Findings Of Fact The applicants, MediVision of Miami, Inc., and MediVision of Northern Dade County, Inc., are wholly owned subsidiaries of MediVision Inc., which maintains its corporate offices in Boston, Massachusetts. MediVision, Inc., was incorporated in January, 1984, to promote the development of outpatient eye surgery, in part through the development and operation of outpatient eye surgery centers. MediVision of Miami, Inc., and MediVision of Northern Dade County, Inc., will each be responsible for the development and operation of the projects proposed in their respective applications. MediVision, Inc., was organized by several individuals in response to a study conducted by Bain and Company, a strategic consulting firms as part of a consulting engagement in which those persons were involved. The study disclosed several demographic and health care delivery trends which prompted MediVision management to pursue the development of outpatient eye surgery centers. Those trends are: an overall movement of all types of surgery from an impatient to an outpatient setting; the increase in the nation's elderly population, and the fact that the likelihood of a person developing cataracts increases dramatically with age; the technological improvements in the provision of cataract surgery; the growth in the number of cataract surgeries performed nationally; and, a change in the manner in which Medicare reimburses a facility for outpatient surgery performed upon Medicare recipients. Medicare, since 1982, has reimbursed licensed freestanding ambulatory surgical facilities at a flat rate for the provision of such surgery, with no cost to the patient. For the same surgical procedures performed in a hospital outpatient setting, Medicare will reimburse the facility its costs of providing the surgery; the patient is responsible to pay the Medicare deductible and 20 percent co-insurance. Various subsidiaries of MediVision Inc., presently operate eight outpatient eye surgery centers nationwide; two are located in Florida. Other MediVision subsidiaries are developing three additional centers in Florida, pursuant to certificates of need issued by the Department of Health and Rehabilitative Services. Both parties employed the same quantitative need methodology. The methodology employs the following steps: acquire data regarding number of impatient and outpatient surgical procedures performed by existing providers; using this data, calculate current overall surgical use rate and outpatient surgical use rate for county; using the projected population for the year in question and the current use rate, calculate projected number of surgeries; multiply total projected surgeries by 40 percent to establish total outpatient surgery pool for year in question; subtract from result of step 4, all outpatient surgical procedures projected to be performed in hospitals and operating freestanding ambulatory surgery centers; subtract financial break-evens of all certificate of need approved freestanding outpatient surgery centers from this pool; and, after subtractions the number of surgical procedures remaining are compared to the break-evens of certificate of need applicant at issue. If the pool is larger than break-evens the condition is satisfied. If the pool is smaller than break-evens the condition is not satisfied. The quantitative methodology provides a reasonable approach to the evaluation of need for ambulatory surgical facilities. The basic methodology has been employed by the Department since 1982; in December, 1985, the Department began to employ a "40 percent outpatient factor" in implementing the policy. Accordingly, looking toward the planning horizon of 1988, the methodology projects that 40 percent of all surgeries in Dade County will be performed on an outpatient basis. The 40 percent outpatient factor is reasonable for use in these proceedings. The prevailing literature suggests that 40 percent of all surgeries can be expected to be performed on an outpatient basis. Within Florida, many counties are already performing in excess of 30 percent of all surgeries on an outpatient basis. Trends in health care delivery and reimbursements including the growth in pre-paid health care organizations, such as health maintenance organizations; professional review organizations, which monitor the appropriateness of hospital admissions; and Medicare reimbursement incentives will contribute to an increase in the percentage of surgeries performed in an outpatient setting. While employing the same quantitative need methodology, the parties' health planning experts arrived at different conclusions as to whether the methodology projects need for the facilities at issue in these proceedings. The differences in outcome are attributable to two issues: (1) the calculation of a base-year use rate; and (2) the calculation of "break-evens" for previously approved, but non-operational, ambulatory surgical facilities. Each expert relied upon the same basic data source in calculating a base-year surgical use rate, employing data collected by HRS and reported in the most current State Agency Action Report prepared by the Department relative to Dade County. Such Action Report (CON Action No. 4095) lacked complete data regarding the total number of surgeries performed in Dade County during the base-year (1984-5), in that six of the thirty-three acute care hospitals in Dade County failed to report. Because it is necessary to have complete data in order to establish an accurate base-year surgical use rate, Mark Druash who was engaged to undertake a need analysis by the applicants, referred to earlier State Agency Action Reports to acquire surgical procedure data for the six hospitals which had failed to report. Such documents are reliable data sources upon which to base a need analysis. In calculating a county's surgical use rate, health planners take into consideration the total population within the county. Accordingly, the total number of surgeries provided within the county must also be considered. In that six Dade County hospitals failed to report data and HRS' health planner did not acquire data relative to those facilities, the surgeries performed at those hospitals were not included in his calculation of a surgical use rate. If the total population of a county is considered in calculating a surgical use rate, but something less than the total number of surgeries is considered, the calculation results in an artificially deflated use rate. As the base-year use rate drives all of the remaining calculations in the quantitative methodology, an error in the calculation of the use rate will be carried through the entire methodology. The ultimate effect of a deflated use rate is to project a smaller number of surgical procedures, as compared to a use rate calculated upon complete data. HRS calculated a base-year surgical use rate for Dade County of 78.2 surgeries/1000 population. MediVision calculated a base-year surgical use rate of 92.8/1000 population. The variance in the use rates is attributable solely to the fact that Druash acquired and employed in his calculations surgical procedure data from all Dade County hospitals previously relied upon by HRS; while HRS relied upon incomplete data. In that Druash's calculations are based on a complete data based the surgical use rate of 92.8/1000 population is found to be more accurate and reliable than the rate of 78.2/1000 population calculated by HRS from incomplete data. The parties differ in their calculation of "break- evens for previously approved, but not yet operational, ambulatory surgical facilities. The break-even calculation is an integral part of the quantitative need methodology. The purpose of subtracting from the available outpatient surgical pool the "break-evens" of approved, but not yet operational ambulatory surgical facilities is to assure that there exists need for the project proposed adequate to allow both such project and previously approved facilities to operate in a financially viable manner. The "break-even" approach is also intended to promote competition; rather than assuming that all of the procedures projected by a facility will be performed in such facility; the approach allocates to the facility only that number of procedures it needs to generate sufficient revenues to cover its expenses. Druash who participated in the development of the quantitative methodology during his tenure with HRS, testified that the "break-even" approach was selected because it would promote competition among providers by approving enough applicants so that they would be "hungry" for the residual surgeries projected by the methodology. The purpose of calculating a financial break-even is to ascertain at what point a project's cash flow will equal its expenditures. The generally accepted method for calculating a financial break-even requires that fixed costs be separated from variable costs. The concept of variable costs is the basis for the computation of a break-even. Fixed costs are those which remain constant regardless of the volume of business conducted by an entity; variable costs are those that change directly with volume. In the operation of an ambulatory surgical facility, virtually all expenses related to medical supplies are variable. If no patients are treated, no medical supplies are needed, and no expenses are incurred. If 100 patients are treated, 100 units of medical supplies are needed, with resultant expense. Certain expenses involved in the operation of an ambulatory surgical center are totally fixed, such as debt service and property taxes. All other expenses are variable to some degree e.g. salaries, utilities, and maintenance. Depreciation and amortization of property and equipment are not considered as expenses in a break-even analysis, as those items do not represent cash expenditures. As mere accounting recognitions of prior investment, depreciation and amortization should not be included in a calculation of a cash flow break-even. HRS' methodology for calculating financial break-evens for ambulatory surgical procedures treats all expenses as fixed, and includes amortization and depreciation among those expenses. By HRS' admissions the Department, "in lieu of attempting to determine what is fixed and what is variable . . . will use a somewhat more crude method". Where a financial break-even is calculated treating all costs as fixed, the resulting break-even number is artificially inflated. By the Department's reckoning, the effect of treating all expenses as fixed is to "add a cushion" to its approvals of prior applications. HRS' expert acknowledged, however, that differentiating between fixed and variable costs in performing a financial break-even analysis is the "preferred methods no question". Lovell Jones, a certified public accountant and expert in health care finance, performed revised break-even analyses for previously approved, but not yet operational, ambulatory surgical facilities. Jones first acquired expense and revenue data from the certificate of need applications submitted by previously approved applicants. Then, treating only medical supplies as variable expenses, and excluding amortization and depreciation from the list of fixed expenses, he calculated the actual financial break-even of each approved, but not yet operational, facility. Jones' analysis finds the collective break- even of all previously approved, but not yet operational, facilities to be 17,996 procedures, whereas the Department's "crude" analysis results in a collective break-even of 25,736. Jones' method of calculating break-even, which was agreed to be technically correct by both parties, is more accurate and reliable than the method employed by the Department. Using the agreed-upon quantitative methodology, the surgical use rate calculated by Druash, and the break-even numbers calculated by Jones, there is projected to exist in 1988 a pool of 5006 outpatient surgical procedures that could be provided by the applicants in these proceedings. Subtracting the break-even numbers of the two proposed facilities, there will exist a residual pool of greater than 3600 procedures. Accordingly, there exists a quantitative need for the two proposed facilities. Furthers the residual pool of greater than 3600 procedures represents an adequate "cushion" to satisfy the concerns of HRS that previously approved facilities be given the opportunity to operate in a financially viable manner. The proposed facilities will improve access to services for both Medicare and indigent patients. Medicare patients receiving surgery at the facilities will be treated free of cost, with the Medicare program having full responsibility for payment. All other patients will be treated at the facilities regardless of ability to pay. The proposed facilities will promote competition in that management intends the charges to commercial patients to be less than the prevailing charges in the community. Where an ambulatory surgical facility enters a market, hospital charges for similar services tend to decrease. The proposed facilities will promote cost containment, as it is more costly to render care in a hospital outpatient department than in a freestanding ambulatory surgical facility. Hospital outpatient departments, which are reimbursed by Medicare for their costs of providing services, do not have the same incentive to reduce costs as do freestanding ambulatory surgery facilities, which are reimbursed at a predetermined flat rate for the provision of services. Accordingly, Medicare has encouraged the use of freestanding ambulatory surgical facilities by incurring all responsibility for payments at no cost to Medicare recipients. The Department's sole concern regarding the financial feasibility of the proposed facilities arises out of its position that there exists no need for the facilities. Accordingly, the Department questions whether the facilities will enjoy utilization sufficient to generate the revenues necessary to their viable operation. In that need for the facilities has been found to exist, it follows that the facilities will be able to generate adequate numbers of surgeries to achieve break-even in their second years of operation. Several other factors indicate that the facilities will experience utilization sufficient to achieve break-even in their second years of operation: The marketing and community education activities proposed by the applicants will encourage utilization. In its existing surgical facility in Orlando, MediVision, Inc., has undertaken similar activities, which have resulted in substantial surgical referrals to the facility; There exists a residual pool of approximately 5,000,000 untreated cataracts nationally; Medicare reimbursement policies which allow Medicare recipients to receive treatment at licensed freestanding ambulatory surgical centers at no cost to the recipient will encourage utilization of the proposed facilities; The applicants' pricing structure, for both Medicare and commercial patients, will encourage utilization of the proposed facilities; and Two local ophthalmology group practices have expressed strong interest in performing surgery at the proposed facilities. Each group presently performs in excess of 1000 surgeries annually, which volume is greater than the break-even volume necessary to be achieved at each facility.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Lawn it is RECOMMENDED that a Final Order be entered approving the applications of Petitioners to establish and operate freestanding ophthalmic ambulatory surgical centers in Dade County, Florida. DONE and RECOMMENDED this 6th day of June, 1986, at Tallahassee, Florida. LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of June, 1986. COPIES FURNISHED: William Page, Jr., Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Robert A. Weiss, Esquire The Perkins House, Suite 101 118 North Gadsden Street Tallahassee, Florida 32301 Richard A. Patterson, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 =================================================================
Findings Of Fact At all times relevant hereto Respondent was licensed as a physician in the State of Florida having been issued license number ME0040318. Respondent completed a residency in internal medicine and later was a nephrology fellow at Mayo Clinic. He was recruited to Florida in 1952 by Humana. In 1984 he became associated with a Health Maintenance Organization (HMO) in an administrative position but took over treating patients when the owner became ill. This HMO was affiliated with IMC who assimilated it when the HMO had financial difficulties. At all times relevant hereto Respondent was a salaried employee of IMC and served as Assistant Medical DIRECTOR in charge of the South Pasadena Clinic. 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 a nearby hospital. He was examined 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. When the ambulance with EMS personnel arrived they examined Stroganow, and concluded Stroganow was no worse than earlier when he was transported to the emergency Room, and refused to again take Stroganow to the emergency Room. 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 check on Stroganow. Upon arrival, she was admitted by the landlady and found an 84 year old man who was incontinent, incoherent, and apparently paralyzed from the waist down, with whom she could not engage in conversation to determine his condition. She called for a Cares Unit team to come and evaluate Stroganow. 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 stethoscope, blood pressure cuff, or thermometer, but makes her evaluation on visual examination. Upon arrival of the Cares Unit, and, after examining Stroganow, both members of the team agreed he needed to be placed where he could be attended. A review of his personal effects produced by his landlady revealed his income to be above that 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, Respondent, a physician employed by IMC at the South Pasadena Clinic. The Cares team ruled out ACLF placement because Stroganow was not ambulatory, but felt he needed to be placed in a hospital or nursing home and not left alone with the weekend approaching. To accomplish this, they proceeded to the South Pasadena HMO clinic of IMC to lay the problem on Dr. Dayton, who was in charge of the South Pasadena Clinic, and, they thought, was Stroganow's doctor. Stroganow had been a client of the South Pasadena HMO for some time and was well known at the clinic as well as by EMS personnel. There were always two, and occasionally three, doctors on duty at South Pasadena Clinic between 8:00 and 5:00 daily and, unless the patient requested a specific doctor he was treated by the first available doctor. Stroganow had not specifically requested to be treated by Respondent. When the Cares unit met with Respondent they advised him that Stroganow had been taken to Metropolitan General Hospital Emergency Room the previous evening but did not advise Respondent that the EMS squad had refused to return Stroganow to the emergency Room when they were recalled for Stroganow the same evening. Respondent telephoned the Metropolitan General Emergency Room and had the emergency Room medical report on Stroganow read to him. With the information provided by the Cares unit and the hospital report, Respondent concluded that Stroganow needed emergency medical treatment and the quickest way to obtain such treatment would be to call the EMS and have Stroganow taken to an emergency Room for evaluation. When the Cares unit arrived, Respondent was treating patients at the clinic. A clinic, or doctors office, is not a desirable or practical place to have an incontinent, incoherent, and non-ambulatory patient brought to wait with other patients until a doctor is free to see him. Nor is the clinic equipped to perform certain procedures that may be required for emergency evaluation of an ill patient. At a hospital emergency Room such equipment is available. EMS squads usually arrive within minutes of a call being placed to 911 for emergency medical treatment and it was necessary that someone be with Stroganow when the EMS squad arrived. Accordingly, Respondent suggested that the Cares team return to Stroganow and call 911 to transport Stroganow to an emergency Room for an evaluation. Upon leaving the South Pasadena 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 with Stroganow. The supervisor then called the Administrator at IMC Tampa Office to tell them that one of their Gold-Plus HMO patients had an emergency situation which was not being property handled. Respondent left the South Pasadena Clinic around noon and went to IMC's Tampa Office where he was available for the balance of the afternoon. There he spoke with Dr. Sanchez, the INC Regional Medical Director, but Stroganow was not deemed to be a continuing problem. By 2:00 p.m. when no ambulance had arrived the Cares Unit called 911 for EMS to take Stroganow to an emergency Room. Upon arrival shortly thereafter the EMS squad again refused to transport Stroganow. The Cares team communicated this to their supervisor who contacted IMC Regional Office to so advise. At this time Dr. Sanchez authorized the transportation of Stroganow to Lake Seminole Hospital for admission. Although neither Respondent nor Sanchez had privileges at Lake Seminole Hospital, IMC had contracted with Lake Seminole Hospital to have IMC patients admitted by a staff doctor at Lake Seminole Hospital. Subsequent to his meeting with the Cares team Respondent received no further information regarding Stroganow until well after Stroganow was admitted to Lake Seminole Hospital. No entry was made on Stroganow's medical record at IMC of the meeting between Respondent and the Cares Unit. Respondent was a salaried employee whose compensation was not affected by whether or not he admitted an IMC Gold-Plus patient to a hospital.
Findings Of Fact In December 1982,, Ambulatory Care filed an application with the Department to be granted a certificate of need to construct a freestanding surgical center in Duval, Florida, to provide surgical treatment which does not involve overnight confinement, i.e. ambulatory or outpatient. The approximate cost of that project is $1,994,280. The proposed facility would be approximately 11,300 square feet in dimensions and contain four operating rooms with attendant substerile areas and scrub areas; necessary recovery, preoperative and postoperative areas; waiting areas; lounges staff changing areas; a business office area and physician space. The particulars of the description of the facility are more completely addressed in the application which is part of Department's Exhibit 1. The specific surgeries to be performed in this outpatient setting have not been determined; however, Ambulatory Care would anticipate proceeding on a basis similar to that of a freestanding ambulatory surgery center in Lexington, Kentucky, allowing for any differences in the two communities which might provide a different surgical mix by type. Information pertaining to that center was provided through the testimony of Dr. Edwin Nighbert, Transcript Pages 137-193. A further description of possible surgeries to be performed in the facility may be in the Department's Exhibit 1 through the Omission's Response of the applicant in an Appendix to that response numbered 1 entitled, "Types of Surgeries performed in an Ambulatory Surgical Facility." The surgeries to be performed are elective in nature and allow the patient to be discharged the same day of the procedure. The characterization of the facility as freestanding means that it is self-contained and not dependent upon other facilities in its normal operation. The exact location of that facility has not been established in that the purchase of property has not been concluded; however, Ambulatory Care intends to build the center in the Riverside area of Jacksonville, Duval County, Florida, as described by drawings and maps in the Omission's Response referred to before. Construction in this area would place the facility in the immediate vicinity of Saint Vincent's and Riverside Hospitals, which facilities also serve patients who undergo ambulatory surgery on an outpatient basis. Other hospitals in Duval County provide outpatient surgery, as more specifically described in latter portions of this Recommended Order. Following review, the Department issued a certificate of need for the project in its entirety, effective December 29, 1982. This action led to Petitioners' timely challenge to the proposed agency action. The Department simultaneously approved a certificate of need for another freestanding surgical facility in Duval County, Surgical Services of Jacksonville, Inc., with proposed expenditures of $2,500,000 and a plan to provide four operating rooms. That latter surgical center has not been challenged on the issue of the grant of its certificate, through protest from local hospitals. With the addition of Surgical Services and Ambulatory Care, outpatient surgery would be performed in Duval County in hospital settings, the freestanding centers, and physician's offices. The hospitals and Ambulatory Care are expected to provide the same surgical procedures either on an outpatient basis or inpatient basis. Saint Vincent's is a hospital which is owned by the Daughters of Charity, a religious order within the Catholic Church and is a nonprofit corporation. Riverside is a nonprofit hospital. Other hospitals in the area providing outpatient surgery at present or in the immediate future are Methodist Hospital, Jacksonville General Hospital, University Hospital, Baptist Medical Center, Memorial Medical Center, and Saint Luke`s Hospital. None of the hospitals referred to have freestanding outpatient surgery units, meaning all procedures provided by those institutions are hospital based. There being no rules promulgated in keeping with Section 381.494, Florida Statutes, related to the establishment of a methodology for considering the question of need for ambulatory surgical centers in Florida, the parties on this occasion attempted to establish a record basis for determining the need question. In this endeavor, objective and subjective observations and predictions were offered. Similarities and dissimilarities between hospital- based outpatient surgery centers and freestanding surgery centers were discussed and the relative merits of those sites ware debated. Given the novelty of this comparison in Florida, determination of need in the ambulatory surgery realm is less than an exact science. To accommodate this situation, factual determinations are based upon those elements of proof which tend to best describe the Duval County circumstance pertaining to the question of need for ambulatory surgeries at present and in the near future, with particular emphasis on the applicant's request for certificate. To begin, there is the issue of what constitutes a surgery for statistical purposes. In the State Agency Action Report related to the fiscal or calendar year reporting of procedures performed by Duval County hospitals ending in 1982, reference is made to the number of impatient and outpatient surgical procedures. There is uncertainty about some of the outpatient procedures reported, whether they are best described as surgical or diagnostic. As example, in Ambulatory Care's Omission's Response request it included certain procedures such as cysto which by exhibit were under a surgical heading. Subsequently, the applicant argued in the course of the hearings that these proceedings were diagnostic in nature and not surgical. One physician who testified believed that a cysto could be considered a surgery. Opinion was expressed that any procedure reported for insurance purposes as surgical should be accepted as such, even if primarily diagnostic in effect. A hospital official believed that procedures that are primarily diagnostic in effect are not surgeries. Another contributing element in the dilemma is the possibility that some procedures might be considered surgical at times and diagnostic at others depending on the intended result. Moreover, the record is not clear on whether some of the inpatient procedures reported for the 1981-82 reporting period by the Duval County hospitals would involve procedures which might arguably be described as diagnostic and not surgical. There being no consensus among the practitioners and the health care planners on the question of what constitutes a surgery and given the existence of a known statistical base, making allowances for adjustments related to numbers of outpatient surgeries in the reporting year ending 1982 which was made in the course of the hearing and consistent with Appendix 1 to the Omission's Response offered by the applicant, all procedures are considered surgical for purposes of this review, with the exception of endoscopic procedures. This determination takes into account that the applicant has not specifically delineated those procedures which it intends to perform. On a similar topic, Duval County has been identified as the service area for the Ambulatory Care facility. It is that population base which the Department used in trying to identify the surgical use rate for all surgeries and ultimately for ambulatory surgery by measure of surgeries per thousand population. This calculation fails to take into account the fact that patients from areas outside Duval County, especially from the surrounding counties use the hospitals in Duval County. It was not established in the course of the hearing what percentage or number of those patients from those outside areas were in the hospital for purposes of undergoing inpatient or outpatient surgery. Nonetheless it can be assumed based upon the facts presented that some portion of those patients did receive surgery thereby increasing the number of persons in the population base who underwent surgeries and decreasing the number of surgeries per thousand population. Moreover, the modification of statistics presented in the course of hearing to more correctly reflect the number of outpatient surgeries done in the reporting periods 1981-82 suggests that the total number of procedures was around 64,600, not the 68,000 plus first thought when the action report was prepared and the Department made its calculations. This change alone would reduce use rate for surgeries per thousand from 118 to 112. Having in mind a necessary adjustment in the population base to account for patients outside Duval County who receive surgery as well as adjustment in the outpatient surgery statistics in the 1982 reporting period, somewhat less than 112 surgeries per thousand could be expected. According to the applicant, the national experience has been an expectation of 55 to 90 surgical procedures per year per thousand population as a planning guideline. Those projections made as a result of research and data gathered are accepted as establishing the base from which more precise estimates may be made. In view of the national experience and the adjustments that are needed in the initial projection of the Department that 115 surgeries per 1,000 population would be the experience, 110 surgeries per 1,000 population is found to be a reliable figure both in 1982 and the succeeding years to include the critical years of 1985 and 1986, for Duval County, Florida, surgical procedures. This finding acknowledges the fact that 97 percent of the residents of Duval County seek their health care in Duval County. In trying to determine what percentage of all surgeries will be ambulatory or outpatient in the critical years 1985 and 1986, considerable testimony has been offered. That testimony tends to establish a potential for outpatient surgeries in the range 15 percent to in excess of 40 percent. During the reporting period for which data is available, as many as 15 percent of the surgeries performed in the Duval County hospitals have been performed on an outpatient basis. The Department has taken a median fraction or number between the extremes of 15 percent and 40 plus percent and anticipated 29 percent of all surgeries to be ambulatory surgeries in the years 1985 and 1986 in Duval County. In consideration of the dramatic increases in the number of outpatient surgeries being performed in local hospitals within the last two or three years, and the continuing improved reimbursement environment for those surgical procedures performed on an outpatient basis, 29 percent is a reasonable policy choice for making the projections. Based upon an analysis of the facts presented, it is not safe to assume that the number of outpatient surgeries performed in Duval County for its patients in the years 1985 and 1986 will approximate the 40 percent experience found in other communities outside Florida. The Department in its calculations has utilized mid-range projections of the University of Florida, BEBR, population studies showing a population in Duval County in 1985 of 387,500 and in 1986, 590,480. This midrange choice is sound. Employing the technique used by the Department, the following predictions are arrived at in terms of expected outpatient surgeries in Duval County in 1985 and 1986: 387,500 total populations x 110 procedures per thousand = 1,000 64,525 total procedures x .29 percentage of outpatient = 18,741 outpatient surgeries in 1985 * * * 390,480 total populations x 110 procedures per thousand = 1,000 64,953 total procedures x .29 percentage of outpatient = 18,835 outpatient surgeries for 1986. Who is to provide those outpatient surgeries in 1985 and 1986? In answering that inquiry, in 1981, excluding endoscopic examination, area hospitals performed 6,450 outpatient surgeries. This number increased to 9,527 in 1982 and based upon statistics provided for the first quarter of 1983 that number would approximate 11,000 outpatient procedures in 1983. This growth pattern in those reporting years reflects substantial increases in the delivery of health care related to outpatient surgeries; however, an extrapolation of percentage increases over the intervening year 1984 and into 1985 and 1986 does not give a reliable approximation of the level of outpatient surgeries to be provided by the several hospitals. Neither does the estimate by the Department that the increase in surgeries performed in the hospitals shall be only to the extent of the increase in population in Duval County in the intervening years. Therefore, the question of available capacity in the years 1985 and 1986 is considered on the basis of an inventory or audit of outpatient surgical suites which may reasonably be expected to provide outpatient surgeries in 1985 and 1986 based upon the selection or a utilization rate for those operating rooms. The applicant has initially indicated in its application that 1,200 ambulatory cases could be dealt with in one operating suite on an annual basis. Initial testimony of one of the applicant's witnesses, Andrew Miller, at transcript page 460, was to the effect that the range 1,200 to 1,250 cases approached the capacity for a single dedicated operating room performing outpatient surgery. In rebuttal testimony, Miller recanted and indicated that 1,300 cases per operating room was not a reasonable estimate for hospitals in Duval County. He suggested the use of lower figures, perhaps as low as 1,000 procedures per room. In the face of the evidence, it is determined that for purposes of this review 1,100 procedures per operating room are an acceptable approximation. Utilization of this number takes into consideration differences in the length of procedures, scheduling and turn-around time in the preparation of the operating suite for a subsequent procedure. By dividing 1,100 procedures into the 15,741 projected outpatient surgeries in 1985, there would he a need for 17 operating suites in that year. Realizing that same process of division against the 19,536 projected ambulatory surgeries in 1986, 17 plus surgery suites would be needed. At the point of hearing, there were 15 ambulatory surgery suites in the hospitals in Duval County, excluding endoscopic rooms and those rooms in which inpatients and outpatients were operated on. Eight of those rooms had capability of general anesthesia. St. Luke's, in the move of their hospital, would add two additional ambulatory surgery suites, both of which would have general anesthesia capability and both of which are under construction. The freestanding ambulatory center, Surgical Services of Jacksonville, Inc., would bring the total to 21 operating rooms with its four additional surgery rooms with general anesthesia capability. With inclusion of the St. Luke's and Surgical Center of Jacksonville, a total of 14 of the 21 operating rooms would have general anesthesia capability. This does not take into account the high number of outpatient surgery procedures which are being performed at Baptist Hospital in rooms which have an inpatient and outpatient mix, nor does it take into account future plans of area hospitals to increase their outpatient surgery capacity, which would provide even greater capacity for outpatient surgery. In summary, there is more than enough capacity to perform needed outpatient surgeries in Duval County in 1985 and 1986. Ambulatory Care and the Department have referred to the cost savings to the individual patient being treated and to the overall patient community should the Ambulatory Care Surgical Center be opened. If there was a demonstrated need for that center the proof tends to bear out the savings to the individual patient and arguably to the patient community as a whole. However, on this occasion, given the fact that the addition of Ambulatory Care's operating suites would bring the total to 25 operating rooms against the need for 17 plus operating rooms, the cost benefits to the individual patients being treated in the applicant's facility and the patient community at large, would not be realized. To the contrary, the inordinate duplication of services that would be experienced with the addition of the applicant's facility would tend to drive up health care costs in Duval County. Additionally, the applicant cannot be expected to survive financially in the overcrowded health delivery environment described in this paragraph. The innovative nature of a freestanding surgery center in matters such as ambience, related to the psychological well being of patients, especially younger patients and potential efficiency of operation of the applicant's surgical center are not sufficient to redeem its request for certificate in this instance. In a related vein, modifications to existing plans in the hospitals and the inconvenience occasioned by those adjustments are not such that those circumstances may be expected to impede the steady progress of increased outpatient ambulatory procedures in those hospitals and make them less than a viable alternative for performing the needed procedures in the 1985 and 1986 periods. Any competitive influence to be fostered by the addition of Ambulatory Care's facility would not be beneficial. Sufficient competitive influence is already present to promote quality care and cost effectiveness. Finally, if trends in outpatient surgery, particularly to be performed under general anesthesia increases beyond the predictions indicated, there is sufficient capacity in the hospitals to accommodate that eventuality by constructing new outpatient surgical suites or by conversion of inpatient surgical suites to perform outpatient surgeries to include ancillary space. This can be accomplished without having to resort to an application for certificate of need, given the $695,000 exemption or exclusion from the certificate of need review process. In view of the overburden that would be created in ambulatory surgeries by the additional capacity of the applicant, provision of needed construction of facilities is being met and can be met in the future in a less costly way then suggested by the applicant. On this occasion, the hospitals can provide more cost effective facilities. Ambulatory surgery is available and accessible in local area hospitals within Duval County in an appropriate and adequate setting. That service does not exclude any patient. Though not needed Ambulatory Care's contemplated facility addresses those contingencies set forth in this paragraph, with one proviso. That matter pertains to the fact that Ambulatory Care shall provide its services to all residents in the service area without regard for physical condition or financial standing, premised upon the willingness of the treating physician to admit those patients to the facility for treatment and subsequent screening to be done by the staff of Ambulatory Care to determine the appropriateness of that setting to achieve the surgery. This will cause a certain number of potential patients to receive their surgery in a hospital environment.
The Issue The issue is whether Florida Administrative Code Rules 64B- 9.0092(2)(f), 64B8-9.0092(4)(a), and 64B8-9.0092(4)(c) constitute invalid exercises of delegated legislative authority as defined by Section 120.52(8), Florida Statutes (2004).
Findings Of Fact In Florida, physicians who perform certain surgical procedures in their offices are required to register the office with DOH. Additionally, DOH must inspect such offices unless a nationally recognized accrediting agency or an accrediting organization approved by the Board inspects and accredits the offices every three years. See § 458.309(3), Fla. Stat. and Fla. Admin. Code R. 64B8-0.0091. Florida Administrative Code Rule 64B8-9.0092, entitled "Approval of Physician Office Accrediting Organizations," establishes requirements that FLACS must meet in order to achieve the Board's approval to operate as an accrediting organization. FLACS is the only organization that the Board has ever approved as an accrediting organization. FLACS is a not-for-profit corporation, organized for the following purposes: (a) to promote office safety through its accreditation activities; (b) to promote cosmetic surgery; and (c) to provide continuing education courses related to office surgery. FLACS was formed in 1999 and, since that time, has participated actively in office surgery issues considered by the Board. FLACS began operating as an approved office surgery accrediting organization early in 2001. In January 2003 FLACS filed a complete renewal application, seeking the Board's approval to continue operating as an office surgery accrediting organization. The Board denied the application and, after a formal administrative hearing, entered a Final Order denying FLACS's application. See Florida Academy of Cosmetic Surgery, Inc. v. Board of Medicine, Case No. DOH-04-0661-FOF-MQA (Final Order, June 18, 2004)(adopting Recommended Order in DOAH Case No. 03-3349, April 15, 2004.) FLACS filed a new application for approval as an office surgery accrediting organization on July 12, 2004. The Board never advised FLACS whether its application was complete or incomplete. There is evidence that a member of the Board's staff, Melinda Grey, reviewed the application, finding it incomplete in many respects. On August 5, 2004, Ms. Grey prepared a spreadsheet entitled "Board of Medicine Staff Issues Regarding FLACS Application." The spreadsheet compared the application with the requirements of the applicable provisions of the Florida Administrative Code, including Florida Administrative Code Rule 64B8-9.0092. Larry McPherson, the Board's Executive Director, was aware that Ms. Grey was reviewing FLACS's application. She did not tell Mr. McPherson that the application was incomplete. Instead, she informed the Board's legal counsel that FLACS had filed the application. Subsequently, Ms. Grey placed the application on the Board's next scheduled meeting agenda. On August 7, 2004, the Board voted to deny the new application. On August 23, 2004, the Board entered an Notice of Intent to Deny FLACS's new application on the following grounds: When participating in accrediting activities in the past, the applicant violated Section 458.331(1)(nn), Florida Statutes, by failing to comply with rules of the Board in the following manner: The applicant failed to provide copies of accreditation reports and corrective action plans to the Board office within 30 days of completion of accrediting activities in violation of Rule 64B8- 9.0092(4)(e), Florida Administrative Code. The applicant failed to immediately report to the Department conditions in physicians' offices that posed a potential immediate threat to patients in violation of Rule 64B8-9.0092(4)(f), Florida Administrative Code. When inspecting and accrediting facilities the applicant ignored its written accreditation standards and failed to provide the Board office with accreditation standards under which it was actually operating. Such facts reveal that the applicant operated in violation of Rule 64B8-9.0092(4)(g), Florida Administrative Code. When inspecting the facilities, the applicant operated with inadequate or applied inconsistently its quality assurance program in violation of Rule 64B8- 9.0092(4)(a), Florida Administrative Code. The applicant failed to provide evidence of an adequate quality assurance program as required by Rule 64B8- 9.0092(4)(a), Florida Administrative Code. The applicant failed to provide evidence of an adequate ongoing anesthesia related accreditation and quality assurance processes as required by Rule 64B8- 9.0092(4)(c), Florida Administrative Code. The applicant failed to submit copies of all incident reports filed with the state that originated at FLACS accredited facilities as required by Rule 64B8-9.0092(4)(f), Florida Administrative Code. Rule 64B8-9.0092(2)(f)--Incident Reports Florida Administrative Code Rule 64B8-9.0092(2)(f) requires an application for approval as an office surgery accreditation organization to include copies of all incident reports filed with the state. The incident reports are defined by Section 458.351(4), Florida Statutes, which reads as follows: (4) For purposes of notification to the department pursuant to this section, the term "adverse incident" means an event over which the physician or licensee could exercise control and which is associated in whole or in part with a medical intervention, rather than the condition for which such intervention occurred, and which results in the following patient injuries: The death of a patient. Brain or spinal damage to a patient. The performance of a surgical procedure on the wrong patient. 1. The performance of a wrong- site surgical procedure; The performance of a wrong surgical procedure; or The surgical repair of damage to a patient resulting from a planned surgical procedure where the damage is not a recognized specific risk as disclosed to the patient and documented through the informed- consent process if it results in: death; brain or spinal damage; permanent disfigurement not to include the incision scar; fracture or dislocation of bones or joints; a limitation of neurological, physical or sensory function; or any condition that required transfer of the patient. A procedure to remove unplanned foreign objects remaining from a surgical procedure. Any condition that required transfer of a patient to a hospital licensed under Chapter 395, Florida Statutes, from any facility or any office maintained by a physician for the practice of medicine which is not licensed under Chapter 395, Florida Statutes. The incident reports are further defined by Florida Administrative Code Rule 64B8-9.001(1)(a), which states as follows in relevant part: . . . an event over which the physician or other licensee could exercise control and which is associated in whole or in part with a medical intervention, rather than the condition for which such intervention occurred, and which results in the following patient injuries: The death of a patient. Brain or spinal damage to a patient. The performance of a surgical procedure on the wrong patient. The performance of a wrong-site surgical procedure, the performance of a wrong surgical procedure; or the surgical repair of damage to a patient resulting from a planned surgical procedure where the damage is not a recognized specific risk as disclosed to the patient and documented through the informed-consent process and if one of the listed procedures in the paragraph results in: death; brain or spinal damage; permanent disfigurement not to include the incision scar; fracture or dislocation of bones or joints; a limitation of neurological, physical or sensory function; or any condition that required transfer of the patient. A procedure to remove unplanned foreign objects remaining from a surgical procedure. Any condition that required transfer of a patient to a hospital licensed under Chapter 395, Florida Statutes, from any facility or any office maintained by a physician for the practice of medicine which is not licensed under Chapter 395, Florida Statutes. FLACS understood that the "incident reports" referenced in Florida Administrative Code Rule 64B8-9.0092(2)(f) are the same as the "reports on adverse incident" defined by Section 458.351, Florida Statutes. FLACS's application specifically references adverse incident reports as defined by Section 458.351, Florida Statutes. FLACS filed two such adverse incident reports with its new application. FLACS has several methods to use in collecting incident reports. First, FLACS requires its accredited physicians and office surgery facilities to attest and acknowledge that they are required to provide FLACS with any and all adverse incident reports related to or following surgery in the accredited offices. Second, FLACS requires the staff of accredited offices to perform self-evaluation surveys after the first and second year of accreditation, said surveys to include such incident reports. Third, FLACS watches for information about adverse incidents as reported by news media or complaints from the public. Most important, FLACS can make quarterly public record searches even though the state system of record keeping for adverse incident reports is not computerized. There is no persuasive evidence that FLACS ever made an oral or written public records request for copies of incident reports related to its accredited practices. There is no statutory or rule requirement for physicians to file copies of incident reports with their accrediting organization. However, at least two of the nationally recognized accrediting agencies, Joint Commission on Accreditation of Healthcare Organizations (JACHO) and American Association for Accreditation of Ambulatory Surgical Facilities (AAAASF), have provisions in their accreditation manuals related to adverse incidents. JACHO's "Accreditation Manual for Office-Based Surgery Practices," Second Edition (2005), defines a "sentinel event" as follows: A sentinel event is an unexpected occurrence involving death or serious physical or psychological injury, or the risk thereof. Serious injury specifically includes loss of limb or function. The phrase "or risk thereof" includes any process variation for which a recurrence would carry a significant chance of a serious adverse outcome. Such events are called "sentinel" because they signal the need for immediate investigation and response. The terms "sentinel event" and "medical error" are not synonymous; not all sentinel events occur because of an error, and not all errors result in sentinel events. JACHO requires each accredited practice to define "sentinel event" for its own purposes in establishing mechanisms to identify, report, and manage these events. JACHO encourages, but does not require, its clients to report "sentinel events" to the accrediting agency within 45 days of the event or of becoming aware of the event. The report should include a root cause analysis and an action plan. If JACHO becomes aware of an unreported "sentinel event," JACHO will advise the accredited practice to prepare and submit the report within a certain time frame. If the accredited practice fails to file an appropriate report within that time frame, JACHO will not revoke accreditation, but will place the accredited practice on an "Accreditation Watch" list. AAAASF's "Standards and Checklist for Accreditaion of Ambulatory Surgery Facilities" contains forms for accredited surgery facilities to use in reporting "unanticipated sequela." The forms refer one to AAAASF's "Quality Assurance and Peer Review Manual" for questions relative to their completion. The record indicates that "unanticipated sequela" are the equivalent of adverse incident reports, including but not limited to, events that result in unplanned hospital admissions. In Florida, physicians are required to file adverse incident reports with DOH's Consumer Services Unit (CSU), which is part of DOH's Medical Quality Assurance Program. On at least a quarterly basis, the Board's staff requests CSU to provide it with copies of adverse incident reports filed during a certain time frame. The staff of the CSU has access to medical consultants who review the incident reports to determine whether there might have been a violation of law or a violation of a standard of care. If so, the matter is referred for further investigation, determination of probable cause, and possible disciplinary prosecution by the Board. The Board's staff places the incident reports in physician registration files and in office surgery inspection/accreditation files. The Board's staff also places copies of incident reports involving physicians or facilities in the respective file of their accrediting agency or accrediting organization. The Board's staff provides copies of adverse incident reports to DOH's state inspectors before they make office inspections of non-accredited facilities or facilities formerly accredited by a national agency or FLACS. The state inspector/risk manager uses the incident reports during inspections to recommend improvements so that such incidents can be avoided in the future. The Board's Surgical Care Committee, uses the incident reports for statistical purposes. The Surgical Care Committee reviews the reports to determine whether changes need to be made in administrative rules, including but not limited to, rules related to standard of care or physician registration. It is important for FLACS to be aware of adverse incident reports filed by its accredited physicians and office- surgery facilities. Such reports are an essential part of any accreditation program. Without such knowledge, FLACS cannot be assured that its accredited physicians and offices are taking steps to prevent such incidents from occurring in the future. Moreover, if FLACS is not aware of the adverse incidents occurring in the offices it inspects, FLACS cannot implement changes in its policies to improve the accreditation process. The Board has no policy or practice for routinely sharing incident reports with accrediting organizations. Nevertheless, requiring FLACS to file copies of incident reports with the Board could alert the Board to incidents that were known to FLACS but never reported to the state and vice versa. As stated above, FLACS could make routine public records requests for copies of reports filed with the Board but not reported directly to FLACS. Rule 64B8-9.0092(4)(a)--Quality Assurance Program Florida Administrative Code Rule 64B8-9.0092(4)(a) requires an accrediting organization to "have a mandatory quality assurance program approved by the Board of Medicine." Though it is not apparent on the face of the rule, this provision relates to an "internal" quality assurance program used by the accrediting organization, not a quality assurance program implemented at a physician's office. The rule does not define a quality assurance program or describe the required contents of a quality assurance program necessary to achieve the Board's approval. There are no forms or instructions to provide guidance in designing an such a program. Mr. McPherson testified that FLACS could have used the quality assurance programs of national accrediting agencies as a reference when designing its own program. The greater weight of the evidence indicates that the "internal" quality assurance programs of national agencies are proprietary and not available to the public. Public information from JACHO and AAAASF relates to the ways that they monitor the quality assurance programs of the offices they inspect. For example, JACHO's manual discusses quality management issues for accredited practices, including standards, elements of participation, and the rationale that supports each. There is no evidence to show what internal steps the national agencies take to assure the quality of their programs apart from monitoring the programs of the accredited practices. Therefore, the Board could not have compared FLACS's "internal" quality assurance program and processes with the "internal" quality assurance programs and processes of the national accrediting agencies. During the hearing, the Board presented expert testimony about quality assurance programs in general. The expert testified that a generic quality assurance program for healthcare providers requires the following: (a) identification of positive outcomes that one desires; (b) identification of undesired negative outcomes based on the service and risk profile of the facility; (c) evaluation of accrued adverse incidents to identify trends; and (d) identification of ways to prevent future problems. The Board's quality assurance expert based his testimony on the standards published by the Center for Medicare and Medicaid Services (CMS). The description of a quality assurance program in the CMS document forms a skeleton for national accreditation programs such as the AAAASF, JACHO, and the Accreditation Association for Ambulatory Health Care (AAAHC). The rule does not reference CMS, JACHO, AAAASF, or AAAHC as having established models for an "internal" mandatory quality assurance program that the Board would approve. FLACS's office quality improvement plan compares favorably to the one established by AAAASF in some respects. For instance FLACS requires its accredited physicians and offices to perform a random chart screen of five cases on a quarterly basis. AAAASF requires a minimum of six cases per surgeon utilizing a facility or two percent of all cases in a group practice every six months. AAAASF requires its clients to engage in a peer review process at least every six months. The review is done by a recognized peer review organization or a medical doctor other than the operating room surgeon. FLACS does not require peer review evaluations due to concerns that peer review documents would be subject to discovery in legal proceedings in Florida. Rule 64B8-9.0092(4)(c)--Ongoing Anesthesia-related Accreditation and Quality Assurance Processes Involving the Active Participation of Anesthesiologists Florida Administrative Code Rule 64B8-9.0092(4)(c) requires an accrediting organization to have "ongoing anesthesia-related accreditation and quality assurance processes involving the active participation of anesthesiologists." The Board did not base its denial on FLACS's anesthesia-related accreditation standards and quality assurance processes required by Florida Administrative Code Rule 64B8-9.0092(4)(b). Instead, the denial is based upon the requirement for "active participation of anesthesiologists." The Board has no standards that describe or define the "active participation of anesthesiologists." There is no evidence that shows how the Board applied this requirement to FLACS's application. There are no forms or instructions to provide guidance for an applicant attempting to show the ongoing active participation of anesthesiologists. There is no evidence regarding the participation of anesthesiologists in ongoing anesthesia-related accreditation and quality assurance processes of national accreditation agencies. FLACS has an Anesthesia Review Committee, which is made up of three participating anesthesiologists, FLACS's inspectors, and FLACS's Executive Director. The committee meets quarterly to discuss current issues involving office surgery anesthesia, any anesthesia incidents involving FLACS's accreditees, new pharmacological agents available for outpatient anesthesia and, when available, additional information such as incident reports involving anesthesia mishaps of physicians who are not FLACS's accreditees. The Anesthesia Review Committee keeps written minutes. FLACS's Board of Directors reviews the minutes during regularly scheduled meeting. The Anesthesia Review Committee is responsible for updating FLACS's Anesthesis Parameters of Care on an annual basis. They also attend FLACS's educational meeting to update members on current practice in outpatient/office surgery anesthesia. The Board's quality assurance expert testified that he could not determine exactly how FLACS's anesthesiologists participated, i.e. what they did and how they came to conclusions. The expert could not say whether the participation of FLACS's anesthesiologists resembled the participation of anesthesiologists in the programs of national accreditation agencies. The expert acknowledged that for a relatively small number of physician's offices with a small number of anesthesia- related problems occurring within those offices, an evaluation of such problems on a quarterly basis might be quite adequate.
The Issue Whether Petitioner is entitled to a Certificate of Need ("CON") authorizing establishment of an (ophthalmological) ambulatory surgical center in Palm Beach County, Florida. Subordinate issues are: Whether the proposed facility satisfies the CON criteria of Sections 381.494-499, Florida Statutes, as implemented by Respondent, Department of Health and Rehabilitative Services ("HRS) rule and non-rule policy; Whether the proposed facility will result in unnecessary duplication of services, underutilization of existing services and increased health care costs to the community; Whether adequate resources are available for the construction and operation of the proposed facility; and Whether the proposed facility is financially feasible.
Findings Of Fact (Numbering corresponds to numbering used in proposed findings.) Preliminary findings: 1-4. Approved. On issue of compliance with applicable criteria: 1-7. Approved. 8. Approved, with caveat that this is subject to supplying an adequate record basis for the policy at hearing. 9-13 Approved. Approved but no presumption of correctness attaches to HRS earlier or more recent evaluation of the application. See, Boca Raton, supra. Approved. Approved but modified to more accurately reflect that HRS takes HMO's into account, but this factor was not used or relied on (in connection with the non-rule policy or standing alone) as the basis for granting Petitioner's application. Approved. 18-32. Approved, in the sense that an HRS expert witness at hearing offered conclusions as to compliance with each statutory criteria; rejected, in that his conclusions (except for those concerning quality of care, financial feasibility, the inapplicability of some criteria, and the cost advantages of modifying an existing facility instead of constructing a new one) are rejected as unsubstantiated by the facts. On the Issue of Need: 1-8. Approved. Approved. Modified to reflect that this is one estimate among several offered by experts. Rejected as unsupported by the credible evidence of record. Approved. Approved. First sentence, approved, in that this is the stated "attempt" of HRS' challenged non-rule policy. Second sentence, rejected as unsupported by the credible evidence; the profitable performance of outpatient surgery at a physician's office does logically compel a conclusion that his office should be licensed as an ambulatory surgical facility. On the issue of adequate resources: 1-8. Approved. On the issue of financial feasibility: 1-19 Approved. 20. Rejected as argumentative. RULINGS ON INTERVENOR'S PROPOSED FINDINGS 1-4. Approved. 5. Approved except for reference to equipment costs, of which there will be none. 9-16 Approved. 17. Such broad-brush incorporation of all facts asserted in argument is not susceptible to explicit rulings. RULINGS ON POST-HEARING MOTIONS. Intervenor's "Motion to Stay Issuance of Recommended Order" is denied. Intervenor's "Request for Hearing Officer to Take Official Recognition" of the Final Order of Hearing Officer Robert T. Benton II, in consolidated DOAH Case Nos. 85-2962R, 85-2963R and 85-3193R (attached to a "Notice of Supplemental Authority" dated November 1, 1985) is granted. The order is made a part of the record of this proceeding. A final order entered by another hearing officer of the Division of Administrative Hearings the authenticity of which is not in question, is an appropriate document to be accorded official recognition. See, Health Quest Realty XII v. HRS, 10 FLW 1729 (Fla. 1st DCA July 16, 1985, pet. for reh. pending). COPIES FURNISHED: Eric B. Tilton, Esquire 104 S. Monroe St. Tallahassee, Florida 32301 Theodore E. Mack, Esquire 1323 Winewood Blvd. Tallahassee Florida 32301 William B. Wiley, Esquire Post Office Box 2174 Tallahassee, Florida 32316
Recommendation Based on the foegoing it is RECOMMENDED: That Petitioner's application for a CON authorizing establishment of an ambulatory surgical facility at his offices in Palm Beach County, Florida, be DENIED. DONE and ORDERED this 15th day of January, 1986, in Tallahassee Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee Florida 32301 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of January, 1986.
The Issue This is a license discipline case in which the Petitioner seeks to take disciplinary action against the Respondent on the basis of charges set forth in a three-count Administrative Complaint. The Administrative Complaint charges the Respondent with two violations of Section 458.331(1)(t), Florida Statutes, and one violation of Section 458.331(1)(m), Florida Statutes.
Findings Of Fact Background facts At all times material to this case, the Respondent, Rene A. Munecas, M.D., has been licensed to practice medicine in the State of Florida. Dr. Munecas is board-certified in Obstetrics. As of the date of the events from which the charges in this case arise, Dr. Munecas had practiced obstetrics for approximately 45 years. Dr. Munecas has practiced obstetrics in the State of Florida since 1970. Dr. Munecas was born in Cuba, and he attended medical school in that country. He graduated from the Havana University, School of Medicine, in 1950. He then did a two-year internship in obstetrics at the University Hospital, Havana, Cuba, followed by a two-year residency in obstetrics at the same hospital. Dr. Munecas practiced obstetrics in Cuba until 1961, at which time he moved to the United States. In this country he did a one-year rotating internship at the Highland Park General Hospital, Highland Park, Michigan, followed by a two-residency in obstetrics/gynecology (OB/GYN) at Jackson Memorial Hospital in Miami, Florida. He completed his OB/GYN residency training at Orange Memorial Hospital in Orlando, Florida. Upon completion of his residency training in this country, he practiced in Michigan until 1970, when he moved to Florida. During the many years Dr. Munecas has practiced in Florida, there has been only one prior instance of disciplinary action concerning his practice of medicine. 1/ The prior disciplinary proceeding did not arise from any misconduct by Dr. Munecas, but from concerns as to whether he was "unable to practice medicine with reasonable skill and safety to patients by reason of illness . . . or as a result of any mental or physical condition." 2/ By the time of the final hearing in the prior disciplinary proceeding, all of the medical experts were of the view that Dr. Munecas was able to practice with reasonable skill and safety so long as he continued to be monitored by his treating psychiatrist. The final order in that case (dated August 27, 1984) concluded as follows: ORDERED AND ADJUDGED that Respondent be placed on probation for a period of two (2) years during which time Respondent shall appear semi-annually before the Board and shall continue to be monitored by his treating psychiatrist, Dr. DeJesus who shall submit quarterly reports concerning Respondent to the Board during the two year probation period. No appearances by the treating psychiatrist, Dr. DeJesus, before the Board are required. Facts regarding patient A. B. There is very little evidence in the record of this proceeding concerning the quality or sufficiency of the written medical records kept by Dr. Munecas regarding his treatment of Patient A. B. 3/ There is no clear and convincing evidence that Dr. Munecas failed to keep written medical records justifying the course of treatment of patient A. B. Patient A. B., born July 4, 1965, was seen by Dr. Munecas on August 11, 1994, in the outpatient obstetrical clinic of Baptist Hospital of Miami. She was pregnant with twins. The hospital record indicates periodic visits to the clinic from August 11 through November 17, 1994. Her weight at the initial visit of August 11 was 210 pounds. She was 5 feet, 2 inches, tall. An outpatient ultrasound performed on November 3, 1994, indicated that both twins were in breech position. The results of that ultrasound were reported on November 4, 1994, and were known to Dr. Munecas prior to November 18, 1994, when another outpatient ultrasound was performed on patient A. B. At approximately 6:30 a.m. on November 19, 1994, patient A. B.'s membranes ruptured, and she was taken to the hospital. Dr. Munecas ordered an x-ray of the patient's abdomen for the purpose of ascertaining fetal position. An x-ray of A. B.'s abdomen was taken at about 8:15 a.m. For reasons not clear in the evidence in this case, a second x-ray of A. B.'s abdomen was taken about 10 minutes later. The two x-ray films did not provide any useful information about the position of either of the twins. A few minutes later, Dr. Munecas performed a pelvic examination of patient A. B., for the purpose of trying to determine the positions of the twins. On the basis of that examination Dr. Munecas was of the opinion that twin "A" was in a vertex position, and twin "B" was in a breech position. Later in the day, this opinion was shown to be incorrect. 4/ Dr. Munecas decided it was appropriate to deliver the twins vaginally, and began to take steps to implement that plan of treatment. Among other things, Dr. Munecas attempted to induce labor by administration of Pitocin, which induces labor by increasing uterine contractions. At approximately 5:00 p.m. on November 19, 1994, Dr. Munecas ordered a portable ultrasound examination of patient A. B.'s abdomen. 5/ The ultrasound examination was promptly performed, and by approximately 6:00 p.m. Dr. Munecas received the examination report. The report revealed that both twins were in a breech position. At some point after receiving the report of the ultrasound examination, Dr. Munecas changed his plan of treatment and decided that patient A. B. should be delivered by cesarean section. For reasons not clear from the record in this case, the cesarean section was not done until approximately 10:00 p.m. Twin "A" was delivered at 10:16 p.m., and twin "B" was delivered at 10:19 p.m. Both twins were healthy. Facts regarding current practice of obstetrics Ultrasound imaging is the procedure of choice for obtaining images to show fetal status. Ultrasound is superior to x-ray for such purposes for a number of reasons. Ultrasound produces fetal images that show more details than can be obtained by x-ray. The use of ultrasound also avoids certain potential fetal health risks that are associated with x-rays. Accordingly, except in the most unusual of circumstances, x-rays should not be used to obtain images of fetal status. Under the circumstances presented by patient A. B. on November 19, 1994, a reasonably prudent similar physician would have ordered an ultrasound. If for some reason an ultrasound was not available on the morning of November 19, 1994, a reasonably prudent similar physician would have relied on the results of the ultrasound that was performed on November 3, 1994. Pitocin is a drug that is commonly used by obstetricians to induce and enforce labor. The effect of Pitocin is to increase uterine contractions. Pitocin should only be used when it is desirable to induce labor. The obvious corollary is that Pitocin should never be administered to a patient in which vaginal delivery is contraindicated. Vaginal delivery was contraindicated for patient A. B. because of risks to fetal safety inherent in a situation when twins are both in a breech position. Those risks can be avoided by cesarean section delivery. In circumstances like those presented by patient A. B., with both twins in a breech position, a reasonably prudent similar physician would find it unacceptable to attempt a vaginal delivery. The only acceptable course of treatment under such circumstances would be a cesarean section. 6/ Therefore, it was a departure from standards of care, skill, and treatment acceptable to a reasonably prudent similar physician for Dr. Munecas to attempt to induce labor by patient A. B. Facts regarding patient M. E. Patient M. E., born November 28, 1963, was seen by Dr. Munecas on May 2, 1995, in the outpatient obstetrical clinic of Baptist Hospital of Miami. The hospital record indicates periodic visits to the clinic from May 2 through June 21, 1995. The record also indicates that lab tests had been performed prior to May 2. Dr. Munecas' note for the visit of June 2 indicates his belief that the fetus may have had intrauterine growth retardation. The visits of June 14 and June 21 indicate increases in patient M. E.'s systolic and diastolic blood pressure, and increased protein in her urinalysis. Pre-eclampsia is a term used to describe a form of pregnancy-induced hypertension. Symptoms of pre-eclampsia include elevated blood pressure, presence of protein in the urine and/or the presence of swelling or edema of the hands and feet. A patient exhibiting symptoms of severe pre-eclampsia is at risk for three circumstances of extreme urgency. One is the possibility of a brain hemorrhage, which can be fatal. Second is the possibility of heart failure and pulmonary edema. Third is the possibility of liver hemorrhage, which can cause the liver to swell and burst. This third possibility manifests itself by right upper quadrant abdominal pain. In the early morning hours of June 22, 1995, patient M. E. awoke with severe right upper quadrant abdominal pain. When the pain continued, she called Dr. Munecas at home and described her pain to him. Dr. Munecas instructed her to go to the hospital. At approximately 4:50 a.m. on June 22, 1995, patient M. E. arrived at the hospital. Her blood pressure was taken in the supine position and read 196/111. Patient M. E. complained of continuous severe right upper quadrant abdominal pain. Dr. Munecas was called at home and advised of the patient's status. At that time, Dr. Munecas gave no orders, but indicated his desire for a perinatal consultation. At about 5:00 a.m., the hospital nursing staff called Dr. Lai. Dr. Lai gave no orders, but said that Dr. Munecas should call him at home. Hospital nursing staff called Dr. Munecas a second time at approximately 5:15 a.m. They requested his presence at the hospital to evaluate the patient. At about 6:00 a.m. on June 22, 1995, the hospital nursing staff again called Dr. Munecas and again requested his presence at the hospital. At this time the nursing staff also requested that Dr. Munecas prescribe medication to lower the patient's blood pressure. Dr. Munecas did not prescribe any medications for the patient. Instead, he ordered that an abdominal ultrasound be performed on the patient immediately to see if the patient had gallbladder problems. The ultrasound was promptly performed. It did not reveal any gallbladder problems. At approximately 6:05 a.m., a nurse manager called Dr. Munecas at home, and again requested his presence at the hospital. Dr. Munecas thereupon embarked for the hospital. He arrived at approximately 7:00 a.m. He promptly examined the patient and found her cervix to be dilated up to 2 centimeters. Dr. Munecas' impressions following the examination included "severe pre-eclampsia." Following the examination of patient M. E., Dr. Munecas performed an amniotomy on the patient. Amniotomy is a technique for the induction of labor. It is accomplished by manual rupture of the patient's membranes. An amniotomy should only be performed when it is desirable to induce labor. The obvious corollary is that an amniotomy should never be performed on a patient in which vaginal delivery is contraindicated. Vaginal delivery was contraindicated for patient M. E. for two main reasons. First, following examination of patient M. E., it should have been obvious to any obstetrician that the patient was suffering from severe pre-eclampsia and that prompt action was necessary to minimize the risk of severe harm to the patient's health. Under the circumstances presented by patient M. E., on June 22, 1995, urgent delivery of the baby was the only acceptable course of patient treatment. Under the circumstances presented that day by patient M. E., there was no prospect for her to have an urgent vaginal delivery. A cesarean section was the only prospect for an urgent delivery of patient M. E. The second reason for which vaginal delivery was contraindicated for patient M. E., was the fact that the fetus appeared to have intrauterine growth retardation. Such a fetus is less able than a normal fetus to withstand the rigors of labor. Therefore, such a fetus is at greater risk for possible brain damage or death during vaginal delivery. Such risks are avoided by a cesarean section delivery. By inducing labor in patient M. E., Dr. Munecas exposed both patient M. E. and her fetus to unreasonable dangers which could be avoided by cesarean section delivery. A reasonably prudent similar physician faced with the circumstances presented by patient M. E. on June 22, 1995, would have gone to the hospital as quickly as possible following the first call from the hospital nursing staff describing the patient's status. Dr. Munecas' failure to do so was a departure from acceptable standards of treatment recognized by a reasonably prudent similar physician. A reasonably prudent similar physician faced with the circumstances presented by patient M. E. on June 22, 1995, in view of the obvious need for urgent relief of the severe pre- eclampsia, would have promptly made arrangements for a cesarean section delivery at the earliest possible time. Dr. Munecas' failure to do so was a departure from acceptable standards of treatment recognized by a reasonably prudent similar physician. Dr. Munecas appears to have voluntarily limited the scope of his medical practice since the incidents which gave rise to this proceeding. He limits his medical practice to gynecology and obstetrics in the office. He no longer performs major surgery or vaginal deliveries.
Recommendation On the basis of the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be issued in this case to the following effect: Dismissing Count Two of the Administrative Complaint; Concluding that the Respondent is guilty of having violated Section 458.331(1)(t), Florida Statutes, as charged in Count One of the Administrative Complaint and as charged in two of the three paragraphs of Count Three of the Administrative Complaint; and Imposing a penalty consisting of a permanent restriction on the scope of the Respondent's medical practice to the following extent: the Respondent is restricted from all hospital-based obstetrical practice and is barred from performing or assisting in the labor or delivery of any hospital obstetrical patient. DONE AND ENTERED this 10th day of February, 2000, in Tallahassee, Leon County, Florida. MICHAEL M. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of February, 2000.
Findings Of Fact Introduction Orlando General Hospital applied in April, 1987, for a certificate of need to allow it to convert 24 existing medical-surgical beds to short term psychiatric beds. O.G. Ex. 2, p. 1. It did not explicitly apply for beds limited to serve adults. It did, however, state that adolescent care would not be provided "at this time," leaving open the use of the 24 beds in the future for possible adolescent use. Id. at p. 5. Charter Medical-Orange County, Inc., applied for a certificate of need for a 50 bed short term psychiatric specialty hospital. It explicitly applied for a specialty hospital having 50 beds of "short term adult psychiatric care." C.M. Ex. 1, application, section I. In the executive summary, it characterized its proposal as a specialty hospital "for adults." Id. at p. 1. Charter does not intend to treat child or adolescent short term psychiatric patients. T. 23. The applications were filed in early 1987 to meet need in the January, 1992, planning horizon. The rule that applies in this case is the one contained in the prehearing stipulation. T. 392. It is rule 10-5.011(1)(o), Fla. Admin. Code. A copy of the rule is contained in O.G. Ex. 7, p. 33. The provisions of the local health plan at issue in this case are accurately reproduced in the State Agency Action Report (SAAR) which is C.M. Ex. 5. Net Short Term Psychiatric Bed Need (Numeric Need) Rule 10-5.011(1)(o)4a-c, Fla. Admin. Code, provides that the projected number of beds shall be based on a bed need ratio of .35 beds per 1,000 population projected five years into the future and based, in this case, on the January, 1987, projections for January, 1992. That 1992 population for District VII is projected to be 1,505,564, and thus the gross short term psychiatric bed need is 527 beds. For this batching cycle, the inventory of licensed and approved short term psychiatric beds was 410. These were: General Hospitals Florida Hospital-Altamonte 20 Florida Hospital-Orlando 85 Orlando Regional Med. Center 32 Wuesthoff Memorial Hospital 25 Subtotal 162 Specialty Hospitals Brevard Mental Health Center 52 CPC Palm Bay (began 10/86) 40 Laurel Oaks (began 10/86) 60 Lynnhaven (approved only) 39 Park Place (approved only) 17 West Lake 40 Subtotal 248 TOTAL (Licensed and approved) 410 TOTAL (Licensed only) 354 Thus, there is a net need for 117 short term psychiatric beds In District VII by 1992. The rule further specifies that a minimum of .15 per 1,000 population should be allocated to hospitals holding a general license, and that .20 per 1,000 of the beds may be located in either speciality hospitals or hospitals holding a general license. HRS interprets the word "should" in the rule with respect to .15 per 1,000 allocated to hospitals with a general license as being mandatory. C.M. Ex. 5, pp. 13-14. This is a reasonable construction of the rule. By 1992 there must be 226 short term psychiatric beds located in hospitals holding a general license. Since currently there are 162 beds in such hospitals, there is a net need by January, 1992, for 64 short term psychiatric beds to be opened in hospitals holding a general license. The remainder of the net bed need, 53 beds, may be located in either a specialty hospital or a hospital holding a general license. T. 500-02. The Occupancy Rate for "All Existing Adult Short Term Inpatient Psychiatric Beds" Rule 10-5.011(1)(o)4e, Fla. Admin. Code, provides in part that "no additional short term inpatient hospital adult psychiatric beds shall normally be approved unless the average annual occupancy rate for all existing adult short term inpatient psychiatric beds in a service district is at or exceeds 75 percent for the preceding 12 month period." (E.S.). Calendar year 1986 is the period of time accepted by all parties as the "preceding 12 month period" as specified by the rule, that is, the period of time to calculate the occupancy rate for this batching cycle. See, e.g., T. 285; C.M. Ex. 5. The State Agency Action Report Occupancy Rate The State Agency Action Report computed the occupancy rate for all licensed short term psychiatric beds in District VII in calendar year 1986 at 70.13 percent. C.M. Ex. 5, p. 10. This figure was based upon data as to patient days as reported by District hospitals to the District VII local health council and was based upon 354 licensed beds in the District during the full calendar year, but excluded 56 beds the re approved but not opened. O.G. Ex. 7, p. 6. Exclusion of CPC Palm Bay and Laurel Oaks CPC Palm Bay and Laurel Oaks have been designated by certificate of need issued by HRS to serve only children and adolescents. T. 507. Since those facilities by law cannot serve adults, their beds are not "adult beds," their patient days are not adult patient days, and their occupancy rate is not an adult occupancy rate. T. 1128. If CPC Palm Bay and Laurel Oaks were excluded from the calculation of the occupancy rate in the SAAR, the occupancy rate would be 73.7 percent. This rate is a weighted average based upon a 86,779 patient days that were possible at 100 percent occupancy of all licensed short term psychiatric beds in District VII in 1986, excluding Palm Bay and Laurel Oaks. C.M. Ex. 17, p. 11, fn. 9. How Many Adult Patient Days and Beds? HRS often issues certificates of need without age restrictions, allowing the facility to provide short term psychiatric treatment to everyone, regardless of age. Such hospitals can and do serve all ages, and their licensed short term psychiatric beds are not designated as, or restricted to, adults. T. 1128-29. With the exception of Palm Bay and Laurel Oaks, none of the other licensed short term psychiatric hospitals in the District are restricted by HRS by patient age. HRS does not have data to enable it to determine which short term psychiatric beds were used by adult patients in the District in 1986. T. 1169. Use of beds for age cohorts can dramatically and continuously change during a calendar year, and 41 has no reliable means to know about such changes. T. 1229-30. Hospitals issued certificates of need without limitation as to the age of the patient are not required by HRS to report the number of patient days served by the hospital by age or age group of the patient. See T. 1218-19; HRS Ex. 2. HRS Ex. 2. Consequently, the reported short term psychiatric patient days for District VII for calendar year 1986 mix adult patient days with patient days for children and adolescents. Thus, with the exception of Laurel Oaks and Palm Bay, it is impossible in this case for the applicants and other parties in this batching cycle to untangle pure adult psychiatric patient days from the available data. T. 392, 353, 287, 291, 371, 1169-71. It is impossible on this record to make a finding of fact as to what would happen to the mixed occupancy rate all patient days attributable to adolescents and children could be excluded from the adult patient days. The only bit of evidence is found in C.M. Ex. 17, the data from Florida Hospital, which shows for that hospital that the 16 adolescent unit in 1986 had an occupancy rate of 60.92 percent, and the open adult unit had an occupancy rate of 82.42 percent. C.M. Ex. 17, p. 3. But that percentage is more a reflection of Florida Hospital's choice in how it set up the beds in the two programs than it is a reflection of need. For example, had Florida Hospital chosen to allocate only 12 beds to its adolescent program, instead of 16, the 1986 occupancy rate for that unit, based on 3,558 patients a day, would have been 81.23 percent. One wonders why Florida Hospital did not simply allocate a lower number of beds to the adolescent unit, since it had only 13 admissions to that unit in 1986. In any event, since a hospital like Florida Hospital has discretion as to how it sets up its beds with respect to the ages of patients. In those beds, the fact that it had an occupancy rate of 60.92 percent in the subunit it called the adolescent unit in 1986 is relatively meaningless when trying to predict which way a pure adult occupancy rate might change if adolescent and child patient days could be excluded. In summary, there is no accurate count of beds licensed only as adult beds, there is no accurate count of beds used only as adult beds, and there is no accurate count of adult patient days. The Problem of West Lake Hospital The record has an additional data problem with respect to calculation of the occupancy rate of adult short term psychiatric beds. West Lake Hospital is licensed for 40 short term beds (not restricted by age), and 30 long term psychiatric beds. Data for calendar year 1986, the only year relevant in this case, is a mixture of short term and long term patient days. C.M. Ex. 17. As will be discussed ahead, additional evidence as to the patient days at West Lake Hospital was excluded from evidence for failure to comply with the prehearing order. The Problem of Short Term Psychiatric Patient Days Occurring in General Hospitals Without Licensed Short Term Psychiatric Beds A general hospital with no licensed short term psychiatric care can lawfully provide temporary and sporadic short term psychiatric care in its medical-surgical beds. T. 1191. In calendar year 1986, Orlando General Hospital reported to the Hospital Cost Containment Board that it provided 4,969 psychiatric (MDC 19) patient days of care. O.G. Ex. 7, p. 11. By 1988, it had over 30 psychiatric patients in the hospital at any given time. T. 753. Orlando General Hospital does not have any beds licensed for short term psychiatric care, or for long term psychiatric care, for that matter. Orlando General Hospital's psychiatric patients are currently receiving inpatient psychiatric care that is substantially the same as would be provided in a licensed short term psychiatric bed, with the exception that the care is osteopathic in nature. See T. 797, 1355-58, 1360-62, 788-90, 792-93. HRS Policy as to the Data Problems HRS stated that it "... would not attempt to fix a specific occupancy for a specific age cohort" in this case, T. 1220. A good faith attempt was made, however. Following a new policy, HRS argued that the adult bed occupancy rate should exclude the beds and patient days of hospitals having certificates of need explicitly limited to service of the needs of children and adolescents (Palm Bay and Laurel Oaks), but should include all of the licensed short term psychiatric beds at any other facility that is not restricted by patient age. T. 1127-29. It was acknowledged that the information is faulty, but the Department urges that it is the best that it can do under the circumstances. T. 1174. With respect to patient days, HRS also urges that only the patient days reported to the local health council by hospitals having licensed adult short term psychiatric beds should be counted in the mixed rate. In particular, HRS argues that it should not use patient day data reported to the Hospital Cost Containment Board because such data is not limited to hospitals having "designated" psychiatric units. T. 1126-27. This argument is not reasonable. Hospitals that are legally authorized to provide short term psychiatric care to adults (i.e., having a certificate of need and a license) can provide such care in any licensed bed in the hospital, even though the bed is not licensed as a psychiatric bed. Moreover, a general hospital with no licensed short term psychiatric care, according to HRS witnesses, can lawfully provide temporary and sporadic short term psychiatric care in its medical-surgical beds. It may even provide such care on a continuous, ongoing basis, as in the case of Orlando General Hospital, although the legality of doing so is questioned by HRS. The critical question is not whether these licensed hospitals have legal authority to provide short term psychiatric care, but whether the care in fact given results in a short term psychiatric patient day in the District. If the care given is essentially the same as if the patient had been in a licensed short term psychiatric bed, it would be unreasonable not to treat the resulting statistic as a short term psychiatric patient day. What is at stake is a true measurement of District capacity. If tomorrow all of the District short term psychiatric patients and the patient days generated by such patients transferred to the District licensed short term psychiatric beds, these short term psychiatric patient days would certainly be counted in the occupancy rate. When trying to assess the real extent of availability of District capacity, a false picture of excess and unused capacity would be shown if real short term psychiatric patient days are occurring somewhere in the District, but are not counted in determining the occupancy rate. On the other hand, if the facility is not even a licensed hospital, it is presumptively providing an alternative kind of inpatient psychiatric care that is different from a licensed psychiatric hospital. Thus, its patient days are irrelevant absent some specific proof that the care given in such a bed is essentially the same as a short term psychiatric patient day in a licensed general or specialty hospital. What is an "Existing" Adult Short Term Bed? Rule 10-5.011(1)(o)4e, Fla. Admin. Code, calls for the occupancy rate for "all existing" adult short term psychiatric beds in the service district, and does not define the word "existing." Petitioners assert that "existing" adult beds of the facility for purposes of determining occupancy rate is the number of beds characterized by the facility as having been in fact used for psychiatric care during the year, but only if that number is less than the number of licensed short term psychiatric beds. T. 391, 354-55. The Respondent and the Intervenor argue that "existing" adult beds is fixed by the number of licensed short term psychiatric beds granted to the facility by the state if available to serve adult patients. Normally, to be licensed a bed must be available within 24 hours. T. 1121. Orlando Regional Medical Center In calendar year 1986, Orlando Regional Medical Center had 32 licensed short term psychiatric beds. T. 348. These 32 beds were not restricted by patient age. In calendar year 1986, Orlando Regional Medical Center characterized as "in service" 32 beds for the first 7 months of 1986, 22 beds for the month of August, 18 beds for the month of September, and 12 beds for the remaining 3 months of the year. The figure of 25 beds used by the Petitioners is the weighted average. T. 348. These licensed short term psychiatric beds at Orlando Regional Medical Center were temporarily not in service because of the construction of new facilities at the hospital. Orlando Regional Medical Facility intended to reopen those beds in the future because the hospital reminded the party seeking discovery that it had 32 licensed beds, and characterized the missing beds as having been "warehoused," that is, saved for future use. T. 509-10; O.G. Ex. 7, appendix 3. Thus, all 32 of Orlando Regional Medical Center's licensed beds would be available and would be used for adult short term psychiatric care if demand existed. Florida Hospital Florida Hospital has two facilities relevant to this case, one in Orlando, in Orange County, and one in Altamonte Springs, in Seminole County. In calendar year 1986, Florida Hospital had 105 beds licensed as short term psychiatric beds. Florida Hospital would serve patients of any age in these 105 beds. C.M. Ex. 18 is a document which was obtained from Florida Hospital through discovery. T. 286. The document is entitled "Florida Hospital Center for Psychiatry Monthly Operating Statistics," and thus was assumed by Charter's expert to be Florida Hospital's characterization of its data as psychiatric data. T. 289. C.M. Ex. 18 could not have been obtained by Charter at the time it made application. It was obtainable only through the discovery process after commencement of section 120.57(1), Fla. Stat., proceedings. T. 314-16, 386-87. Florida Hospital reported in discovery that in calendar year 1986, it had 113 beds operating in its "Center for Psychiatry." Of these, 16 were substance abuse beds, 13 were beds in an eating disorders unit, and 16 were adolescent beds. That left 24 beds in the intensive care unit, 24 beds in an open unit, and 20 beds at a unit at Altamonte Springs. C.M. Ex. 18. The 16 substance abuse beds clearly were not psychiatric beds. If the 13 eating disorders beds were short term psychiatric beds, Florida Hospital had 97 of its 105 licensed short term psychiatric beds in actual operation in 1986. If they were not, Florida Hospital had 84 of its 105 licensed short term psychiatric beds in actual operation in 1986. There is no evidence in this record that Florida Hospital could not and would not have readily opened 8 more short term psychiatric beds during 1986 if demand for those beds had existed, thus having "open" all 105 of its licensed beds. There is no evidence in this record that in 1986, Florida Hospital could not have closed its 16 bed adolescent unit and devoted all of those beds to adult short term psychiatric care, had there been a need. Indeed, it appears that generally speaking, that is how Florida Hospital operates: by shifting beds to other uses within its licensed authority according to demand. See T. 1322-26. Thus, all 105 of Florida Hospital's licensed beds would have been available and would have been used for adult short term psychiatric patients if the demand existed. Counting Patient Days - Are Eating Disorder Patient Days Psychiatric Patient Days? Florida Hospital reported in discovery that it had 2,982 patient days in its eating disorder unit, and that the unit operated with 13 beds. C.M. Ex. 18, P. 3, lines 8 and 26. The eating disorder unit reports to the administrative director of the Florida Hospital Center for Psychiatry. T. 977. The administrative director could not explain why the unit reported to the Center for Psychiatry. T. 977. The unit has co-directors, one a psychiatrist, and the other a specialist in internal medicine. Id. The administrative director of the Center for Psychiatry characterizes the 13 eating disorders beds as medical-surgical beds, and classifies patients in those beds as primarily having a medical problem, T. 976, but the psychiatrist co-director of the program hedged, and would not say whether the primary diagnosis is medical or psychiatric. T. 1315. The patients typically are, however, very ill from a medical point of view. T. 1314. Florida Hospital's characterization of the nature of the care given in its eating disorders unit, as summarized in the preceding paragraph, in view of the manner in which the witnesses were unclear as to how to characterize the eating disorder unit, is not evidence that the care given in that unit is not psychiatric care in view of Florida Hospital's interest in these cases in opposition to the applications. Charter's expert concluded from C.M. Ex. 18 that Florida Hospital was serving short term psychiatric patients in its eating disorders unit at Altamonte Springs. T. 287. He characterized this as a short term psychiatric service in medical-surgical beds. T. 289. But he also characterized the 13 beds as psychiatric beds. T. 287-88. HRS has issued a certificate of need to a short term psychiatric hospital limiting that certificate of need to treatment of eating disorders, thereby recognizing treatment of eating disorders in that case as a form of psychiatric treatment. T. 1191. From testimony at the hearing, it would appear that HRS's expert would view the eating disorder unit at Altamonte Springs as a short term psychiatric program. T. 1191-1192, 1194. It is concluded that the preponderance of the evidence shows that the care rendered to patients in the eating disorders unit was psychiatric care. The unit is administratively a part of the hospital's Center for Psychiatry. While the patients are very ill, medically speaking, they also have substantial mental health problems. Finally, and most persuasive, HRS has previously characterized such care as short term psychiatric care. If these 2,982 eating disorder patient days are counted as psychiatric patient days in 1986 for District VII, and if the number of beds at Florida Hospital remains as it was in the SAAR calculation (105 licensed beds), then the total patient days for the District changes from 63,976 to 66,958. The result is that the occupancy rate for District VII for 1986 for adult and mixed short term psychiatric beds changes from 73.72 percent to 77.16 percent. C.M. Ex. 17, p. 13. This calculation is the result of a weighted average discussed above. Psychiatric Patient Days Reported to the Hospital Cost Containment Board Orlando Regional Medical Center and Florida Hospital report patient days by Medicare major diagnostic categories (MDC). MDC 19 is the category for psychiatric care. T. 512; O.G. Ex. 7. The data collected in this record was for calendar year 1986. T. 603-604. Relying upon MDC 19 statistics for calendar year 1986, Florida Hospital (Orlando and Altamonte Springs combined) had 28,372 MDC 19 patient days, and Orlando Regional Medical Center had 7,328 MDC 19 patient days. The Florida Hospital MDC 19 patient days shown in table 6, O.G. Ex. 7, are very close to the number of patient days shown on C.M. Ex. 18, the operating statistics from the "Center for Psychiatry" obtained from Florida Hospital in discovery. The MDC 19 patient days, 28,372, exceed the "Center for Psychiatry" reported data by only 452. The Orlando Regional Medical Center's MDO 19 patient days, 7,328, is 618 patient days greater than the patient days reported by Orlando Regional Medical Center to the local health council. If these MDC 19 patient days are assumed to be short term adult psychiatric patient days, following the same mathematical calculation used by HRS both in the SAAR and in testimony during the hearing (with the same weighted averages), the occupancy rate for adult and mixed short term psychiatric care in District VII, using licensed beds, was 78.39 percent in calendar year 1986. O.G. Ex. 7, table 6. This calculation uses the same weighted average (86,779 patient days at 100 percent occupancy) as used by all the other parties. C.M. Ex. 17, p. 11, fn. 9. There is no evidence in the record that the foregoing MDC 19 patient days are limited to short term psychiatric days, or the extent to which the data considers long term patient days as well. Of course, there is also no evidence available to separate the MDC 19 patient days into adult patient days and patient days attributable to children and adolescents. Westlake Hospital Data as to Short Term Psychiatric Patient Days in 1986 The Intervenor, Florida Hospital, has renewed its effort to have F.H. Ex. 3, and testimony based upon that exhibit admitted, into evidence. The exhibit and testimony involves data as to short term psychiatric patient days for 1986 at Westlake Hospital, located in Seminole County. Florida Hospital argues that the ruling excluding F.H. Ex. 3 from evidence, as well as testimony related to that exhibit, is inconsistent with the ruling that allowed Charter Medical to introduce C.M. Ex. 19. It is argued that the only difference is that in the case of Charter Medical, the witness first testified as to the contents of the exhibit, whereas in Florida Hospital's case, the exhibit was admitted, the witness testified, and then the exhibit was excluded. Florida Hospital argues that as a result of this sequence of events, its witness was not afforded an opportunity to present the same evidence from memory without the exhibit. From a review of the sequence of events, it is apparent that there is a substantial difference between the two exhibits, as well as a substantial difference in the procedures used by counsel, and that difference necessitates the two rulings. C.M. Ex. 19 is nearly identical to C.M. Ex. 17, with three exceptions. In C.M. Ex. 19 the patient days at the Florida Hospital eating disorder unit were moved from the Orlando facility to the Altamonte Springs facility. C.M. Ex. 19 also excluded adolescent patient days from the Florida Hospital count changed the number of "existing" beds at Orlando Regional Medical Center to 25 instead of 32. T. 295. C.M. Ex. 19 made no other changes to C.M. Ex. 17 with respect to patient days or number of beds. Two objections were made by Florida Hospital to the admission of C.M. Ex. 19, that C.M. Ex. 19 had not been provided to opposing counsel at the exchange of exhibits, in violation of the prehearing order, and that C.M. Ex. 19 was an impermissible amendment to Charter Medical's application for certificate of need. T. 295-296. Only the first objection is the subject of Florida Hospital's renewed argument. The Hearing Officer at the time overruled the first objection because it was determined that C.M. Ex. 19 merely summarized the testimony of Dr. Luke as to changes he would make to C.M. Ex. 17. That ruling was correct, and should not be changed at this time. All of the underlying data for the expert analysis in C.M. Ex. 19 came into evidence without objection that it had not been exchanged among the parties. C.M. Ex. 18 contained the data as to adolescent patient days and eating disorder patient days at Florida Hospital in 196. That data came into evidence without objection that it had not been exchanged. T. 316. Dr. Luke's testimony that Orlando Regional Medical Center had only 25 beds operational in 1986 came into evidence without objection. T. 292. Dr. Luke's testimony concerning the location of the eating disorders unit at Altamonte Springs came into evidence without objection. T. 287, 291. Both of these latter evidentiary matters were of a type that easily could have been known to Dr. Luke without reference to a document to refresh his memory. Additionally, the parties were well aware of the argument that Orlando Regional Medical Center had only 25 operational beds in 1986, and that Florida Hospital had only 48 adult beds in operation in 1986, since that evidence and argument was a fundamental part of Orlando General Hospital's basic bed need exhibit, O.G. Ex. 7, and the testimony of Ms. Horowitz. Moreover, the type of analysis of the data contained in C.M. Ex. 19 is the same as that of Ms. Horowitz in O.G. Ex. 7. Thus, Florida Hospital was not caught by surprise by C.M. Ex. 19. The exhibit did not contain new data or new modes of analysis. Florida Hospital's attempt to introduce data as to the actual number of short term psychiatric patient days at Westlake Hospital in 1986 was quite different. The data as to patient days at Westlake had not been produced during the deposition of Florida Hospital's witness, although similar data for 1987 and 1988 was produced. T. 867. Had it been made available in discovery, the failure to exchange the data as an exhibit as required by the prehearing order would have been less serious. But the exhibit had not been given by Florida Hospital to opposing parties, in violation of the prehearing order. T. 869. F.H. Ex. 3 did not reorganize data that otherwise was exchanged between the parties. It attempted to introduce new raw statistical data that had not been furnished opposing counsel as required by the prehearing order. The Hearing Officer initially ruled that F.H. Ex. 3 should be admitted into evidence and allowed the witness to testify concerning the data contained in the document. T. 870-871. That initial ruling was in error. The data contained in F.H. Ex. 3 is not at all simple. The document consists of four pages of numbers representing monthly statistics in 1986 at Westlake Hospital for each of its units. It is highly unlikely that a witness could have remembered all of that data presented the data in testimony without reliance upon the exhibit. Indeed, the witness testified that all of his testimony was based upon F.H. Ex. 3. T. 907. The witness had apparently given a different impression as to Westlake's occupancy rate in 1986 during his deposition, and did so without the benefit of F.H. Ex. 3. T. 910. Florida Hospital could have asked the witness if he could have presented his testimony without reference to F.H. Ex. 3, but it did not ask the witness that critical question. In sum, the witness could not have presented his analysis from memory. He had to have F.H. Ex. 3 in front of him as he testified. On December 2, 1987, an order was entered setting this case for formal administrative hearing beginning on July 11, 1988. That order established prehearing procedures. Paragraph 3 of that order requires counsel to meet no later than 10 days before the hearing to, among other things, "examine and number all exhibits and documents proposed to be introduced into evidence at the hearing." Later in the same paragraph is the requirement that the parties file a prehearing stipulation containing a list of all exhibits to be offered at the hearing. Paragraph 3D of the prehearing order states in part that failure to comply with the requirements of the order "may result in the exclusion of testimony or exhibits." The first time that opposing counsel were given the opportunity to see the data in F.H. Ex. 3 was in the middle of the formal administrative hearing. The exhibit contained detailed raw statistical data. C.M. Ex. 19 did not try to present new raw statistical data. For these reasons, F.H. Ex. 3 and all testimony related to that exhibit by Mr. Menard was excluded from evidence. Later in the hearing, Florida Hospital sought to introduce the same data through the testimony of Wendy Thomas, the planning director and data manager for the local health council. T. 1050. Counsel for Florida Hospital first attempted to show the witness the document that had been excluded from evidence, and counsel for the other parties objected. T. 1047-1049. The Hearing Officer suggested to counsel that counsel should first ask the witness whether she had made a computation and then ask what was the basis of the computation, rather than show the witness the document. T. 1049. Counsel then attempted to do that. But when counsel asked the witness for her computation, it was still unclear whether the witness based her calculation upon data in the excluded document. T. 1053. After a number of other questions, it still was unclear whether the data in the excluded document was the basis for the calculation. T. 1053-1055. The Hearing Officer then asked the witness if she could identify F.H. Ex. 3. The witness said that F.H. Ex. 3 contained the exact type of information that she had in her own files, and that her document looked like F.H. Ex. 3, except it was photocopied smaller. T. 1056. During all of this exchange, the witness was never asked by counsel for Florida Hospital if she ever had an independent memory of the details of the underlying data, or whether, if that memory now had faded, looking at F.H. Ex. 3 would refresh her memory. Since it was apparent that the basis for the witness's calculation was the same raw statistical data as contained in F.H. Ex. 3, the Hearing Officer granted the motion to exclude the testimony. Later, in cross examination of the proffered testimony, the witness testified that the basis for her calculation was the use of a document containing the same data as F.H. Ex. 3. T. 1087-1088, 1091. Thus, counsel for Florida Hospital did not lay a proper predicate for attempting to use F.H. Ex. 3 to refresh the memory of either witness. As discussed above, had it done so, it is unlikely that either witness could have testified from memory as to the statistics because the data contained in F.H. Ex. 3 was too detailed to have ever been in the memory of either witness. Florida Hospital argued that Ms. Thomas's calculation should be admitted because the raw data had been in her possession for over a year. That argument is unpersuasive. The raw data was in the possession of Westlake Hospital as well. The issue is not whether opposing parties might have discovered the data on their own, but compliance with the prehearing order requiring exchange of important exhibits. For these reasons, the Hearing Officer's rulings as to exclusion of the foregoing evidence will remain unchanged. The Local Health Plan Applicability No part of the District VII local health plan was adopted by HRS as a rule when these applications were and reviewed. T. 1214. Several years ago, with respect to applications for certificates of need for short term psychiatric beds, HRS considered need and occupancy rates only on a district-wide basis. T. 1184. See e.g. C.M. Ex. 20, where HRS did not refer to the local health plan as to these issues in District VII. HRS has now changed that policy, however, and considers need and occupancy at the district level and by portions of the District if those issues are effectively required by the local health plan. T. 1184. For purposes of planning for short term psychiatric services, the local health plan divides District VII into county "planning areas." Orange County is thus a local health plan planning area. The local health plan does not use planning areas for substance abuse planning, and it does not explain why there is a difference in planning. Orlando General and Charter both propose to locate their proposed short term adult psychiatric beds in Orange County if granted certificates of need. Counties are convenient units for health planning purposes because population data exists by county. T. 1180. Census tracts and zip code areas are also convenient geographical units for health planning. T. 1180-81. If a proposed facility is to be located very close to the county line, it would make no difference which side of the line it was on with respect to the ability of the facility to serve patients originating in either county. T. 1181. Allocation of Net Need to Orange County The local health plan, policy 3, provides that if the application of rule 10-5.011(1)(o) indicates a need (at the District level), the need is to be allocated among the counties in the district using the state numeric need method by county. T. 1027-29; C.M. Ex. 5. Applying all of the age calculations for the projected populations and bed inventory of Orange County only, the local health plan allocates 55 new short term psychiatric beds to Orange County by 1992. However, applying the allocation ratios of the rule, there is an excess of 18 short term psychiatric beds in general hospitals, and thus none of the 55 beds would be mainly allocable to a general hospital. There is, nonetheless, a potential allocation of need of 73 beds in either a specialty or a general hospital, and the net need of 55 beds could be allocated to either a specialty hospital or a general hospital. The Orange County Mixed Occupancy Rate The local health plan, policy 4, applies the 75 percent occupancy standard to the county level. The policy explicitly calls for an average annual occupancy rate for all existing facilities in the planning area with respect to adult short term psychiatric beds. C.M. Ex. 5. Relying upon the calculation in the SAAR, but deleting Laurel Oaks, the mixed occupancy rate for Grange County in 1986 was less than 58.4 percent. This calculation only includes the beds at Florida Hospital (Orlando) and Orlando Regional Medical Center. The calculation is based upon 18,696 patient days at Florida Hospital (Orlando) in 85 beds, and 6,242 patient days in Orlando Regional Medical Center in 32 beds. There were 4,969 MDC 19 patient days occurring at Orlando General Hospital in 1986. There were 7,328 MDC 19 patient days occurring at Orlando Regional Medical Center in 1986. The eating disorder patient days occurred in Seminole County (Altamonte springs) and should not be counted in an Orlando occupancy rate. The only data as to patient days at Florida Hospital, Orlando only, is that found in C.M. Ex. 18, which is the same as the SAAR, which reports 18,696 patient days. (The MDC 19 data mixes the two units.) The number of licensed short term psychiatric beds in Orange County in 1986 was 117. All of these beds were licensed the entire year, and thus there was no need to do a weighted average of potential patient days for these beds. See C.M. Ex. 17, p. 11; O.G. Ex. 7, table 6. Using all of the foregoing patient days, the number of patient days was 30,993, the number of licensed short term psychiatric beds was 117, and the mixed occupancy rate for Orange County for 1986 was 72.6 percent. If it is not appropriate to count the 4,969 patient days at Orlando General Hospital in the Orange County occupancy rate, the 1986 Orange County occupancy rate was only 60.09 percent. Conversion of Existing Beds and Service to Indigent Patients Policy 5 of the local health plan states that excess bed capacity in, among other types of beds, medical/surgical beds, should be eliminated by reallocation of beds among the services, including psychiatric services. Policy 6 of the local health plan states that primary consideration should be given for project approval to applicants who satisfy to the greatest extent the following priorities: The first priority is to applicants who commit to serving "underserved client groups," including Medicaid, Baker Act, and medically indigent patients. The second priority is to applicants who convert underutilized existing beds. As will be discussed in the conclusions of law, Orlando General's application satisfies these priorities, and Charter Medical's application does not. Other Evidence as to Future Need Historically, health care providers have been reimbursed on a fee- for-service basis. The more services provided, the greater the payment. These insurance arrangements had little incentive to decrease the level of services. T. 720. In the last three or four years, the health insurance industry has changed its methods of providing insurance. A very large percentage of insured patient care is now managed by use of flat rates based upon a per person count (capitation). The rates do not increase related to utilization. Managed health care reimbursement uses a system whereby the health care provider is paid a flat rate annually for each insured person, and agrees to provide for the health care needs of all such persons generally without considering the degree of utilization during the year. T. 722-723. Under the capitation system, the provider has the incentive to provide only such care that, in intensity or duration, is the minimum that is clinically acceptable. T. 724. Psychiatric services have been included in the movement of the industry toward managed health care reimbursement rather than fee-for-service reimbursement. T. 722. The health care industry now offers competitive managed health care plans in central Florida, and the trend is for an increase in the availability of such methods of reimbursement in central Florida. T. 726-727. It is now 40 percent of the insurance market, and in the early 1990's, the percentage of managed health care may be twice that percentage. T. 727. The effect of the new reimbursement system is to substantially lower the length of stay, and to lower the rate of admission as well, at short term psychiatric hospitals. T. 724-725, 881-882, 1319-1320. Orlando General Hospital projected that its average length of stay would be 30 days in 1992. It has discovered from current experience that its average length of stay is about 15 days. T. 433, 464. District VII has recently experienced an increase in the availability of community based mental health facilities. These facilities provide a variety of mental health services, including brief inpatient care. The facilities do not require a certificate of need. T. 1046-1047, 1319. The Nature of the Proposed Programs Orlando General Hospital General Orlando General is a 197 bed acute care general osteopathic hospital located in Orlando, Florida, in Orange County. Orlando General proposes to convert a 35 bed medical-surgical unit to 24 short term psychiatric beds at a capital cost of $689,272. It would relocate 11 of its medical-surgical beds, and convert the remainder to short term psychiatric beds. Orlando General Hospital is located in the southeast portion of Orange County. T. 1107. It is the most eastward facility in Orange County with the exception of a long term psychiatric hospital now under construction. T. 1107. The primary service area of Orlando General by location of physicians offices is the southern half of Seminole County and the northern portion of Orange County. In particular, the hospital serves northeastern Orange County through the location of its physicians' offices. T. 412; O.G. Ex. 2, p. 27. The program of treatment described in Orlando General's application is no longer an accurate description of Orlando General's current program or of the intended program. T. 453. The treatment programs planned for the new short term psychiatric unit are comparable to the programs planned by Charter Medical-Orange County, Inc., and are adequate and appropriate programs for short term psychiatric care. Psychiatric Care for the Elderly Orlando General Hospital would provide adequate and appropriate specialized short term psychiatric care for elderly patients, but would not provide such care in a unit physically separated from other patients. There currently is a split of professional opinion as to whether or not geriatric patients should be treated in a psychiatric unit separated (physically as well as programmatically) from other patients. There are benefits from both approaches. T. 1315-1317, 68, 74-76, 43-45, 770. Various Charter Medical hospitals do it both ways. T. 70. Osteopathic Medicine at Orlando General Hospital Osteopathic medicine differs from allopathic medicine in its emphasis upon viewing the interaction of all parts of the body, rather than a single part, and the use of muscular and skeletal manipulation. T. 1349, 753-754. Orlando General Hospital is an osteopathic hospital and has been osteopathic in nature since the 1960's. It was founded by osteopathic physicians, and the hospital abides by osteopathic philosophies. The Board of Trustees at the hospital are all osteopathic physicians. Although it has medical doctors on staff, the majority are osteopathic physicians Orlando General Hospital is accredited by the American Osteopathic Association to train osteopathic physicians, and has such training programs, primarily in family medicine. T. 412-414, 755. There are about 80 osteopathic physicians in Orange County, and the vast majority are on the staff at Orlando General Hospital. T. 760. Patients who prefer osteopathy, and osteopathic physicians, prefer an osteopathic hospital. Osteopathic physicians believe that they deliver better care to their patients in an osteopathic facility rather than an allopathic facility. About 30 percent of the psychiatric patients treated by Dr. Greene at Orlando General Hospital receive manipulation as a therapy. T. 1351. There is a shortage of osteopathic psychiatrists. T. 756. Other than Randall Greene, D.O., there are no osteopathic psychiatrists in the Orange County area. Id. There is a shortage of places for psychiatric resident training. There is no osteopathic psychiatric residency in Florida, and only a few in the country. T. 764, 1349. Consequently, osteopaths seeking to become psychiatrists often have to go to allopathic hospitals for residencies. T. 1349 Residency in an allopathic hospital is often not approved by the American College of osteopathic psychiatrists. Thus the osteopath who has had his or her residency in an allopathic hospital and lacks such approval will not be readily accepted as an osteopathic psychiatrist on the staff of an osteopathic hospital. T. 1350. Orlando General Intends to have a residency program in osteopathic psychiatric for at least two positions if it is granted a certificate of need. T. 762, 415. The Evolution of Osteo-Psychiatric Care at Orlando General Hospital Dr. Randall Greene came to Orlando in 1982. He is an osteopathic physician and psychiatrist. He initially was on the staff at four hospitals but soon discovered that other osteopathic physicians were referring patients needing psychiatric care to Orlando General Hospital because it was an osteopathic hospital. These physicians frequently asked Dr. Greene to provide psychiatric care at Orlando General. T. 754. Osteopathic physicians who referred their patients to Dr. Greene and to Orlando General Hospital continued to treat the physical ailments of those patients at Orlando General Hospital. T. 760. Dr. Greene now limits his psychiatric practice to Orlando General Hospital because of the large number of psychiatric patients being treated at the hospital. T. 756. Thirty to forty percent of the psychiatric patients come to Orlando General via the emergency room. T. 421, 445. Additionally, patients admitted to the new substance abuse program often need psychiatric care. T. 407. Orlando General has difficulty transferring its psychiatric patients to other hospitals. A number of the patients have no insurance or have only Medicaid coverage. T. 420. Orlando General Hospital is located in a lower economic area, and thus attracts patients of this type. Id. Patients who prefer osteopathic treatment also prefer not to be transferred to an allopathic hospital. T. 759. The increase in numbers of psychiatric patients served at Orlando General Hospital in medical-surgical beds helped to offset the hospital's loss of medical-surgical patient days during the same period. T. 452 Due to the large number of psychiatric patients, and the decline in need for medical-surgical beds, Orlando General hospital decided to apply for the instant certificate of need. Due to the osteopathic nature of the hospital, physicians, patients and the hospital prefer to keep these patients at Orlando General Hospital rather than refer them to an allopathic hospital. It is HRS's position that if a hospital does not advertise itself as having a distinct psychiatric unit and does not organize within itself a distinct psychiatric unit, the admission and treatment of psychiatric patients to medical-surgical beds on an "random" and unplanned basis is proper even the hospital does not have licensed psychiatric beds. T. 1191. Orlando General hospital does not hold itself out to the public through advertising as having a separate psychiatric unit. T. 468. Patient Mix & Commitment to Charity Care Orlando General Hospital currently provides a large portion of charity care for Orange County. T. 1100. In its 26 bed chemical dependency unit, Orlando General reserves 2 beds for indigents. T. 785. The unit also sets aside, as needed, one bed for any Florida nurse whose license is in jeopardy due to chemical dependence and who has no financial means to pay for treatment. Id. Orlando General Hospital typically has a larger amount of bad debt and charity care (for people who do not pay) than other hospitals in the area. T. 423. In 1987, Orlando General Hospital reported to the Hospital Cost Containment Board that it had $141,404 in charity care, and that it had $3,244,530 in bad debt. T. 657, 660. Bad debt constituted 9.7 percent of gross revenue. T. 660. Since it is very difficult to determine at admission whether the patient realistically can pay for services, a lot of this bad debt is, in a functional sense, charity care. T. 659-660. It is concluded from the foregoing that Orlando General Hospital has a genuine commitment to providing health care to persons who cannot pay. T. 422, 662. Orlando General Hospital projects that it will in its proposed 24 bed short term psychiatric unit 5 percent indigent patients, 8 percent Medicaid patients, 20 percent Medicare patients, 50 percent insured patients, and 17 percent private pay patients. These projections are reasonable and are consistent with Orlando General Hospital's current experience. T. 662-664; O.G. Ex. 2, p. 16. Charter Medical-Orange County, Inc. General Charter Medical proposes to construct a 50 bed free standing short term psychiatric hospital in Orange County, Florida. The capital cost of the proposed project would $5,85,000. C.M. Ex. 1. Charter Medical would offer adult and geriatric short term psychiatric services in the proposed short term beds. As a free standing specialty hospital devoted entirely to short term psychiatric care, Charter Medical's proposal should be able to provide more space and additional therapies than would typically be found at a general hospital with a short term psychiatric unit. T. 47-50, 890-91. Charter Medical would provide adequate geriatric short term psychiatric care in a separate unit with separate programs consisting of the latest techniques for caring for the mentally ill elderly patient. Charter Medical's proposed facility would not be able to treat short term psychiatric patients who also have serious medical problems, which undoubtedly will include elderly patients. Charter Medical would have adequate transfer arrangements with a general hospital to serve the medical needs of its patients, and would have adequate staffing and equipment within the free standing specialty hospital to meet the routine and emergency medical needs of its patients. Staffing Orlando General and Charter Medical would be able to recruit, train, and retain adequate staff to operate its proposed short term psychiatric unit. T. 635-648, 849-852, T. 137-143. Lone Term Financial Feasibility Orlando General Hospital Charges When these applications were filed, HRS did not have standards for the contents of a pro forma of income and expenses. Orlando General Hospital initially projected a charge rate of $350 in 1987 and $375 in 1988. This charge rate was based upon the charge rate for Orlando General's substance abuse unit at that time, compared with a survey of five other hospitals having short term psychiatric beds. T. 425; O.G. Ex. 2, p. 24, 49. As of the summer of 1988, the Medicaid program reimbursed Orlando General Hospital for its MDC 19 (psychiatric) patients at the rate of $418 per day. T. 585. Charter Medical proposes to charge $475 per day during 1988. Florida Hospital currently charges between $425 and $445 per short term psychiatric patient day, and these charges do not include ancillary charges. T. 992. Westlake Hospital currently charges about $550 per short term psychiatric patient day. T. 888. Winter Park Pavilion is a freestanding psychiatric hospital with 39 adult psychiatric beds. The record does not indicate whether it is licensed for short or long term care. The facility charges about $500 per patient day, which does not include ancillary costs. T. 913, 918. Crossroads University Behavioral Center is a freestanding 100 bed long term psychiatric hospital that is under construction. T. 808. Crossroads has considered charges in the range of $500 to $600 per day, but has not definitely settled on the rate. T. 832-833. The charges proposed by Orlando General Hospital in its application are very reasonable, if not very conservative. Projected Utilization Orlando General Hospital's MDC 19 patient days (psychiatric patient days) have increased steadily from 1986. In 1986, the hospital had 4,969 MDC 19 patient days; in 1987, it had 7,779 MDC 19 patient days; and extrapolating (multiplying by 4) from the data for the first three months of 196, Orlando General could reasonably expect 11,804 MDC 19 patient days in 1988. O.G. Ex. 2, p. 11; T. 516. Since a 24 bed unit at 100 percent occupancy would only generate 8,760 patient days, it is unreasonable to use 11,804 as the estimate of patient days in 1988. However, it is concluded that Orlando General Hospital would have no difficulty at all in very quickly filling its proposed 24 bed unit to capacity. Expenses Orlando General Hospital's application estimated that direct expenses of the proposed 24 bed short term psychiatric unit would be $801,505 in 1987, $839,080. In 1988, and $887,030 in 1989. O.G. Ex. 2. These are reasonable projections of direct expenses. The pro forma filed by Orlando General Hospital in its application did not include an estimate of allocated expenses. The allocated expenses would typically have been 60 percent of total expenses, and the direct expenses only 40 percent of total expenses. T. 698. The projected direct expenses for 1988 in Orlando General Hospital's application were $839,080. Since that is only 40 percent of the total expense, the total projected expense (including 60 percent for indirect allocated expense) would be $2,097,700. Long Term Financial Feasibility If Orlando General Hospital charged $375 per patient day in 1988, and had 8,760 patient days, as is reasonable to expect, given its actual experience, Orlando General would have $3,285,000 in gross revenue for 1988. Assuming that net revenue, after additions and after accounting for contractuals and bad debt, will be the same percentage of gross revenue as shown in Orlando General's application, which was 76.74 percent, this would generate a net revenue of $2,520,909. This net revenue would entirely cover not only the direct expenses but also the allocated expenses, and would leave profit of $423,209. All of the remaining issues raised by the parties as to the accuracy of Orlando General's estimates of nursing expense or bad debt are irrelevant given the large amount of leeway Orlando General would have, if necessary, to raise its charges from $375 to something closer to the charges of other area hospitals. In summary, Orlando General Hospital's proposal is financially feasible in the long term. Charter Medical-Orange County, Inc. Charter Medical's proposed charges include charges for physicians who admit patients, perform histories and physicals, and make daily medical rounds. The proposed charges are reasonable. If there were need, Charter Medical's proposal would be financially feasible in the long term. The need for Charter Medical's proposed facility has not been proven by a preponderance of the evidence, however. See the Conclusions of Law herein. While the numerical need rule as applied to Orange County shows a need for 55 beds, in actual practice that need is a need for osteopathic psychiatric care. The thirty or so patients currently treated on a daily basis at Orlando General Hospital ended up at that hospital, rather than Orlando Regional Medical Center or Florida Hospital, primarily because the patients preferred osteopathic care and were admitted to Orlando General Hospital by osteopathic physicians. Absent action by HRS to stop Orlando General Hospital from treating these patients, the patients would not be available to Charter Medical in its proposed facility. This would leave Charter Medical in a situation of opening a new 50 bed facility when the county occupancy rate in 1986 was 60 percent in the only two licensed facilities in the area. It would also leave Charter Medical in a situation of opening a new facility in the face of the trend to managed health care and the certainty that the average length of stay for short term psychiatric care by 1992 will decrease from current levels. For these reasons, Charter Medical has not proven financially feasibility in the long term by a preponderance of the evidence. Quality of Care Orlando General Hospital Orlando General Hospital would provide care of good quality comparable to care that would be provided by Charter Medical. Charter Medical-Orange County, Inc. Charter Medical Corporation is a large corporation that has experience in the operation of a large number of psychiatric hospitals. That expertise would be available to insure that the care provided in Orange County would be of good quality. Charter Medical-Orange County, Inc., would provide care of good quality comparable to care that would be provided by Orlando General. Comparative Review as to Important Differences The Orlando General Hospital Application Orlando General Hospital intends to convert 24 underutilized medical and surgical beds to 24 short term psychiatric beds. T. 517. Since the project calls for conversion of existing facilities, the capital cost is $700,000, and does not include the construction of new buildings. T. 517. Since the capital cost is relatively low, the project will not drain away a large amount of reimbursement from reimbursement funding sources, thus making those funds available to other health care facilities. T. 1223. As a licensed general hospital, Orlando General Hospital's patients including the patients that would be served by the proposed short term psychiatric unit, would be eligible for Medicaid reimbursement T. 1224. Orlando General Hospital has a good record in Orange County of serving indigent patients, and currently is providing care to a large portion of the indigents cared for by Orange County. T. 1099-1100. As discussed in the section concerning osteopathic care, Orlando General Hospital's proposal for a short term psychiatric unit would have a number of benefits to the practice of osteopathic medicine in the region, and the availability of osteopathic care to patients desiring that form of care. Patients in the short term psychiatric unit at Orlando General Hospital could be transferred to a medical bed when a medical need arises without having to be transported by an ambulance. The Charter Medical Application Charter Medical-Orange County, Inc., is a wholly owned subsidiary of Charter Medical Corporation. Charter Medical Corporation has been in existence for 20 years and has 81 hospitals. Of these, 68 are psychiatric or substance abuse facilities. Charter Medical thus has extensive resources and experience to provide very good psychiatric care at the proposed facility. As a free standing hospital dedicated solely to short term psychiatric care, it is reasonable to expect that Charter Medical's facility will tend to provide more space, more varied programs, and more intensive patient care than a general hospital. This would occur because in a general hospital, the psychiatric unit must compete with medical units for allocation of resources, and in some hospitals, the psychiatric unit is given a lower priority due to the tendency of such hospitals to emphasize the medical aspect of their services. T. 47-49. Charter Medical's facility would not treat Medicaid patients, and it proposes to serve a very small percentage of indigent patients. Charter proposes in future years after the second year to provide 1.5 percent of gross revenue as charity care, and 5 percent as bad debt. T. 377-79, 197. Charter Medical's facility would serve primarily private pay and insured patients, thus draining away these paying patients from other hospitals, to the detriment of other hospitals. T. 971. The Substantial Interest of Florida Hospital If a certificate of need were granted to Charter Medical, Florida Hospital would suffer an adverse impact by loss of patients and additional competition for staff. T. 971-972, 1318-1321, 1327.
Recommendation For these reasons, it is recommended in case number 87-4748 that a final order be entered denying the application of Charter Medical-Orange County, Inc., to construct and operate a new 50 bed short term psychiatric hospital, and in case number 87-4753 that a final order be entered granting the application of Orlando General Hospital to convert 24 medical-surgical beds to short term psychiatric beds. DONE and ENTERED this 28th day of November, 1988, in Tallahassee, Florida. WILLIAM C. SHERRILL, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of November, 1988. APPENDIX 1 TO RECOMMENDED ORDER, CASE NOS. 87-4748 and 87-4753 The following are rulings upon proposed findings of fact which have either been rejected or which have been adopted by reference. The numbers used are the numbers used by the parties. Statements of fact in this appendix or proposed findings of fact adopted by reference in this appendix are additional findings of fact. Findings of fact proposed by Charter Medical: 3-5. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The need is for beds in either a specialty or a general hospital. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The operational use of the beds is not relevant to the occupancy rate. Had the beds been restricted as a matter of licensure to children, like Palm Bay or Laurel Oaks, the beds would not have been potentially available for adults. Only in that case would exclusion of these beds have been proper. The operational use of the beds is not relevant to the occupancy rate. The testimony regarding the use of the word "existing" in the health planning field has been rejected as not persuasive. The context of such use was not explained, and thus a finding cannot be made that the use of the word is properly applicable to the way HRS intends the word to be used in its occupancy rule. The equation of "existing" with "operational" confuses capacity and need as discussed elsewhere in this recommended order. The HRS interpretation is the most reasonable construction of the word, and leads to a meaning far more consistent with the purposes of the certificate of need regulatory law than does the equation of "existing" with merely being operational. The certificate of need law is aimed at determining need five years into the future. How a hospital may temporarily operate its licensed beds during that period to respond to fluctuations in demand and operational idiosyncrasies at the particular hospital is irrelevant to the question of whether HRS should grant certificates of need and additional licensed capacity within the District. Dr. Luke's calculation was conservative and correct, but a better calculation is the one by Orlando General's expert (78 percent) that uses MDC 19 patient days. The only relevant count is 105 licensed beds at the two facilities. The last sentence is rejected for lack of credible evidence from which to draw that inference, as explained elsewhere in this recommended order. 20-21. The only relevant count is licensed beds. 22. Orlando General's average daily census was 13.6 based upon 4,969 MDC 19 patient days in 1986. 23-24. The only relevant count is licensed beds. 28. These are matters of law, and thus not appropriate as proposed findings of fact. 30. It is true that the health care needs of the metropolitan Orlando impact counties adjacent to Orange County due to the sprawl of that urban area across several county lines. But there is sufficient expert evidence in this record to conclude that generally speaking, the local health council has not acted arbitrarily and capriciously in its choices of counties as health planning areas for purposes of allocation of bed need and for purposes of applying occupancy rates. Nonetheless, the that the urban extent of the metropolitan Orlando area is important has been accepted in this recommended order with respect to the conclusion that the factor that the Orange County occupancy rate is only slightly below 75 percent is entitled to less weight in this case. 32, 33, 35, 37-63. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 64 (first sentence). It is realistically expected that Charter Medical will devote 1.5 percent of its gross patient revenue to barity care. T. 377- 379. 65-70. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 71-72. Financial feasibility has not been shown due to lack of need. Lack of need will result in insufficient occupancy and revenue. 73-74. The extrapolation from the actual trend of increase in patient days in District VII for the years 1983-1987 to create a projection of patient days in 1988 through 1992 would have been a valid and important way to show need, and would have been accepted had the projection accounted for the trend in the industry toward shorter lengths of stay due to changes in methods of payments for mental health care. The extrapolation simply assumes that the past will continue. In this case, there is substantial reason to believe that the past will not continue, that the base data, 1983-1987, is not valid for predicting patient days in 1992 because the patient days in 1992 will largely be paid for under a new system, a system that discourages inpatient stays beyond that which is absolutely necessary from a clinical point of view. Charter Medical projects that it will rely upon insurance for payment 67 percent of the time, so the changes in insurance payments will substantially affect patient days in 1992 at its proposed facility. 75-85. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 89. While osteopathic psychiatric care is essentially the same as allopathic psychiatric care, there are two critical differences. Osteopathic medicine in general emphasizes consideration of the functioning of the body as a whole; allopathic medicine does not. Secondly, osteopathic medicine utilizes muscular and skeletal manipulation in treatment, including psychiatric treatment, and allopathic medicine does not. These two differences are sufficiently marked for patients to have a preference for one or the other approach. 91-92. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 93-94. These proposed findings are true and are adopted by reference, but the findings do not prove that the quality of care at Orlando General Hospital would not be adequate in 1992. It was apparent that Dr. Greene's heavy caseload was not an optimum circumstance. However, at the time of the , Orlando General had four staff psychiatrists. T. 1355. Dr. Greene testified that the care was "basically" the same, but his testimony clearly reflected his opinion that the "deeper" differences were significant. T. 756, 1350-1354. The record cited does not support a finding that the majority of the patients transferred were indigent. That question was not asked. This proposed finding places the cart before the horse. Osteopathic physicians gravitate to Orlando General Hospital to practice osteopathy. In the practice of osteopathy, they achieve many job satisfactions, including care of patients and making money. 98-99. These proposed findings of fact are irrelevant because based upon the past, not upon a future having more staff psychiatrists. Moreover, it is clinically acceptable for other professionals to provide therapy and counseling. These proposed findings of fact are irrelevant. The program description in the application was superseded by evidence during the formal administrative hearing. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. Orlando General Hospital is an existing hospital that already has these functions. It may need some augmentation of staff in these areas, but if it does, it would be an unreasonable conclusion to make that it would fail to add such 103-106. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The only exception is the last sentence in proposed finding 106. The number 18 is not supported by the record cited. This method has not been shown to be unreasonable. It is true that it was the method used. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. There was an accounting for bad debt. O.G. Ex. 2, p. 48. The point is essentially irrelevant. A 10 percent increase based upon 1987 salaries would be only about 20,000. Moreover, Charter Medical stipulated in the prehearing stipulation that the salaries of all personnel are reasonable. The proposed finding of fact is true but irrelevant. A pro forma does not have to comport with generally accepted accounting principles. Even with the addition of these charges, the resultant charge is comparable to charges of other area hospitals, including. Charter Medical's proposed charge of $475, which with inflation would increase rapidly to $500. 113-122, 124. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 125-127. Proof that an existing health care program is in sound financial condition is essentially irrelevant to the question of whether that program has a substantial interest sufficient to permit intervention into a section 120.57(1), Fla. Stat., formal proceeding. Proof of competition for the same patients in the same service area is sufficient to show that the existing program will be "substantially affected" to entitle it to intervene. Section 381.709(5)(b), Fla. Stat. (1987). Florida Hospital has proven its substantial interest by showing that the addition of new short term psychiatric beds, particularily a new facility like proposed by Charter Medical, will increase competition in Orange County for patients and staff. T. 881, 883, 649, 855-856. 128-129. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference 130. Mr. Holton's testimony was not only based upon consideration of the data mentioned in this proposed finding of fact, but also his experience in general with managed health care plans and the effect such plans have had upon the market place. The proposed finding that his testimony was not credible is rejected. 131 (first two sentences), 132-133. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. Findings of Fact proposed by Orlando General Hospital: 7-12, 17, 19, 29. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The statement is true only from the perspective of the osteopathic psychiatrist and with respect to osteopathic care. Allopathic physicians disagree. The second sentence is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 34. The second sentence is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 38-49, 51-60. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The proposition that separate geriatric units offer no benefits to geriatric patients is contrary to the preponderance of the evidence. The proposition that there is no problem in mixing the elderly with younger patients, or that an elderly patient does much better in a mixed population, is contrary to the preponderance of the evidence. The second and third sentences are contrary to the preponderance of the evidence. 67-71, 73-80. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 86-87. While these proposed findings of fact are true, they are only marginally relevant since the ratio is measured as of 1992, not 1988. These are matters of law, and thus not appropriate as proposed findings of fact. It is unclear when Dr. Greene meant when he testified that his census was 35 to 40 patients. For the first 90 days of 1988, the hospital had 2,951 MDC 19 patient days, or 32.8 patients per day. The analysis with respect to "existing" beds and the county analysis have been rejected as explained in this recommended order. The last sentence is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 97-102. The legal argument that beds temporarily not in operation are not "existing" has been rejected as explained in this recommended order. Thus, these findings are not relevant. 105, 107 (last sentence). These are matters of law, and thus not appropriate as proposed findings of fact. 109. The second sentence is rejected as a finding of fact because the health planning context was not adequately explained. 110-111. These are matters of law, and thus not appropriate as proposed findings of fact. 114-115. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 117. These are matters of law, and thus not appropriate as proposed findings of fact. 118-120. These proposed findings of fact are irrelevant. 122. These are matters of law, and thus not appropriate as proposed findings of fact. 123, 124, 126, 127, 129-131, 133. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The proposed finding of fact is true, but has not been shown to impact the financial feasibility of the Charter Medical proposal. The indirect costs within a single hospital are more relevant to long term financial feasibility of the proposed project than the indirect costs to a single hospital from a parent corporation that has over 60 such hospitals. 136, 147, 151, 152. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The patient body count for the first three months of 1988 was 32.8. O.G. Ex. 2, p. 11. The "consciousness" of a corporation is difficult . Orlando General Hospital was well aware that its medical-surgical census was decreasing and its psychiatric population was increasing. It is true that the increase of its psychiatric population was largely due to causes outside the control of the hospital, however, and not due to marketing efforts by the hospital. 161 (last sentence), 162. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. These are matters of law, and thus not appropriate as proposed findings of fact. This proposed finding of fact is only marginally relevant because the result could be an average caused a minority of states who do things differently. Moreover, there Is no evidence that Florida is like this. The third sentence is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 167. The statement is true only if HRS allows Orlando General Hospital to continue to serve this large number of psychiatric patients without having a certificate of need. If the practice were discontinued, some of the patients would be served by other hospitals in the District, including Florida Hospital. These are matters of law, and thus not appropriate as proposed findings of fact. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 174, 176. These are matters of law, and thus not appropriate as proposed findings of fact. 177. The current state of access to short term psychiatric services in eastern Orange County was not credibly proven. 179. These are matters of law, and thus not appropriate as proposed findings of fact. Findings of fact proposed by HRS: 1, 2, 3, 4. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 5, 6. These are matters of law, and thus not appropriate as proposed findings of fact. 13. The number should be 64, not 63. 22. The occupancy rate is a mathematical attempt to measure the degree to which the District VII capacity to serve adult short term psychiatric patients has been used up. The theory implicit in the rule is that, with respect to adult capacity, the decision to add new capacity should be delayed until the old capacity is at least 75 percent or more used up. The rate has a numerator (patient days) and a denominator (the real capacity). Any argument that tries to ignore real patient days occurring in the District, or real capacity to serve those patients, is unreasonable. Findings of fact proposed by Florida Hospital: The second sentence is true, but the issue is not she license of the beds is, but what type of patient day is generated by that service. The preponderance of the evidence is that those were short term psychiatric patient days. The first sentence is rejected for the reasons stated above. 19-21. These are matters of law, and thus not appropriate as proposed findings of fact. 20-27. F.H. Ex. 3 was excluded from evidence, and the testimony related to that exhibit was also excluded from evidence for the reasons stated elsewhere in this recommended order. 28. This proposed finding fails to consider the MDC 19 evidence of patient days at Florida Hospital and Orlando Regional Medical Center. 29-30. These proposed findings of fact are true, and the reasoning therein is part of the reason why the denominator of the fraction that is the occupancy rate must be licensed beds. 31. A correction to the number of patient days at Westlake Hospital is legally appropriate, but the evidence for such a correction has been excluded from the record for reasons having nothing to do with the legal propriety of such a correction. 33. These are matters of law, and thus not appropriate as proposed findings of fact. 34-39. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The fact that existing facilities may have beds available to treat future patients is not inconsistent with a decision to grant a certificate of need for additional licensed beds. The occupancy rate threshold in the rule is 75 percent occupancy, not 100 percent occupancy. It is to be expected that the District will have 25 percent or less of its beds unoccupied when new beds are approved. 41, 43-44, 46-47. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. This proposed finding of fact is contrary to the credible evidence. These proposed findings of fact are irrelevant. See section 381.705(1)(g) and (h), Fla. Stat. (1987). This proposed finding of fact is contrary to the credible evidence. This proposed finding of fact is contrary to the credible evidence. To the contrary, where need exists, these are grounds for determining which of the competing applicants should be approved. 60. A conclusion that the occupancy rates are "stable" cannot be made from data based only upon calendar year 1986, which was two years ago, and six years from 1992, the time when need is projected. 61-69. These findings of fact are true. Even where there is need, the opening of the new facility normally lures some patients away from existing facilities. But if need exists sufficient to grant a certificate of need, this short term harm to existing providers is irrelevant. Finally, health care costs would not increase if there is need. While it is true that the Charter Medical utilization projections were initially prepared without a close analysis of District VII, the projections are nonetheless reasonable as discussed elsewhere in this recommenced order. Inflation of expenses without projection of inflation in revenues is an incomplete and unreasonable mode of projection. T. 229-230. Given the size of the Charter Medical Corporation and the number of hospitals it owns and operates, the condition of one more hospital will not Increase home office expenses. Those expenses will exist whether this project exists or not. The financial feasibility of the project in Orlando, therefor, need not consider home office expenses. T. 242-244. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The quantitative relevancy of this proposed finding of fact has not been shown. The proposed finding of fact is otherwise true. Orlando General Hospital's current patient census is a sufficient basis for a finding that its projected occupancy rate is reasonable. Charges proposed in an application for a certificate of need are not promises binding upon the applicant. In future years, the applicant is reasonably expected to make substantial changes in its charge structure based upon market conditions. Proposed charges, as well as proposed changes to charges to meet altered contingencies beyond the control of the applicant, is entirely appropriate for analysis in a certificate of need case. The only relevant question is whether the altered charge compares favorably with competing applicants. 81-83. Florida Hospital proved that the market for staff is competitive and that hiring staff is difficult at the moment. But it did not prove that the applicants would fail to hire adequate staff to operate their proposed facilities. T. 1327. 92-102. These proposed findings of fact summarize proposed findings of fact which have previously been addressed. APPENDIX 2 TO RECOMMENDED ORDER, CASE NOS. 87-4748 and 87-4753 Rule 10-5.008(3), Fla. Admin. Code, provides that "[s]ubsequent to an application being deemed complete by the Office of Health Planning and Development, no further information or amendment will be accepted by the Department." (E.S.) The rule states that the Department will accept no information after the application is deemed complete. The words used are not ambiguous or unclear. Thus, if normal rules of construction were to be followed, the conclusion would be drawn $ha the Department is bound by its own clear rule, and cannot, by interpretation, add exceptions. But an equally valid rule of construction is that absurd results must be avoided. Certificate of need cases, particular ones like the case at bar, are highly competitive and complicated. It would be unreasonable to require the applicants to prove applications that have become erroneous due to the passage of time. While the question is a close one, the Hearing Officer has concluded that it would be better to ignore the clear words of the rule, and attempt to apply the evolving interpretative policy of the Department to avoid an absurd result. The following appear to be the existing final orders of the Department interpreting rule 10-5.008(3), and its predecessor, published in the Florida Administrative Law Reports. Health Care and Retirement Corporation of America, d/b/a Heartland of Palm Beach, 8 F.A.L.R. 4650 (September 24, 1986); Arbor Health Care Company, Inc., d/b/a Martin Health Center, Inc., v. Department of Health and Rehabilitative Services et al., 9 F.A.L.R. 709 (October 13, 1986); Mease Hospital and Clinic v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 159 (October 13, 1986); Health Care and Retirement Corporation of America, d/b/a Heartland of Collier County v. Department of Health and Rehabilitative Services, 8 F.A.L.R. 5883 (December 8, 1986); Health Care and Retirement Corporation of America, d/b/a Nursing Center of Highlands County, v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1081 (December, 1986); Manatee Mental Health Center, Inc. d/b/a Manatee Crisis Center v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 1430 (February 2, 1987); Health Care and Retirement Corporation of America, d/b/a Heartland of Hillsborouh, v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1630 (February 5, 1987); Manor Care, Inc. v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1628 (March 2, 1987); Psychiatric Institutes of America, Inc., d/b/a Psychiatric Institute of Orlando v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 1626a (March 5, 1987) ; Manor Care, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2139 (March 24, 1987); Wuesthoff Health Services, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2110 (April 17, 1987); Hialeah Hospital, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2363 (May 1, 1987); Palms Residential Treatment Center, Inc., d/b/a Manatee Palms Residential Treatment Center v. Department of Health and Rehabilitative Services, et al., 10 F.A.L.R. 1425 (February 15, 1988). These final orders contain the following statements concerning the Department's interpretation of rule 10-5.008(3) and its evolving policy with respect to changes to applications for certificates of need during section proceedings and admissibility of new information not contained in the original applications: Health Care and Retirement, supra, 8 F.A.L.R. 1081: During 120.57 proceedings, an application may be updated to address facts extrinsic to the application such as interest rates, inflation of construction costs, current occupancies, compliance with new state or local health plans, and changes in bed or service inventories. An applicant is not allowed to update by adding additional services, beds, construction, or other concepts not initially reviewed by HRS. Manatee Mental Health Center, supra, 9 F.A.L.R. at 1431: ... HRS has authority by statute to issue a CON for an identifiable portion of . Section 381.4C4(8), Florida Statutes. MMHC's "amended" proposal reduced the number of beds sought, and was properly considered during the 120.57 proceedings. Manor Care. Inc., supra, 9 F.A.L.R. at 1628: The amended applications [amended to address needs of Alzheimer's disease patients] changed the scope and character of the proposed facilities and services and thus, must be reviewed initially at HRS... [ limited the denovo concept by requiring that evidence of changed circumstances be considered only if relevant to the application. Hialeah Hospital, Inc., 9 F.A.L.R. at 2366: It is recognized that more than a year may pass between the free form decision by HRS and the final 120.57 hearing and this passage of time may require updating an application by evidence of changed circumstances such as the' effect of inflation on interest and construction costs. For the sake of clarity HRS would avoid the use of the word "amendment" to describe such updating. Such evidence of changed circumstances beyond the control of the applicant is relevant to the original application and is admissible at the 120.57 hearing. Taking the easiest first, those items explicitly listed by the Department in the first Health Care and Retirement case, "interest rates, inflation of construction costs, current occupancies, compliance with new state or local health plans, and changes in bed or service inventories," which change after the application is initially filed, are permitted. Not permitted are "additional services, beds, construction, or other concepts not initially reviewed by HRS." The remainder of the Department's incipient policy, as presently articulated, is obscure. The word "extrinsic" without the list of examples is of little guidance. The application is only an idea on paper. Anything new, other than the bare words on the paper as originally filed, is literally "extrinsic" thereto. The concept of whether the new information changes the "scope and character of the facilities and services" originally reviewed in free form action by the Department is similarly of little guidance because the phrase "scope and character" can mean practically anything. Of fundamental difficulty is whether this phrase is intended to select substantial changes to the original application, or all changes. For example, if the original application proposes separate shower stalls and tubs for double rooms, but the amended application proposes a combination shower and tub, has the "scope and character" of the "facilities and services" changed? The phrase "additional services, beds, construction, or other concepts not initially reviewed by HRS" is similarly vague. What is a service or construction or a concept not originally reviewed? Would this include the change in bathing equipment discussed above? The concept of "control" of the applicant over the information that goes into the original application is the only phrase that gives applicants any guidance. The word "control" probably is intended as a "knew or reasonably should have "known" standard. If the applicant reasonably should have known about the information and should have provided the Department with the information as a part of its original application, then the new information cannot be considered during the formal administrative hearing. The Hearing Officer will be guided, thus, by the explicit list of items provided by the Department in the Health Care and Retirement case, and by the concept of "control" provided by the Hialeah case. COPIES FURNISHED: For Agency HRS Theodore D. Mack. Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive Fort Knox Executive Building Tallahassee, Florida 32308 (904) 488-8673 Charter Medical-Orange County, Inc. Fred W. Baggett, Esquire Stephen A. Ecenia, Esquire Roberts, Baggett, LaFace & Richard 101 East College Avenue Post Office Drawer 1838 Tallahassee, Florida 32301 (904) 222-6891 William D. Hoffman, Jr., Esquire Deborah J. Winegard, Esquire King & Spalding 2500 Trust Company Tower Atlanta, GA 30303 (404) 572-4600 Orlando Regional Medical Center, Inc. Steven R. Bechtel, Esquire Mateer, Harbert & Bates, P. A. 100 East Robinson Street Post Office Box 2854 Orlando, Florida 32802 (305) 425-9044 Orlando General Hospital, Inc. Eric J. Haugdahl, Esquire 1363 East Lafayette Street Suite C Tallahassee, Florida 32301 (904) 878-0215 Florida Hospital Stephen K. Boone, Esquire Robert P. Mudge, Esquire Boone, Boone, Klingbeil & Boone, P. A. 1001 Avenida del Circo Post Office Box 1596 Venice, Florida 34284 (813) 488-6716 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
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 HRS stipulated that the challenging parties, petitioners and intervenor, are substantially affected by, and so have standing to challenge, the memoranda in question. According to the pleadings, the challengers are existing providers of surgical services faced with the prospect of increased competition from competitors likely to receive certificates of need for ambulatory surgical centers under the HRS policy articulated in the challenged memoranda. On June 6, 1985, Robert Maryanski, administrator of HRS' Office of Community Medical Facilities, "issued to staff regarding the review of ambulatory surgical [c]ertificate of [n]eed applications," (T. 71) including applications for certificates of need for limited or specialty ambulatory surgical centers, Deposition of Marta Hardy, p. 23, the following: PDCF POLICY MEMORANDUM #7 JUNE 6, 1985 SUBJECT: Policy on CON review of ambulatory surgical center proposals TO: PDCF (Liz Dudek) PDCF (Paul Reilly) PDCF (Wayne McDaniel) PDCF (Joe Mitchell) The following policies will be employed by this office in the review of ambulatory surgical center CON applications: Based upon a review of available literature and outpatient surgical information obtained from the American Hospital Association Survey, a 30 percent factor will be used as the optimum number of surgeries to be performed on an outpatient basis. In all instances, the potential for outpatient surgeries will be determined at a county level. "Specialty" ambulatory surgical center (e.g., opthalmic) will not be given special consideration. The break even level of operations approach is considered adequate to assess the potential for such facilities. In those instances when the outpatient surgical potential in a county is calculated to be slightly below the applicant's projected break even level of operation and there is no existing and/or approved ambulatory surgical center in the county-consideration will be given to approving the application, assuring all other appropriate criteria are satisfied, to foster competition for outpatient surgery as an alternative to more costly inpatient surgery. Proposals which include a captive population (e.g., health maintenance organization) will be given additional consideration as required by appropriate statutory criteria (e.g., Chapter 381.494(6)(c), Florida Statutes.) If "pre-existing clinics, which have been performing surgical procedures similar to those approval of the project, after assuring that all other appropriate criteria are satisfied. An architectural review will be conducted to verify that the existing facility meets, or will be capable of meeting, licensure requirements. In those instances, in which a hospital makes application for outpatient surgical capabilities or an increase in its existing outpatient surgery capability via the establishment or expansion of operating rooms dedicated to outpatient surgery, the hospital's current level of outpatient surgical procedures will be subtracted from the total hospitals' outpatient surgical procedures. The hospitals' outpatient surgical rate (minus the applicant hospital) will be computed separately from the applicant's outpatient surgical rate. The county's projected population will be used to project hospitals' (minus the applicant hospital) outpatient volume, as well as existing ambulatory surgical facilities' volume. These figures will be subtracted from the total outpatient surgical "pool" projection. The 2nd year break even point number of procedures for approved ambulatory surgical facilities (which either are not in operation or have not operated a full year), is next subtracted from the total "pool." At this point, the projected number of outpatient procedures which would be performed at the applicant hospital, is compared to the remainder from the previous calculations. Should the projected outpatient level equal or exceed the calculated break even level of operation, consideration will be given to approving the application, assuring all other appropriate criteria are satisfied. In the case of hospital ambulatory Surgical projects which do not involve additional operating rooms dedicated to outpatient surgery, the above ambulatory surgery methodology will not be used. Licensed and existing ambulatory surgical centers which have been operational one year or more, will be surveyed to determine the number of procedures performed over one year. These procedures will be applied to the projected population and deducted from the total outpatient potential as described above. In the case of those approved but unlicensed ambulatory surgery methodology will not be used. Licensed and existing ambulatory surgical centers which have been operational one year or more, will be surveyed to determine the number of procedures performed over one year. These procedures will be applied to the projected population and deducted from the total outpatient potential as described above. In the case of those approved but unlicensed ambulatory surgical centers, the previously calculated break even level of operation will be deducted from the total outpatient potential. In all instances, the projected year of operation will be based on the time required for construction, if appropriate, as reflected in the application plus two years from the date of this office's review. "Procedures" include all diagnostic procedures (e.g., endoscopic and cystoscopic), as well as all other invasive procedures regularly construed of as surgeries. If you have any questions regarding this policy, please contact me upon receipt. This policy is effective on June 15, 1985. Petitioner's Exhibit A The June memorandum stated policy substantially similar to a memorandum authored by Mr. Maryanski's predecessor on February 21, 1985, which contained at least some of the elements of the policy that HRS applied earlier than October 9, 1983, Deposition of Nelson, p. 5, and even as early as December of 1982, Deposition of Porter, p. 11, and which reads: TO: PDCF STAFF SUBJECT: UPDATED POLICY ON CON REVIEW OF AMBULATORY SURGERY PROPOSALS At a meeting with Doug Mannheimer, members of PDCFR, and myself on February 14, the following guidelines for reviewing CON proposals for ambulatory surgery were agreed upon: Effective immediately, we will use 30 percent as the optimum number of surgeries to be performed on an outpatient basis as opposed to 29 percent. health maintenance organizations. The issue of how to deal with "pre-existing" unlicensed ambulatory surgery providers was also discussed. It was decided that if an applicant can demonstrate that it has been providing ambulatory surgical services historically in a facility which meets, or for a minor capital expenditure could meet, licensing requirements and that the provision of such services has been done profitably, this type of applicant should receive special consideration in CON reviews. However, in such cases, it will be necessary for the CON architect to verify that the existing facility meets, or almost meets, licensure requirements, and for the CON accountant to verify that the operation has historically been profitable. Data base issues were discussed. PDCFR was informed of the decision to remove the ambulatory surgery data collection burden from Nell Mitchem. The possibility of having PDCH and/or the local health councils collect such information on a semi-annual basis was discussed and will be explored further by Tom Porter. The method of counting procedures of existing ambulatory surgery centers was considered. The pros and cons of utilizing the center's break even point as described in its CON application versus its actual use was debated. It was decided that existing ambulatory surgery centers which have been in business one year or more will be surveyed to determine their actual use. In the case of those existing centers in business less than one year, the break even point will be used. The issue of counting dedicated hospital-based ambulatory surgery facilities was discussed. It was decided that in instances where a hospital applies for ambulatory surgical capabilities or an increase in that capability via the establishment or expansion of operating rooms solely dedicated to outpatient surgery, the hospital's current provision of outpatient surgery will be subtracted from the total of outpatient surgeries performed and then converted to an institution-specific rate and applied to projected population to determine the need. In the case of hospital ambulatory surgery projects not involving additional operating rooms or solely dedicated outpatient operating rooms, the ambulatory surgery methodology will not be employed. In these instances, the review will be primarily architectural. The definition of "procedures" was considered. It was determined that procedures should include all diagnostic procedures (e.g., endoscopic and cystoscopic), as well as all procedures regularly thought of as surgeries. establishment or expansion of operating rooms solely dedicated to outpatient surgery, the hospital's current provision of outpatient surgery will be subtracted from the total of outpatient surgeries performed and then converted to an institution-specific rate and applied to projected population to determine the need. In the case of hospital ambulatory surgery projects not involving additional operating rooms or solely dedicated outpatient operating rooms, the ambulatory surgery methodology will not be employed. In these instances, the review will be primarily architectural. The definition of "procedures" was considered. It was determined that procedures should include all diagnostic procedures (e.g., endoscopic and cystoscopic), as well as all procedures regularly thought of as surgeries. The method of computing the break even point was discussed. Tom Porter will work with Joe Mitchell to come up with an improved method for doing this. The issue of what year we project need to was discussed. It was decided that in all cases, the projection year would be based on the time shown in the application as required for construction and licensing of the facility plus two years from the date of the HRS review or date of administrative hearing, whichever is later. If you have any questions concerning this memorandum, please see me. /s/ Gene W. Eugene Nelson, Administrator COMMUNITY MEDICAL FACILITIES Petitioner's Exhibit B. The June memorandum supersedes the February memorandum but "not totally." Deposition of Marta Hardy, p. 10. The June memorandum made changes regarding the treatment of hospitals' applications. Deposition of Elizabeth Dudek, p. 23. On September 13, 1985, more than two weeks after the petitions had been filed in Cases Nos. 85-2962RX and 85-2963RX, Mr. Maryanski signed the following memorandum: SUBJECT: Policy Memorandums TO: PDCF (Liz Dudek) (Wayne McDaniel) (Paul Reilly) (Joe Mitchell) Policy memorandums are statements of the current policy of the Office of Community Medical Facilities, and the Department of Health and Rehabilitative Services, regarding the subject to which it is addressed. The policy at issue is in a state of development, and should not be considered to have reached a level of general applicability to all cases. This memorandum is not intended to dictate the out-come of action being taken on any given case, but rather represents a momentary picture of this policy as it has developed through cases previously encountered. In order to provide for reasonably consistent actions taken in similar instances in this office, please utilize this policy memorandum as a guideline, subject to change and development on a case basis. Respondent's Exhibit No. 1 At some point staff were told "if there are reasons to deviate [from the policy embodied in the June memorandum] that they should come and discuss those reasons with their supervisor or" (T. 73) Mr. Maryanski. At least some HRS staff adhere to the policy stated in the June memorandum. Deposition of Elizabeth Dudek, p. 28. But the only reasons for deviating from the policy set out in the Maryanski memorandum of June 6, 1985, are the very reasons that would justify deviation from duly promulgated administrative rules. (T. 77) Petitioner's Exhibit A, the June memorandum, has application statewide and is addressed to all applications for certificate of need for ambulatory surgical centers. (T. 77) Without this policy in effect, "the only means [HRS] would have available would be to review am-surg applications according to statutory criteria." (T. 73) HRS has assigned to its Office of Comprehensive Health Planning, not to its Office of Community Medical Facilities (headed by Mr. Maryanski and, before him, by Mr. Nelson), responsibility for promulgating administrative rules. On July 6, 1984, HRS published notice of intent to adopt a rule governing applications for certificates of need for ambulatory surgical centers, at 10 Florida Administrative Weekly No. 27, pp. 2064-2067. Petitioner's Exhibit C. Additional or amended notice was published on March 15, 1985, at 11 Florida Administrative Weekly No. 11. After petitions challenging HRS' proposed rule 10-5.11(30) were filed, HRS abandoned the effort formally to adopt a rule specifying the criteria for granting certificates of need for ambulatory surgical centers, by filing notice of withdrawal with the Department of State on June 20, 1985. On deposition, HRS' Deputy Assistant Secretary for Health Planning testified that the June "memo was issued right after we withdrew the rule." At 6. Although in fact the notice of withdrawal of proposed rule 10-5.11(30) was not filed until after the June 6 memorandum was executed, the decision to withdraw the proposed rule, to judge from this testimony, antedated the memorandum which "in the absence of any kind of methodology, [HRS] decided to issue. . . to provide methodology guidelines to the staff within the office." Deposition of Marta Hardy, p. 6.
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.
