter indicated that the subjective method is "bad" if not carefully applied. What Dr. Meeter actually said was that any method should be applied carefully. Secondly, Mercy has proposed a finding of fact that in a book relied upon by Dr. Meeter in rendering his opinion about the subjective method--John Hardigan's 1975 book, Clustering Algorithms--the author describes the subjective method as an "unsatisfactory" one. What Dr. Meeter's testimony proves is that Hardigan's comment was a tongue- in-cheek comment that there are several appropriate methods of weighting variables all of which are unsatisfactory, including regression analysis (used by Dr. Zimmerman) and the subjective method (use by the HCCB). Dr. Meeter also relied upon other statistical literature in rendering his opinion as to the use of the subjective method in determining variable weights. Finally, Mercy has suggested that Dr. Meeter did not undertake any independent "statistical" analysis which would support his opinions. Based upon the nature of Dr. Meeter's testimony, it does not appear that such a statistical analysis is a prerequisite to concluding that the use of the subjective method is an acceptable method of determining variable weights. Mercy has proposed a finding that the subjective method of weighting is inappropriate based upon Dr. Zimmerman's testimony. Dr. Zimmerman was asked the following questions and gave the following responses concerning the subjective method: Q Now, in your understanding of how the Board arrived at its weights, is it your opinion that that is totally inappropriate methodology for clustering? Yes or no or maybe? A I am looking to counsel for counsel here. MR. PARKER: Do you understand the questions? THE WITNESS: I do understand the question. And let me give you my full answer as I best understand it. The weights -- and I think what I have commented on at great length -- the weights used by the Hospital Cost Containment Board are clearly on statistical grounds inappropriate. There's no question about that. BY MR. COLLETTE: Now, on these clustering grounds, you testified as to your familiarity with clustering grounds, on clustering grounds, are they totally inappropriate? A If the question is -- I wouldn't say that. Hearing that there is no objection, I will continue. I would rule out the use of a purely subjective weighting scheme as a final solution for cluster analysis. I think it might be one that would be considered at a very early step, but never used, as kind of a preliminary idea. However, I would clearly rule out the use of a purely subjective weighting scheme as something to be proud of and actually put into application. So, if that means yes to your question, I guess yes in that specific way. Dr. Zimmerman's responses are not totally clear with regard to whether the subjective method is, in his opinion, an acceptable method of determining variable weights. Nor would his response, if totally clear, overcome the weight of the evidence in support of a conclusion that the HCCB's method of determining variable weights is not arbitrary and capricious. Alternative Methods of Grouping Hospitals. Mercy has proposed a number of findings of fact under a section of its proposed order entitled "Alternative Variables and Weights Indicated by Statistical Analyses." Pages 22 to 29 of Mercy's proposed order. Some of the proposed findings included therein have been dealt with in other portions of this Final Order, including those findings of fact dealing with the use of multiple regression analysis and multicollinearity. In Dr. Zimmerman's report (Mercy exhibit 17) and during his testimony a number of alternative methods of grouping hospitals were tested and evaluated. Dr. Zimmerman concluded that a number of these alternative methods would be preferable to the methodology adopted by the HCCB. Dr. Zimmerman tested twelve different methods (referred to as "Schemes" by Dr. Zimmerman): the HCCB's, the State of Washington's and ten other methods which used some or all of the seven variables designated by the HCCB. Scheme 3 used all seven variables selected by the HCCB but with different weights. Dr. Zimmerman rejected this scheme because of multicollinearity. In Scheme 4, Dr. Zimmerman used only the four variables which he found to be statistically significant: physician specialties mix, number of residents, percent Medicare days and the Florida price level index. Dr. Zimmerman recognized that this Scheme was not acceptable because of the statutory mandate as to the types of factors which must be taken into account. In order to recognize the requirement of Sections 395.507(2) and 395.509(4)(a), Florida Statutes (1984 Suppl.), that certain variables be taken into account and to alleviate the purported multicollinearity problem, Dr. Zimmerman combined the variables he considered highly correlated into two "scales." "Scale 1" combined physician specialties mix, available services and average occupied beds and "Scale 2" combined the Florida price level index and median income. The weights assigned to these scale were based upon the weights Dr. Zimmerman felt were more appropriate as discussed, supra. Dr. Zimmerman then used multiple regression analysis and a variety of combinations of variables and Scales in Schemes 6-12. Of these Schemes, Dr. Zimmerman testified that Schemes 6 and 10 were preferable, if Scheme 4 could not be used. Scheme 6 involved the use of all of the variables: percent Medicare days, number of residents and Scales 1 and 2. Scheme 10 involved the use of all of the variables except median income: percent Medicare days, number of residents, the Florida price level index and Scale 1. Dr. Zimmerman compared the results of using the HCCB's grouping methodology to the results from using Schemes 3,4,6 and 10. The results showed that more Dade County hospitals had GRAA's, in comparison to the hospitals in the resulting groups under Schemes 3,4,6 and 10, which would result in automatic approval of their budgets than under the HCCB's methodology. Mercy's position within its group also improved as a result of using Schemes 3,4,6 and 10. These proposed findings of and Mercy's proposed findings of fact concerning alternatives considered by Dr. Meeter do not prove that the HCCB's grouping methodology is arbitrary and capricious. As found, supra, six of the seven variables selected by the HCCB are reasonable. The weights assigned to those variables have also been found to be reasonable and Mercy's suggested findings of fact with regard to multicollinearity have been rejected. Mercy has failed to prove that the HCCB's grouping methodology is arbitrary and capricious. Therefore, any alternative methods or Schemes and the results of using such methods cannot and do not overcome such findings. Conclusions. Based upon the foregoing, it is clear that the bases for the opinions that the HCCB's grouping methodology is inappropriate are not supported by a preponderance of the evidence. Dr. Zimmerman's opinion, which was based upon a number of conclusions, was only supported by the fact that one of the variables selected by the HCCB is not proper. The evidence, however, does not support a finding that this fact alone means that the grouping methodology adopted by the HCCB is inappropriate. The facts do not support a conclusion that the grouping methodology adopted by the HCCB is arbitrary and capricious.
The Issue Whether the Division of Administrative Hearings (DOAH) has jurisdiction to conduct a formal hearing under the provisions of Sections 120.569 and 120.57(1), Florida Statutes, if the Florida Commission on Human Relations (FCHR) does not make a "cause" or "no cause" determination, as provided in Section 760.11(3), Florida Statutes, but rather issues a Notice of Dismissal, pursuant to Section 760.11(8), Florida Statutes. Whether DOAH has jurisdiction to conduct a formal hearing under the provisions of Sections 120.569 and 120.57(1), Florida Statutes, if the Petition for Relief was not timely filed pursuant to Section 760.11(6), Florida Statutes. Whether DOAH has jurisdiction to conduct a formal hearing under the provisions of Sections 120.569 and 120.57(1), Florida Statutes, if Petitioner fails to name Respondent in the Petition for Relief filed with the FCHR, as required by Section 760.11(1), Florida Statutes.
Recommendation Based on the foregoing facts and conclusions of law, it is RECOMMENDED that a final order be entered dismissing with prejudice the Petition of Manuel Pedraza in DOAH Case No. 02-0237, and FCHR Case No. 99-0849, for failure to timely file his Petition for Relief and for failure to properly name Respondent in the Petition. DONE AND ENTERED this 21st day of June, 2002, in Tallahassee, Leon County, Florida. ___________________________________ DANIEL M. KILBRIDE 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 21st day of June, 2002. COPIES FURNISHED: Susan K. W. Erlenbach, Esquire Erlenbach Law Offices, P.A. 2532 Garden Street Titusville, Florida 32796 W. Russell Hamilton, III, Esquire Morgan, Lewis & Bockius, LLP 5300 First Union Financial Center 200 South Biscayne Boulevard Miami, Florida 33131-2339 Denise Crawford, Agency Clerk Florida Commission on Human Relations 2009 Apalachee Parkway, Suite 100 Tallahassee, Florida 32301 Cecil Howard, General Counsel Florida Commission on Human Relations 2009 Apalachee Parkway, Suite 100 Tallahassee, Florida 32301
Findings Of Fact At all times relevant hereto Daniel Francis Sanchez was licensed as a physician by the Florida Board of Medical Examiners having been issued license number ME0038795. At all times relevant hereto Respondent was Regional Medical Director of IMC which operated HMO offices in Hillsborough and Pinellas Counties. On October 17, 1985, Alexander Stroganow, an 84 year old Russian immigrant and former cossack, who spoke and understood only what English he wanted to, suffered a fall and was taken to the emergency room at Metropolitan General Hospital. He was checked and released without being admitted for inpatient treatment. Later that evening his landlady thought Stroganow needed medical attention and again called the Emergency Medical Service. The ambulance with EMS personnel arrived and concluded Stroganow was no worse than earlier when taken to the emergency room and they refused to transport him again to the hospital. The landlady then called the HRS hotline to report abuse of the elderly. The following morning, October 18, 1985, an HRS case worker was dispatched to the place where Stroganow lived. She was let in by the landlady and found an 84 year old man who was incontinent, incoherent, apparently paralyzed from the waist down, with whom she could not carry on a conversation to find out what condition he was in. She called for a Cares Unit to come and evaluate the client. An HRS Cares Unit is a two person team consisting of a social worker and nurse whose primary function is to screen clients for admission to nursing homes and adult congregate living facilities (ACLF). The nurse on the team carries no medical equipment such as a stethoscope, blood pressure cuff, or thermometer, but makes her determination on visual examination only. Upon arrival of the Cares Unit both members felt Stroganow needed to be placed where he could be attended. A review of his personal effects produced by his landlady showed his income to be over the maximum for which he could qualify for medicaid placement in a nursing home; that he was a member of IMC's Gold- Plus HMO; his social security card; and several medications, some of which had been prescribed by Dr. Dayton, a physician employed by IMC at the South Pasadena Clinic. The Cares team ruled out ACLF placement for Stroganow at the time because he was not ambulatory but felt he needed to be placed where he could be attended to and not left alone over the coming weekend. To accomplish this, they proceeded to the South Pasadena HMO clinic of IMC to lay the problem on Dr. Dayton, the Assistant Medical Director for IMC in charge of the South Pasadena Clinic. Stroganow had been a client of the South Pasadena HMO for some time and was well known at the clinic and by EMS personnel. There were two and sometimes three doctors who treated patients at this clinic and, unless the patient requested a specific doctor, he was treated by the first doctor available. Stroganow had not specifically requested he be treated by Dr. Dayton. When the Cares team met with Dr. Dayton they advised him that Stroganow had been taken to Metropolitan General Hospital Emergency Room the night before but did not advise Dayton that the EMS team had refused to transport Stroganow to the hospital emergency room a second time the previous evening. Dayton telephoned the emergency room at Metropolitan General to ascertain the medical condition of Stroganow when brought in the evening before. With the information provided by the Cares team and the hospital, Dayton concluded that Stroganow should be given a medical evaluation and the quickest way for that to occur was to call the EMS and have Stroganow taken to an emergency room for evaluation. When the Cares team arrived, Dayton was treating patients at the clinic. A doctor's office, or clinic, is not a desirable place to have an incontinent, incoherent, non- ambulatory patient brought to wait with other patients until a doctor is free to see him. Nor is the clinic equipped to do certain procedures frequently needed in diagnosing the illness and determining treatment needed for an acutely ill patient. EMS squads usually arrive within minutes of a call to 911 for emergency medical assistance and it was necessary for someone to be with Stroganow with the EMS squad arrived. Accordingly, Dayton suggested that the Cares team return to Stroganow and call 911 for assistance in obtaining a medical evaluation of Stroganow. If called from the HMO office, the EMS squad would have arrived long before the Cares team could have gotten back to Stroganow. Dr. Dayton did not have admitting privileges at any hospital in Pinellas County at this time. Upon leaving the South Pasadena HMO clinic, the Cares team returned to Stroganow. Enroute, they stopped to call a supervisor at HRS to report that the HMO had not solved their problem. The supervisor then called the Administrator at IMC to tell them that one of their Gold-Plus patients had an emergency situation. Respondent, Dr. Sanchez, called and advised that Dr. Dayton would take care of the problem. Later, around 2:00 p.m. when no ambulance had arrived, the Cares team called 911 from a telephone a block away from Stroganow's residence and arrived back just before the emergency squad. The EMS squad again refused to transport Stroganow to an emergency room and this information was passed back to Sanchez who directed that Stroganow be taken to Lake Seminole Hospital. This was the first time either Dayton or Sanchez was aware that the EMS squad had refused to transport Stroganow to an emergency room. Although Sanchez did not have admitting privileges at Lake Seminole Hospital, IMC had a contractual agreement with Lake Seminole which provided that certain staff doctors at Lake Seminole would admit patients referred to Lake Seminole by IMC. Pursuant to this contractual arrangement, Stroganow was admitted to Lake Seminole Hospital where he was treated for his injuries and evaluated for his future medical needs.
Findings Of Fact Petitioner applied to the Board of Medicine for licensure by endorsement as a physician in the State of Florida. The Board of Medicine is the regulatory agency in the State of Florida charged with the duty to regulate the practice of medicine in the state, including the licensure of physicians. Petitioner has been in psychotherapy as a patient of Dr. Stanley G. Garner since 1986. Dr. Garner was qualified and accepted as an expert witness in the speciality of psychiatric medicine. Petitioner began psychotherapy with Dr. Garner and has remained in therapy with him on a voluntary basis. The purpose and emphasis of Petitioner's psychotherapy has been the identification and resolution of ongoing family problems, including marital and divorce issues, which have been imposed upon an earlier history of being raised in a dysfunctional family. Petitioner was very upset when she first saw Dr. Garner in 1986 due to events that resulted in protracted divorce proceedings. The purpose of Petitioner's therapy has never been to assess or ensure Petitioner's fitness to practice medicine since this was never a therapeutic issue to either the Petitioner or to Dr. Garner. Petitioner's psychotherapy has been directed towards improving her comfort, happiness, and quality of life. Dr. Garner has spent over 400 hours in therapy with Petitioner and has diagnosed Petitioner as having Dysthymia, which is a fairly recent term for a depressive condition that used to be called neurotic depression or depressive neurosis. Dysthymia was described by Dr. Garner as being an extremely common condition and one that is shared by many of his physician patients without impairment of their ability to perform as physicians with reasonable care and skill. According to the Diagnostic and Statistical Manual of the American Psychiatric Association, the diagnosis of Dysthymia has to include the presence of at least two of the following conditions while depressed: (1) poor appetite or over eating, (2) insomnia or hypersomnia, (3) low energy or fatigue, (4) low self esteem, (5) poor concentration or difficulty making decisions, (6) feelings of hopelessness. Dysthymia does not usually lead to sudden changes in personality or behavior, and Dr. Garner has noted no sudden changes in Petitioner's personality during the course of his treatment of her. Petitioner's application reflected that she had undergone psychotherapy as a patient of Dr. Garner since 1986. In response to the application, Respondent required information from Dr. Garner as to Petitioner's treatment. By his letter of July 17, 1991, Dr. Garner provided Respondent with historical information as to Petitioner's condition and her psychotherapy and advised Respondent, in pertinent part, as follows: Dr. Shienvold has been in psychotherapy with me, on a regular basis, since 9/13/86 for treatment of her depressive disorder. She is currently being seen weekly in individual psychotherapy and weekly in group psychotherapy. The frequency of her visits has varied during the course of her treatment. Currently, she is taking Prozac 20 mg. each morning; this medication seems to be helping her cope with the many pressures of her current life situation. She was not on medication during most of her time in therapy. * * * Dr. Shienvold's diagnosis is Dysthymia (300.40 DSM III-R). She has never shown any evidence of a psychotic disorder and has no history of, nor propensity for, substance abuse. Her prognosis is excellent, but she definitely needs ongoing psychotherapy for the foreseeable future. There are still many current vocational, financial, familial, and parental pressures which impede her more rapid progress. I have no doubt, however, that she will overcome these obstacles and continue to be a dedicated and hard working physician. This applicant for medical licensure, in my professional opinion, will certainly be able to practice medicine with reasonable skill and safety. Given her very high level of intelligence and her rapidly increasing fund of knowledge and experience, along with her genuine caring devotion to her patients, I am convinced that Dr. Shienvold will become a truly outstanding physician and do honor to our profession. If my comments seem flowery and excessive, it is because in my almost 35 years as a physician, and as a psychiatrist to a large number of fellow physicians, I have only rarely seen someone as qualified to practice Medicine as Frances Shienvold. As part of the application process, Respondent arranged for the Physician's Recovery Network (PRN) to have Petitioner examined by an independent psychiatrist. This examination was performed in January 1992 by Dr. Burton Cahn. On February 24, 1992, Dr. Cahn submitted his report to Dr. Goetz by letter. Dr. Cahn's letter provided, in pertinent part, as follows: At the present time, I see no reason why Dr. Shienvold would be unable to practice medicine because of a mental or emotional condition. She is not psychotic. She is not a substance abuser. She is not at this time significantly depressed. She does not represent a danger to herself or to others. I therefore find no reason on a mental or emotional basis that Dr. Shienvold is unable to practice medicine. The record in this proceeding is not clear when the idea that a monitoring contract with the PRN would be deemed necessary by the Board of Medicine. It is apparent from Dr. Garner's follow-up letter to the Board of Medicine on January 16, 1992, that Petitioner was aware at that time that such a condition may be imposed on her licensure by Respondent. Dr. Garner's letter of January 16, 1992, provided, in pertinent part, as follows: It is my professional opinion that the assignment of Dr. Shienvold to the Physicians Recovery Network was an error. The requirement that she sign an Advocacy Contract with "PRN" is inappropriate for her situation, and would be for anyone else with her particular medical/psychological history. There is certainly no need for any kind of "monitoring" of her continuation in psychotherapy. . . . * * * In summary, I believe that Dr. Shienvold should be granted her Florida license to practice medicine without any special conditions or restrictions. . . . * * * Her diagnosis remains the same (Dysthymia), and her prognosis is excellent. By letter dated February 26, 1992, Dr. Goetz advised the Board of Medicine that "Dr. Cahn finds no reason why Dr. Shienvold would be unable to practice medicine with reasonable skill and safety." Dr. Goetz's letter of February 26, 1992, also provided the following: "If the Board chooses to license this applicant, I would be pleased to monitor Dr. Shienvold's continuing treatment with a PRN contract." By Order dated March 16, 1993, the Board of Medicine approved Petitioner's application for licensure by endorsement with a condition. The Board's Order provided, in pertinent part, as follows: You are hereby notified pursuant to Section 120.60(3), Florida Statutes, that the Board of Medicine voted to APPROVE with certain requirements your application for licensure as a physician by endorsement. The Board of Medicine reviewed and considered your application by endorsement on October 2, 1992, in Miami, Florida and has determined that said licensure by endorsement be APPROVED with the requirement that you establish a monitoring contract with the Physician Resource Network (PRN). The Board stated as grounds therefore: That you have a history of successful psychotherapy for a depressive disorder that requires ongoing treatment. Although your ability to practice medicine has not been compromised, it is appropriate to establish monitoring to ensure continued successful treatment. At its February 6, 1993, meeting in Jacksonville, Florida, the Board denied your request for reconsideration of this matter. The requirement set forth herein is a requirement for licensure and should not be interpreted or applied as disciplinary action by the Board. The Physician's Resources Network referred to by the foregoing Order is the same organization as the Physician's Recovery Network. The PRN is also referred to as the Impaired Practitioner Program. The purpose of the PRN program is to protect the public by assuring the health and well being of licensed health practitioners in the State of Florida. Dr. Garner's testimony at the formal hearing was consistent with the opinions he expressed in his two letters to Respondent. Petitioner has been responsible in securing appropriate medical care for herself including psychiatric care, and has been a cooperative patient while under Dr. Garner's care. For most of her psychotherapy, Petitioner has been seeing Dr. Garner twice a week. At the time of the formal hearing, she was seeing him once a week. Dr. Garner has no reason to believe that she would irresponsibly discontinue her therapy or become uncooperative in the foreseeable future. Petitioner has not suffered severe Dysthymia, but she has been at times severely depressed. Those occasions when she was severely depressed were in reaction to her mother's death and in reaction to her abandonment by her father and by her husband. Prior to entering medical school, Petitioner held a Ph.D. in cell biology and anatomy. Over the past seven years she has gone through a divorce, reconciled with her mother, suffered the death of her mother, become estranged from her father and stepmother, and completed medical school. At the time of the formal hearing, she had almost completed her residency. Petitioner has never been found to be unfit to practice medicine with requisite levels of skill and care at any time during her residency. Petitioner has participated in a residency program at Jackson Memorial Hospital for approximately three years. The residency program includes participation in out patient clinics at Mt. Sinai Hospital and service in regular hospital wards, the emergency room, intensive care units for both neonatal patients and other pediatric patients. As a resident, Petitioner worked under the general supervision of a licensed physician, but she had ample opportunity to independently exercise her professional responsibilities and judgment. Petitioner's ability to practice medicine with fitness and safety has not been impaired by Dysthymia, any other mental or emotional condition, or the medication she takes for the Dysthymia. Her memory has not been impaired. At any given time, a person suffering from depression can have difficulty in concentrating or in making decisions. The evidence in this proceeding established that Petitioner's ability to concentrate and to make decisions in the day to day practice of her profession has not been impaired. Her interest in her patients has not been impaired. She does not suffer from unusual fatigue. Petitioner has various medical conditions that add stress to her life. She suffers from sinus problems which have resulted in surgery and ongoing treatment for infections, hypertension, hyperthyroidism, gastritis which includes duodenitis, and esophageal reflux. Petitioner continues to suffer financial and family problems relating to her father, stepmother, brother, and son. Petitioner can still become very upset at times. It is anticipated that Petitioner will remain under Dr. Garner's care for at least one more year. Petitioner intends to continue in psychotherapy until her symptomology is fully resolved. Dr. Garner considers Petitioner's prognosis to be excellent, but is of the opinion that she needs ongoing psychotherapy for the foreseeable future. Dr. Garner is of the opinion that Petitioner could practice medicine with the requisite skill and safety if she were to discontinue psychotherapy completely. At the time of the formal hearing, Petitioner had been taking Prozac for approximately two years. Prozac is an antidepressant which helps Petitioner keep her mood at a high level while she deals with difficult problems in psychotherapy. Dr. Garner is of the opinion that Petitioner can practice medicine with the requisite level of skill and safety without Prozac. He is of the opinion that it is best for her to continue to take Prozac and that there are no significant side effects to the medication. Dr. Roger Goetz is the director of the PRN program and was accepted as an expert in Respondent's impaired practitioner program. The purpose of a monitoring contract with the PRN is to monitor whether there is a failure of a participant to progress in psychotherapy, if there is a change in medication, if there is any discontinuance of therapy, or if there is a change of treating professionals. Dr. Goetz considers the monitoring contract to be the least intrusive way to establish a relationship between the participant and the PRN program. Dr. Goetz is of the opinion that it is in Petitioner's best interest and the best interest of the public that she be in a monitoring contract with the PRN as a condition of her licensure because the contract would provide confirmation that Petitioner is doing well in her therapy before it became necessary to institute a disciplinary action or investigation, the contract would ensure that no abnormal transference was going on, and the contract would, in light of her psychiatric treatment, give assurance that she poses no problem to the public welfare. Dr. Goetz made it clear that he was testifying as the Director of the PRN and that he was not attempting to speak on behalf of the Board of Medicine. He also made it clear that it was the responsibility of the Board of Medicine to decide whether a practitioner needs services from the PRN and that the PRN becomes involved after the Board of Medicine determines that a practitioner needs its services. The terms and conditions of the monitoring contract would be negotiated by the parties after the Board of Medicine enters a Final Order that requires the imposition of a monitoring contract. Because those negotiations have not occurred, Dr. Goetz could only testify as to the terms he would expect to be contained in a monitoring contract. In addition to the reports required of the treating psychiatrist, the contract would confer on the PRN the authority to require Petitioner to withdraw from practice for evaluation if the PRN determines that "any problem" has developed. The monitoring contract is expected to be of at least five years duration and, according to Dr. Goetz, be imposed as long as Petitioner is in therapy without regard to the purpose or the nature of her therapy. Dr. Garner is of the opinion that PRN monitoring would impede rather than ensure Petitioner's progress in therapy because it would diminish the underlying confidentiality of therapy. From the proceedings before the Board of Medicine, it is apparent that the board considered the information contained in Petitioner's application file, including the opinions expressed by Dr. Garner and by Dr. Cahn before entering its Order of March 16, 1993. At the formal hearing, there was no articulation of the reasons the Board of Medicine had for determining that Petitioner's history of psychotherapy and the fact that the psychotherapy was ongoing justified the imposition of the monitoring contract with the PRN.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a final order which unconditionally grants Petitioner's application for licensure to practice medicine by endorsement. DONE AND ENTERED this 29th day of November, 1993, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON 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 29th day of November, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-3038 The following rulings are made on the proposed findings of fact submitted by Petitioner. The proposed findings of fact in paragraphs 1, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 22, 25, 26, 27, 29, 32, 33, 34, and 40 are adopted in material part by the Recommended Order. The proposed findings of fact in paragraph 2 are adopted by the Recommended Order or are subordinate to the findings made. The proposed findings of fact in paragraphs 19, 20, 21, 23, 24, 28, 30, 31, 35, 36, 37, 42, and 43 are subordinate to the findings made. The proposed findings of fact in paragraphs 38 and 41 are rejected as being unnecessary as findings of fact, but are consistent with the conclusions reached. The proposed findings of fact in paragraph 39 are rejected as being speculative. The proposed findings of fact in paragraph 44 are rejected as being unnecessary to the conclusions reached. The following rulings are made on the proposed findings of fact submitted by Respondent. The proposed findings of fact in paragraphs 1, 2, 3, 4, 5, 7, 8, 10, 11, 13, and 14 are adopted in material part by the Recommended Order. The proposed findings of fact in paragraphs 6 and 9 are adopted in part by the Recommended Order. These proposed findings of fact are, in part, rejected as being inconsistent with the findings made. The proposed findings of fact in paragraph 12 are adopted as being opinions expressed by Dr. Goetz. COPIES FURNISHED: Howard J. Hochman, Esquire 1320 South Dixie Highway, Suite 1180 Coral Gables, Florida 33146 Claire D. Dryfuss, Esquire Assistant Attorney General Office of the Attorney General The Capitol, PL-01 Tallahassee, Florida 32399-1050 Dorothy Faircloth, Executive Director Board of Medicine Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0770 Jack McRay, Acting General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0770
Findings Of Fact Cilla McCray, is a resident of Gadsden County. The parties have stipulated that on December 3, 1977, she was admitted to the Tallahassee Memorial Hospital in an emergency medical condition, and that the treatment performed by the hospital was of an emergency nature. The parties have further stipulated that the Tallahassee Memorial Hospital is a regional referral hospital within the meaning of Section 154.304(4) , Florida Statutes (1977). Cilla McCray was admitted to the Tallahassee Memorial Hospital on December 3, 1977, and was discharged on January 9, 1978. The total bill for her services amounted to $8,753.80. The Hospital submitted a bill to Gadsden County in the amount of $1,521.48 for the services. This latter amount is the maximum allowed to be billed in accordance with the Florida Health Care Responsibility Act. Gadsden County has refused to pay the bill, contending that the patient was not indigent. The patient has not paid the bill. Cilla McCray is married to Lawrence McCray. They have three children but only two of them reside at home. The oldest child is not supported by his parents. During the six months preceding the hospitalization of Cilla McCray her husband had average earnings of $80.00 per week as a logger. Mrs. McCray had earned a total of $732.60 for employment during the six months prior to her hospitalization. The McCray's thus had average monthly earnings during that period in excess of $450.00 per month.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED: That a final order be entered rejecting the bill submitted by the Tallahassee Memorial Hospital for medical services performed for Cilla McCray. RECOMMENDED this 16th day of June, 1978, in Tallahassee, Florida. G. STEVEN PFEIFFER, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: John Shaw Curry, Esquire Post Office Box 706 Quincy, Florida 32351 John D. Buchanan, Jr., Esquire Post Office Drawer 1049 Tallahassee, Florida 32302 Chairman Board of County Commissioners Gadsden County Courthouse Quincy, Florida
The Issue Whether a certificate of need to construct a 60-bed short-term inpatient psychiatric hospital should be granted to CPC and whether a certificate of need to construct a 24-bed short-term inpatient psychiatric hospital should be granted to Apalachee?
Findings Of Fact Introduction. CPC. Community Psychiatric Centers, Inc., a proprietary corporation, was formed in 1968 by the merger of 2 existing psychiatric hospitals. It now consists of 24 psychiatric hospitals, two of which are located in Florida, and two subsidiary corporations. On December 16, 1983, CPC submitted to the Department an application for a certificate of need to construct and operate a 60-bed inpatient psychiatric hospital. The 60-beds are to consist of 15 beds for adolescents, 20 beds for adults in an open unit, 10 beds for adults in an intensive care unit and 15 beds for geriatric patients. Apalachee. Apalachee is a not-for-profit corporation. It began approximately 30 years ago as a small clinic. It was incorporated as the Leon County Mental Health Clinic in the 1960's and later changed its name to Apalachee Community Mental Health Services, Inc. Apalachee presently serves over 7,000 clients a year, has a $6,500,000.00 budget and 300 employees. It provides services to 8 north Florida counties: Gadsden, Liberty, Franklin, Leon, Wakulla, Madison, Jefferson and Taylor. Apalachee provides specialized continuums of care for substance abuse, children and geriatrics and basic generic services, including a 24-hour, 365 days-a-year emergency telephone and/or face-to-face evaluations. It also provides a full range of case management, day treatment and residential care primarily aimed at the acute and chronically mentally ill and specific programs for children, such as an adolescent day treatment program and an adolescent residential facility. Apalachee's residential programs include a program called Positive Alternatives to Hospitalization (hereinafter referred to as "PATH"). Apalachee also operates an 8-bed non-hospital medical detoxification program in conjunction with PATH. This program is operated in the same building as PATH. It also operates 3 group homes (an adult, an alcohol abuse and an adolescent half-way house) with 10 clients each (these houses will be expanded to 16 clients each), a geriatric residential facility with 60 to 70 beds and cater Oaks, a long-term residential treatment facility for adolescents. On November 15, 1983, Apalachee applied to the Department for a certificate of need for 24 short-term inpatient psychiatric beds. In its application filed during the final hearing of these cases, Apalachee proposed to construct a facility to house the 24-beds adjacent to its current "Eastside" facility. Its Eastside facility currently houses Emergency Services, PATH and its non-hospital medical detoxification programs. All adult mental health programs of Apalachee will also be located on the site in order to consolidate the full continuum of adult psychiatric care provided by Apalachee. Statutory Criteria. The following findings of fact are made as they pertain to the criteria included in Section 381.494(6)(c) and (d), Florida Statutes (1983), and Section 10-5.11(25), F.A.C. The Need for Psychiatric Services Florida State Health Plan and the District 2 Health Plan. General. The Florida State Health Plan is outdated and the District 2 Health Plan does not contain specific goals as to the need for short-term psychiatric care for District 2, the District the facilities would be constructed in. CPC and Apalachee did, however, address both plans, to the extent applicable, in their applications. The relationship of "need" to these plans, as agreed to by the Department, is not relevant to this proceeding, however. CPC also indicated that it evaluated local bed need by studying socioeconomic, population and employment data and by interviewing local practicing psychiatrists. CPC concluded that additional services were needed and filed its application. Although the Florida State Health Plan and the District 2 Health Plan do not address the question of need, need as determined under the Department's rules is crucial. Section 10-5.11(25), F.A.C., provides that a favorable need determination will "not normally" be given on applications for short-term psychiatric care facilities unless bed need exists under paragraph (25)(d). Under Section 10-5.11(25)(d)(3), F.A.C., bed need is to be determined 5 years into the future by subtracting the number of existing and approved beds in the District from the number of beds for the planning year based upon a ratio of .35 beds per 1,000 population projected for the planning year. The population projection is to be based on the latest mid-range projections published by the Bureau of Economic and Business Research at the University of Florida. The Department has projected a need for 185 total short-term psychiatric beds for District 2 for 1989. There are 82 currently licensed and 35 approved short-term psychiatric beds in District 2. Therefore, for 1989 there is a net short-term psychiatric bed need projected of 68 beds. Based upon the projected population of District 2 for 1990 (537, 567), which is 5 years from 1985, the total bed need is 188 beds. The net bed need for 1990 is 71 beds (188 total beds less 117 licensed and approved beds). The Department did not use this figure because the calculation for bed need for 1990 will not be made by the Department until July of 1985. Pursuant to Section 10-17.003, F.A.C., the total projected short-term psychiatric bed need for District 2 is allocated among 2 subdistricts. Subdistrict 2 consist of Franklin, Gadsden, Jefferson, Leon, Liberty, Madison, Taylor and Wakulla Counties. CPC's and Apalachee's proposed facility will be located in Subdistrict 2. Subdistrict 2 is the same area designated by CPC as its "primary" service area. This rule, which is to be "used in conjunction with Rule 10-5.11(25)(c)(d)(e)" allocates the 1988 short-term inpatient psychiatric and substance abuse projected bed need as follows: Subdistrict 1: 75 Subdistrict 2: 104 Total 179 Because the projected bed need for Subdistrict 2 under this rule is based upon 1988 projections, it is clearly in conflict with the requirement of Section 10-5.11(25)(d)(3), F.A.C., that bed need is to be projected 5 years into the future. The total bed need projected for the District for 1988 is 179 beds; for 1990, the total is 188 beds. Based upon the allocation of total bed need in Section 10- 17.003, F.A.C., the net bed need for Subdistrict 2 for 1988 is 44 beds: 104 total beds less 60 licensed and approved beds in Subdistrict 2. If it is assumed that the 9 additional total beds projected for 1990 should be allocated to Subdistrict 2, the net bed need for 1990 in Subdistrict 2 would be 53 beds (100 beds less 50 licensed and approved beds). No evidence was presented, however, to support the assumption that all 9 additional total beds will be allocated to Subdistrict 2. It is more likely that only 1 or 2 additional beds will be allocated to Subdistrict 2. Based upon the foregoing, the total net bed need for District 2 projected to 1990 is 71 beds and for Subdistrict 2 it is between 44 and 53 beds. CPC. CPC attempted at the hearing to show that its proposal is consistent with the bed need for District 2 as determined under Section 10-5.11(25)(d)(3), F.A.C. In the alternative, CPC has attempted to prove that there is a sufficient need in District 2 for additional short-term psychiatric beds based upon other methodologies and the state of psychiatric care currently being provided in Subdistrict 2. Sources of referral to the proposed CPC facility, according to Mr. John Mercer, will include physicians, the judiciary and legal system, the school system, employers and law enforcement. Referrals are inspected by Mr. Mercer based upon his conversations with physicians (Mr. Mercer did not interview persons from the other referral sources) , his personal experience and the fact that there will be a community relations or marketing position at the proposed facility. Local psychiatrists did testify that they would refer patients to CPC if its facility is approved. They did not, however, testify that they would refer all of their patients to CPC. They also testified that the CPC facility is needed. The local psychiatrists did not, however, indicate that they were aware of all of the facts as established during the proceeding. CPC, in its application, projected, based upon conversations with local physicians, that the facility will serve most of the area designated by the Department as District 2. District 2 is subdivided by CPC into a primary service area, consisting of Franklin, Gadsden, Jefferson, Leon, Liberty, Madison, Taylor and Wakulla Counties, and a secondary service area, consisting of Clay, Calhoun, Gulf and Jackson Counties in Florida and several counties located in extreme southwest Georgia. In Mr. Mercer's opinion, the proposed facility will serve persons from southwest Georgia; specifically, Brook, Decatur, Grady, Seminole and Thomas Counties. Mr. Mercer's opinion was based upon the availability of services in Georgia and conversations he had with Tallahassee physicians. Mr. Mercer's opinion, however, has been given little weight in determining the need for additional short-term psychiatric beds in District 2 based upon the testimony of Jay D. Cushman, an expert in health planning and development. Mr. Mercer's opinion that southwest Georgia residents will use the proposed CPC facility implies that there may be a need for additional short-term psychiatric beds. Mr. Mercer, however, failed to consider travel time and barriers to travel, patient origins or the effect, if any, of outmigration--the number of persons in District 2 who may leave the District for treatment outside the District. Although Mr. Mercer's conversations with local physicians are relevant and of some supportive weight, the local physicians' opinions should have been supported with other evidence. They were not. CPC, in its exhibit 3, projected a bed need of 14.67 beds attributable to southwest Georgia. This figure was arrived at by first assuming a bed need in the area of .35 beds per 1,000 population (119,051). This results in a gross bed need in southwest Georgia of 41.67 beds. From the gross number of beds, 27 existing beds were subtracted to arrive at a net bed need in District 2 attributable to southwest Georgia residents of 14.67 beds. No evidence supporting a conclusion that such a bed need exists in District 2 was presented at the hearing other than Mr. Mercer's opinion that the proposed facility will serve residents from southwest Georgia. It is therefore concluded that there is not a need for 14.67 beds in District 2 attributable to southwest Georgia residents. In its application, CPC projected a need for an additional 195 short- term psychiatric inpatient beds for District 2. This figure was based upon an average of bed need projected by using three different bed need methodologies. The three different methods resulted in a projected bed need of 64 beds, 266 beds and 255 beds. Application of the method which resulted in a bed need of 266 was modified during the hearing. The modification resulted in a bed need of 75.8 beds. Therefore, the bed need based upon the average of all 3 methodologies, as amended would be 131.6 beds. The three methods used by CPC in its application are different than the method used by the Department. None of the methods, based upon Mr. Cushman's testimony, are sound; they are structurally unsound, applied in an unsound manner or both. Under Method I, CPC starts with a projected short-term psychiatric bed need of 1988 of 44 beds, the net bed need as determined in Section 10-17.003, F.A.C. This figure is then increased by 9.44 beds for in-migration and 11 beds attributable to an adjustment for "desired occupancy level." As clearly established by Mr. Cushman's testimony, neither of the adjustments are sound. The projected bed need of 64 beds for 1988 pursuant to method I is therefore not a reliable figure. Pursuant to Method II, as modified during the hearing, CPC projected a bed need of 75.8 beds. Method III resulted in a projected net bed need of 255 beds. These projections are based upon a projected average length of stay of 30 days. No evidence was presented to support this projection; in fact, it is unrealistic when compared with the average length of stay of 16 days at similar facilities in Florida. CPC's Florida facilities have also not been able to achieve an average length of stay of 30 days. These formulas are also unrealistic because population figures used were for all of District 2. But existing beds taken into account only included the beds in Subdistrict 2. Finally, occupancy was not taken into account in either of the methods. CPC's Methods II and III are not sound, based upon the foregoing. Apalachee. Apalachee's application is for only 24 inpatient psychiatric beds, which is well below the bed need projected under the Department's methodologies for the District and the Subdistrict. Apalachee has projected that its proposed facilities will serve persons in the 8 counties it currently serves. These counties are the same counties which make up Subdistrict 2. Apalachee has not assumed that any patients will come from outside of the Subdistrict. Apalachee has shown that the patients who will use its facility are clients within its own present system, based upon historical data. This historical data establishes that an average of 10 to 12 Baker Act patients have been admitted to Tallahassee Memorial's psychiatric facility during past years. These persons would be admitted to Apalachee's new facility. Additional patients would consist of Apalachee clients which Tallahassee Memorial's facility will not admit and clients currently going into other Apalachee programs. Accessibility to Underserved Groups. CPC is willing to provide care for Baker Act patients. It has been projected that 5 percent of the proposed facility's patient days will be attributable to Baker Act patients. CPC is also willing to treat Medicaid patients and has again projected that 5 percent of the facility's days will be attributable to Medicaid patients. In addition, CPC has projected that 5 percent of its gross revenue will be set aside for the care of indigent patients which consist of those persons who are unable, at the time of admission, to pay all or a part of the charges attributable to their care. Indigent care may not be provided, however, if the facility is losing money. The provision of indigent care is based upon a CPC policy which was recently agreed upon and applies to new CPC facilities. The policy does not apply at the two existing CPC Florida psychiatric hospitals since they were established before the policy was adopted. Pursuant to the Florida Mental Health Act, Chapter 394, Part II, Florida Statutes, the Department's district administrator designates a facility in the district as the public receiving facility for Baker Act patients. In Subdistrict 2 of District 2, Apalachee has been designated as the public receiving facility. Apalachee is therefore responsible for ensuring that emergency care, temporary detention for diagnosis and evaluation and community inpatient care is available to Baker Act clients. As the public receiving facility in Subdistrict 2, Apalachee will clearly serve Baker Act patients. It has projected that in the first year of operation 40 percent (39.7 percent in the second year) of its patients at the new facility will be indigent and that the indigent patients will be primarily Baker Act patients. Seventy percent of Apalachee's clients are persons who need some type of financial assistance; Medicare, Medicaid and Baker Act. Apalachee has proposed to continue to serve these persons in the new facility. Apalachee's purpose in requesting a certificate of need is to allow Apalachee to provide a continuum of care for more Apalachee clients. In the past, Apalachee has experienced difficulty in obtaining inpatient care for certain Baker Act clients. Additionally, even though those problems have been minimal in the past year, there are some Baker Act clients who need inpatient care who are not appropriate patients for Tallahassee Memorial's psychiatric hospital. These patients are sometimes violent and "acting out." Although Tallahassee Memorial is providing adequate care for most Baker Act patients, some Baker Act patients are not admitted. Additionally, removal of Baker Act patients who are admitted by Tallahassee Memorial from Tallahassee Memorial's facility, as discussed infra, will improve the quality of care at Tallahassee Memorial. The cost of providing inpatient care to Baker Act patients will be less if Apalachee is granted a certificate of need for the requested 24 beds. At present, because of limited Baker Act funds, some Baker Act clients who need inpatient care are placed in other programs. With reduced cost for inpatient care, these clients will be able to receive the inpatient care they need. Additionally, Apalachee will serve forensic clients -- those mental health clients with criminal charges. A full-time forensic psychologist has been provided by Apalachee at the Leon County jail to facilitate this type service. The psychologist also evaluates for Baker Act qualification. According to the Director of the Leon County jail, persons in the jail with psychiatric problems are placed in a single "bull pen." Apalachee's work with forensics has been helpful. Like and Existing Psychiatric Services. The only "like and existing" psychiatric health care services in Subdistrict 2 are provided by Tallahassee Memorial. Tallahassee Memorial is a not-for-profit corporation. It currently owns an existing 60-bed short-term inpatient psychiatric facility located in Subdistrict 2. The facility is operated as a separate department of Tallahassee Memorial. Tallahassee Memorial's psychiatric facility has been continuously operated by or for Tallahassee Memorial since 1979. It was initially known as Goodwood Manor. In 1983, however, the management of the facility was taken over by, and its name was changed to, Behavioral Medical Care (Tallahassee Memorial's facility will be hereinafter referred to as "BMC"). From 1977 to 1979, the facility was owned and operated by Tallahassee Psychiatric Center, Inc., which failed for financial reasons. Prior to 1977 Tallahassee Memorial operated a small psychiatric unit as pert of its hospital. The occupancy rate at BMC for the 12-month period ending September, 1984, was 37 percent. The occupancy rate since 1979 has been consistently low and is low at the present time. There are a number of reasons for the low occupancy rate: a) The physical location and physical plant of BMC. BMC is located in a 2-story building near Tallahassee Memorial. BMC occupies the top floor of the building and a nursing home is located on the first floor. In order to get to BMC, it is necessary to travel through the nursing home. Also, the building is surrounded by a parking lot so there is inadequate outdoor and recreational space around the facility. The facility, which was originally designed as a nursing home, presently consists of one closed unit and one open unit. Patients of all ages and with various problems have to be housed in these 2 units together. Because of the physical plant, patients cannot be separated into adult, adolescent and geriatric units. There also is not enough space for therapy rooms and common areas. b) The reputation of the facility. The reputation in the community of Goodwood Manor has carried over to BMC. The facility is perceived by some as a "crazies place," a place "where violent people go." This reputation is partly attributable to the lack of credibility that psychiatry as a discipline enjoys. It is also partly attributable to the operation of BMC as Goodwood Manor prior to 1982 when Behavioral Medical Care took over management of BMC. c) The type of programs offered. To date, no program has been separately offered and provided or adolescents, children, substance, alcohol and drug abuse patients, or geriatrics. Basically only one structured program has been provided which has been more suited to adult psychotic patients. Closely related to this problem is the fact that BMC has had a poor patient mix. This has been caused in part by the physical plant and in part by the type of patients BMC has had to take in. Some of those patients have been suffering from problems other than psychiatric problems, i.e., persons suffering from DT's, which is a medical disorder, and persons suffering from organic problems which cause behavioral difficulties. d) Marketing. There has been a lack of an effort to market the availability of the facility. e) Training. The programs offered are not as advanced because of the lack of necessary training. f) Practice patterns. Practice patterns of psychiatrists in the community have contributed to the low occupancy. Because there are only a few psychiatrists in the area and the fact that the Tallahassee Memorial facility has primarily been involved in crisis intervention, the average length of stay (6 to 7 days) is much lower than the average length of stay in other parts of the country. This average length of stay has also, however, been caused by the shortage of Baker Act funds. Closely related to this problem is the fact that there are a large number of nonphysicians providing mental health services in Tallahassee who do not admit patients to the hospital and a large number of health maintenance organizations. g) Communication. The low occupancy rate has also been caused, at least in the minds of Drs. Speer, Sebastian and Moore, by the lack of solicitation of their input into the operation of the facility. At least partly because of the problems at BMC, a few patients have been referred to facilities outside of District 2 for care. Tallahassee Memorial has committed itself to eliminating the low occupancy rate at BMC. In 1982, the administration of Tallahassee Memorial felt it had to decide whether it was going to make a commitment to the facility or get out of psychiatric care. It opted for the former. After making the commitment, 2 primary actions were taken. One was to contract for the services of Behavioral Medical Care; the other was to apply for a certificate of need to replace its 60-bed facility with a new one. Behavioral Medical Care is a joint venture formed by 2 corporations, Comprehensive Health Corporation and Voluntary Health Enterprises. Comprehensive Health Corporation is the largest private provider of chemical dependency rehabilitation services in the country. Voluntary Health Enterprises is an affiliate of Voluntary Hospitals of America which services 70 of the nation's largest not-for-profit hospitals, including Tallahassee Memorial. Behavioral Medical Care was formed to provide the highest quality, lowest cost psychiatric and chemical dependency rehabilitation programs possible. Behavioral Medical Care provides consultation services and/or actually carries out programs and is now providing 20 different programs at 16 different facilities. Of these 20 programs, 5 to 8 are psychiatric programs. The first consultation concerning the psychiatric program at Tallahassee Memorial began in the late winter or early spring of 1983. This consultation was provided by Dr. Russell J. Ricci, now chairman of the board and medical director of Behavioral Medical Care. Dr. Ricci reviewed the status of Tallahassee Memorial's program at that time and recommended significant changes be made in 2 phases: one phase to begin immediately and the second to begin after construction of a new psychiatric hospital. Tallahassee Memorial agreed with Dr. Ricci's proposal and contracted with Behavioral Medical Care to carry out the proposal. Behavioral Medical Care began BMC with an orientation period during which time the existing staff was analyzed, new staff members were hired and the entire staff was trained to implement the new program. During this period, admitting physicians were invited to participate in the implementation program. A new inpatient psychiatric program at BMC was then begun. The program was established to achieve the following goals: to restore patients to their optimum mental health; to make patients as comfortable as possible; to maintain the patients' sense of dignity and self worth; to maintain modern and efficient treatment modalities through research and education; to provide maximum freedom of patients to interact with family and community; and to educate the community. The program was established along interdisciplinary lines and is basically an adult program. It includes individual and group therapy, lectures and seminars, social and nursing assessments, physical examination and psychological testing. The ultimate program provided for a patient, however, depends upon the treatment plan prescribed by the attending physician. The program is, however, limited because of the type of patients at BMC and especially because of the physical plant, which consists of only an open unit and a locked unit. Separation of patients for specialized treatment based upon other factors, such as age, is not achievable in the existing facility. The program at BMC is an adequate program but can be improved. The program is, however, intended only as an interim type program. Treatment of geriatrics and adolescents is available but specialized programs for these groups are not available. Dr. Sebastian agreed that since Behavioral Medical Care had begun managing BMC, the programs had improved. Dr. Moore testified that BMC had attempted to change. As part of the interim program, BMC has established more restrictive admission guidelines; not based upon ability to pay but upon clinical needs. Attempts have been made to eliminate psychotics, geriatrics and persons with significant medical problems. These restrictions on admission are designed to limit admission to persons who will benefit from the new program and are consistent with the existing physical plant. The existing staff, established by Behavioral Medical Care, is adequate. Training of the staff began during the orientation period at BMC and continues today. Educational activities have also been directed toward the medical profession in the community in order to gain more credibility for the discipline of psychiatry. Other steps to improve BMC which have been or will soon be taken include the reclassification of BMC as a department of Tallahassee Memorial and the initiation of a crisis intervention and liaison service in the emergency room of Tallahassee Memorial's main hospital. This new service in the emergency room is designed to identify persons being admitted to the hospital with a need for psychiatric services. As a department, BMC conducts formal monthly meetings of physicians at which input into the operation of BMC may be made. Input by psychiatrists is therefore possible at BMC. The second phase of the changes recommended by Dr. Ricci will begin after completion of the second action to be taken by Tallahassee Memorial as part of its commitment to a psychiatric program: the construction of a new 60- bed facility. Tallahassee Memorial filed an application to replace its present facility with a new 64-bed facility. That application was ultimately granted but for only 60 beds. An application to build another facility considered at the same time was denied. As a result of the issuance of the certificate of need to Tallahassee Memorial, construction of a new psychiatric facility has begun and should be completed in the summer of 1985. The total cost of this new facility is $7,225,000.00. This amount, plus the cost of new programs and staff, has been committed by Tallahassee Memorial to BMC. The facility, a two-level structure, is being constructed on a wooded, sloping site next to the present building BMC is located in. Each level will have 30 beds. It will be a state-of-the-art facility and was designed by architects who specialize in the design of psychiatric facilities. The building was designed with input from the medical staff and Behavioral Medical Care. It is being constructed to accommodate separate psychiatric programs and allows flexibility to accommodate changes in the type of programs offered. Once the new facility is completed, BMC will initiate the second phase of Dr. Ricci's proposal. This phase will consist of the implementation of separate specialized psychiatric programs not available at BMC today. Dr. Ricci has recommended the offering of adult, adolescent, geriatric and chemical dependency programs. Tallahassee Memorial has decided to add an adult program, an adolescent program and will probably add a geriatric program. Other programs, such as a chemical dependency program will be considered. The geriatric program will be added if there are a sufficient number of patients in need of such a program admitted to BMC. Based upon the testimony of Dr. Sebastian, there are a sufficient number of patients who need a geriatric program. Assuming that Dr. Sebastian is correct, a geriatric program should be added to BMC. Even if a separate program is not added, geriatric psychiatric services will be available at the new facility. The construction of the new facility will not eliminate all of the problems which have contributed to the low occupancy at BMC. Phase 2 of Dr. Ricci's proposal to Tallahassee Memorial and the other actions which Tallahassee Memorial has indicated they plan to take should, however, eliminate or at least reduce most of the problems. Dr. Sebastian testified that there will not be enough open space around the new facility The new facility will, however, have 2 open court yards, woods on 3 sides of the building and a greenhouse. The reputation of BMC as being a "crazies place" should be improved with the opening of the new facility and the providing of new, more advanced programs. Efforts to educate the medical community will also help. Also, if Apalachee is granted its certificate of need, the elimination of some of the Baker Act patients cared for by BMC who will be cared for by Apalachee should help improve the reputation of BMC. Finally, BMC has already taken some steps to improve its reputation by initiating an interim program, hiring new staff and limiting its admissions. Instituting specialized programs will also help alleviate the low occupancy problem at BMC. The new facility will allow BMC to establish programs which are needed by allowing the separation of patients which could not be accomplished in the existing facility. Again, eliminating some Baker Act patients will help reduce the problems created by the poor patient mix at BMC. Efforts are being made to market BMC's services. Establishing a liaison in Tallahassee Memorial's emergency room, which is planned, should contribute to increasing occupancy. Tallahassee Memorial projected that sizeable numbers of patients in the general hospital need psychiatric services. This program could reach those patients. BMC, however, needs to institute marketing efforts to reach the general public. Formal training of the staff at BMC was started with Behavioral Medical Care's orientation phase and has continued since that time. Not much can be done directly by BMC to improve the practice patterns of psychiatrists in the community. The new facility and improved programs may help. Transfering Baker Act patients to a new facility operated by Apalachee should allow for more economical treatment of those patients and thus allow for longer lengths of stay. Providing specialized programs also should promote longer lengths of stay. Converting BMC to department status and the holding of monthly meetings of admitting physicians has improved the ability of psychiatrists in the community to have a voice in the operation of BMC. Not enough of an effort is being made in this area, however. Three psychiatrists testified about the lack of solicitation of their input. They are obviously dissatisfied. Despite this fact, Dr. Brodsky, the Medical Director of BMC, testified that BMC was working cooperatively with psychiatrists in the community. In the undersigned's opinion, BMC, Tallahassee Memorial and the psychiatrists in the community need to continue to work toward resolving their differences and to work together to improve the occupancy and the psychiatric care provided at BMC. The perceived effect of CPC's proposal and Apalachee's proposal of the various witnesses was mixed. Drs. Speer, Sebastian and Moore all testified that they supported the CPC proposal. Dr. Speer indicated that she supported CPC's proposal over that of Apalachee and that she thought there was a need for CPC. Dr. Speer's opinion was based almost exclusively on a brochure provided to her by CPC. She did not have any familiarity with existing CPC hospitals. She also had only "some familiarity" with Apalachee's programs. The only reason Dr. Speer specifically gave for supporting CPC was the amount of effort CPC had exerted to solicit physician input and the need for cohesiveness among psychiatrists which she felt was promoted by support of the CPC proposal. Dr. Sebastian testified that he supported the CPC proposal because a new hospital would promote competition which would in turn improve the quality of care. Dr. Moore testified that he was familiar with CPC's and Apalachee's proposals and that he supported CPC's. He also stated that the addition of another psychiatric hospital would improve the availability of medical care because of competition. Dr. Moore also testified that a new facility was needed to provide care for the "private segment" which he described as "those people who choose not to go to the local mental health center for treatment, those people who choose to go to psychiatrists for treatment. " Dr. Brodsky testified that the addition of a new facility to the community might improve BMC because of the added competition. Mr. Honaman and Dr. Ricci both agreed that, if CPC's proposal was approved, a new facility could have an adverse impact on BMC which has been operating at a loss of $300,000.00 a year. Dr. Ricci explained that in order to have specialized programs a hospital must have a sufficient number of patients who need the specialized program. Because of the low occupancy rate at BMC, there is concern as to whether a sufficient number of patients will be available to warrant the specialized programs BMC plans to start if the CPC proposal is approved. Apalachee's proposal will not adversely effect BMC. In fact, Mr. Honaman and Ms. Pamela McDowell, both of whom testified on behalf of Tallahassee Memorial, indicated that if Apalachee's facility was approved BMC's ability to provide quality care would be enhanced. Tom Porter, testifying on behalf on the Department, indicated that CPC's and Apalachee's proposals should both be denied because of the low occupancy at BMC and the adverse effect approval of either proposal would have on BMC. Mr. Porter's opinion, however, was based only upon his review of the Petitioners' applications. Mr. Porter made no independent studies as to the impact of the proposals on BMC and was not aware of most of the evidence presented at the hearing. The Ability of the Applicant to Provide Quality of Care. CPC. The services to be available at or provided by the proposed CPC facility include psycho-physiological diagnosis and evaluation, emergency service, milieu therapy (immersion into the clinical environment for structured daily treatment), individual and group therapy, family therapy, occupational therapy, an adolescent school program, a partial hospitalization program, aftercare, community education and related medical services (which will be provided by contracting with other area health care providers). Actual programs to be provided at the facility are to be developed by the physicians who join the medical staff of the facility with the assistance of CPC which has developed model programs which may be used. The staffing projections for the facility are adequate. The manpower projected can provide quality of care and will comply with the standards of the Joint Commission on Accreditation of Hospitals. CPC's experience in operating its 24 existing psychiatric facilities and its philosophy that it will provide quality of care support a finding that CPC does have the ability to provide quality of care. 1/ CPC's proposed physical facility is designed to provide quality of care. The facility will be located in northeast Tallahassee. It will be constructed on a little less than one acre of a 10-acre parcel of land which CPC has a contract to purchase for $400,000.00. Part of the remaining 9-plus acres will be used for parking and recreational space and a substantial portion will be left in its natural state as a buffer. The hospital building itself will consist of a one-story structure with a separate section for each category of proposed beds, a lobby, business and general offices and storage rooms. One section will be used as a 20-bed open adult unit. Another section will be used as a 10-bed adult intensive care unit. This section will be locked. A nursing station will separate the adult intensive care unit and the open adult unit and is designed for visibility down the halls of both units. Two seclusion rooms will be located at the nursing station also to allow for observation from the nursing station. The location of the nursing station will reduce staff responsibility thus reducing the cost of operating the facility. The other two units will consist of a 15-bed adolescent open unit and a 15-bed geriatric unit. These units will be separated by a nursing station designed in the same manner as the nursing station separating the adult units. These units will also be separated by a locked door. There will also be a support structure built next to the hospital which will contain a kitchen, dining hall for all patients, 4 classrooms, 4 multi-purpose rooms, an occupational therapy room and a half-court gymnasium. There is no covered access from the main building to the support structure. The floor plan for the facility is similar to the floor plans used for other CPC hospitals. Therefore, the design costs of the facility will be less than for a new one-of-a-kind facility. Apalachee. In order to ensure quality of care, Apalachee has established a Quality Assurance Committee. Additionally, Apalachee is inspected by the Department and is accredited by the Joint Committee on Accreditation of Hospitals. No evidence was submitted which raises any question as to Apalachee's ability to provide quality of care. The existing building to which Apalachee's proposed facility will be added is located at Apalachee's Eastside facility. Eastside is located on 10 acres of land in northeast Tallahassee. Eastside presently consists of a building in which PATH, the detoxification program and emergency services is located. The building has 12 semi-private rooms and 24 beds. The new facility will be added to the existing building. A total of 13,000 square feet will be added. It will consist of an 18-bed open unit and a 6-bed closed unit. Also to be located at the Eastside facility is a 16-bed long-term adolescent psychiatric hospital which the Department has indicated it will approve. If this facility and the proposed 24-bed facility are built, Apalachee will have a total of 96 beds providing a variety of services. The Availability and Adequacy of Other Psychiatric Services. Apalachee currently provides a wide range of psychiatric health services in Subdistrict 2, including a crisis stabilization unit and short-term residential treatment programs. These services have been used as an alternative to inpatient care in some cases. CPC gave no consideration to these programs in its application. Apalachee did consider these programs and showed that its proposal would compliment its existing programs. As suggested by CPC in its proposed recommended order, Apalachee's existing programs are not a substitute for acute inpatient psychiatric services. Joint, Cooperative and Shared Psychiatric Services. CPC. CPC's operation of 24 psychiatric hospitals provides the potential for joint, cooperative or shared health resources in the operation of its proposed facility. Very little evidence was presented, however, that such potential would be realized if CPC's proposed facility is approved. Evidence was presented that model programs will be "available" for use in developing programs for the proposed facility. CPC also showed that standardized equipment selection and purchasing, and standardized floor plans would be used in establishing the facility. This will effect the short-term financial feasibility of the proposal. Apalachee. By placing the facility at the same location of other Apalachee programs, Apalachee will be able to share some services among programs and thereby reduce costs. For example, kitchen and dining services, staffing, security, purchasing, and maintenance and administrative services will be shared. The integration of Apalachee's existing programs with the proposed facility will promote a continuum of care and thus improve the quality of care. The Need for Research and Education Facilities. 106. Apalachee currently provides training to practitioners pursuant to an agreement with the School of Social Welfare at Florida State University. It also provides internship programs for psychology majors at Florida State University and nursing students at Florida State University and Florida A&M University. It is probable, therefore, that the new facility will be available for training purposes. No proof was offered, however, that indicates there is a need for training programs not being currently met which will be met if either of the proposed facilities is approved. Availability of Resources. 107. Health manpower and management personnel are available to staff the CPC or the Apalachee proposal. CPC and Apalachee also have adequate funds to build the proposed facilities. The adequacy of funds to build and operate the facilities is discussed further, infra. The Immediate and Long-Term Financial Feasibility of the Proposal. CPC. The projected cost of CPC's facility was $5,086,000.00. This amount will be increased for inflation if the facility is delayed another year. CPC will contribute 20 percent of the projected cost of the facility in the form of cash and liquid assets CPC has on hand. Eighty percent of the projected cost will constitute debt of the facility to CPC payable at a 12 percent interest rate over a 20-year period. The immediate financial feasibility of CPC's proposal has clearly been shown. In its application, CPC projected that its facility would generate a net income after taxes in each of the first 2 years of its operation. In its proforma, patient revenues were based upon the following charges per patient day: Adolescent $225.00 Adult, I.C.U. 215.00 Adult Open Unit 210.00 Geriatric 200.00 These projected rates were based upon a 1985 opening date. The rates will therefore be higher if the facility opens in 1987, but, according to Mr. Mercer, the bottom line profitability of the facility will not change. The projected rates, according to Mr. Mercer, are based upon rates charged at other CPC hospitals in Atlanta, New Orleans, Jacksonville and Ft. Lauderdale and interviews with Tallahassee physicians. According to Alton Scott, an expert in health care finance and financial feasibility, the proposed rates are considerably lower than the average rate at CPC's Jacksonville and Ft. Lauderdale hospitals, which was $240.00 for their fiscal year ending in 1984. Mr. Scott did not indicate that he considered the rate at CPC's Atlanta or New Orleans facility, however, which Mr. Mercer also considered in projecting rates for the proposed facility. Mr. Scott's testimony, however, raises a question as to the reasonableness of the proposed facility's rates. CPC's projected gross patient revenue is based upon an occupancy rate of 53 percent in the first year of operation and 75 percent in the second year. CPC projects $2,476,160.00 of gross patient revenue in the first year (an average $212.00 per day rate x 11,680 patient days) and $3,597,075.00 of gross patient revenue in the second year (an average $219.00 per day rate x 16,425 patient days). CPC's average occupancy rates are directly related to the number of admissions and the average length of stay of a patient. In support of the number of admissions projected by CPC, CPC offered the 3 need methodologies discussed, supra. Those methodologies have, however, been rejected as unsound. CPC's admission rates are based only on an assumed census. The assumed census is based upon conversations with physicians and the corporate experience of CPC. Although conversations with physicians and the corporate experience of CPC should be considered, these factors should be considered as support for other evidence as to possible admissions which has not been presented by CPC. What physicians have told Mr. Mercer is not alone sufficient to support assumed admissions. There is no guarantee that local physicians will refer clients only to CPC's facility or that their case load will remain the same. CPC's corporate experience as to length of stay does not add much support since the overall corporate experience of CPC's facilities for the year ending November 20, 1983, shows that the overall occupancy (excluding its Valley Vista facility) was 56.3 percent. This rate of occupancy is well below CPC's projected second year occupancy rate for the Tallahassee facility. The occupancy rate of CPC's Ft. Lauderdale and Jacksonville hospitals was 50.6 percent and 60 percent respectively, which is low for the State. Of all of CPC's psychiatric hospitals only 1 has an occupancy rate over 80 percent. Another problem with CPC's projected occupancy rate is that CPC has projected that 5 percent of its patient days will be attributable to Baker Act patients and 5 percent will be attributable to Medicaid Patients. In order for the proposed facility to receive Baker Act patients it will be necessary that it enter into a contract with Apalachee. No evidence was presented that such a contract could be obtained from Apalachee. As to the percentage of Medicaid patients, it is clear that CPC would not be entitled to receive reimbursement from Medicaid for these patients since its facility will be a free-standing facility and Medicaid does not reimburse for inpatient psychiatric services at free-standing hospitals. Based upon these facts, it appears that the assumption of CPC that a total of 10 percent of its patient days will be attributable to Baker Act and Medicaid patients is of questionable validity. Mr. Mercer's testimony that, even without the Baker Act and Medicaid patients, the projected occupancy could be met is illogical. If the projected revenue attributable to Baker Act and Medicaid patients is eliminated along with the projected expenses attributable thereto, CPC still projected a net after tax profit for its first two years of operation. CPC offered no evidence, however, sufficient to conclude that its projections as to occupancy of other types of patients can be achieved. CPC's projected average length of stay of 30 days is also suspect. It is not consistent with the average length of stay locally, in Florida, nationwide or in CPC's experience. Based upon the foregoing, CPC's projected occupancy levels are not realistic. This directly effects the projected revenues for the proposed facility. Salary and other expenses projected for the facility are also questionable. Nonsalary expenses are significantly lower than CPC's existing Florida facilities which are the lowest in Florida. Salary expenses, projected 2 years in the future, are also lower than present salary levels at CPC's Florida facilities. Again, the salary levels at CPC's 2 Florida hospitals are among the lowest for the 10 Florida facilities providing similar services. These low salaries are also based upon projections for a project which will not open for 2 more years. Despite this fact, they are lower than current salaries at CPC's existing Florida facilities and salaries being paid locally. Apalachee. The projected cost of the addition of the 24-bed facility to Apalachee's existing PATH and detoxification facility is $1,114,339.00. Apalachee will provide $114,339.00 of the necessary funds from its operating fund and the remaining $1,000,000.00 will be obtained from the sale of industrial revenue bonds. The bonds will be 15-year bonds, with a 7 year balloon and were projected at a 10.75 percent annual interest rate (75 percent of the Chase Manhattan Bank prime interest rate). First National Bank has committed to purchase $3,000,000.00 of industrial revenue bonds, which includes the $1,000,000.00 for this project. The immediate financial feasibility of Apalachee's proposal has clearly been shown. In projecting its gross charges for the first 2 years of operation, Apalachee has predicted an occupancy rate of 62.5 percent in the first month of operation increasing to 87.4 percent in the last month of operation of the second year. Gross charges are projected at $1,557,940.00 the first year (6,385 patient days x $244.00 per day rate) and $1,883,648.00 the second year (7,358 patient days x $256.00 per day rate). Apalachee' s projections are reasonable. Although it will be a free-standing psychiatric facility, Apalachee will be able to receive some Medicaid funding under the Department's "centers and clinics" option. Apalachee's projections as to gross charges, deductions from gross charges, and operating expenses are reasonable. Based upon its projections, Apalachee will realize a profit from the new facility in each of its first 2 years of operation. Competition. CPC. The addition of CPC's facility will promote competition in Subdistrict 2, as testified to by Dr. Brodsky, the Medical Director of BMC, among others. Because of the low occupancy at BMC, however, such competition at this time would be harmful. Apalachee. Apalachee's proposed facility will not compete with BMC. Although Apalachee's facility will initially reduce BMC's occupancy, removing the patients Apalachee will serve from BMC will improve the quality of care provided at BMC. Construction. CPC Construction and related costs of the CPC facility will consist of the following: Parking $27,500.00 Project development costs 22,000.00 Architectural/engineering fees 135,000.00 Site survey and soil investigation report 25,000.00 Construction supervision 10,000.00 Construction manager 4,000.00 Site preparation 100,000.00 Construction 3,000,000.00 Contingency 100,000.00 Inflation 270,000.00 These costs are all adequate to cover the cost of these items. These amounts will also be adequate even if construction does not begin until the end of 1985. The projected cost of equipment and furnishings was $500,000.00. This amount is adequate to equip the facility properly. In fact, the projected cost is probably substantially overstated. 2/ Although CPC failed to list in its application all of the equipment and furnishings (only major movable equipment was listed) necessary to equip the facility, adequate equipment and furnishings will be provided. Apalachee. The projected cost of constructing Apalachee's facility consists of the following: Architectural/engineering fees Site survey and soil investigation $75,740.00 report 2,000.00 Construction 876,620.00 Contingency 43,831.00 Inflation 26,298.00 These amounts are sufficient to construct the facility. The cost per square foot of the construction will be $60.00. The cost of equipment needed to equip the new facility is projected at $53,850.00. This amount is adequate for the purchase of the equipment listed in Apalachee's application.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the certificate of need application filed by CPC, case number 84-1614, be denied. It is further RECOMMENDED: That the certificate of need application, as amended, filed by Apalachee, case number 84-1820, be approved. DONE and ENTERED this 10th day of April, 1985, in Tallahassee, Florida. LARRY J. SARTIN 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 10th day of April, 1985.
The Issue Whether there is need for a new 60-bed general acute care hospital in Seminole County? If so, to which of two applicants should a CON be awarded to construct and operate the hospital: Orlando Regional Healthcare System, Inc. (CON 9496), or Adventist Health System/Sunbelt, Inc., d/b/a Florida Hospital (CON 9497)?
Findings Of Fact The Battleground: District 7 At the heart of the conflict in this proceeding is that the two corporate combatants are the dominant providers of hospital services in major metropolitan Orlando and both are providers of very high quality acute care hospital services. Each seeks authority to construct and operate a 60-bed general acute care hospital in the fast-growing community of Oviedo, Florida. The Agency for Health Care Administration, arbiter of the conflict, has introduced a quarrel of its own by its determination that there is no need for the hospital in Oviedo, a determination with which the hospitals decidedly take issue. Oviedo is an incorporated area in east Seminole County. Seminole County, in turn, is a county that with two other counties makes a contribution by suburb or city center to the conurbation in and around Orlando, Florida's largest non-coastal city. Seminole County is also one of four counties that comprise District 7, one of eleven health service planning districts into which the Legislature has partitioned the state. See Section 408.032(5), Florida Statutes. The other three counties in the District are Orange, Osceola and, removed from the controversy in this case, Brevard. The four counties are each considered by rule of AHCA to constitute a sub-district of District 7. Brevard is Sub-district 1; Orange, sub-district 2; Seminole, sub-district 3; and, Osceola, sub-district 4. The parties consider parts of Seminole and Osceola Counties to constitute the major metropolitan area of the City of Orlando together with, of course, parts of Orange County, the county that contains incorporated Orlando. As indicated above and by its irrelevance to this proceeding, no part of Brevard County is considered by the parties to make up any of metropolitan Orlando. There is also one county outside District 7 about which the parties introduced evidence, Lake County in District 3. Nonetheless, District 7 remains the primary battleground with a focus on sub-district 3 as the site of the CON sought by the parties. The Parties AHCA The Agency for Health Care Administration is the state agency responsible for the administration of the CON program in Florida pursuant to the Health Facility and Services Development Act, Sections 408.031-408.045, Florida Statutes. ORHS One of the two dominant health care providers in the Orlando area, Orlando Regional Healthcare System, Inc., is a Florida not-for-profit corporation that owns and operates eight facilities in the four-county area of Orange, Seminole, Osceola and Lake Counties, "the only market" (tr. 22) that it serves. Half of ORHS's facilities are in Orange County. These four facilities are: Orlando Regional Medical Center, a 517-bed general acute care hospital that provides tertiary services in addition to routine acute care hospital services and that is the site of a trauma center; Arnold Palmer Hospital for Children and Women, a 281-bed specialty hospital that provides women's and children's services including neonatal services; Orlando Regional Sand Lake Hospital, a 153-bed general acute care facility that provides comprehensive medical rehabilitation services; and Orlando Regional Lucerne Hospital, a 267-bed general acute care hospital that provides comprehensive medical rehabilitation and skilled nursing unit services. In Seminole County, ORHS wholly owns and operates Orlando Regional South Seminole Hospital ("South Seminole"), a 206-bed general acute care facility that provides adult/child psychiatric and adult substance abuse services as well as general acute care services. In Osceola County, ORHS owns Orlando Regional St. Cloud Hospital, an 84-bed general acute care facility. In Lake County, ORHS jointly owns and operates two health care facilities under joint venture business arrangements: South Lake Hospital, a 68-bed general acute care facility and Leesburg Regional Medical Center, a 294-bed general acute care facility. The wholly owned facilities operate under a single license and are accredited by the Joint Commission on Accreditation of Health Care Organizations ("JCAHO"). One of six statutory teaching hospitals in the state, ORHS has been in continuous existence since 1918. Its mission is to be a local, unaffiliated health care provider, providing health care services to the citizens of Central Florida. Recognized as one of the top 100 hospitals in the United States by US News and World Report, ORHS has been the recipient of numerous awards and recognitions. As but one example, it was the winner of a Consumer Choice Award from the National Research Corporation for the years 1999 through 2001. Orlando Regional Healthcare System provides outstanding health care of the highest quality to patients at its eight facilities in three of the four counties in AHCA's Health Care Planning District 7. Florida Hospital The other dominant health care provider in the Orlando area is Florida Hospital. Founded as a sanitarium, Florida Hospital has been in existence and a presence in the Orlando medical community since 1908. Florida Hospital is part of the Adventist Health System, a not-for-profit hospital organization that operates hospitals throughout the country. In the Orlando area, Florida Hospital has seven acute care campus systems operated under a single license in a three- county area: Orange, Seminole and Osceola Counties. The original and main campus is located in downtown Orlando. A second campus is in East Orlando. The five other facilities are in Altamonte Springs, to the northwest of Orlando; Apopka, further northwest; Winter Park, just north of Orlando; and Celebration and Kissimmee, both southwest of the city. Florida Hospital also operates Florida Hospital Waterman under a separate license in Lake County in District 3. The seven campuses in District 7 are unified by more than just licensure. Consistent with their operation under a single license, all seven operate under a single provider number with Medicare/Medicaid. They have a single medical staff and a single accreditation with JCAHO. The seven Florida Hospital campuses operate under a single leadership structure; all policies, procedures and matters that pertain to the operation of the hospital are part of the single body of operational guidelines and procedures that are provided by the organization. The seven campuses also operate under a single price structure, a single charge master that runs across the entire organization. The goal of operating the seven campuses in a unified manner is to maintain continuity and promote one standard of care so that when a patient enters any of the facilities, the patient can rely on receiving the same high standard of care as would be received at any other Florida Hospital facility. Operation under a single structure also provides a patient with the coverage of physicians and staff throughout the system to cover any and all needs of the patient. From its inception, the mission of Florida Hospital has been to extend a religious ministry of healing to the community consistent with Adventist principles. Among these principles are awareness of the eternal nature of the moment at which care is extended to the patient as well as recognition of each patient as a child of God, entitled to the highest possible quality of care embodied in "whole person health" (tr. 876) composed of physical, mental and spiritual well-being. Florida Hospital carries out its mission with "a strong sense of stewardship for providing care in the communities that [the hospital] serve[s] . . . ." (Tr. 875). The success of Florida Hospital's philosophy of care is evident in recognition bestowed by others. For example, Florida Hospital was recognized as being among the top 50 hospitals in the country for nine specialties in the July 2002 edition of U.S. News & World Report's "America's Best Hospitals." To take but one of the nine, "Heart & Heart Surgery," Florida Hospital is ranked 12th in the nation in the company of those ranked just above: Cleveland Clinic, Mayo Clinic (Rochester), Massachusetts General, Brigham and Women's Hospital, Duke University Medical Center, Johns Hopkins, Texas Heart Institute-St. Luke's in Houston, Emory University Hospital, Stanford University Hospital, Barnes-Jewish Hospital in St. Louis and the UCLA Medical Center. Well-Matched Applicants In its state agency action report ("SAAR"), AHCA noted that ORHS and Florida Hospital are two large, well-matched hospital systems. Both operate over 1,500 beds in the Orlando area. Both generate approximately two billion dollars of gross charges annually. Both deliver over 300,000 patient days of patient care. Together, they are the overwhelmingly dominant providers of health care in the major metropolitan Orlando area. In the SAAR, the Agency discussed distinctions between the two applicants. Had AHCA determined that there was need for the facility, it would have had a difficult time deciding which corporation should be awarded the CON. None of the distinctions between the two were found by AHCA to be substantial enough to serve as a basis for choosing either applicant over the other. Other District 7 Hospitals Besides the two applicants, the dominant providers of hospital services in District 7 by virtue of number of facilities (13 hospitals in the District and three hospitals in Lake County immediately adjacent to the District), among other reasons, there are three other hospitals in the District. Health Central is a hospital operated by a statutorily created tax district in the City of Ocoee, in Orange County. Central Florida Regional Hospital is owned and operated by Hospital Corporation of America ("HCA") located in the City of Sanford in Seminole County. It is approximately 14 miles from the proposed locations of the applicant's facilities. Osceola Regional Medical Center, another HCA facility, is located in Kissimmee in Osceola County, not far from Florida Hospital's Kissimmee and Celebration facilities. Stipulation The parties stipulated to the following: The applicable fixed-need is zero. Both applications complied with the requirements of Sections 408.037, 408.038 and Subsections (1), (2) and (3) of Section 408.039, Florida Statutes, and the requirements of Rules 59C-1.008 and 59C-1.010, Florida Administrative Code. Both applications meet the review criteria contained in Subsections 408.035 (3),(6),(8),(10) and (11), Florida Statutes and the review criteria in Subsections 408.035(4),(5) and (12), Florida Statutes, are not applicable in this case. The statutory review criteria at issue in this case are Subsections 408.035(1), (2), (7) and (9), Florida Statutes. Numeric Need Numeric need for general acute care beds is determined pursuant to Agency rule, Rule 59C-1.038, Florida Administrative Code. The rule's methodology for the calculation of numeric need for general acute care beds is by sub-district. Since "there really is no longer a future projection methodology in the rule . . . it was stricken out two or three years ago," Gene Nelson, one of ORHS' experts in health planning, refers to the rule as containing a "retrospective occupancy model." (Tr. 619). Under the methodology, additional beds are not normally approved in any sub-district where historic occupancy is less than 75%. If occupancy exceeds 75%, beds will be awarded to bring occupancy down to 75%. In other words, instead of projecting forward as it once did to determine need, the rule looks back to occupancy. If occupancy in the sub- district has met the threshold, then positive numeric need is established. Criticism has been leveled at the methodology. Not taking into account future population growth or occupancy rates at times other than midnight, are but two examples. Criticism, however, of the rule is of little moment in this case since the case is a challenge to agency action not to the rule that contains the methodology. Whatever the appropriateness or validity of the criticism, the calculations pursuant to the methodology have not yielded a fixed-need pool above zero for any of the many sub- districts in the eleven districts of the state for some years now. Nor is numeric need for general acute care beds expected by the Agency to exceed zero anywhere in the state for the foreseeable future. During this time of numeric need "drought," AHCA, nonetheless has awarded CONs for new general acute care beds and even new hospitals on a number of occasions. For example, "[d]espite the fact that there was an applicant proposing to relocate beds within the subdistrict, which wouldn't have affected the bed inventory at all, the state elected to approve [another] applicant . . . that applied for a brand-new 60 bed hospital" (tr. 635) in the community of Lady Lake in District 3. The application in that instance had been filed in the fall of 1998. In a second example, in the fall of 2001, a few years later, Osceola Regional and Florida Hospital Celebration were each approved to add beds to existing facilities despite the fact that there was no numeric need and the hospitals did not meet the statutory occupancy levels for additional beds. Mr. Nelson also testified about a third recent example where a new hospital was built when the subdistrict occupancy was low, the facts of which compare favorably, in his view, with the facts in this case. As he tells it, these three cases, compared to this case, produce inconsistency: In the fall of 1999, Sacred Heart Hospital applied to build a new 60-bed hospital in the southern portion of Walton County. That particular subdistrict is actually a two-county subdistrict consisting of Okaloosa and Walton counties, has some existing hospitals, current subdistrict occupancy in that area is 56.3 percent. Despite . . . the low occupancy . . . the state recognized the validity of the arguments about a growing population, about accessibility, many of the same issues that you have here and approved Sacred Heart to build a new 60-bed hospital in that location. * * * I am not criticizing any of these approvals. I . . . am criticizing [that the state was] presented with a similar set of circumstances in this case [and] the applications were all denied. And I think there is an inconsistency here. (Tr. 637-8). During the same period, moreover, beds have been added to existing hospitals without CON review, accomplished by way of Section 408.036(n), Florida Statutes. The statute allows 10 beds or 10% of licensed bed capacity to be added to a hospital's acute bed inventory upon certification "that the prior 12-month average occupancy rate for the category of licensed beds being expanded at the facility meets or exceeds 80% . . . ." Section 408.036(n)(1)a., Florida Statutes. See also Rule 59C-1.038(5), Florida Administrative Code. The bed additions made with and without CON review contribute to current numeric need determinations of "zero" and the continued reasonable expectation that AHCA's methodology for determining acute care bed numeric need will not yield numeric need in excess of zero for years to come. Most pertinently to this case, these additions erode AHCA's position advanced in hearing in this case for a preference to keep open the option for a future competitor, a competitor other than one of the two dominant providers, presumably when numeric need has been determined to exist, a condition not likely to come into play for the foreseeable future. However the future plays itself out and the effect on AHCA's current methodology, there remains one point central to consideration in this case. In light of a numeric need of "zero" for the applicable batching cycle, for a CON to be awarded as a result of this proceeding, as a first step, the applicants must demonstrate the existence of "not normal" circumstances that support an award. The two applicants attempt that step in tandem. Both ORHS and Florida Hospital contend that rapid population growth, problems of access to acute care and emergency services in the Oveido area, and mal-distribution of beds in the sub-district and district constitute circumstances that justify need for their proposed facilities. In other words, they are "not normal" circumstances. Not Normal Circumstances - Population Growth A rural farm community not long ago with a population of about 7,500, the City of Oviedo, in the last 15 years, has grown into an Orlando bedroom community. The population increase within the city limits is proof of the city's metamorphosis from countryside to suburb. During this period of time, the municipal population has nearly quadrupled to 28,000 with no end in sight to continued growth in the area as explained by ORHS' expert, Dr. Rond: The special circumstances . . . that drive this application are, first, the unprecedented population growth. As we have seen, we are experiencing population growth in excess of a hundred percent in the east Seminole area. In the adjacent Winter Springs area, we are experiencing a rate in excess of 51 percent. We are talking about a population that is going to reach almost 200,000 people by the year 2006. (Tr. 377-8). The area is projected for an additional 18.2% growth by 2006, when as testified to by Dr. Rond, the population will reach nearly 200,000. The municipal population is not the only population of a political entity in the area to quadruple in modern memory. Over the past three decades Seminole County has grown fourfold - from 83,692 in 1970 to 365,196 in 2000. As a result, the county is the third most densely populated of the state's 67 counties. Until the mid-1990's, population growth was concentrated in the western half of the county as Orlando area development spread north into Seminole County along the I-4 and U.S. Highway 17/92 corridors. Since then the rate of population growth has been dramatic in east Seminole County in part because of the opening of another major transportation corridor, the "Greenway," Highway 417. Between 1990 and 2001, east Seminole County more than doubled in size (24,840 to 51,287; a 107% increase) while West Seminole grew by only 22%. East Seminole County is expected to remain the fastest growing portion of the county into the foreseeable future. With approximately 43% of the total land area of the county but only about 16% of the population, it remains much less densely populated than the remainder of the county, affording greater opportunities for future growth. Seminole County is unique in the state from the perspective of bed-to-population ratios. The three hospitals in Seminole County with a combined total of 575 licensed beds, yield a ratio of 1.55 beds per 1,000 population; tied for lowest bed to population ratio of the sub-districts in the state. The only area with a comparable ratio is Sub-district 8-4, comprised of Glades and Hendry Counties, located southwest of Lake Okeechobee, "a very rural area." (Tr. 625). While these two sub-districts are similar in bed to population ratio, they are at opposite extremes in terms of population density. The population of Seminole County, at 371,000 is nearly nine times the combined populations of Glades and Hendry Counties at slightly more than 42,000. Sub-district 8-4 is "totally unlike Seminole County from the standpoint of population demographics; and yet in terms of resource availability, . . . it has a comparable amount of resources per thousand population." (Id.) Thus, Seminole County occupies a unique place in the state for its low bed-to- population ratio considering its overall population. Population forecasts for the next five-year period support the expectation of continued strong growth in east Seminole County. For example, the downtown area of Oviedo plans a residential area with a density up to 50 dwellings per acre, at least one of the highest in the County. In the City of Oviedo vicinity, median densities are increasing from 4 homes per acre to 10, to allow for townhouses. East Seminole County is reasonably expected to have 60,597 residents by the year 2006, an 18.2% increase over 2001. By comparison, West Seminole County is expected to experience only a 6.3% rate of growth. Projected growth in the City of Oviedo, moreover, is in all likelihood understated due to significant residential developments currently underway that alone are expected to add up to 6,238 new residents to the city's population. One need only look to actual growth in the area for support for such a prediction. Actual growth has consistently outpaced projected growth governed by methodologies that have repeatedly failed to reflect the reality of population growth in Oviedo. Related to population growth are utilization projections by the applicants' health planning experts for an Oviedo hospital. Judy Horowitz, Florida Hospital's expert health care planner, explained Florida Hospital's: [W]e looked at historically what had come out of the service area as we defined it. We projected that that volume would grow in proportion to population growth. We looked at a subset of services, those that were likely to be provided at a community hospital as was being proposed by Florida Hospital Oviedo. We looked at what we thought a reasonable market share would be; and our overall forecast is that within two years of opening this facility, that we would reach 77 percent occupancy at a 60-bed facility. So our year two, which is the 12 months ending June of 2007, . . . . we would already be at 77 percent occupancy. Then our first year we would be at approximately 68 percent occupancy. * * * [T]here is clearly sufficient demand to support the hospital as proposed; and the fact that we are projecting a relatively high utilization very quickly shows the magnitude of that demand. (Tr. 1352, 1353). With the high level of population growth and the demand for hospital services that such growth generates, the citizens of Oviedo expect access to hospital care within the community. In keeping with citizen expectation, the City of Oviedo has adopted a resolution that urges AHCA to approve a new hospital in the Oviedo community. It has been joined in its resolve by the Board of County Commissioners for Seminole County through a resolution of its own. To underscore the force of the two resolutions, the corporate parties presented the testimony of representatives of both the City Council and the County Commission. Grant Malloy, the County Commissioner for County District I who grew up in the area with fond childhood memories of "being overcome by the orange blossom smells, they were so intense," (tr. 802) described the growth observed first-hand by him during his lifetime as "phenomenal." (Tr. 806). In answer to the question whether his constituents would benefit by a new 60-bed hospital, Commissioner Malloy testified I do believe so. There is . . . the growth that's occurring there. And I heard . . . discussion about getting to some of the other hospitals. And once you get out of Seminole County . . . the roads are very, very difficult to travel on especially getting into Orlando. Especially rush hour . . . . . . . [T]he growth . . . would support such a facility. I know our board passed a resolution, along with the City of Oviedo[.] [O]ur board, and all the commissioners are unanimously supportive of a hospital in the area. I haven't heard from any residents or constituents that have said it was a bad idea. . . . [P]eople are pretty excited about it. (Tr. 807-8). Tom O'Hanlon, Chairman of the City Council, in the company of three other members of the council, unequivocally backed up Commissioner Malloy's appeal for a new hospital. The changes he has seen in Oviedo, he described as: Dramatic changes. When I moved there, [Oviedo] was a very rural area, and it is no longer . . .; it’s a highly compacted urban area. [W]e are working on a new master plan for downtown, which will have higher densities than we have in our city today. (Tr. 812). Chairman O'Hanlon went on to describe how the pace of the growth continuously outstrips population projections that are the product of the City's best efforts to follow appropriate methodologies for making such projections: [T]he city continually makes population projections. I have always been involved with them[.] [T]here are guidelines . . .; and everytime we make them, the city grows far in excess of th[e] projections. The area is such a dynamic area because we have got the University of Central Florida there, which is just growing as fast as the city is, maybe even faster. You have the Research Park there and you have got excellent schools. And for that combination . . . everybody wants to move there. (Tr. 812-3). The university is just south of the city limits. It has minimal dormitory facilities on campus. The result is that "a vast majority [of students] live off campus in housing and apartments [and they are impacting all the services that must be provided in Oviedo.]" (Tr. 814). Following this testimony of Chairman O'Hanlon, the following colloquy ensued between him and counsel for ORHS: Q Is it fair to say, Councilman O'Hanlon, that the City of Oviedo and surrounding area is in growing urban area that has everything but a hospital? A That is a true statement. Q Are you familiar, Councilman O'Hanlon, with the proposals of Orlando Regional Healthcare System and Florida Hospital to locate a 60-bed hospital in the City of Oviedo? A Yes. Q Do you support that effort? A A hundred percent. Q Do you believe, Councilman O'Hanlon, it would be of benefit to your constituents to have that [hospital] in the city of Oviedo? A Absolutely. People approach me every week wanting to know where our hospital is. Q Can't understand why it's not there already?A Well what they understand is that there is a tremendous need for a hospital and they don't understand why it's not in the process. (Tr 816-7). Residents of Oviedo also do not understand why they have to drive for such a long time to reach a hospital particularly when their goal is the emergency department. This concern about which Councilman O'Hanlon hears from a constituent "at least once a month" (tr. 819) also made its way into the resolutions of the two political bodies in the form of an identical introductory clause, as follows: "WHEREAS, there are increasing problems with timely access to care especially for emergencies," (Joint ORHS/Florida Hospital Nos. 8 and 10). It is, moreover, a concern that takes up the second prong of the applicants' case for "not normal" circumstances: issues of access. - Access The Oviedo Service Area Although similarities exist between the two, the Oviedo Service Areas defined by the two applicants are somewhat different. The service area selected by ORHS is larger than the service area selected by Florida Hospital. The Primary Service Area ("PSA") for ORHS' proposed hospital is composed of four zip codes: 32765, 32732, 32766, and 32708. Of the four, the first three are in eastern Seminole County, that is, east of Highway 417, the Greenway, and south of Lake Jessup. The fourth, 32708 in the Winter Springs area, is just west of the Greenway. The Winter Springs zip code was included in ORHS' PSA in part because it is adjacent to the Greenway. It has also experienced tremendous population growth and is very close to the proposed site for ORHS' hospital. A secondary service area proposed by ORHS is composed of a zip code in Seminole County north of Lake Jessup, 32773, and three zip codes in Orange County, 32817, 32820, and 32826. Located in the midst of the three Orange County zip codes is zip code 32816. It appears on ORHS exhibits as part of the secondary service area. As the zip code for the University of Central Florida, it has a very low residential population so that there are only a few students who might live in a dorm that would list it as their residence when receiving hospital services. There are actually "very few" (tr. 302) discharges from zip code 32816. If one does not include zip code 32816 then ORHS' service area is a comprised of eight zip codes. The April 1, 2001, population for the primary and secondary service areas or the service area designated by ORHS is 170,774. This service area has more than doubled in population over the last decade. Over the next five years, the service area is expected to reach 193,408 residents, of which 45% will be of prime child bearing age (15-44), "a dominant position for that age cohort within the population." (Tr. 315). The Oviedo service area is defined by Florida Hospital as four zip codes in Seminole County, 32708, 32732, 32765, and 32766 and one in Orange County: 32826 (all zip codes in ORHS' service area) with a population of more than 100,000. Florida Hospital's service area does not include Zip Code 32773 (the zip code north of Lake Jessup) that is in ORHS' service area nor, with the exception of 32826, does it include any of the Orange County zip codes that are in ORHS' service area. Thus, there are five zip codes in what Florida Hospital regards as the Oviedo Service Area and eight in what ORHS regards as the Oviedo Service Area if zip code 32816 is excluded. Although somewhat different, for purposes of examining travel distance and time between Oviedo and area hospitals, the Oviedo Service Areas of the two applicants are similar enough to be considered to be the same. Or, as William E. Tipton, an expert in traffic transportation and civil engineering, testified at hearing, the results of his study entitled "Travel Time Analysis Proposed ORHS Oviedo Campus, Oviedo, Florida" (ORHS Ex. 14) would not be substantially different if he had focused on the Florida Hospital site instead of the ORHS site. Travel Time Analysis Mr. Tipton prepared a travel time analysis to evaluate the differences in travel time that could be anticipated with the development of a hospital campus in Oviedo. Mr. Tipton's study concluded that there would be a reduction of average daily travel time from the ORHS PSA to a hospital by 64% or 18 minutes. The maximum reduction will be 75% of the time or 21 minutes. In the critical peak afternoon hour, there will be a maximum reduction of 79% or 22 minutes in time from that which exists today. The reductions in drive distance for Oviedo area residents if a hospital were in Oviedo would be significant especially in the arena of emergency services. Emergency Services Access to emergency services at a hospital emergency department ("ED") is one of the most important factors in making sure people have reasonable access to community hospitals. "[Y]ou really need . . . immediate care for emergencies, and so it's important to be able to get to the emergency department quickly and to receive care rapidly once you get there." (Tr. 336). Between 1997 and 2001, the hospitals experiencing the highest percentage of ED visit increase, other than Health Central, were Florida Hospital East in Orange County and South Seminole Hospital in Seminole County. During the period between 1997 and 2001, although the population of Seminole County grew less than Orange County, Seminole County had a larger percentage of ED visits. Specifically, the population of Seminole County grew 12% but its ED visits increased 23%, twice its population growth. During the same period, the population of Orange County grew by 15% but its ED visits only increased by 17%. Closer examination of these statistics reveals that ED visits in the downtown area of Orlando, to include Orlando Regional Medical Center and Florida Hospital, were below the county average. However, suburban hospitals, or those in outlying areas, particularly near Oviedo, had much greater ED visit growth: ED visits grew 27% at Florida Hospital Apopka and 37% at Florida Hospital East. Florida Hospital East is the closest hospital in Orange County to the Oviedo area. Of the hospitals in Seminole County, South Seminole was the most severely affected by ED visit increase with a 38% increase of ED visits between 1997 and 2001. (ED visits in excess of 27,000 by area residents are projected in 2006.) In the Oviedo area there are unfortunate but not uncommon delays in emergency transport. More than 20% of emergency transports involve delays of in excess of 45 minutes after arrival at the hospital. These delays are serious because patient outcomes decline dramatically if definitive care is not delivered within the "golden hour," a concept that: reflects the fact that patient outcomes decline [dra]matically in terms of . . . mortality rates if definitive care is not delivered within one hour of the traumatic injury that has been sustained. In cardiology, they tend to . . . say "time is muscle," * * * the longer it takes for a patient to get definitive care following a major cardiovascular event, the more muscle mass is likely to be damaged. . . . [Y]ou can go on and talk about stroke victims, cerebral vascular patients and just a whole array of patients who [fare] much better in terms of morbidity and mortality if they receive definitive care within an hour of the episode. (Tr. 336). Part of the delay for patients in need of prompt emergency services is due to ambulance standing time. Standing time is the time a patient waits in the ambulance or hallway of the emergency department before the patient is seen by medical staff. This standing time does not include the time it takes the ambulance to respond to the call or the time the EMS personnel spend at the scene to stabilize the patient. Nor does it include the travel time to the hospital from the scene. Ambulance standing time for patients from the Oviedo area on average is between 42 and 47 minutes. When average travel times established in Mr. Tipton's study are combined with the standing times, there is not one existing provider of emergency services that can provide a patient from Florida Hospital's Oviedo Service Area or ORHS' PSA with emergency care within the "golden hour." This combination, moreover, as stated above, does not take into account the dispatch time and time of the ambulance at the scene. The typical types of emergency calls EMS personnel see in Oviedo include difficulty breathing, auto accidents, kids falling off bicycles, heart attacks, and drug overdoses. The largest majority of calls would go to a local community hospital as opposed to trauma center in downtown Orlando. Jeffrey M. Gregg, Chief of the Bureau of Health Facility Regulation, which includes the Certificate of Need Program for the Agency for Health Care Administration, testified that emergency room access is a problem that has gotten worse over time. Mr. Gregg also stated that a new hospital in the area will improve emergency access for people in the immediate area. A new hospital in Oviedo service area would also benefit and improve emergency access for patients in Orange County emergency rooms by lessening the emergency patient loads they experience. Wayne Martin, Fire Chief, Emergency Management Director, City of Oviedo, testified that the standing times and delays at the area hospital emergency rooms tie up Oviedo area ambulance services for an extended period of time. Emergency Medical Service ("EMS") staff must stay with their patient until the patient is taken into the emergency room and given medical care by emergency department staff. Because of these delays, EMS staff are out of their service area for extended periods of time. This decreases the level of service for the residents of the Oviedo area. One aspect of the problem influences another so as to create a compounding effect. Dr. Robert A. Schamberger, a family practitioner in Oviedo, testified that recently a patient went to the emergency room at an area hospital and it took 16 hours from the times she arrived until she was seen by the emergency room personnel. Dr. Schamberger tried to admit another patient of his in an area hospital on a recent Friday and was informed there were no beds. The hospital said they would call when they had an available bed. The patient was finally admitted on Monday. Emergency room waiting times across the entire community are several hours, which is an unacceptable care standard. Dr. Zulma Cintron practices internal medicine in Oviedo. Dr. Cintron testified that there is a "huge need" for a hospital in the Oviedo area. "We definitely need the beds." Dr. Cintron has had patients with chest pains who ended up waiting in the emergency room for four, five, and six hours before receiving care. Patients with less imminent needs have waited 12, 16 even 24 hours. Dr. Cintron's testimony for Florida Hospital was confirmed by the testimony produced by ORHS of Scott Greenwood, M.D., a cardiologist who heads a cardiology group. The evidence provided by Drs. Schamberger, Cintron And Greenwood, anecdotal though it may be, supports the existence of a problem with emergency services access in the Oviedo area that is shown by the analysis provided by the combination of Mr. Tipton's traffic study and ambulance standing time. So does projected volume for ED visits. Projected volume at Florida Hospital Oviedo in year two would be in excess of 27,000 visits. The Oviedo area has a population that "is adequate to support a hospital at high utilization levels within [a] short period of time and also will generate a significant number of emergency visits." (Tr. 1355). A new hospital facility in the Oviedo service area would help to alleviate the delays currently being experienced in the area hospital emergency departments. The Agency is not unaware of the problem and the solution that an Oviedo hospital would provide. The issue for AHCA is "[w]ould the improvement that would result for some people justify the construction of an new hospital?" (Tr. 726). The applicants claim that the three existing Seminole County hospitals are not appropriately located to provide emergency services required by the growing population of Oviedo. Put another way, within the sub-district and District 7, ORHS and Florida Hospital assert there is a mal-distribution of beds. Mal-distribution of Beds While population growth has increased dramatically in east Seminole the opening of health care facilities in the east part of the county has lagged behind; the area has more than 100,000 people but no hospital. The three acute care hospitals in Subdistrict 7-4 are all located in the western portion of Seminole County. People tend to use hospitals closest to them especially for emergency services. Because of the north/south nature of the road corridors in Seminole County and the congestion and distances involved in east/west travel in the county, the Oviedo area population's access to existing hospital service in the district is problematic. The population has better access to resources in Orange County, a different subdistrict, and, in fact, 66% of the Oviedo population take advantage of that better access. Consistent with the pattern of transportation development in Seminole County, all three hospitals in Seminole County are located between I-4 and U.S. Highway 17-92. Florida Hospital Altamonte is situated along the 436 corridor, whereas South Seminole Hospital is located further to the north on State Road 434, while Central Florida Regional Hospital is situated at the northern border of the county along the U.S. Highway 17-92 corridor. Dr. Rond had this to say about the locations of the three Seminole County hospitals in relation to the population in east Seminole County: The resources in the western part of the county are not situated in such a way that they are being utilized effectively by residents of [ORHS'] service area. Instead, they seek to move along the north/south corridor, primarily the Greenway, to utilize the services located in Orange County or … they take other routes of access to reach Winter Park Hospital, which is . . . in Orange County. (Tr. 319). The problem of distribution of hospitals is not restricted simply to inside the county. There is a mal- distribution in District 7 as well. Overall in the district, there are 2.3 beds per thousand. Orange County enjoys a ratio that is very high when compared to Seminole County's. Orange County's bed to population ratio is 2.7 beds per thousand, whereas Seminole County's is only 1.55 beds per thousand. The average bed ratio in Florida is 2.85 per thousand. Whether measured against the state ratio or the Orange County ratio, general acute care hospital beds per thousand population in Seminole County is low. The ratio comparison between Orange County and Seminole County will improve with an Oviedo Hospital although it makes the overall ratio only "a little closer; so that Orange County has beds per thousand and Seminole County would have 1.6 beds per thousand." (Tr. 316). The applicants intend to make that improvement with their proposed projects. The Proposed Projects ORHS' Orlando Regional proposes to construct a new 60-bed acute care hospital in the City of Oviedo. The location was described at hearing by Karl W. Hodges, ORHS vice president of Business Development: [T]he hospital [will be built] within a two- mile radius of . . . Highway 426, also called Loma and Mitchell Hammock Road which is also called Red Bug Road. [The CON Application] further stipulates we'll be east of 417. (Tr. 20). Within that area, ORHS proposes to build a three-story 155,000 square foot facility on approximately 35 acres of land. Although a site has not yet been purchased, there is at least one parcel of 35 acres of land available in the area that can be acquired by ORHS at a price of $7,000,000 or less, as indicated in its application. The bed complement of the proposed facility will be eight ICU beds, ten labor-delivery-recovery and post-partum ("LDRP") beds serving the obstetrics department, 15 telemetry monitored beds, and 27 medical/surgical acute care beds. The proposal will add 30 beds to the inventory of beds in the sub-district but it will not add beds to the inventory of District 7. The 60 beds will be transferred by ORHS from two facilities. Thirty of the beds will come from South Seminole Hospital (in Seminole County). By itself, moving the 30 beds within the sub-district "for the stated goal of enhancing access . . . is a non-controversial project" (tr. 627) that is not subject to a certificate of need methodology but that still requires CON review and approval. The other thirty beds will come from Orlando Regional Lucerne Hospital in Orange County. However attractive for its minimization of controversy, all 60 beds could not have been transferred from South Seminole because to do so would have raised its occupancy above 80%, "an untenable result." (Tr. 630). For the additional 30 beds, "Lucerne seemed like a logical choice, given its bed size and its utilization." (Tr. 628). The design of the proposed hospital is based on another ORHS facility: South Lake Hospital, a replacement facility that opened in January of 2000. Florida Hospital's Florida Hospital also proposes to construct a 60-bed acute care hospital in the City of Oviedo. Unlike ORHS, Florida Hospital owns the site, 15 acres at 8000 Red Bug Lake Road near an intersection with the Greenway. The site currently includes a two-story, 41,000 square foot medical office building and a one- story, 6,000 square foot urgent care center. A two-story, 161,000 square foot facility is proposed to be constructed on the remaining vacant space at the site that has been approved under the Development of Regional Impact process for a 120-bed hospital. Ownership of a DRI-approved site will save Florida Hospital time and expense entailed by permitting requirements. All 60 beds will be part of an innovative design referred to as a "universal room and universal care delivery model." For the present, Florida Hospital does not intend to provide obstetrics at the Oviedo facility but "all of the universal patient rooms are capable of being LDRP rooms" (tr. 1181) should Florida Hospital decide in the future to provide obstetric services at the hospital. Florida Hospital will transfer 60 beds from Orange County facilities so that Florida Hospital's proposal will increase the sub-district's bed inventory by 60 beds, 30 more than the increase that will be affected by ORHS' proposal. Just as with ORHS, Florida Hospital's proposal will not increase the bed inventory in District 7. Fifty beds will be transferred from Florida Hospital's Winter Park facility and 10 beds will transferred from Florida Hospital's Apopka facility. AHCA's View of the Proposals The Agency's conclusion that the applications did not demonstrate "not normal" circumstances was reached with difficulty. Review of the applications taxed the agency's decision-making process because of the challenging circumstances presented by the applicants. As Jeffrey Gregg testified for the Agency, when there is "no fixed-need pool," AHCA look[s] at applicants in terms of a unique set of circumstances that they present . . . and in this instance, The circumstances . . . in this case challenge the system, make it more difficult for [the Agency] to make a sound decision in the tradition of the CON program. (Tr. 723). However much in keeping or not with the tradition of the CON program, the determination that there were no "not normal" circumstances to justify need afforded a benefit to the Agency; it would not have to make the difficult choice between the applications. While it could have granted both applications, an option considered by the Agency (see tr. 729), no party contended in this proceeding that circumstances justify two new 60-bed hospitals in Oviedo. If need is proven for but one hospital, then a selection must be made. Yet, at every turn, AHCA has found one advantage held by an applicant to be defeated by another held by its opponent or one set of circumstances that would normally be an advantage neutralized by other considerations. For example, in view of the nature of the Orlando market, AHCA reasonably did not give much weight to ORHS' proposal to add fewer beds than Florida Hospital to the sub- district despite the fact that usually there would be advantage to a mere intra-sub-district move. In the absence of fixed need, for example, such a move would not have to be supported by "not normal" circumstances. To the contrary, however, from the point of view of practicality, it makes more sense "to take beds from a more urban setting [in Orange County, a different sub-district] where they are not being used [as proposed by Florida Hospital] and move them to a new rapidly growing area where there are not hospital beds." (Tr. 739). A sense of practicality guided AHCA throughout its CON review in this case. The Agency, in fact, approached the applications by "trying to be as practical as possible." (Id.) As explained by Mr. Gregg, again on behalf of AHCA: [The Agency] do[es] not give much weight to the fact that [the applicants] would be crossing subdistrict lines here and that one of them [ORHS] is in a position to . . . add fewer beds to the planning area. That's noted in the SAAR, but practically speaking, we are talking about a metropolitan area here. We are talking about in both cases large systems wanting to move beds from one part of their system to another part. So in many ways, . . . once again, [ORHS and Florida Hospital] are really well-matched and difficult to distinguish. (Tr. 724, emphasis supplied). The difficulty inherent in distinguishing between the applicants was repeatedly emphasized by the Agency. The point was brought home once more in questioning of Mr. Gregg by counsel at hearing: Q [W]ith regard to the minute distinctions between the applicants, at your deposition, some of the statements you made in that regard included [that ORHS and Florida Hospital] are both good citizens. All of these things in this case, coming up so close and so equal, that . . . in terms of CON analysis, it becomes very difficult . . . to make a distinction between the two of them. They are both just that good. And then also [the Agency] think[s] they compare very favorably, and very evenly, noting again and again and again that they are very, very close, very, very comparable. Is that still your position here today? A Yes. (Tr. 766-7). However close the Agency regards the two, there are differences in the applications. While some may not be of great benefit to a decision, others may serve to sustain a principled choice. Differences in the Applications Obstetrics The leading reason for hospitalization among area residents is the need for obstetrical services with births running at more than 2,000 per year. During the 12-month period ending June 2000, for example, childbirths accounted for 2,041 discharges. Of the top ten DRGs for discharges among area residents, uncomplicated vaginal delivery accounts for the most discharges, cesarean section ranks third and vaginal delivery with complications is seventh. In keeping with the demand for obstetrical services, the utilization patterns of the population in the Oviedo Service Area and the area's age composition, upon the opening of its facility, ORHS proposes to provide obstetrical services. The proposal is also due, in part, in response to the closing of the obstetric program at Florida Hospital East in May of 2001. There is physician support for ORHS' proposed obstetric services. Robert Bowles, M.D., testified by deposition that his group practice, Physician Associates of Florida, comprised of 14 obstetricians and gynecologists would cover obstetrics at an Oviedo hospital. While Dr. Bowles would not personally admit obstetrics patients at the new hospital, three of his partners would. Florida Hospital does not propose to provide obstetrics upon opening although it has designed its physical plant to provide an OB unit so that Florida Hospital would have the capability of initiating that service without a problem. In other words, Florida Hospital's proposed facility would be "OB- ready." (Tr. 725). Unlike ORHS, Florida Hospital does not have physician support for providing obstetric services at its proposed facility, a part of the reason for not offering OB. The basis for Florida Hospital's lack of physician support is a malpractice insurance crisis for obstetricians. Florida Hospital's proposed facility is not projected to open for another three years. If, during that time, the malpractice crisis eases and there is greater physician coverage availability, Florida Hospital could open obstetric services at the same the hospital opens since it will be OB-ready. Another reason that Florida Hospital has decided against offering obstetrics upon opening is that most maternity patients are more comfortable delivering babies in a setting that has neonatal intensive care services available. Two such settings are ORHS-Arnold Palmer and Florida Hospital's main campus. Indeed, a significant number of maternity patients from Oviedo are choosing to travel past multiple hospitals that offer obstetric services to have their babies delivered at one or the other of these two hospitals. Arnold Palmer, in fact, is the leading provider of obstetrical services to the residents of the Oviedo area's two most populous zip codes: 32708 and 32765, both more than 30 minutes driving time away from the hospital. Medicaid and Charity Care Conditions Approval of ORHS' CON is conditioned on a minimum of 7% of total annual patient days for Medicaid patients and 1% for charity care. Florida Hospital's application offers no conditions with regard to Medicaid or charity care. Like ORHS, Florida Hospital is one of the top ten providers in the State of indigent care, and a disproportionate share Medicaid provider. The Agency's view of the difference between ORHS' provision of indigent care conditions and Florida Hospital's decision to not condition its application was explained by Mr. Gregg: Conditions [such as those for indigent care] are important when it allows us to distinguish between applicants. They are less important when we have competing applicants, both of whom has such strong track records as these two do. . . . [W]e look at evidence of past performance relative to indigent care . . . . [I]n a case like this . . . both of these applicants have such good records in th[e] area [of indigent care]. They are both in the top ten statewide. . . . [A] promise of this condition or that condition [does not] give us particular concern one way or the other. They are both very good in that area [of Medicaid and charity care] and very tough to distinguish between. (Tr. 735-6). Architectural Design and Site The architectural plans of both applicants meet all codes that apply to a new hospital in the state of Florida. The ORHS design is tried and proven at ORHS' South Lake facility and will work on a 35-acre site. The size of Florida Hospital's site, 15 acres much smaller than ORHS', led to criticism of the site from ORHS experts. But the site is large enough to incorporate growth in the future. It can accommodate 320 beds and ancillary services. The design, moreover, takes these expansion capabilities into account. Related to the size of the site, the site's conservation area, comprised of wetlands and a forested upland buffer that will remain undeveloped indefinitely also produced criticism that the site is too cramped for a new hospital. But the conservation area, with its mature tree canopy, presents advantages. The hospital was designed to incorporate the view of the conservation area from hospital rooms because such a view is beneficial to the healing process. Furthermore, the conservation area can be used to satisfy water retention requirements. Florida Hospital's site is DRI-approved and part of a DRI master storm water plan that connects many ponds and wetlands. Surrounded by three roads, it has excellent access from existing roadways. Vehicular circulation is split to provide different public, service and emergency entrances. Innovation by Florida Hospital Unlike traditional hospital care models where the patient is moved from room to room depending on type and intensity of care, all care and services are provided to the patient in one "universal" room under the "universal delivery of care model." The model was developed by Florida Hospital. "The nursing leadership of the universal room design . . . was under the direction of Connie Hamilton." (Tr. 1080). Ms. Hamilton, accepted as an expert in nursing and nursing administration, explained at hearing that under the model, the room is designed to provide any type of care the patient might need. Whether the patient is admitted in acute care and then moves to intermediate care or med-surg, all care is provided within one "universal" room. Not only does the patient stay in one place, but as Ms. Hamilton testified, "[t]he nurses stay in one place in providing that care to [the patient] and the families know where the patient is and the physician knows where the patient is [at all times]." (Tr. 933). The universal care model streamlines the interactive processes of care of a patient. The care and attention of physicians, nursing staff and families devoted to moving the patient from room to room and keeping track of the patient as type and intensity of care changes is reduced to nearly zero if not eliminated entirely. The time, energy and resources formerly devoted to all that is entailed with changes in the patient's room is then free to be re-directed to care and attention paid to the patient. The result is enhancement of Florida Hospital's ability to provide "whole person" care consistent with Adventist principles of health care. The universal care delivery model is an innovative approach to the delivery of healthcare. Pioneered by Florida Hospital at Celebration Health, the universal care delivery model has been shown there to reduce medical error, reduce length of stay, reduce pharmacy costs, reduce nursing workload, reduce housekeeping work, and probably to reduce infection rates. Following the universal care model employed at Celebration Health, Florida Hospital has designed its proposed Oviedo hospital facility with universal rooms. Consistent with the universal care delivery model, the rooms are designed to improve the healing experience during hospitalization and minimize the patient's feeling of being in a hospital setting. Another benefit of the universal care model is high physician satisfaction due to continuity of nursing care and other factors. The physicians know where the patient is, that is, in the same location every day. Physicians, moreover, are not called at all hours of the day and night to effectuate patient transfers to other rooms. Kathleen Mitchell has studied the universal care model and published and submitted articles on the model to nursing journals. She has consulted with hospitals around the country interested in the model as well as the "health care arm of the Department of Defense, Air Force, Army, Navy, Veteran's Administration." (Tr. 1084). Ms. Mitchell, accepted as an expert in nursing amplified the testimony of Ms. Hamilton. With regard to the problem the universal care delivery model is designed to address, Ms. Mitchell testified: [T]ransferring patients for different levels of care . . . fractures continuum of care. It is . . . disruptive to everyone . . . involved . . . to the patient and their families . . ., to nursing, pharmacy, the physicians . . . . It creates a great deal of anxiety for patient and the families . . . even [those] who are getting better and moving to a lower acuity of care. One of the most significant things about transferring patients for different levels of care is it involves a great deal of work. Not only bundling the patient up, but the documentation and all the communication that goes along with securing a new location for the patient and expediting a transfer. And moving patients around creates a risk of medical error. The length of stay in hospitals has gotten so short and everybody is focused on reducing the length of stay that in the traditional model of care, nurses are turning over more than half their patient assignment daily . . . . [T]here is the confusion and risk that goes along with that. (Tr. 1086-1088). The benefits of the reduction and elimination of transfers produced by the universal care model were listed by Ms. Mitchell: increase in the continuity of care, reduction in nurse workload, high physician satisfaction, reduction in emergency room waiting time, family satisfaction, connectivity between patient, family and staff. Others were elaborated on by Ms. Mitchell. For example, reduction in pharmacy costs, probable reduction in infection and reduction in housekeeping costs: When you are meeting the needs of the patient in one location, you are not leaving medications behind or sending them to the wrong place, and there is work that nurses and pharmacists do with calling each other with ['] where is it, I can't find it, I sent it[',] all that goes away. We are demonstrating a low incidence of nosocomial infections because we expose our patients to one environment of organisms. This is a very difficult one to prove; even though we have a low incidence of nosocomial infections, we also have a fairly new facility [at Celebration], but it makes common sense that if you are reducing the transfer of the patient and the exposure . . . to different environments, you are reducing their exposure to organisms and will have a lower . . . infection rate. . . . [W]e don't strip linens off the beds and clean the beds where the bed was just made three hours ago, with all the patient transfers that are involved. So there is a reduction in . . . housekeeping work and . . . linen expense. (Tr. 1089-1090). Like the housekeeping efficiencies, the nursing staff benefits from the efficiencies associated with supplies. All of the supplies the nurse needs to care for the patient are close by, so the nurse saves time otherwise retrieving supplies from down the hall or in other areas of a hospital wing. Another benefit of the design is "connectivity to the outside world. The rooms have large windows . . . patients feel connected to the outside world . . . . " (Tr. 1091). This design feature will make use of the conservation area on the Florida Hospital site and the soothing vista it will provide to the patient, and assist in the healing process. Other Design Features Design drawings are a living and continually evolving process. The planning process of Florida Hospital for the design of its new Oviedo hospital involved specialty department experts and ancillary representatives discussing delivery of quality care for a patient throughout the system. The specialty experts and ancillary representative include radiology, emergency department, lab, pharmacy, and respiratory. The involvement of these people assures optimal patient flow throughout the system. In Florida Hospital's design plans, the patient flow and interaction between departments are well designed and well laid out so as to minimize the opportunity for confusion. In order to maximize efficiency, a larger number of beds in one nursing unit works better than smaller pockets. Florida Hospital's design plans have one 40-bed unit and one 38- bed unit. This design gives more flexibility and can expand or shrink more easily as needed. You don't have to open up another unit and staff it so often, when adding only one or two patients. Florida Hospital designed its facility specifically to take advantage of the economies of scale that being a satellite hospital in a larger system provide. For example, Florida Hospital's general storage, central lab, and other areas were purposely designed smaller than one would typically find because Florida Hospital operates a system-wide central warehouse, thus greatly reducing the need for central storage areas. Likewise, Florida Hospital operates a system-wide central clinical lab, thus minimizing the space necessary within a hospital like Oviedo for lab space. ORHS did not design its facility to take advantage of the economies scale of being part of a system. Presence in Oviedo Florida Hospital has had a presence in the Oviedo community since the 1970's, when it purchased land in the Red Bug corridor area. In the 1980's, Florida Hospital built a medical office facility in Oviedo and began to recruit and encourage physicians to practice in the area. When Florida Hospital acquired Winter Park Hospital, its commitment to the community of Oviedo increased by virtue of the fact that the Winter Park Hospital organization already had property and outpatient facilities in Oviedo. The result of Florida Hospital's early presence in Oviedo is that it has a high degree of physician support in place in the Oviedo community. Many of the primary care physicians in Oviedo refer their surgical cases to Florida Hospital. Florida Hospital purchased Winter Park Hospital on or about July 1, 2000. With that purchase, Florida Hospital acquired the hospital site in Oviedo. With the purchase of Winter Park Hospital, Florida Hospital also "purchased" Winter Park's plan to build a hospital in Oviedo. The Florida Hospital site has long been recognized as the "Hospital Site" in Oviedo. Immediately after purchasing Winter Park Hospital, Florida Hospital went to work on developing a plan to build a hospital in Oviedo. Florida Hospital began meeting with Oviedo city leaders in the fall of 2000 and early 2001; Florida Hospital also assembled a team of people from all areas of Florida Hospital including radiology, clinical services, marketing, finance, facilities, and engineering to work toward the development of a Certificate of Need application for a hospital on its site in Oviedo. Florida Hospital's two existing medical office buildings in Oviedo contain over 60,000 square feet of medical office space, in which are housed physicians practicing in a wide range of areas including Family Practice, Internal Medicine, General Surgery, Orthopedic Surgery, Urology, Radiology, Gastroenterology, Ear, Nose and Throat, OB/GYN, and Dental and Psychological Practitioners as well. These physicians are all currently on the staff of Florida Hospital. Also included in these facilities are a Florida Hospital owned and operated radiology center, outpatient rehabilitation center, and outpatient lab. The radiology center offers general radiology services, including CT scanning and ultrasound. The larger of the two medical facilities that Florida Hospital owns in Oviedo is located on the site where the new hospital will be located. This is the facility that includes the outpatient radiology, rehabilitation and laboratory services. An urgent care center is also located on the site. As a result, residents of Oviedo are used to coming to Florida Hospital's site for medical services and already recognize it as a medical facility site. The fact that Florida Hospital has such a significant presence in the Oviedo Community, and that a large number of staff physicians are already in place in Oviedo, is a great benefit because of the existing referral patterns in place between the physicians at the existing Florida Hospital facilities in Oviedo and specialists and sub-specialists on Florida Hospital's staff. In contrast, ORHS had an outpatient surgery center in Oviedo; however, it has been closed due to lack of physician support. Likewise, ORHS originally offered radiology diagnostics at its Oviedo office building, but has since sold that business to the radiologists. Finally, ORHS does not own the medical office building in Oviedo anymore, having sold it two weeks before this final hearing commenced. Dr. Joseph Portoghese, a Board Certified Surgeon, practicing in the Orlando area for over 13 years and president- elect of the Florida Hospital medical staff, testified that his group, Surgical Associates, which is made up of six surgeons, derives approximately 20% of their patients from the Oviedo area. In his opinion, Florida Hospital knows the Oviedo population best as evidenced by its "major presence" in Oviedo with its two facilities. Dr. Portoghese also testified that his group knows most of the primary care physicians in the Oviedo area and that a good many of them send their surgical cases to his group. Dr. Portoghese is on the staff of Florida Hospital, but not on the staff of Orlando Regional. Dr. Schamberger, a family practitioner who has practiced in Oviedo for 16 years and whose patients come primarily from the Oviedo, Chuluota, Winter Springs and East Orlando area testified that Florida Hospital has the best infrastructure for the provision of medical care in the Oviedo area. "The physicians who provide a great bulk of the care for that Oviedo, Chuluota, Winter Springs area practice at Florida Hospital. Their referral patterns are to Florida Hospital. Florida Hospital provides us with all the specialty and sub- specialty care we need for our patients." Dr. Schamberger is on the staff of Florida Hospital, but he is not on the staff of Orlando Regional. Dr. Schamberger further testified to the disruption in continuity of care that would occur for many Oviedo area patients whose physicians are on the staff at Florida Hospital if Orlando Regional were to be the only applicant approved to build a hospital in Oviedo: "[I]ts a negative impact for continuity of care. If I have been attending a patient for many years, the first thing that happens to a patient when they get in the hospital is that they have a history and physical examination done to establish what their underlying medical conditions are. I know a lot more about that from my patients than someone who doesn't see them and doesn't know them." (Tr. 1318) Dr. Cintron, a physician practicing in the area of Internal Medicine, whose main office is in Oviedo at the Florida Hospital site, testified that she has approximately 3,000 active files and 75% to 80% of those are in the Oviedo area. She has been practicing in Oviedo since 1994. Dr. Cintron testified that approximately 85% of her patients that get admitted to a hospital are admitted to one of Florida Hospital's facilities. Also, when she makes a referral to a specialist or a sub-specialist, approximately 85% of those patients go to a Florida Hospital facility. Competition "[T]he U.S. health care system is a competitively driven market . . . with some regulatory components and based on a managed care model." (Tr. 485). Rather than every insurance plan having a contract with every provider, the managed care model uses selective contracting. Competing health insurance plans select providers with which to contract for the provision of health care services to their subscribers. The ability of the competing insurance plans to engage in selective contracting requires providers such as the two hospitals in this case to compete along a number of dimensions including price. When successful, this competitive price model holds down price and maintains quality. The State of Florida has a "fairly well developed and active managed care sector." (Tr. 507). "[M]anaged care in and of itself [however] is not really able to save much money for consumers. . . . [T]he key ingredient in the ability of managed care plans to control health care cost increases is the competitiveness of the hospital market, the structure of the market in which they are negotiating on behalf of their health plan subscribers." (Tr. 500). The parties define the "market" differently. Florida Hospital uses the Elzinga-Hogarty ("EH") Test. The test, along with appropriate supplemental information, indicates that the market is all of Orange and Seminole Counties or the tri-county area that also includes Osceola County. Whether a two county or tri-county market, Florida Hospital refers to its market as the metropolitan Orlando market or the "overall Orlando market." Orlando Regional identified a smaller area as the relevant market, one that is more local to Oviedo. The reason for this more local market was explained by Glenn Alan Melnick, Ph.D., and an expert in health care economics who testified for ORHS: [I]n order for [managed care plans] to attract subscribers, they have to have a health plan that's attractive to people. And one of the features that people look for in their health plans is the availability of local hospital services. . . . [I]n order to make their products marketable, they have to include reasonably accessible hospitals . . . [I]f there is limited local competition, then the opportunities for them to generate price competition by leveraging competitive conditions . . . are very limited and [the managed care] model will not be successful. (Tr. 489). Dr. Melnick used the five and eight zip code Oviedo Service Areas as defined by the applicants as the market. He calculated Herfandahl-Hershman Index ("HHI") valuations for each zip code in the two Oviedo Service Areas. He also calculated HHI valuations for another seven zip codes in Orange County "to provide background to [his] understanding of the allocations in [the] area . . . . ." (Tr. 516). Dr. Melnick's calculations showed that Florida Hospital has a market share between 60 and 69% for the five zip codes in Florida Hospital's Oviedo Service Area and it showed a market share of between 25% and 59% for the three zip codes in ORHS' Oviedo Service Area that were not included in Florida Hospital's Oviedo Service Area. In each of the seven zip codes in the area outside the Oviedo Service Area, Florida Hospital's market share was higher: in excess of 70%. The analysis led Dr. Melnick to conclude that the market is highly concentrated in favor of Florida Hospital. Using the zip codes in the Oviedo Service (and it appears from the record the seven not in either applicant's Oviedo Service Area that Dr. Melnick had analyzed for background purposes), Dr. Melnick concluded that if the CON is awarded to Florida Hospital "[i]t would make an already concentrated market much more concentrated." (Tr. 524). Florida Hospital's relative market share would rise from 65.8% to 85.7%. Orlando Regional's would drop from 27.4% to 11.5%. The award of the CON to Florida Hospital would, moreover, "seal its already existing market power into the future." (Id.) Conversely, awarding the CON to ORHS led Dr. Melnick to conclude that the market as he defined it would be more competitive; Florida Hospital relative market share would drop to 51% and ORHS' would rise to 44%. What Dr. Melnick's relative market shares would have been had he not used the seven zip codes he selected outside the Oviedo Service Areas of the two applicants does not appear to have been shown by ORHS. Including the seven zip codes outside the Oviedo Service Areas for determining the relative market share that led to Dr. Melnick's conclusions runs counter to his premise that the market should be a local one, that is, an Oviedo market. It is not clear what relevance these seven zip codes had to his analysis since their inclusion runs counter to the underpinnings of his approach to the issue. If the overall Orlando market used by Florida Hospital is considered the market, the conclusion is that, whether a CON for an Oviedo hospital is awarded to ORHS or Florida Hospital, the impact on relative market share is minimal. As for pricing, there has been no significant pricing difference between Florida Hospital and ORHS for Oviedo residents. Furthermore, both Florida Hospital and ORHS contract with managed care companies on a system-wide basis; Florida Hospital, moreover, uses a single master charge structure for all of its Orlando area campuses. It is not likely that the presence of a hospital in Oviedo would enable either Florida Hospital or ORHS to control pricing.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency enter a final order on the basis of the facts found in this order concluding that "not normal" circumstances exist for the construction and operation of a new 60-bed hospital in Oviedo and that Florida Hospital's CON application be approved and ORHS' be denied. DONE AND ENTERED this 18th day of November, 2002, in Tallahassee, Leon County, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of November, 2002. COPIES FURNISHED: Lealand McCharen, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Valda Clark Christian, General Counsel Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 James M. Barclay, Esquire Ruden, McClosky, Smith, Schuster & Russell, P.A. 215 South Monroe Street, Suite 815 Tallahassee, Florida 32301 Steven R. Bechtel, Esquire Mateer & Harbert, P.A. Post Office Box 2854 225 East Robinson Street, Suite 600 Orlando, Florida 32802 Stephen K. Boone, Esquire Boone, Boone, Boone, Hines & Koda, P.A. 1001 Avenida del Circo Post Office Box 1596 Venice, Florida 34284 Michael P. Sasso, Esquire Agency for Health Care Administration 525 Mirror Lake Drive, North Suite 310G St. Petersburg, Florida 33701
The Issue Whether the certificate of need (CON) applications filed by New Port Richey Hospital, Inc., d/b/a Community Hospital of New Port Richey (Community Hospital) (CON No. 9539), and Morton Plant Hospital Association, Inc., d/b/a North Bay Hospital (North Bay) (CON No. 9538), each seeking to replace and relocate their respective general acute care hospital, satisfy, on balance, the applicable statutory and rule criteria.
Findings Of Fact The Parties AHCA AHCA is the single state agency responsible for the administration of the CON program in Florida pursuant to Chapter 408, Florida Statutes (2000). The agency separately reviewed and preliminarily approved both applications. Community Hospital Community Hospital is a 300,000 square feet, accredited hospital with 345 licensed acute care beds and 56 licensed adult psychiatric beds, located in southern New Port Richey, Florida, within Sub-District 5-1. Community Hospital is seeking to construct a replacement facility approximately five miles to the southeast within a rapidly developing suburb known as "Trinity." Community Hospital currently provides a wide array of comprehensive inpatient and outpatient services and is the only provider of obstetrical and adult psychiatric services in Sub-District 5-1. It is the largest provider of emergency services in Pasco County with approximately 35,000 visits annually. It is also the largest provider of Medicaid and indigent patient days in Sub-District 5-1. Community Hospital was originally built in 1969 and is an aging facility. Although it has been renovated over time, the hospital is in poor condition. Community Hospital's average daily census is below 50 percent. North Bay North Bay is a 122-bed facility containing 102 licensed acute care beds and 20 licensed comprehensive medical rehabilitation beds, located approximately one mile north of Community Hospital in Sub-District 5-1. It serves a large elderly population and does not provide pediatric or obstetrical care. North Bay is also an aging facility and proposes to construct a replacement facility in the Trinity area. Notably, however, North Bay has spent approximately 12 million dollars over the past three years for physical improvements and is in reasonable physical condition. Helen Ellis Helen Ellis is an accredited hospital with 150 licensed acute care beds and 18 licensed skilled nursing unit beds. It is located in northern Pinellas County, approximately eight miles south of Community Hospital and nine miles south of North Bay. Helen Ellis provides a full array of acute care services including obstetrics and cardiac catheterization. Its daily census average has fluctuated over the years but is approximately 45 percent. Mease Mease operates two acute care hospitals in Pinellas County including Mease Dunedin Hospital, located approximately 18 to 20 miles south of the applicants and Mease Countryside Hospital, located approximately 16 to 18 miles south of Community and North Bay. Each hospital operates 189 licensed beds. The Mease hospitals are located in the adjacent acute care sub-district but compete with the applicants. The Health Planning District AHCA's Health Planning District 5 consists of Pinellas and Pasco Counties. U.S. Highway 41 runs north and south through the District and splits Pasco County into Sub- District 5-1 and Sub-District 5-2. Sub-District 5-1, where Community Hospital and North Bay are located, extends from U.S. 41 west to the Gulf Coast. Sub-District 5-2 extends from U.S. 41 to the eastern edge of Pasco County. Pinellas County is the most densely populated county in Florida and steadily grows at 5.52 percent per year. On the other hand, its neighbor to the north, Pasco County, has been experiencing over 15 percent annual growth in population. The evidence demonstrates that the area known as Trinity, located four to five miles southeast of New Port Richey, is largely responsible for the growth. With its large, single- owner land tracts, Trinity has become the area's fuel for growth, while New Port Richey, the older coastal anchor which houses the applicants' facilities, remains static. In addition to the available land in Trinity, roadway development in the southwest section of Pasco County is further fueling growth. For example, the Suncoast Highway, a major highway, was recently extended north from Hillsborough County through Sub-District 5-1, west of U.S. 41. It intersects with several large east-west thoroughfares including State Road 54, providing easy highway access to the Tampa area. The General Proposals Community Hospital's Proposal Community Hospital's CON application proposes to replace its existing, 401-bed hospital with a 376-bed state- of-the-art facility and relocate it approximately five miles to the southeast in the Trinity area. Community Hospital intends to construct a large medical office adjacent to its new facility and provide all of its current services including obstetrical care. It does not intend to change its primary service area. North Bay's Proposal North Bay's CON application proposes to replace its existing hospital with a 122-bed state-of-the-art facility and also plans to relocate it approximately eight miles to the southeast in the Trinity area of southwestern Pasco County. North Bay intends to provide the same array of services it currently offers its patients and will not provide pediatric and obstetrical care in the proposed facility. The proposed relocation site is adjacent to the Trinity Outpatient Center which is owned by North Bay's parent company, Morton Plant. The Outpatient Center offers a full range of diagnostic imaging services including nuclear medicine, cardiac nuclear stress testing, bone density scanning, CAT scanning, mammography, ultrasound, as well as many others. It also offers general and specialty ambulatory surgical services including urology; ear, nose and throat; ophthalmology; gastroenterology; endoscopy; and pain management. Approximately 14 physician offices are currently located at the Trinity Outpatient Center. The Condition of Community Hospital Facility Community Hospital's core facilities were constructed between 1969 and 1971. Additions to the hospital were made in 1973, 1975, 1976, 1977, 1979, 1981, 1992, and 1999. With an area of approximately 294,000 square feet and 401 licensed beds, or 733 square feet per bed, Community Hospital's gross area-to-bed ratio is approximately half of current hospital planning standards of 1,600 square feet per bed. With the exception of the "E" wing which was completed in 1999, all of the clinical and support departments are undersized. Medical-Surgical Beds And Intensive Care Units Community Hospital's "D" wing, constructed in 1975, is made up of two general medical-surgical unit floors which are grossly undersized. Each floor operates 47 general medical-surgical beds, 24 of which are in three-bed wards and 23 in semi-private rooms. None of the patient rooms in the "D" wing have showers or tubs so the patients bathe in a single facility located at the center of the wing on each floor. Community Hospital's "A" wing, added in 1973, is situated at the west end of the second floor and is also undersized. It too has a combination of semi-private rooms and three-bed wards without showers or tubs. Community Hospital's "F" wing, added in 1979, includes a medical-surgical unit on the second and third floor, each with semi-private and private rooms. The second floor unit is centrally located between a 56-bed adult psychiatric unit and the Surgical Intensive Care Unit (SICU) which creates security and privacy issues. The third floor unit is adjacent to the Medical Intensive Care Unit (MICU) which must be accessed through the medical-surgical unit. Neither intensive care unit (ICU) possesses an isolation area. Although the three-bed wards are generally restricted to in-season use, and not always full, they pose significant privacy, security, safety, and health concerns. They fail to meet minimum space requirements and are a serious health risk. The evidence demonstrates that reconfiguring the wards would be extremely costly and impractical due to code compliance issues. The wards hinder the hospital's acute care utilization, and impair its ability to effectively compete with other hospitals. Surgical Department and Recovery Community Hospital's surgical department is separated into two locations including the main surgical suite on the second floor and the Endoscopy/Pain Management unit located on the first floor of "C" wing. Consequently, the department cannot share support staff and space such as preparation and recovery. The main surgical suite, adjacent recovery room, and central sterile processing are 25 years old. This unit's operating rooms, cystoscopy rooms, storage areas, work- stations, central sterile, and recovery rooms are undersized and antiquated. The 12-bay Recovery Room has no patient toilet and is lacking storage. The soiled utility room is deficient. In addition, the patient bays are extremely narrow and separated by curtains. There is no direct connection to the sterile corridor, and staff must break the sterile field to transport patients from surgery to recovery. Moreover, surgery outpatients must pass through a major public lobby going to and returning from surgery. The Emergency Department Community Hospital's existing emergency department was constructed in 1992 and is the largest provider of hospital emergency services in Pasco County, handling approximately 35,000 visits per year. The hospital is also designated a "Baker Act" receiving facility under Chapter 394, Florida Statutes, and utilizes two secure examination rooms for emergent psychiatric patients. At less than 8,000 total square feet, the emergency department is severely undersized to meet the needs of its patients. The emergency department is currently undergoing renovation which will connect the triage area to the main emergency department. The renovation will not enlarge the entrance, waiting area, storage, nursing station, nor add privacy to the patient care areas in the emergency department. The renovation will not increase the total size of the emergency department, but in fact, the department's total bed availability will decrease by five beds. Similar to other departments, a more meaningful renovation cannot occur within the emergency department without triggering costly building code compliance measures. In addition to its space limitations, the emergency department is awkwardly located. In 1992, the emergency department was relocated to the front of the hospital and is completely separated from the diagnostic imaging department which remained in the original 1971 building. Consequently, emergency patients are routinely transported across the hospital for imaging and CT scans. Issues Relating to Replacement of Community Hospital Although physically possible, renovating and expanding Community Hospital's existing facility is unreasonable. First, it is cost prohibitive. Any significant renovation to the 1971, 1975, 1977, and 1979 structures would require asbestos abatement prior to construction, at an estimated cost of $1,000,000. In addition, as previously noted, the hospital will be saddled with the major expense of complying with all current building code requirements in the 40-year-old facility. Merely installing showers in patient rooms would immediately trigger a host of expensive, albeit necessary, code requirements involving access, wiring, square footage, fireproofing columns and beams, as well as floor/ceiling and roof/ceiling assemblies. Concurrent with the significant demolition and construction costs, the hospital will experience the incalculable expense and loss of revenue related to closing major portions, if not all, of the hospital. Second, renovation and expansion to the existing facility is an unreasonable option due to its physical restrictions. The 12'4" height of the hospital's first floor limits its ability to accommodate HVAC ductwork large enough to meet current ventilation requirements. In addition, there is inadequate space to expand any department within the confines of the existing hospital without cannibalizing adjacent areas, and vertical expansion is not an option. Community Hospital's application includes a lengthy Facility Condition Assessment which factually details the architectural, mechanical, and electrical deficiencies of the hospital's existing physical plant. The assessment is accurate and reasonable. Community Hospital's Proposed Replacement Community Hospital proposes to construct a six- story, 320 licensed beds, acute care replacement facility. The hospital will consist of 548,995 gross square feet and include a 56-bed adult psychiatric unit connected by a hallway to the first floor of the main hospital building. The proposal also includes the construction of an adjacent medical office building to centralize the outpatient offices and staff physicians. The evidence establishes that the deficiencies inherent in Community Hospital's existing hospital will be cured by its replacement hospital. All patients will be provided large private rooms. The emergency department will double in size, and contain private examination rooms. All building code requirements will be met or exceeded. Patients and staff will have separate elevators from the public. In addition, the surgical department will have large operating rooms, and adequate storage. The MICU and SICU will be adjacent to each other on the second floor to avoid unnecessary traffic within the hospital. Surgical patients will be transported to the ICU via a private elevator dedicated to that purpose. Medical-surgical patient rooms will be efficiently located on the third through sixth floors, in "double-T" configuration. Community Hospital's Existing and Proposed Sites Community Hospital is currently located on a 23-acre site inside the southern boundary of New Port Richey. Single- family homes and offices occupy the two-lane residential streets that surround the site on all sides. The hospital buildings are situated on the northern half of the site, with the main parking lot located to the south, in front of the main entrance to the hospital. Marine Parkway cuts through the southern half of the site from the west, and enters the main parking lot. A private medical mall sits immediately to the west of the main parking lot and a one-acre storm-water retention pond sits to the west of the mall. A private medical office building occupies the south end of the main parking lot and a four-acre drainage easement is located in the southwest corner of the site. Community Hospital's administration has actively analyzed its existing site, aging facility, and adjacent areas. It has commissioned studies by civil engineers, health care consultants, and architects. The collective evidence demonstrates that, although on-site relocation is potentially an option, on balance, it is not a reasonable option. Replacing Community Hospital on its existing site is not practical for several reasons. First, the hospital will experience significant disruption and may be required to completely close down for a period of time. Second, the site's southwestern large four-acre parcel is necessary for storm-water retention and is unavailable for expansion. Third, a reliable cost differential is unknown given Community Hospital's inability to successfully negotiate with the city and owners of the adjacent medical office complexes to acquire additional parcels. Fourth, acquiring other adjacent properties is not a viable option since they consist of individually owned residential lots. In addition to the site's physical restrictions, the site is hindered by its location. The hospital is situated in a neighborhood between small streets and a local school. From the north and south, motorists utilize either U.S. 19, a congested corridor that accommodates approximately 50,000 vehicles per day, or Grand and Madison Streets, two-lane streets within a school zone. From the east and west, motorists utilize similar two-lane neighborhood streets including Marine Parkway, which often floods in heavy rains. Community Hospital's proposed site, on the other hand, is a 53-acre tract positioned five miles from its current facility, at the intersection of two major thoroughfares in southwestern Pasco County. The proposed site offers ample space for all facilities, parking, outpatient care, and future expansion. In addition, Community Hospital's proposed site provides reasonable access to all patients within its existing primary service area made up of zip codes 34652, 34653, 34668, 34655, 34690, and 34691. For example, the average drive times from the population centers of each zip code to the existing site of the hospital and the proposed site are as follows: Zip code Difference Existing site Proposed site 34652 3 minutes 14 minutes 11 minutes 34653 8 minutes 11 minutes 3 minutes 34668 15 minutes 21 minutes 6 minutes 34655 11 minutes 4 minutes -7 minutes 34690 11 minutes 13 minutes 2 minutes 34691 11 minutes 17 minutes 6 minutes While the average drive time from the population centroids of zip codes 34653, 34668, 34690, and 34691 to the proposed site slightly increases, it decreases from the Trinity area, where population growth has been most significant in southwestern Pasco County. In addition, a motorist's average drive time from Community Hospital's existing location to its proposed site is only 10 to 11 minutes, and patients utilizing public transportation will be able to access the new hospital via a bus stop located adjacent to the proposed site. The Condition of North Bay Facility North Bay Hospital is also an aging facility. Its original structure and portions of its physical plant are approximately 30 years old. Portions of its major mechanical systems will soon require replacement including its boilers, air handlers, and chillers. In addition, the hospital is undersized and awkwardly configured. Despite its shortcomings, however, North Bay is generally in good condition. The hospital has been consistently renovated and updated over time and is aesthetically pleasing. Moreover, its second and third floors were added in 1986, are in good shape, and structurally capable of vertical expansion. Medical Surgical Beds and ICU Units By-in-large, North Bay is comprised of undersized, semi-private rooms containing toilet and shower facilities. The hospital does not have any three-bed wards. North Bay's first floor houses all ancillary and support services including lab, radiology, pharmacy, surgery, pre-op, post-anesthesia recovery, central sterile processing and supply, kitchen and cafeteria, housekeeping and administration, as well as the mechanical, electrical, and facilities maintenance and engineering. The first floor also contains a 20-bed CMR unit and a 15-bed acute care unit. North Bay's second and third floors are mostly comprised of semi-private rooms and supporting nursing stations. Although the rooms and stations are not ideally sized, they are in relatively good shape. North Bay utilizes a single ICU with ten critical care beds. The ICU rooms and nursing stations are also undersized. A four-bed ICU ward and former nursery are routinely used to serve overflow patients. Surgery Department and Recovery North Bay utilizes a single pre-operative surgical room for all of its surgery patients. The room accommodates up to five patient beds, but has limited space for storage and pre-operative procedures. Its operating rooms are sufficiently sized. While carts and large equipment are routinely stored in hallways throughout the surgical suite, North Bay has converted the former obstetrics recovery room to surgical storage and has made efficient use of other available space. North Bay operates a small six-bed Post Anesthesia Care Unit. Nurses routinely prepare patient medications in the unit which is often crowded with staff and patients. The Emergency Department North Bay has recently expanded its emergency department. The evidence demonstrates that this department is sufficient and meets current and future expected patient volumes. Replacement Issues Relating to North Bay While it is clear that areas of North Bay's physical plant are aging, the facility is in relatively good condition. It is apparent that North Bay must soon replace significant equipment, including cast-iron sewer pipes, plumbing, boilers, and chillers which will cause some interruption to hospital operations. However, North Bay's four-page written assessment of the facility and its argument citing the need for total replacement is, on balance, not persuasive. North Bay's Proposed Replacement North Bay proposes to construct a new, state-of-the- art, hospital approximately eight miles southeast of its existing facility and intends to offer the identical array of services the hospital currently provides. North Bay's Existing and Proposed Sites North Bay's existing hospital is located on an eight-acre site with limited storm-water drainage capacity. Consequently, much of its parking area is covered by deep, porous, gravel instead of asphalt. North Bay's existing site is generally surrounded by residential properties. While the city has committed, in writing, it willingness to assist both applicants with on-site expansion, it is unknown whether North Bay can acquire additional adjacent property. North Bay's proposed site is located at the intersection of Trinity Oaks Boulevard and Mitchell Boulevard, south of Community Hospital's proposed site, and is quite spacious. It contains sufficient land for the facilities, parking, and future growth, and has all necessary infrastructure in place, including utility systems, storm- water structures, and roadways. Currently however, there is no public transportation service available to North Bay's proposed site. Projected Utilization by Applicants The evidence presented at hearing indicates that, statewide, replacement hospitals often increase a provider's acute care bed utilization. For example, Bartow Memorial Hospital, Heart of Florida Regional Medical Center, Lake City Medical Center, Florida Hospital Heartland Medical Center, South Lake Hospital, and Florida Hospital-Fish Memorial each experienced significant increases in utilization following the opening of their new hospital. The applicants in this case each project an increase in utilization following the construction of their new facility. Specifically, Community Hospital's application projects 82,685 total hospital patient days (64,427 acute care patient days) in year one (2006) of the operation of its proposed replacement facility, and 86,201 total hospital patient days (67,648 acute care patient days) in year two (2007). Using projected 2006 and 2007 population estimates, applying 2002 acute care hospital use rates which are below 50 percent, and keeping Community Hospital's acute care market share constant at its 2002 level, it is reasonably estimated that Community Hospital's existing hospital will experience 52,623 acute care patient days in 2006, and 53,451 acute care patient days in 2007. Consequently, Community Hospital's proposed facility must attain 11,804 additional acute care patient days in 2006, and 14,197 more acute care patient days in 2007, in order to achieve its projected acute care utilization. Although Community Hospital lost eight percent of the acute care market in its service area between 1995 and 2002, two-thirds of that loss was due to residents of Sub- District 5-1 acquiring services in another area. While Community Hospital experienced 78,444 acute care patient days in 1995, it projects only 64,427 acute care patient days in year one. Given the new facility and population factors, it is reasonable that the hospital will recapture half of its lost acute care market share and achieve its projections. With respect to its psychiatric unit, Community Hospital projects 16,615 adult psychiatric inpatient days in year one (2006) and 17,069 adult inpatient days in year two (2007) of the proposed replacement hospital. The evidence indicates that these projections are reasonable. Similarly, North Bay's acute care utilization rate has been consistently below 50 percent. Since 1999, the hospital has experienced declining utilization. In its application, North Bay states that it achieved total actual acute care patient days of 21,925 in 2000 and 19,824 in 2001 and the evidence at hearing indicates that North Bay experienced 17,693 total acute care patient days in 2002. North Bay projects 25,909 acute care patient days in the first year of operation of its proposed replacement hospital, and 27,334 acute care patient days in the second year of operation. Despite each applicant's current facility utilization rate, Community Hospital must increase its current acute care patient days by 20 percent to reach its projected utilization, and North Bay must increase its patient days by at least 50 percent. Given the population trends, service mix and existing competition, the evidence demonstrates that it is not possible for both applicants to simultaneously achieve their projections. In fact, it is strongly noted that the applicants' own projections are predicated upon only one applicant being approved and cannot be supported with the approval of two facilities. Local Health Plan Preferences In its local health plan for District 5, the Suncoast Health Council, Inc., adopted acute care preferences in October, 2000. The replacement of an existing hospital is not specifically addressed by any of the preferences. However, certain acute care preferences and specialty care preferences are applicable. The first applicable preference provides that preference "shall be given to an applicant who proposes to locate a new facility in an area that will improve access for Medicaid and indigent patients." It is clear that the majority of Medicaid and indigent patients live closer to the existing hospitals. However, Community Hospital proposes to move 5.5 miles from its current location, whereas North Bay proposes to move eight miles from its current location. While the short distances alone are less than significant, North Bay's proposed location is further removed from New Port Richey, is not located on a major highway or bus-route, and would therefore be less accessible to the medically indigent residents. Community Hospital's proposed site will be accessible using public transportation. Furthermore, Community Hospital has consistently provided excellent service to the medically indigent and its proposal would better serve that population. In 2000, Community Hospital provided 7.4 percent of its total patient days to Medicaid patients and 0.8 percent of its total patient days to charity patients. Community Hospital provided the highest percentage and greatest number of Medicaid patient days in Sub-District 5-1. By comparison, North Bay provided 5.8 percent of its total patient days to Medicaid patients and 0.9 percent of its total patient days to charity patients. In 2002, North Bay's Medicaid patients days declined to 3.56 percent. Finally, given the closeness and available bed space of the existing providers and the increasing population in the Trinity area, access will be improved by Community Hospital's relocation. The second local health plan preference provides that "[i]n cases where an applicant is a corporation with previously awarded certificates of need, preference shall be given to those which follow through in a timely manner to construct and operate the additional facilities or beds and do not use them for later negotiations with other organizations seeking to enter or expand the number of beds they own or control." Both applicants meet this preference. The third local health plan preference recognizes "Certificate of Need applications that provide AHCA with documentation that they provide, or propose to provide, the largest percentage of Medicaid and charity care patient days in relation to other hospitals in the sub-district." Community Hospital provides the largest percentage of Medicaid and charity care patient days in relation to other hospitals in Sub-District 5-1, and therefore meets this preference. The fourth local health plan preference applies to "Certificate of Need applications that demonstrate intent to serve HIV/AIDS infected persons." Both applicants accept and treat HIV/AIDS infected persons, and would continue to do so in their proposed replacement hospitals. The fifth local health plan preference recognizes "Certificate of Need applications that commit to provide a full array of acute care services including medical-surgical, intensive care, pediatric, and obstetrical services within the sub-district for which they are applying." Community Hospital qualifies since it will continue to provide its current services, including obstetrical care and psychiatric care, in its proposed replacement hospital. North Bay discontinued its pediatric and obstetrical programs in 2001, does not intend to provide them in its proposed replacement hospital, and will not provide psychiatric care. Agency Rule Preferences Florida Administrative Code Rule 59C-1.038(6) provides an applicable preference to a facility proposing "new acute care services and capital expenditures" that has "a documented history of providing services to medically indigent patients or a commitment to do so." As the largest Medicaid provider in Sub-District 5-1, Community Hospital meets this preference better than does North Bay. North Bay's history demonstrates a declining rate of service to the medically indigent. Statutory Review Criteria Section 408.035(1), Florida Statutes: The need for the health care facilities and health services being proposed in relation to the applicable district health plan District 5 includes Pasco and Pinellas County. Pasco County is rapidly developing, whereas Pinellas County is the most densely populated county in Florida. Given the population trends, service mix, and utilization rates of the existing providers, on balance, there is a need for a replacement hospital in the Trinity area. Section 408.035(2), Florida Statutes: The availability, quality of care, accessibility, and extent of utilization of existing health care facilities and health services in the service district of the applicant Community Hospital and North Bay are both located in Sub-District 5-1. Each proposes to relocate to an area of southwestern Pasco County which is experiencing explosive population growth. The other general acute care hospital located in Sub-District 5-1 is Regional Medical Center Bayonet Point, which is located further north, in the Hudson area of western Pasco County. The only other acute care hospitals in Pasco County are East Pasco Medical Center, in Zephyrhills, and Pasco Community Hospital, in Dade City. Those hospitals are located in Sub-District 5-2, east Pasco County, far from the area proposed to be served by either Community Hospital or North Bay. District 5 includes Pinellas County as well as Pasco County. Helen Ellis and Mease are existing hospital providers located in Pinellas County. Helen Ellis has 168 licensed beds, consisting of 150 acute care beds and an 18-bed skilled nursing unit, and is located 7.9 miles from Community Hospital's existing location and 10.8 miles from Community Hospital's proposed location. Access to Helen Ellis for patients originating from southwestern Pasco County requires those patients to travel congested U.S. 19 south to Tarpon Springs. As a result, the average drive time from Community Hospital's existing and proposed site to Helen Ellis is approximately 22 minutes. Helen Ellis is not a reasonable alternative to Community Hospital's proposal. The applicants' proposals are specifically designed for the current and future health care needs of southwestern Pasco County. Given its financial history, it is unknown whether Helen Ellis will be financially capable of providing the necessary care to the residents of southwestern Pasco. Mease Countryside Hospital has 189 licensed acute care beds. It is located 16.0 miles from Community Hospital's existing location and 13.8 miles from Community Hospital's proposed location. The average drive time to Mease Countryside is 32 minutes from Community Hospital's existing site and 24 minutes from its proposed site. In addition, Mease Countryside Hospital has experienced extremely high utilization over the past several years, in excess of 90 percent for calendar years 2000 and 2001. Utilization at Mease Countryside Hospital has remained over 80 percent despite the addition of 45 acute care beds in April 2002. Given the growth and demand, it is unknown whether Mease can accommodate the residents in southwest Pasco County. Mease Dunedin Hospital has 189 licensed beds, consisting of 149 acute care beds, a 30-bed skilled nursing unit, five Level 2 neonatal intensive care beds, and five Level 3 neonatal intensive care beds. Its former 15-bed adult psychiatric unit has been converted into acute care beds. It is transferring its entire obstetrics program at Mease Dunedin Hospital to Mease Countryside Hospital. Mease Dunedin Hospital is located approximately 18 to 20 miles from the applicants' existing and proposed locations with an average drive time of 35-38 minutes. With their remote location, and the exceedingly high utilization at Mease Countryside Hospital, neither of the two Mease hospitals is a viable alternative to the applicants' proposals. In addition, the construction of a replacement hospital would positively impact economic development and further attract medical professionals to Sub-District 5-1. On balance, given the proximity, utilization, service array, and accessibility of the existing providers, including the applicants, the relocation of Community Hospital will enhance access to health care to the residents. Section 408.035(3), Florida Statutes: The ability of the applicant to provide quality of care and the applicant's record of providing quality of care As stipulated, both applicants provide excellent quality of care. However, Community Hospital's proposal will better enhance its ability to provide quality care. Community is currently undersized, non-compliant with today's standards, and located on a site that does not allow for reasonable expansion. Its emergency department is inadequate for patient volume, and the configuration of the first floor leads to inefficiencies in the diagnosis and treatment of emergency patients. Again, most inpatients are placed in semi-private rooms and three-bed wards, with no showers or tubs, little privacy, and an increased risk of infection. The hospital's waiting areas for families of patients are antiquated and undersized, its nursing stations are small and cramped and the operating rooms and storage facilities are undersized. Community Hospital's deficiencies will be effectively eliminated by its proposed replacement hospital. As a result, patients will experience qualitatively better care by the staff who serve them. Conversely, North Bay is in better physical condition and not in need of replacement. It has more reasonable options to expand or relocate its facility on site. Quality of care at North Bay will not be markedly enhanced by the construction of a new hospital. Sections 408.035(4)and(5), Florida Statutes, have been stipulated as not applicable in this case. Section 408.035(6), Florida Statutes: The availability of resources, including health personnel, management personnel, and funds available for capital and operating expenditures, for project accomplishment and operation The parties stipulated that both Community Hospital and North Bay have available health personnel and management personnel for project accomplishment and operation. In addition, the evidence proves that both applicants have sufficient funds for capital and operating expenditures. Community Hospital proposes to rely on its parent company to finance the project. Keith Giger, Vice-President of Finance for HCA, Inc., Community Hospital's parent organization, provided credible deposition testimony that HCA, Inc., will finance 100 percent of the total project cost by an inter-company loan at eight percent interest. Moreover, it is noted that the amount to be financed is actually $20 million less than the $196,849,328 stated in the CON Application, since Community Hospital previously purchased the proposed site in June 2003 with existing funds and does not need to finance the land acquisition. Community Hospital has sufficient working capital for operating expenditures of the proposed replacement hospital. North Bay, on the other hand, proposes to acquire financing from BayCare Obligated Group which includes Morton Plant Hospital Association, Inc.; Mease; and several other hospital entities. Its proposal, while feasible, is less certain since member hospitals must approve the indebtedness, thereby providing Mease with the ability to derail North Bay's proposed bond financing. Section 408.035(7), Florida Statutes: The extent to which the proposed services will enhance access to health care for residents of the service district The evidence proves that either proposal will enhance geographical access to the growing population in the service district. However, with its provision of obstetrical services, Community Hospital is better suited to address the needs of the younger community. With respect to financial access, both proposed relocation sites are slightly farther away from the higher elderly and indigent population centers. Since the evidence demonstrates that it is unreasonable to relocate both facilities away from the down-town area, Community Hospital's proposal, on balance, provides better access to poor patients. First, public transportation will be available to Community Hospital's site. Second, Community Hospital has an excellent record of providing care to the poor and indigent and has accepted the agency's condition to provide ten percent of its total annual patient days to Medicaid recipients To the contrary, North Bay's site will not be accessible by public transportation. In addition, North Bay has a less impressive record of providing care to the poor and indigent. Although AHCA conditioned North Bay's approval upon it providing 9.7 percent of total annual patient days to Medicaid and charity patients, instead of the 9.7 percent of gross annual revenue proposed in its application, North Bay has consistently provided Medicaid and charity patients less than seven percent of its total annual patient days. Section 408.035(8), Florida Statutes: The immediate and long-term financial feasibility of the proposal Immediate financial feasibility refers to the availability of funds to capitalize and operate the proposal. See Memorial Healthcare Group, Ltd. d/b/a Memorial Hospital Jacksonville vs. AHCA et al., Case No. 02-0447 et seq. Community Hospital has acquired reliable financing for the project and has sufficiently demonstrated that its project is immediately financially feasible. North Bay's short-term financial proposal is less secure. As noted, North Bay intends to acquire financing from BayCare Obligated Group. As a member of the group, Mease, the parent company of two hospitals that oppose North Bay's application, must approve the plan. Long-term financial feasibility is the ability of the project to reach a break-even point within a reasonable period of time and at a reasonable achievable point in the future. Big Bend Hospice, Inc. vs. AHCA and Covenant Hospice, Inc., Case No. 02-0455. Although CON pro forma financial schedules typically show profitability within two to three years of operation, it is not a requirement. In fact, in some circumstances, such as the case of a replacement hospital, it may be unrealistic for the proposal to project profitability before the third or fourth year of operation. In this case, Community Hospital's utilization projections, gross and net revenues, and expense figures are reasonable. The evidence reliably demonstrates that its replacement hospital will be profitable by the fourth year of operation. The hospital's financial projections are further supported by credible evidence, including the fact that the hospital experienced financial improvement in 2002 despite its poor physical condition, declining utilization, and lost market share to providers outside of its district. In addition, the development and population trends in the Trinity area support the need for a replacement hospital in the area. Also, Community Hospital has benefited from increases in its Medicaid per diem and renegotiated managed care contracts. North Bay's long-term financial feasibility of its proposal is less certain. In calendar year 2001, North Bay incurred an operating loss of $306,000. In calendar year 2002, it incurred a loss of $1,160,000. In its CON application, however, North Bay projects operating income of $1,538,827 in 2007, yet omitted the ongoing expenses of interest ($1,600,000) and depreciation ($3,000,000) from its existing facility that North Bay intends to continue operating. Since North Bay's proposal does not project beyond year two, it is less certain whether it is financially feasible in the third or fourth year. In addition to the interest and depreciation issues, North Bay's utilization projections are less reasonable than Community Hospital's proposal. While possible, North Bay will have a difficult task achieving its projected 55 percent increase in acute care patient days in its second year of operation given its declining utilization, loss of obstetric/pediatric services and termination of two exclusive managed care contracts. Section 408.035(9), Florida Statutes: The extent to which the proposal will foster competition that promotes quality and cost-effectiveness Both applicants have substantial unused capacity. However, Community Hospital's existing facility is at a distinct competitive disadvantage in the market place. In fact, from 1994 to 1998, Community Hospital's overall market share in its service area declined from 40.3 percent to 35.3 percent. During that same period, Helen Ellis' overall market share in Community Hospital's service area increased from 7.2 percent to 9.2 percent. From 1995 to the 12-month period ending June 30, 2002, Community Hospital's acute care market share in its service area declined from 34.0 percent to 25.9 percent. During that same period, Helen Ellis' acute care market share in Community Hospital's service area increased from 11.7 percent to 12.0 percent. In addition, acute care average occupancy rates at Mease Dunedin Hospital increased each year from 1999 through 2002. Acute care average occupancy at Mease Countryside Hospital exceeded 90 percent in 2000 and 2001, and was approximately 85 percent for the period ending June 30, 2002. Some of the loss in Community Hospital's market share is due to an out-migration of patients from its service area to hospitals in northern Pinellas and Hillsborough Counties. Market share in Community's service area by out-of- market providers increased from 33 percent in 1995 to 40 percent in 2002. Community Hospital's outdated hospital has hampered its ability to compete for patients in its service area. Mease is increasing its efforts to attract patients and currently completing a $92 million expansion of Mease Countryside Hospital. The project includes the development of 1,134 parking spaces on 30 acres of raw land north of the Mease Countryside Hospital campus and the addition of two floors to the hospital. It also involves the relocation of 51 acute care beds, the obstetrics program and the Neonatal Intensive Care Units from Mease Dunedin Hosptial to Mease Countryside Hospital. Mease is also seeking to more than double the size of the Countryside emergency department to handle its 62,000 emergency visits. With the transfer of licensed beds from Mease Dunedin Hospital to Mease Countryside Hospital, Mease will also convert formerly semi-private patient rooms to private rooms at Mease Dunedin Hospital. The approval of Community Hospital's relocated facility will enable it to better compete with the hospitals in the area and promote quality and cost- effectiveness. North Bay, on the other hand, is not operating at a distinct disadvantage, yet is still experiencing declining utilization. North Bay is the only community-owned, not-for- profit provider in western Pasco County and is a valuable asset to the city. Section 408.035(10), Florida Statutes: The costs and methods of the proposed construction, including the costs and methods or energy provision and the availability of alternative, less costly, or more effective methods of construction The parties stipulated that the project costs in both applications are reasonable to construct the replacement hospitals. Community Hospital's proposed construction cost per square foot is $175, and slightly less than North Bay's $178 proposal. The costs and methods of proposed construction for each proposal is reasonable. Given Community Hospital's severe site and facility problems, the evidence demonstrates that there is no reasonable, less costly, or more effective methods of construction available for its proposed replacement hospital. Additional "band-aide" approaches are not financially reasonable and will not enable Community Hospital to effectively compete. The facility is currently licensed for 401 beds, operates approximately 311 beds and is still undersized. The proposed replacement hospital will meet the standards in Florida Administrative Code Rule 59A-3.081, and will meet current building codes, including the Americans with Disabilities Act and the Guidelines for Design and Construction of Hospitals and Health Care Facilities, developed by the American Institute of Architects. The opponents' argue that Community Hospital will not utilize the 320 acute care beds proposed in its CON application, and therefore, a smaller facility is a less- costly alternative. In addition, Helen Ellis' architectural expert witness provided schematic design alternatives for Community Hospital to be expanded and replaced on-site, without providing a detailed and credible cost accounting of the alternatives. Given the evidence and the law, their arguments are not persuasive. While North Bay's replacement cost figures are reasonable, given the aforementioned reasons, including the fact that the facility is in reasonably good condition and can expand vertically, on balance, it is unreasonable for North Bay to construct a replacement facility in the Trinity area. Section 408.035(11), Florida Statutes: The applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent Community Hospital has consistently provided the most health care services to Medicaid patients and the medically indigent in Sub-District 5-1. Community Hospital agreed to provide at least ten percent of its patient days to Medicaid recipients. Similarly, North Bay agreed to provide 9.7 percent of its total annual patient days to Medicaid and charity patients combined. North Bay, by contrast, provided only 3.56 percent of its total patient days to Medicaid patients in 2002, and would have to significantly reverse a declining trend in its Medicaid provision to comply with the imposed condition. Community Hospital better satisfies the criterion. Section 408.035(12) has been stipulated as not applicable in this case. Adverse Impact on Existing Providers Historical figures demonstrate that hospital market shares are not static, but fluctuate with competition. No hospital is entitled to a specific or historic market share free from competition. While the applicants are located in health planning Sub-District 5-1 and Helen Ellis and the two Mease hospitals are located in health planning Sub-District 5- 2, they compete for business. None of the opponents is a disproportionate share, safety net, Medicaid provider. As a result, AHCA gives less consideration to any potential adverse financial impact upon them resulting from the approval of either application as a low priority. The opponents, however, argue that the approval of either replacement hospital would severely affect each of them. While the precise distance from the existing facilities to the relocation sites is relevant, it is clear that neither applicants' proposed site is unreasonably close to any of the existing providers. In fact, Community Hospital intends to locate its replacement facility three miles farther away from Helen Ellis and 1.5 miles farther away from Mease Dunedin Hospital. While Helen Ellis' primary service area is seemingly fluid, as noted by its chief operating officer's hearing and deposition testimony, and the Mease hospitals are located 15 to 20 miles south, they overlap parts of the applicants' primary service areas. Accordingly, each applicant concedes that the proposed increase in their patient volume would be derived from the growing population as well as existing providers. Although it is clear that the existing providers may be more affected by the approval of Community Hosptial's proposal, the exact degree to which they will be adversely impacted by either applicant is unknown. All parties agree, however, that the existing providers will experience less adverse affects by the approval of only one applicant, as opposed to two. Furthermore, Mease concedes that its hospitals will continue to aggressively compete and will remain profitable. In fact, Mease's adverse impact analysis does not show any credible reduction in loss of acute care admissions at Mease Countryside Hospital or Mease Dunedin Hospital until 2010. Even then, the reliable evidence demonstrates that the impact is negligible. Helen Ellis, on the other hand, will likely experience a greater loss of patient volume. To achieve its utilization projections, Community Hospital will aggressively compete for and increase market share in Pinellas County zip code 34689, which borders Pasco County. While that increase does not facially prove that Helen Ellis will be materially affected by Community Hospital's replacement hospital, Helen Ellis will confront targeted competition. To minimize the potential adverse affect, Helen Ellis will aggressively compete to expand its market share in the Pinellas County zip codes south of 34689, which is experiencing population growth. In addition, Helen Ellis is targeting broader service markets, and has filed an application to establish an open- heart surgery program. While Helen Ellis will experience greater competition and financial loss, there is insufficient evidence to conclude that it will experience material financial adverse impact as a result of Community Hospital's proposed relocation. In fact, Helen Ellis' impact analysis is less than reliable. In its contribution-margin analysis, Helen Ellis utilized its actual hospital financial data as filed with AHCA for the fiscal year October 1, 2001, to September 30, 2002. The analysis included total inpatient and total outpatient service revenues found in the filed financial data, including ambulatory services and ancillary services, yet it did not include the expenses incurred in generating ambulatory or ancillary services revenue. As a result, the overstated net revenue per patient day was applied to its speculative lost number of patient days which resulted in an inflated loss of net patient service revenue. Moreover, the evidence indicates that Helen Ellis' analysis incorrectly included operational revenue and excluded expenses related to its 18-bed skilled nursing unit since neither applicant intends to operate a skilled nursing unit. While including the skilled nursing unit revenues, the analysis failed to include the sub-acute inpatient days that produced those revenues, and thereby over inflated the projected total lost net patient service revenue by over one million dollars.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that: Community Hospital's CON Application No. 9539, to establish a 376-bed replacement hospital in Pasco County, Sub- District 5-1, be granted; and North Bay's CON Application No. 9538, to establish a 122-bed replacement hospital in Pasco County, Sub-District 5- 1, be denied. DONE AND ENTERED this 19th day of March, 2004, in Tallahassee, Leon County, Florida. S WILLIAM R. PFEIFFER 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 19th day of March, 2004. COPIES FURNISHED: James C. Hauser, Esquire R. Terry Rigsby, Esquire Metz, Hauser & Husband, P.A. 215 South Monroe Street, Suite 505 Post Office Box 10909 Tallahassee, Florida 32302 Stephen A. Ecenia, Esquire R. David Prescott, Esquire Richard M. Ellis, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551 Richard J. Saliba, Esquire Agency for Health Care Administration Fort Knox Building III, Mail Station 3 2727 Mahan Drive Tallahassee, Florida 32308 Robert A. Weiss, Esquire Karen A. Putnal, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 Darrell White, Esquire William B. Wiley, Esquire McFarlain & Cassedy, P.A. 305 South Gadsden Street, Suite 600 Tallahassee, Florida 32301 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Rhonda M. Medows, M.D., Secretary Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308
