The Issue Whether a certificate of need to construct a 60-bed short-term inpatient psychiatric hospital should be granted to CPC and whether a certificate of need to construct a 24-bed short-term inpatient psychiatric hospital should be granted to Apalachee?
Findings Of Fact Introduction. CPC. Community Psychiatric Centers, Inc., a proprietary corporation, was formed in 1968 by the merger of 2 existing psychiatric hospitals. It now consists of 24 psychiatric hospitals, two of which are located in Florida, and two subsidiary corporations. On December 16, 1983, CPC submitted to the Department an application for a certificate of need to construct and operate a 60-bed inpatient psychiatric hospital. The 60-beds are to consist of 15 beds for adolescents, 20 beds for adults in an open unit, 10 beds for adults in an intensive care unit and 15 beds for geriatric patients. Apalachee. Apalachee is a not-for-profit corporation. It began approximately 30 years ago as a small clinic. It was incorporated as the Leon County Mental Health Clinic in the 1960's and later changed its name to Apalachee Community Mental Health Services, Inc. Apalachee presently serves over 7,000 clients a year, has a $6,500,000.00 budget and 300 employees. It provides services to 8 north Florida counties: Gadsden, Liberty, Franklin, Leon, Wakulla, Madison, Jefferson and Taylor. Apalachee provides specialized continuums of care for substance abuse, children and geriatrics and basic generic services, including a 24-hour, 365 days-a-year emergency telephone and/or face-to-face evaluations. It also provides a full range of case management, day treatment and residential care primarily aimed at the acute and chronically mentally ill and specific programs for children, such as an adolescent day treatment program and an adolescent residential facility. Apalachee's residential programs include a program called Positive Alternatives to Hospitalization (hereinafter referred to as "PATH"). Apalachee also operates an 8-bed non-hospital medical detoxification program in conjunction with PATH. This program is operated in the same building as PATH. It also operates 3 group homes (an adult, an alcohol abuse and an adolescent half-way house) with 10 clients each (these houses will be expanded to 16 clients each), a geriatric residential facility with 60 to 70 beds and cater Oaks, a long-term residential treatment facility for adolescents. On November 15, 1983, Apalachee applied to the Department for a certificate of need for 24 short-term inpatient psychiatric beds. In its application filed during the final hearing of these cases, Apalachee proposed to construct a facility to house the 24-beds adjacent to its current "Eastside" facility. Its Eastside facility currently houses Emergency Services, PATH and its non-hospital medical detoxification programs. All adult mental health programs of Apalachee will also be located on the site in order to consolidate the full continuum of adult psychiatric care provided by Apalachee. Statutory Criteria. The following findings of fact are made as they pertain to the criteria included in Section 381.494(6)(c) and (d), Florida Statutes (1983), and Section 10-5.11(25), F.A.C. The Need for Psychiatric Services Florida State Health Plan and the District 2 Health Plan. General. The Florida State Health Plan is outdated and the District 2 Health Plan does not contain specific goals as to the need for short-term psychiatric care for District 2, the District the facilities would be constructed in. CPC and Apalachee did, however, address both plans, to the extent applicable, in their applications. The relationship of "need" to these plans, as agreed to by the Department, is not relevant to this proceeding, however. CPC also indicated that it evaluated local bed need by studying socioeconomic, population and employment data and by interviewing local practicing psychiatrists. CPC concluded that additional services were needed and filed its application. Although the Florida State Health Plan and the District 2 Health Plan do not address the question of need, need as determined under the Department's rules is crucial. Section 10-5.11(25), F.A.C., provides that a favorable need determination will "not normally" be given on applications for short-term psychiatric care facilities unless bed need exists under paragraph (25)(d). Under Section 10-5.11(25)(d)(3), F.A.C., bed need is to be determined 5 years into the future by subtracting the number of existing and approved beds in the District from the number of beds for the planning year based upon a ratio of .35 beds per 1,000 population projected for the planning year. The population projection is to be based on the latest mid-range projections published by the Bureau of Economic and Business Research at the University of Florida. The Department has projected a need for 185 total short-term psychiatric beds for District 2 for 1989. There are 82 currently licensed and 35 approved short-term psychiatric beds in District 2. Therefore, for 1989 there is a net short-term psychiatric bed need projected of 68 beds. Based upon the projected population of District 2 for 1990 (537, 567), which is 5 years from 1985, the total bed need is 188 beds. The net bed need for 1990 is 71 beds (188 total beds less 117 licensed and approved beds). The Department did not use this figure because the calculation for bed need for 1990 will not be made by the Department until July of 1985. Pursuant to Section 10-17.003, F.A.C., the total projected short-term psychiatric bed need for District 2 is allocated among 2 subdistricts. Subdistrict 2 consist of Franklin, Gadsden, Jefferson, Leon, Liberty, Madison, Taylor and Wakulla Counties. CPC's and Apalachee's proposed facility will be located in Subdistrict 2. Subdistrict 2 is the same area designated by CPC as its "primary" service area. This rule, which is to be "used in conjunction with Rule 10-5.11(25)(c)(d)(e)" allocates the 1988 short-term inpatient psychiatric and substance abuse projected bed need as follows: Subdistrict 1: 75 Subdistrict 2: 104 Total 179 Because the projected bed need for Subdistrict 2 under this rule is based upon 1988 projections, it is clearly in conflict with the requirement of Section 10-5.11(25)(d)(3), F.A.C., that bed need is to be projected 5 years into the future. The total bed need projected for the District for 1988 is 179 beds; for 1990, the total is 188 beds. Based upon the allocation of total bed need in Section 10- 17.003, F.A.C., the net bed need for Subdistrict 2 for 1988 is 44 beds: 104 total beds less 60 licensed and approved beds in Subdistrict 2. If it is assumed that the 9 additional total beds projected for 1990 should be allocated to Subdistrict 2, the net bed need for 1990 in Subdistrict 2 would be 53 beds (100 beds less 50 licensed and approved beds). No evidence was presented, however, to support the assumption that all 9 additional total beds will be allocated to Subdistrict 2. It is more likely that only 1 or 2 additional beds will be allocated to Subdistrict 2. Based upon the foregoing, the total net bed need for District 2 projected to 1990 is 71 beds and for Subdistrict 2 it is between 44 and 53 beds. CPC. CPC attempted at the hearing to show that its proposal is consistent with the bed need for District 2 as determined under Section 10-5.11(25)(d)(3), F.A.C. In the alternative, CPC has attempted to prove that there is a sufficient need in District 2 for additional short-term psychiatric beds based upon other methodologies and the state of psychiatric care currently being provided in Subdistrict 2. Sources of referral to the proposed CPC facility, according to Mr. John Mercer, will include physicians, the judiciary and legal system, the school system, employers and law enforcement. Referrals are inspected by Mr. Mercer based upon his conversations with physicians (Mr. Mercer did not interview persons from the other referral sources) , his personal experience and the fact that there will be a community relations or marketing position at the proposed facility. Local psychiatrists did testify that they would refer patients to CPC if its facility is approved. They did not, however, testify that they would refer all of their patients to CPC. They also testified that the CPC facility is needed. The local psychiatrists did not, however, indicate that they were aware of all of the facts as established during the proceeding. CPC, in its application, projected, based upon conversations with local physicians, that the facility will serve most of the area designated by the Department as District 2. District 2 is subdivided by CPC into a primary service area, consisting of Franklin, Gadsden, Jefferson, Leon, Liberty, Madison, Taylor and Wakulla Counties, and a secondary service area, consisting of Clay, Calhoun, Gulf and Jackson Counties in Florida and several counties located in extreme southwest Georgia. In Mr. Mercer's opinion, the proposed facility will serve persons from southwest Georgia; specifically, Brook, Decatur, Grady, Seminole and Thomas Counties. Mr. Mercer's opinion was based upon the availability of services in Georgia and conversations he had with Tallahassee physicians. Mr. Mercer's opinion, however, has been given little weight in determining the need for additional short-term psychiatric beds in District 2 based upon the testimony of Jay D. Cushman, an expert in health planning and development. Mr. Mercer's opinion that southwest Georgia residents will use the proposed CPC facility implies that there may be a need for additional short-term psychiatric beds. Mr. Mercer, however, failed to consider travel time and barriers to travel, patient origins or the effect, if any, of outmigration--the number of persons in District 2 who may leave the District for treatment outside the District. Although Mr. Mercer's conversations with local physicians are relevant and of some supportive weight, the local physicians' opinions should have been supported with other evidence. They were not. CPC, in its exhibit 3, projected a bed need of 14.67 beds attributable to southwest Georgia. This figure was arrived at by first assuming a bed need in the area of .35 beds per 1,000 population (119,051). This results in a gross bed need in southwest Georgia of 41.67 beds. From the gross number of beds, 27 existing beds were subtracted to arrive at a net bed need in District 2 attributable to southwest Georgia residents of 14.67 beds. No evidence supporting a conclusion that such a bed need exists in District 2 was presented at the hearing other than Mr. Mercer's opinion that the proposed facility will serve residents from southwest Georgia. It is therefore concluded that there is not a need for 14.67 beds in District 2 attributable to southwest Georgia residents. In its application, CPC projected a need for an additional 195 short- term psychiatric inpatient beds for District 2. This figure was based upon an average of bed need projected by using three different bed need methodologies. The three different methods resulted in a projected bed need of 64 beds, 266 beds and 255 beds. Application of the method which resulted in a bed need of 266 was modified during the hearing. The modification resulted in a bed need of 75.8 beds. Therefore, the bed need based upon the average of all 3 methodologies, as amended would be 131.6 beds. The three methods used by CPC in its application are different than the method used by the Department. None of the methods, based upon Mr. Cushman's testimony, are sound; they are structurally unsound, applied in an unsound manner or both. Under Method I, CPC starts with a projected short-term psychiatric bed need of 1988 of 44 beds, the net bed need as determined in Section 10-17.003, F.A.C. This figure is then increased by 9.44 beds for in-migration and 11 beds attributable to an adjustment for "desired occupancy level." As clearly established by Mr. Cushman's testimony, neither of the adjustments are sound. The projected bed need of 64 beds for 1988 pursuant to method I is therefore not a reliable figure. Pursuant to Method II, as modified during the hearing, CPC projected a bed need of 75.8 beds. Method III resulted in a projected net bed need of 255 beds. These projections are based upon a projected average length of stay of 30 days. No evidence was presented to support this projection; in fact, it is unrealistic when compared with the average length of stay of 16 days at similar facilities in Florida. CPC's Florida facilities have also not been able to achieve an average length of stay of 30 days. These formulas are also unrealistic because population figures used were for all of District 2. But existing beds taken into account only included the beds in Subdistrict 2. Finally, occupancy was not taken into account in either of the methods. CPC's Methods II and III are not sound, based upon the foregoing. Apalachee. Apalachee's application is for only 24 inpatient psychiatric beds, which is well below the bed need projected under the Department's methodologies for the District and the Subdistrict. Apalachee has projected that its proposed facilities will serve persons in the 8 counties it currently serves. These counties are the same counties which make up Subdistrict 2. Apalachee has not assumed that any patients will come from outside of the Subdistrict. Apalachee has shown that the patients who will use its facility are clients within its own present system, based upon historical data. This historical data establishes that an average of 10 to 12 Baker Act patients have been admitted to Tallahassee Memorial's psychiatric facility during past years. These persons would be admitted to Apalachee's new facility. Additional patients would consist of Apalachee clients which Tallahassee Memorial's facility will not admit and clients currently going into other Apalachee programs. Accessibility to Underserved Groups. CPC is willing to provide care for Baker Act patients. It has been projected that 5 percent of the proposed facility's patient days will be attributable to Baker Act patients. CPC is also willing to treat Medicaid patients and has again projected that 5 percent of the facility's days will be attributable to Medicaid patients. In addition, CPC has projected that 5 percent of its gross revenue will be set aside for the care of indigent patients which consist of those persons who are unable, at the time of admission, to pay all or a part of the charges attributable to their care. Indigent care may not be provided, however, if the facility is losing money. The provision of indigent care is based upon a CPC policy which was recently agreed upon and applies to new CPC facilities. The policy does not apply at the two existing CPC Florida psychiatric hospitals since they were established before the policy was adopted. Pursuant to the Florida Mental Health Act, Chapter 394, Part II, Florida Statutes, the Department's district administrator designates a facility in the district as the public receiving facility for Baker Act patients. In Subdistrict 2 of District 2, Apalachee has been designated as the public receiving facility. Apalachee is therefore responsible for ensuring that emergency care, temporary detention for diagnosis and evaluation and community inpatient care is available to Baker Act clients. As the public receiving facility in Subdistrict 2, Apalachee will clearly serve Baker Act patients. It has projected that in the first year of operation 40 percent (39.7 percent in the second year) of its patients at the new facility will be indigent and that the indigent patients will be primarily Baker Act patients. Seventy percent of Apalachee's clients are persons who need some type of financial assistance; Medicare, Medicaid and Baker Act. Apalachee has proposed to continue to serve these persons in the new facility. Apalachee's purpose in requesting a certificate of need is to allow Apalachee to provide a continuum of care for more Apalachee clients. In the past, Apalachee has experienced difficulty in obtaining inpatient care for certain Baker Act clients. Additionally, even though those problems have been minimal in the past year, there are some Baker Act clients who need inpatient care who are not appropriate patients for Tallahassee Memorial's psychiatric hospital. These patients are sometimes violent and "acting out." Although Tallahassee Memorial is providing adequate care for most Baker Act patients, some Baker Act patients are not admitted. Additionally, removal of Baker Act patients who are admitted by Tallahassee Memorial from Tallahassee Memorial's facility, as discussed infra, will improve the quality of care at Tallahassee Memorial. The cost of providing inpatient care to Baker Act patients will be less if Apalachee is granted a certificate of need for the requested 24 beds. At present, because of limited Baker Act funds, some Baker Act clients who need inpatient care are placed in other programs. With reduced cost for inpatient care, these clients will be able to receive the inpatient care they need. Additionally, Apalachee will serve forensic clients -- those mental health clients with criminal charges. A full-time forensic psychologist has been provided by Apalachee at the Leon County jail to facilitate this type service. The psychologist also evaluates for Baker Act qualification. According to the Director of the Leon County jail, persons in the jail with psychiatric problems are placed in a single "bull pen." Apalachee's work with forensics has been helpful. Like and Existing Psychiatric Services. The only "like and existing" psychiatric health care services in Subdistrict 2 are provided by Tallahassee Memorial. Tallahassee Memorial is a not-for-profit corporation. It currently owns an existing 60-bed short-term inpatient psychiatric facility located in Subdistrict 2. The facility is operated as a separate department of Tallahassee Memorial. Tallahassee Memorial's psychiatric facility has been continuously operated by or for Tallahassee Memorial since 1979. It was initially known as Goodwood Manor. In 1983, however, the management of the facility was taken over by, and its name was changed to, Behavioral Medical Care (Tallahassee Memorial's facility will be hereinafter referred to as "BMC"). From 1977 to 1979, the facility was owned and operated by Tallahassee Psychiatric Center, Inc., which failed for financial reasons. Prior to 1977 Tallahassee Memorial operated a small psychiatric unit as pert of its hospital. The occupancy rate at BMC for the 12-month period ending September, 1984, was 37 percent. The occupancy rate since 1979 has been consistently low and is low at the present time. There are a number of reasons for the low occupancy rate: a) The physical location and physical plant of BMC. BMC is located in a 2-story building near Tallahassee Memorial. BMC occupies the top floor of the building and a nursing home is located on the first floor. In order to get to BMC, it is necessary to travel through the nursing home. Also, the building is surrounded by a parking lot so there is inadequate outdoor and recreational space around the facility. The facility, which was originally designed as a nursing home, presently consists of one closed unit and one open unit. Patients of all ages and with various problems have to be housed in these 2 units together. Because of the physical plant, patients cannot be separated into adult, adolescent and geriatric units. There also is not enough space for therapy rooms and common areas. b) The reputation of the facility. The reputation in the community of Goodwood Manor has carried over to BMC. The facility is perceived by some as a "crazies place," a place "where violent people go." This reputation is partly attributable to the lack of credibility that psychiatry as a discipline enjoys. It is also partly attributable to the operation of BMC as Goodwood Manor prior to 1982 when Behavioral Medical Care took over management of BMC. c) The type of programs offered. To date, no program has been separately offered and provided or adolescents, children, substance, alcohol and drug abuse patients, or geriatrics. Basically only one structured program has been provided which has been more suited to adult psychotic patients. Closely related to this problem is the fact that BMC has had a poor patient mix. This has been caused in part by the physical plant and in part by the type of patients BMC has had to take in. Some of those patients have been suffering from problems other than psychiatric problems, i.e., persons suffering from DT's, which is a medical disorder, and persons suffering from organic problems which cause behavioral difficulties. d) Marketing. There has been a lack of an effort to market the availability of the facility. e) Training. The programs offered are not as advanced because of the lack of necessary training. f) Practice patterns. Practice patterns of psychiatrists in the community have contributed to the low occupancy. Because there are only a few psychiatrists in the area and the fact that the Tallahassee Memorial facility has primarily been involved in crisis intervention, the average length of stay (6 to 7 days) is much lower than the average length of stay in other parts of the country. This average length of stay has also, however, been caused by the shortage of Baker Act funds. Closely related to this problem is the fact that there are a large number of nonphysicians providing mental health services in Tallahassee who do not admit patients to the hospital and a large number of health maintenance organizations. g) Communication. The low occupancy rate has also been caused, at least in the minds of Drs. Speer, Sebastian and Moore, by the lack of solicitation of their input into the operation of the facility. At least partly because of the problems at BMC, a few patients have been referred to facilities outside of District 2 for care. Tallahassee Memorial has committed itself to eliminating the low occupancy rate at BMC. In 1982, the administration of Tallahassee Memorial felt it had to decide whether it was going to make a commitment to the facility or get out of psychiatric care. It opted for the former. After making the commitment, 2 primary actions were taken. One was to contract for the services of Behavioral Medical Care; the other was to apply for a certificate of need to replace its 60-bed facility with a new one. Behavioral Medical Care is a joint venture formed by 2 corporations, Comprehensive Health Corporation and Voluntary Health Enterprises. Comprehensive Health Corporation is the largest private provider of chemical dependency rehabilitation services in the country. Voluntary Health Enterprises is an affiliate of Voluntary Hospitals of America which services 70 of the nation's largest not-for-profit hospitals, including Tallahassee Memorial. Behavioral Medical Care was formed to provide the highest quality, lowest cost psychiatric and chemical dependency rehabilitation programs possible. Behavioral Medical Care provides consultation services and/or actually carries out programs and is now providing 20 different programs at 16 different facilities. Of these 20 programs, 5 to 8 are psychiatric programs. The first consultation concerning the psychiatric program at Tallahassee Memorial began in the late winter or early spring of 1983. This consultation was provided by Dr. Russell J. Ricci, now chairman of the board and medical director of Behavioral Medical Care. Dr. Ricci reviewed the status of Tallahassee Memorial's program at that time and recommended significant changes be made in 2 phases: one phase to begin immediately and the second to begin after construction of a new psychiatric hospital. Tallahassee Memorial agreed with Dr. Ricci's proposal and contracted with Behavioral Medical Care to carry out the proposal. Behavioral Medical Care began BMC with an orientation period during which time the existing staff was analyzed, new staff members were hired and the entire staff was trained to implement the new program. During this period, admitting physicians were invited to participate in the implementation program. A new inpatient psychiatric program at BMC was then begun. The program was established to achieve the following goals: to restore patients to their optimum mental health; to make patients as comfortable as possible; to maintain the patients' sense of dignity and self worth; to maintain modern and efficient treatment modalities through research and education; to provide maximum freedom of patients to interact with family and community; and to educate the community. The program was established along interdisciplinary lines and is basically an adult program. It includes individual and group therapy, lectures and seminars, social and nursing assessments, physical examination and psychological testing. The ultimate program provided for a patient, however, depends upon the treatment plan prescribed by the attending physician. The program is, however, limited because of the type of patients at BMC and especially because of the physical plant, which consists of only an open unit and a locked unit. Separation of patients for specialized treatment based upon other factors, such as age, is not achievable in the existing facility. The program at BMC is an adequate program but can be improved. The program is, however, intended only as an interim type program. Treatment of geriatrics and adolescents is available but specialized programs for these groups are not available. Dr. Sebastian agreed that since Behavioral Medical Care had begun managing BMC, the programs had improved. Dr. Moore testified that BMC had attempted to change. As part of the interim program, BMC has established more restrictive admission guidelines; not based upon ability to pay but upon clinical needs. Attempts have been made to eliminate psychotics, geriatrics and persons with significant medical problems. These restrictions on admission are designed to limit admission to persons who will benefit from the new program and are consistent with the existing physical plant. The existing staff, established by Behavioral Medical Care, is adequate. Training of the staff began during the orientation period at BMC and continues today. Educational activities have also been directed toward the medical profession in the community in order to gain more credibility for the discipline of psychiatry. Other steps to improve BMC which have been or will soon be taken include the reclassification of BMC as a department of Tallahassee Memorial and the initiation of a crisis intervention and liaison service in the emergency room of Tallahassee Memorial's main hospital. This new service in the emergency room is designed to identify persons being admitted to the hospital with a need for psychiatric services. As a department, BMC conducts formal monthly meetings of physicians at which input into the operation of BMC may be made. Input by psychiatrists is therefore possible at BMC. The second phase of the changes recommended by Dr. Ricci will begin after completion of the second action to be taken by Tallahassee Memorial as part of its commitment to a psychiatric program: the construction of a new 60- bed facility. Tallahassee Memorial filed an application to replace its present facility with a new 64-bed facility. That application was ultimately granted but for only 60 beds. An application to build another facility considered at the same time was denied. As a result of the issuance of the certificate of need to Tallahassee Memorial, construction of a new psychiatric facility has begun and should be completed in the summer of 1985. The total cost of this new facility is $7,225,000.00. This amount, plus the cost of new programs and staff, has been committed by Tallahassee Memorial to BMC. The facility, a two-level structure, is being constructed on a wooded, sloping site next to the present building BMC is located in. Each level will have 30 beds. It will be a state-of-the-art facility and was designed by architects who specialize in the design of psychiatric facilities. The building was designed with input from the medical staff and Behavioral Medical Care. It is being constructed to accommodate separate psychiatric programs and allows flexibility to accommodate changes in the type of programs offered. Once the new facility is completed, BMC will initiate the second phase of Dr. Ricci's proposal. This phase will consist of the implementation of separate specialized psychiatric programs not available at BMC today. Dr. Ricci has recommended the offering of adult, adolescent, geriatric and chemical dependency programs. Tallahassee Memorial has decided to add an adult program, an adolescent program and will probably add a geriatric program. Other programs, such as a chemical dependency program will be considered. The geriatric program will be added if there are a sufficient number of patients in need of such a program admitted to BMC. Based upon the testimony of Dr. Sebastian, there are a sufficient number of patients who need a geriatric program. Assuming that Dr. Sebastian is correct, a geriatric program should be added to BMC. Even if a separate program is not added, geriatric psychiatric services will be available at the new facility. The construction of the new facility will not eliminate all of the problems which have contributed to the low occupancy at BMC. Phase 2 of Dr. Ricci's proposal to Tallahassee Memorial and the other actions which Tallahassee Memorial has indicated they plan to take should, however, eliminate or at least reduce most of the problems. Dr. Sebastian testified that there will not be enough open space around the new facility The new facility will, however, have 2 open court yards, woods on 3 sides of the building and a greenhouse. The reputation of BMC as being a "crazies place" should be improved with the opening of the new facility and the providing of new, more advanced programs. Efforts to educate the medical community will also help. Also, if Apalachee is granted its certificate of need, the elimination of some of the Baker Act patients cared for by BMC who will be cared for by Apalachee should help improve the reputation of BMC. Finally, BMC has already taken some steps to improve its reputation by initiating an interim program, hiring new staff and limiting its admissions. Instituting specialized programs will also help alleviate the low occupancy problem at BMC. The new facility will allow BMC to establish programs which are needed by allowing the separation of patients which could not be accomplished in the existing facility. Again, eliminating some Baker Act patients will help reduce the problems created by the poor patient mix at BMC. Efforts are being made to market BMC's services. Establishing a liaison in Tallahassee Memorial's emergency room, which is planned, should contribute to increasing occupancy. Tallahassee Memorial projected that sizeable numbers of patients in the general hospital need psychiatric services. This program could reach those patients. BMC, however, needs to institute marketing efforts to reach the general public. Formal training of the staff at BMC was started with Behavioral Medical Care's orientation phase and has continued since that time. Not much can be done directly by BMC to improve the practice patterns of psychiatrists in the community. The new facility and improved programs may help. Transfering Baker Act patients to a new facility operated by Apalachee should allow for more economical treatment of those patients and thus allow for longer lengths of stay. Providing specialized programs also should promote longer lengths of stay. Converting BMC to department status and the holding of monthly meetings of admitting physicians has improved the ability of psychiatrists in the community to have a voice in the operation of BMC. Not enough of an effort is being made in this area, however. Three psychiatrists testified about the lack of solicitation of their input. They are obviously dissatisfied. Despite this fact, Dr. Brodsky, the Medical Director of BMC, testified that BMC was working cooperatively with psychiatrists in the community. In the undersigned's opinion, BMC, Tallahassee Memorial and the psychiatrists in the community need to continue to work toward resolving their differences and to work together to improve the occupancy and the psychiatric care provided at BMC. The perceived effect of CPC's proposal and Apalachee's proposal of the various witnesses was mixed. Drs. Speer, Sebastian and Moore all testified that they supported the CPC proposal. Dr. Speer indicated that she supported CPC's proposal over that of Apalachee and that she thought there was a need for CPC. Dr. Speer's opinion was based almost exclusively on a brochure provided to her by CPC. She did not have any familiarity with existing CPC hospitals. She also had only "some familiarity" with Apalachee's programs. The only reason Dr. Speer specifically gave for supporting CPC was the amount of effort CPC had exerted to solicit physician input and the need for cohesiveness among psychiatrists which she felt was promoted by support of the CPC proposal. Dr. Sebastian testified that he supported the CPC proposal because a new hospital would promote competition which would in turn improve the quality of care. Dr. Moore testified that he was familiar with CPC's and Apalachee's proposals and that he supported CPC's. He also stated that the addition of another psychiatric hospital would improve the availability of medical care because of competition. Dr. Moore also testified that a new facility was needed to provide care for the "private segment" which he described as "those people who choose not to go to the local mental health center for treatment, those people who choose to go to psychiatrists for treatment. " Dr. Brodsky testified that the addition of a new facility to the community might improve BMC because of the added competition. Mr. Honaman and Dr. Ricci both agreed that, if CPC's proposal was approved, a new facility could have an adverse impact on BMC which has been operating at a loss of $300,000.00 a year. Dr. Ricci explained that in order to have specialized programs a hospital must have a sufficient number of patients who need the specialized program. Because of the low occupancy rate at BMC, there is concern as to whether a sufficient number of patients will be available to warrant the specialized programs BMC plans to start if the CPC proposal is approved. Apalachee's proposal will not adversely effect BMC. In fact, Mr. Honaman and Ms. Pamela McDowell, both of whom testified on behalf of Tallahassee Memorial, indicated that if Apalachee's facility was approved BMC's ability to provide quality care would be enhanced. Tom Porter, testifying on behalf on the Department, indicated that CPC's and Apalachee's proposals should both be denied because of the low occupancy at BMC and the adverse effect approval of either proposal would have on BMC. Mr. Porter's opinion, however, was based only upon his review of the Petitioners' applications. Mr. Porter made no independent studies as to the impact of the proposals on BMC and was not aware of most of the evidence presented at the hearing. The Ability of the Applicant to Provide Quality of Care. CPC. The services to be available at or provided by the proposed CPC facility include psycho-physiological diagnosis and evaluation, emergency service, milieu therapy (immersion into the clinical environment for structured daily treatment), individual and group therapy, family therapy, occupational therapy, an adolescent school program, a partial hospitalization program, aftercare, community education and related medical services (which will be provided by contracting with other area health care providers). Actual programs to be provided at the facility are to be developed by the physicians who join the medical staff of the facility with the assistance of CPC which has developed model programs which may be used. The staffing projections for the facility are adequate. The manpower projected can provide quality of care and will comply with the standards of the Joint Commission on Accreditation of Hospitals. CPC's experience in operating its 24 existing psychiatric facilities and its philosophy that it will provide quality of care support a finding that CPC does have the ability to provide quality of care. 1/ CPC's proposed physical facility is designed to provide quality of care. The facility will be located in northeast Tallahassee. It will be constructed on a little less than one acre of a 10-acre parcel of land which CPC has a contract to purchase for $400,000.00. Part of the remaining 9-plus acres will be used for parking and recreational space and a substantial portion will be left in its natural state as a buffer. The hospital building itself will consist of a one-story structure with a separate section for each category of proposed beds, a lobby, business and general offices and storage rooms. One section will be used as a 20-bed open adult unit. Another section will be used as a 10-bed adult intensive care unit. This section will be locked. A nursing station will separate the adult intensive care unit and the open adult unit and is designed for visibility down the halls of both units. Two seclusion rooms will be located at the nursing station also to allow for observation from the nursing station. The location of the nursing station will reduce staff responsibility thus reducing the cost of operating the facility. The other two units will consist of a 15-bed adolescent open unit and a 15-bed geriatric unit. These units will be separated by a nursing station designed in the same manner as the nursing station separating the adult units. These units will also be separated by a locked door. There will also be a support structure built next to the hospital which will contain a kitchen, dining hall for all patients, 4 classrooms, 4 multi-purpose rooms, an occupational therapy room and a half-court gymnasium. There is no covered access from the main building to the support structure. The floor plan for the facility is similar to the floor plans used for other CPC hospitals. Therefore, the design costs of the facility will be less than for a new one-of-a-kind facility. Apalachee. In order to ensure quality of care, Apalachee has established a Quality Assurance Committee. Additionally, Apalachee is inspected by the Department and is accredited by the Joint Committee on Accreditation of Hospitals. No evidence was submitted which raises any question as to Apalachee's ability to provide quality of care. The existing building to which Apalachee's proposed facility will be added is located at Apalachee's Eastside facility. Eastside is located on 10 acres of land in northeast Tallahassee. Eastside presently consists of a building in which PATH, the detoxification program and emergency services is located. The building has 12 semi-private rooms and 24 beds. The new facility will be added to the existing building. A total of 13,000 square feet will be added. It will consist of an 18-bed open unit and a 6-bed closed unit. Also to be located at the Eastside facility is a 16-bed long-term adolescent psychiatric hospital which the Department has indicated it will approve. If this facility and the proposed 24-bed facility are built, Apalachee will have a total of 96 beds providing a variety of services. The Availability and Adequacy of Other Psychiatric Services. Apalachee currently provides a wide range of psychiatric health services in Subdistrict 2, including a crisis stabilization unit and short-term residential treatment programs. These services have been used as an alternative to inpatient care in some cases. CPC gave no consideration to these programs in its application. Apalachee did consider these programs and showed that its proposal would compliment its existing programs. As suggested by CPC in its proposed recommended order, Apalachee's existing programs are not a substitute for acute inpatient psychiatric services. Joint, Cooperative and Shared Psychiatric Services. CPC. CPC's operation of 24 psychiatric hospitals provides the potential for joint, cooperative or shared health resources in the operation of its proposed facility. Very little evidence was presented, however, that such potential would be realized if CPC's proposed facility is approved. Evidence was presented that model programs will be "available" for use in developing programs for the proposed facility. CPC also showed that standardized equipment selection and purchasing, and standardized floor plans would be used in establishing the facility. This will effect the short-term financial feasibility of the proposal. Apalachee. By placing the facility at the same location of other Apalachee programs, Apalachee will be able to share some services among programs and thereby reduce costs. For example, kitchen and dining services, staffing, security, purchasing, and maintenance and administrative services will be shared. The integration of Apalachee's existing programs with the proposed facility will promote a continuum of care and thus improve the quality of care. The Need for Research and Education Facilities. 106. Apalachee currently provides training to practitioners pursuant to an agreement with the School of Social Welfare at Florida State University. It also provides internship programs for psychology majors at Florida State University and nursing students at Florida State University and Florida A&M University. It is probable, therefore, that the new facility will be available for training purposes. No proof was offered, however, that indicates there is a need for training programs not being currently met which will be met if either of the proposed facilities is approved. Availability of Resources. 107. Health manpower and management personnel are available to staff the CPC or the Apalachee proposal. CPC and Apalachee also have adequate funds to build the proposed facilities. The adequacy of funds to build and operate the facilities is discussed further, infra. The Immediate and Long-Term Financial Feasibility of the Proposal. CPC. The projected cost of CPC's facility was $5,086,000.00. This amount will be increased for inflation if the facility is delayed another year. CPC will contribute 20 percent of the projected cost of the facility in the form of cash and liquid assets CPC has on hand. Eighty percent of the projected cost will constitute debt of the facility to CPC payable at a 12 percent interest rate over a 20-year period. The immediate financial feasibility of CPC's proposal has clearly been shown. In its application, CPC projected that its facility would generate a net income after taxes in each of the first 2 years of its operation. In its proforma, patient revenues were based upon the following charges per patient day: Adolescent $225.00 Adult, I.C.U. 215.00 Adult Open Unit 210.00 Geriatric 200.00 These projected rates were based upon a 1985 opening date. The rates will therefore be higher if the facility opens in 1987, but, according to Mr. Mercer, the bottom line profitability of the facility will not change. The projected rates, according to Mr. Mercer, are based upon rates charged at other CPC hospitals in Atlanta, New Orleans, Jacksonville and Ft. Lauderdale and interviews with Tallahassee physicians. According to Alton Scott, an expert in health care finance and financial feasibility, the proposed rates are considerably lower than the average rate at CPC's Jacksonville and Ft. Lauderdale hospitals, which was $240.00 for their fiscal year ending in 1984. Mr. Scott did not indicate that he considered the rate at CPC's Atlanta or New Orleans facility, however, which Mr. Mercer also considered in projecting rates for the proposed facility. Mr. Scott's testimony, however, raises a question as to the reasonableness of the proposed facility's rates. CPC's projected gross patient revenue is based upon an occupancy rate of 53 percent in the first year of operation and 75 percent in the second year. CPC projects $2,476,160.00 of gross patient revenue in the first year (an average $212.00 per day rate x 11,680 patient days) and $3,597,075.00 of gross patient revenue in the second year (an average $219.00 per day rate x 16,425 patient days). CPC's average occupancy rates are directly related to the number of admissions and the average length of stay of a patient. In support of the number of admissions projected by CPC, CPC offered the 3 need methodologies discussed, supra. Those methodologies have, however, been rejected as unsound. CPC's admission rates are based only on an assumed census. The assumed census is based upon conversations with physicians and the corporate experience of CPC. Although conversations with physicians and the corporate experience of CPC should be considered, these factors should be considered as support for other evidence as to possible admissions which has not been presented by CPC. What physicians have told Mr. Mercer is not alone sufficient to support assumed admissions. There is no guarantee that local physicians will refer clients only to CPC's facility or that their case load will remain the same. CPC's corporate experience as to length of stay does not add much support since the overall corporate experience of CPC's facilities for the year ending November 20, 1983, shows that the overall occupancy (excluding its Valley Vista facility) was 56.3 percent. This rate of occupancy is well below CPC's projected second year occupancy rate for the Tallahassee facility. The occupancy rate of CPC's Ft. Lauderdale and Jacksonville hospitals was 50.6 percent and 60 percent respectively, which is low for the State. Of all of CPC's psychiatric hospitals only 1 has an occupancy rate over 80 percent. Another problem with CPC's projected occupancy rate is that CPC has projected that 5 percent of its patient days will be attributable to Baker Act patients and 5 percent will be attributable to Medicaid Patients. In order for the proposed facility to receive Baker Act patients it will be necessary that it enter into a contract with Apalachee. No evidence was presented that such a contract could be obtained from Apalachee. As to the percentage of Medicaid patients, it is clear that CPC would not be entitled to receive reimbursement from Medicaid for these patients since its facility will be a free-standing facility and Medicaid does not reimburse for inpatient psychiatric services at free-standing hospitals. Based upon these facts, it appears that the assumption of CPC that a total of 10 percent of its patient days will be attributable to Baker Act and Medicaid patients is of questionable validity. Mr. Mercer's testimony that, even without the Baker Act and Medicaid patients, the projected occupancy could be met is illogical. If the projected revenue attributable to Baker Act and Medicaid patients is eliminated along with the projected expenses attributable thereto, CPC still projected a net after tax profit for its first two years of operation. CPC offered no evidence, however, sufficient to conclude that its projections as to occupancy of other types of patients can be achieved. CPC's projected average length of stay of 30 days is also suspect. It is not consistent with the average length of stay locally, in Florida, nationwide or in CPC's experience. Based upon the foregoing, CPC's projected occupancy levels are not realistic. This directly effects the projected revenues for the proposed facility. Salary and other expenses projected for the facility are also questionable. Nonsalary expenses are significantly lower than CPC's existing Florida facilities which are the lowest in Florida. Salary expenses, projected 2 years in the future, are also lower than present salary levels at CPC's Florida facilities. Again, the salary levels at CPC's 2 Florida hospitals are among the lowest for the 10 Florida facilities providing similar services. These low salaries are also based upon projections for a project which will not open for 2 more years. Despite this fact, they are lower than current salaries at CPC's existing Florida facilities and salaries being paid locally. Apalachee. The projected cost of the addition of the 24-bed facility to Apalachee's existing PATH and detoxification facility is $1,114,339.00. Apalachee will provide $114,339.00 of the necessary funds from its operating fund and the remaining $1,000,000.00 will be obtained from the sale of industrial revenue bonds. The bonds will be 15-year bonds, with a 7 year balloon and were projected at a 10.75 percent annual interest rate (75 percent of the Chase Manhattan Bank prime interest rate). First National Bank has committed to purchase $3,000,000.00 of industrial revenue bonds, which includes the $1,000,000.00 for this project. The immediate financial feasibility of Apalachee's proposal has clearly been shown. In projecting its gross charges for the first 2 years of operation, Apalachee has predicted an occupancy rate of 62.5 percent in the first month of operation increasing to 87.4 percent in the last month of operation of the second year. Gross charges are projected at $1,557,940.00 the first year (6,385 patient days x $244.00 per day rate) and $1,883,648.00 the second year (7,358 patient days x $256.00 per day rate). Apalachee' s projections are reasonable. Although it will be a free-standing psychiatric facility, Apalachee will be able to receive some Medicaid funding under the Department's "centers and clinics" option. Apalachee's projections as to gross charges, deductions from gross charges, and operating expenses are reasonable. Based upon its projections, Apalachee will realize a profit from the new facility in each of its first 2 years of operation. Competition. CPC. The addition of CPC's facility will promote competition in Subdistrict 2, as testified to by Dr. Brodsky, the Medical Director of BMC, among others. Because of the low occupancy at BMC, however, such competition at this time would be harmful. Apalachee. Apalachee's proposed facility will not compete with BMC. Although Apalachee's facility will initially reduce BMC's occupancy, removing the patients Apalachee will serve from BMC will improve the quality of care provided at BMC. Construction. CPC Construction and related costs of the CPC facility will consist of the following: Parking $27,500.00 Project development costs 22,000.00 Architectural/engineering fees 135,000.00 Site survey and soil investigation report 25,000.00 Construction supervision 10,000.00 Construction manager 4,000.00 Site preparation 100,000.00 Construction 3,000,000.00 Contingency 100,000.00 Inflation 270,000.00 These costs are all adequate to cover the cost of these items. These amounts will also be adequate even if construction does not begin until the end of 1985. The projected cost of equipment and furnishings was $500,000.00. This amount is adequate to equip the facility properly. In fact, the projected cost is probably substantially overstated. 2/ Although CPC failed to list in its application all of the equipment and furnishings (only major movable equipment was listed) necessary to equip the facility, adequate equipment and furnishings will be provided. Apalachee. The projected cost of constructing Apalachee's facility consists of the following: Architectural/engineering fees Site survey and soil investigation $75,740.00 report 2,000.00 Construction 876,620.00 Contingency 43,831.00 Inflation 26,298.00 These amounts are sufficient to construct the facility. The cost per square foot of the construction will be $60.00. The cost of equipment needed to equip the new facility is projected at $53,850.00. This amount is adequate for the purchase of the equipment listed in Apalachee's application.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the certificate of need application filed by CPC, case number 84-1614, be denied. It is further RECOMMENDED: That the certificate of need application, as amended, filed by Apalachee, case number 84-1820, be approved. DONE and ENTERED this 10th day of April, 1985, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of April, 1985.
The Issue The issue is whether Windmoor has standing to challenge AHCA's award of Certificate of Need No. 10074 to Community to establish a Class III Specialty Psychiatric Hospital in New Port Richey, Florida.
Findings Of Fact AHCA is the state agency responsible for administering the CON program, and is authorized to evaluate and make final determinations on CON applications pursuant to the Health Facilities and Services Development Act, sections 408.031-.045, Florida Statutes. Community Community Hospital owns and operates a 389-bed Class I general acute care hospital, comprised of 343 acute care beds and 46 adult psychiatric beds, currently located at 5637 Marine Parkway, New Port Richey, Pasco County, Florida, AHCA Health Planning District 5. AHCA previously awarded CON No. 9539 to Community authorizing construction of a replacement facility in an area known as Trinity, approximately 5.5 miles southeast of Community's current location. The Trinity replacement hospital facility is currently under construction and scheduled for occupancy in November 2011. The route between the Trinity and Community campuses is a drive of approximately one mile on a two-lane road leading into State Road 54, a six-lane divided highway. Trinity Medical Center campus is located on State Road 54. Windmoor Windmoor is a licensed Class III Specialty Hospital with 78 adult psychiatric beds and 22 adult substance abuse beds, located in Clearwater, Pinellas County, Florida. Windmoor is an existing provider of adult psychiatric services located within the same Health Planning District 5 as Community. Windmoor's facility has remained in its current location since its inception in 1987. That year, Windmoor had 200 adult psychiatric beds, which were reduced in 1996 to 163. In 2001, the number of adult psychiatric beds was reduced to its current 100. Windmoor has the capability of adding 40 to 60 additional beds. Windmoor's parent corporation is Psychiatric Solutions, Inc. (PSI), a publicly traded company based in Franklin, Tennessee, that also owns psychiatric hospitals in other states. PSI also owns at least seven other psychiatric hospitals in Florida, as well as other treatment facilities. PSI acquired all of its Florida facilities within the past five years, including Windmoor in 2006. On November 15, 2010, PSI was acquired by Universal Health Systems, which owns and operates psychiatric hospitals and general acute care hospitals throughout the United States, including Florida. This is the first CON proceeding in which Windmoor has participated. District 5 Providers District 5 consists of Pasco and Pinellas Counties. At the time the CON application was filed, Pasco County had two adult inpatient psychiatric providers: Community and Florida Hospital Zephyrhills with 15 beds. The Pinellas County providers were Morton Plant Hospital (Clearwater), St. Anthony's Hospital, Sun Coast Hospital (now known as Largo Medical Center- Indian Rocks) (Largo), and Windmoor. Windmoor was the only Class III specialty psychiatric hospital in District 5. Additionally, new CON-approved adult psychiatric beds included 17 at Largo, and approval for Ten Broeck Tampa, Inc., to construct a new 35-bed Class III adult psychiatric hospital in Pasco County. Also, Morton Plant North Bay Recovery Center (NB Recovery Center) had received CON exemptions to establish 56 adult psychiatric beds at its new Class III facility in Pasco County which had already been approved for 10 child/adolescent psychiatric beds. NB Recovery Center is a new entrant into the market, having opened its Class III psychiatric hospital in August 2010. This Class III psychiatric hospital is on the same license as North Bay Hospitals' Class I general acute care hospital (North Bay). North Bay is located about one mile north of Community. The approximate distances of the District 5 providers from Community are: NB Recovery Center, 19 miles; Florida Hospital Zephyrhills, 40 miles; Morton Plant Hospital, 24 miles; and Windmoor, 26 miles. Also, Largo, like Community, is an HCA affiliated hospital located approximately nine miles north-northwest of Windmoor, and two to four miles south of Morton Plant. St. Anthony's Hospital is located in downtown St. Petersburg. CON approvals and exemptions are no longer reliable predictors of bed inventory since existing psychiatric facilities can add beds through CON exemptions at will. Service Areas No overlap exists between Community and Windmoor's service areas. Community's primary service area (PSA) is a nine zip code area located in western Pasco County. Community's secondary service area (SSA) consists of four zip codes in Hernando County to the north, a few zip codes in eastern Pasco County, and a single zip code in the far northwestern corner of Pinellas County - 34689. Community's PSA accounts for 79.4% of its psychiatric discharges. An additional 9.1% of its discharges are from its SSA, defined as any non-PSA zip code from which it receives at least 1% of its discharges. The remaining 11% of Community's discharges are scattered among other areas. All of Community's PSA zip codes are within Pasco County. The only SSA zip code in Pinellas County is in the northwestern corner of the county – 34689, from which Community received only 2% of its discharges. Community derives 84.4% of its discharges from Pasco County, while only 6.9% of discharges originate from Pinellas County residents. Another 5.6% of Community's discharges originate in Hernando County which is outside District 5. Community's psychiatric service area is not expected to change with the implementation of the CON. While Community received 1367 discharges from its PSA, Windmoor received only 97 of its discharges from that PSA. On a percentage basis this is 79.4% versus 4.7% of discharges, respectively. Windmoor did not derive even 1% of its discharges from any single zip code within Community's PSA. When a provider receives less than 1% of its discharges from a particular zip code, that zip code is not appropriately considered part of the provider's PSA or SSA. Further, Windmoor has no significant market share in Community's SSA. On a county basis, while Community derived 84.4% of its psychiatric discharges from Pasco County residents, Windmoor received only 5.9% of its discharges from Pasco County. Conversely, Community derived only 6.9% of its discharges from Pinellas County compared with 73.6% for Windmoor. During the year ending June 2009, among all providers of inpatient psychiatric services to Community's PSA, Community had a 70% market share compared with Windmoor's 4% market share. For Pasco County as a whole, Community had a 52% market share compared with Windmoor's 4% market share. Like Windmoor, Morton Plant had only a 4% market share for both Pasco County and Community's PSA. The conclusion from this analysis is that Community is predominantly a Pasco County provider while Windmoor is predominantly a Pinellas County provider. Windmoor is not a significant provider in either Community's PSA or in Pasco County. Further, there is no physician overlap between the psychiatrists on the respective medical staffs of Community and Windmoor. Community's CON Proposal In its State Agency Action Report concerning Community's CON application, AHCA summarized the proposal: "[t]his project is to keep 46 existing adult inpatient psychiatric beds at their present location following completion of the replacement facility authorized by CON #9539." The proposal is to allow Community's psychiatric facility to remain in the same location with the same bed complement, which will remain unchanged in terms of its historical operations. The psychiatric unit at Community has been located at its current site since at least 1981. A CON is required only because, upon occupancy of the Trinity replacement facility, the continued use of the existing site for its inpatient psychiatric activity would fall within the statutory criteria for projects subject to CON review as an "establishment of additional healthcare facilities." With respect to both hospital campuses, Community will own, operate, and be the licensee of both facilities. All components of patient care will be controlled by a single governing body, and will have a single medical staff, chief medical officer, and CEO. Florida is home to other similarly situated hospitals that own and operate a Class I general acute care hospital and an affiliated Class III licensed specialty hospital on separate campuses. In each case, the Class I and Class III facilities share the same license and license number, owner, and CEO. These facilities include Westchester General Hospital and its affiliated Class III Southern Winds Hospital; Halifax Health Medical Center and its affiliated Halifax Psychiatric Center North; Shands Hospital at the University of Florida and Shands at Vista; and Morton Plant North Bay Hospital and NB Recovery Center. AHCA issues an actual license certificate for each facility for general display at each campus. The approximate distances between the two campuses of these Class I and Class III single license facilities are: Westchester General Hospital and Southern Winds Hospital – nine miles; Halifax Health Medical Center and Halifax Psychiatric Center – 1.5 miles; Shands at the University of Florida and Shands at Vista – 10 miles; and Morton Plant North Bay and NB Recovery Center – 20 miles. The scenario of a Class I hospital with an affiliated Class III hospital with a single license number is considered one licensee with two premises. Psychiatric Services at Community Will Remain Unchanged Implementation of the CON will result in no changes in the current level of health care services provided to patients for both psychiatric and non-psychiatric medical conditions. Those patients who might currently be transported internally to the psychiatric unit behavioral health unit or (BHU) upon discharge from non-psychiatric medical units of the hospital will now be transported by vehicle to the BHU campus if the patient requires transport assistance. The transport of psychiatric patients is not material to the discussion of whether the two campuses are, in fact, one hospital. Patients cannot be admitted to the BHU until they have been medically cleared of any non-psychiatric medical conditions that would require inpatient medical care. "Medically cleared" means the patient no longer requires medical/surgical inpatient care. Those processes and requirements will not change as a result of implementation of the CON. Community currently provides transport services for all types of patients. Those services will continue for patients between the two campuses, including any psychiatric patients who may need transport assistance. AHCA has never had a regulatory issue involving the movement of patients among different facilities that are operated by one licensee. AHCA has no concern about the ability of hospitals to transport patients among their various facilities, including any hospital provider-based services. Under federal regulations such services may be provided at locations up to 35 miles from the main hospital campus. A psychiatric patient presenting to a hospital's emergency department (ED) is handled the same initially as any patient. The patient undergoes triage and is seen by an ED physician. If the patient exhibits both psychiatric and non- psychiatric medical conditions, the ED physician calls a psychiatrist and together they will determine the primary diagnosis. If an ED patient has achieved medical stability, and is ready to be medically discharged from the ED, yet still suffers from a psychiatric condition, the ED physician will call in a psychiatrist to participate in the disposition of the patient. If the primary diagnosis for a patient is medical or emergent, but with a secondary or co-morbid psychiatric condition, the patient receives medical/surgical care with a psychiatrist serving as a consulting physician. If deemed appropriate, the patient would be admitted to the medical/surgical unit for care until reaching medical stability. While on the medical/surgical unit, the patient needing psychiatric care would receive it from a psychiatrist while on the medical/surgical unit. Once medically cleared for discharge, the patient requiring further inpatient psychiatric care would be transferred to the BHU. Once in the BHU, the patient would still receive any necessary care for any non- psychiatric conditions from the appropriate physicians. This system will not change with the implementation of the CON. Coverage of the BHU by hospitalists and other members of the medical staff who do rounds will not change as a result of implementation of the CON. Some patients will achieve medical stability for both the psychiatric and non-psychiatric conditions from which they suffer, and will therefore not be admitted to the BHU upon discharge from the ED or medical/surgical unit. As reflected in Community's policies and procedures, all BHU patients must be admitted under the care of a psychiatrist, and can only be discharged by a psychiatrist. Every BHU patient also receives a general medical history and physical examination performed by a consulting medical physician. Non-psychiatrist medical staff physicians are always available for consultation to the psychiatrist and other clinical staff while the patient stays in the BHU. Community's current practices with respect to psychiatric patient services and physician coverage will not change due to implementation of the CON. AHCA's Review of Community's CON Application AHCA gave notice of its intent to approve CON No. 10074 in the June 25, 2010, Florida Administrative Weekly. In AHCA's view, the status quo will be maintained by the issuance of the CON. Nothing will be different in the way Community delivers its health care services in District 5. This is a case where the applicant has to go through the CON process to arrive at the same place it already was. AHCA expects no change at all. AHCA concluded that "this project is not likely to change the current competitive structure of the existing market." By that conclusion, AHCA intended to convey a lack of adverse impact on existing providers based upon CON approval. Particularly due to deregulation, AHCA believes there have already been significant changes to the competitive structure of the District 5 market, such as psychiatric bed additions through CON exemption, CON approval of a new Ten Broeck psychiatric hospital, and upcoming shifts toward greater Medicaid HMO reimbursement and associated federal health care reform legislation. Conversely, the Agency projects no impact from Community's CON. Lack of Adverse Impact Adverse impact analyses typically arise from a new entrant to the market. Community's proposal does not present a new entrant to the market for inpatient psychiatric services. Adverse impact will occur when a new provider enters a service area or an existing provider increases its capacity to offer services. Neither of those will occur as a result of Community's CON. None of the conditions that could lead to an adverse impact is present. Implementation of the Community CON will have no adverse impact or effect on existing providers because Community will continue to have the same historic PSA and its market shares will remain the same, except for potential market changes unrelated to the CON, such as entrance of new providers. This case is unique. For example, Ms. Patricia Greenberg, Windmoor's highly qualified and experienced expert in health care planning, has never been involved in a case such as this where the applicant sought approval to remain at its current location. The typical CON application seeks permission for a new provider, facility, for beds, or services to enter a particular market for the first time. In the typical case, health care planners will agree that some shift in market share will occur among existing providers as the result of the new entrant to the market. Ms. Greenberg's adverse impact analysis did not take into account the new market entrants such as Ten Broeck and NB Recovery Center, even though she expects them to have a greater impact on Community, due in part to geography. Health care planners develop adverse impact analyses that attempt to estimate the future shift in market shares. From there, the planner will attempt to project a number of lost patients per provider, and then apply a financial impact. Regarding Community's proposal, since there will be no new entrant into the market, the typical adverse analysis cannot be performed. Windmoor, through Ms. Greenberg, creatively developed four theories of adverse impact that could result from the status quo. Each of Windmoor's theories is premised on assumptions that Community will cease providing certain clinical services that will result in Community losing the capability to serve some of its psychiatric patients. However, Windmoor provided no clinical evidence to support its alleged changes to Community's clinical services. Indeed, all clinical evidence in the record confirms that Community can and will continue its current clinical services to all patients, including its BHU patients. The four impact theories offered by Windmoor are each based upon the unproven assumption that CON implementation will transform Community into two separate unaffiliated hospitals as opposed to a single hospital with two campuses. From that assumption, Ms. Greenberg contended there are two, and only two, categories of psychiatric facilities, which she labeled as either a "hospital based unit" or a "freestanding" facility. Ms. Greenberg defined "hospital based unit" (HBU) as either located inside a hospital or on the campus of a general hospital. She defined "freestanding" as any facility that is not co-located with a general hospital on the same campus. Ms. Greenberg did not consider or address a category of commonly owned and operated Class I general acute care hospitals affiliated with Class III psychiatric hospitals. Ms. Greenberg did not recognize the existence in Florida of several general hospital affiliated Class III psychiatric hospitals. The fact that two hospital campuses of Class I and Class III facilities exist is irrelevant, so long as in reasonable proximity to one another. The relevant factors are whether the two campuses share the same: 1) license number, 2) ownership, 3) hospital administration, and 4) medical staff. If these factors are present, it is incorrect to characterize one of the two facilities or campuses as "freestanding" because that implies no connection to a general acute care hospital. Community is a general acute care hospital with an affiliated psychiatric facility which is in no sense "freestanding." Ms. Greenberg's attempt to compare statewide data for various patient characteristics between facilities that she defines as "freestanding" versus HBUs is not persuasive, primarily because it is built upon the incorrect assumption that Community and other Florida hospitals cannot operate a Class I general acute care hospital and a Class III specialty psychiatric hospital under the same license. Characteristics such as payor source or patient mix are influenced by a number of factors other than simply whether an inpatient program is "freestanding" or "hospital based," as defined by Ms. Greenberg, including influences such as age composition of the service area, income distribution, and whether the hospital is located in an urban or rural area, to cite but a few. Attempts to draw generalizations from such data and then conclude that Community will be more like a HBU than a freestanding or vice versa, is without merit. Ms. Greenberg's data indicates that Community falls into her defined HBU categories in some respects while, in other respects, falls into her freestanding categories. This type of analysis is not sound. Community will not transform into a "freestanding" facility as defined by Ms. Greenberg, as a result of this CON. Moreover, many people with a primary diagnosis of psychosis are treated in hospitals that do not have inpatient psychiatric beds. In 2008, psychosis was the number one discharge diagnosis for all males in Florida hospitals, and was the number three diagnosis for all females behind conditions associated with pregnancy. Simply looking at discharge data by diagnosis between freestanding and HBUs as defined by Ms. Greenberg is not a meaningful analysis. Every adverse impact scenario presented by Windmoor is based upon the incorrect premise that implementation of Community's CON will result in Community becoming a "freestanding" facility as defined by Ms. Greenberg. For this reason alone, none of Ms. Greenberg's adverse impact theories is valid and each must be rejected. Another common thread running through Windmoor's impact theories is the assertion that, based again upon the false "freestanding" presumption, Community's patient mix will change due to changes in clinical services available to patients, such as ED services, no medical environment for comprehensive treatment, and certain patients allegedly no longer clinically appropriate for Community's HBU. There is no evidence in the record to support such claims, either operationally or clinically. All of Ms. Greenberg's impact theories lead to the contention that CON implementation will result in Community being adversely affected by its own CON through the loss of psychiatric patients. Ms. Greenberg further speculates that because of her asserted loss of patients, Community would need to replace those patients ("backfill") with patients who might otherwise be admitted to a competing hospital. As explained previously, however, there is virtually no overlap of service area or competition between Windmoor and Community as reflected by their respective service areas. Community does not contact health care providers in Windmoor's service area regarding the availability of Community's psychiatric services. In fact, Largo, a sister facility of Community, is an inpatient provider located between Community and Windmoor. Community would not actively seek patients in those areas of Pinellas County. It is neither reasonable to expect, nor was any credible evidence presented, that to make up for lost patients, Community would go outside its current PSA into the Windmoor area to seek patients when it has its sister Largo facility near Windmoor. As stated above, Windmoor, through Ms. Greenberg, offered four adverse impact scenarios. All four scenarios are premised upon the assumption that CON implementation will transform Community's BHU into a "freestanding" facility. The premise is not correct for the reasons stated above, primarily that AHCA recognizes the ability of hospitals in Florida to have Class I general acute care facilities along with Class III specialty psychiatric hospitals under the same license, ownership, management, etc. Further, all four scenarios are based upon Ms. Greenberg's theory of "backfill" under which Community will have to make up lost patients by intruding into Windmoor's service area. The evidence supports the assertion that Community expects no lost admissions because its PSA and SSA will not change, nor will the type and extent of services it provides, including ED, medical/surgical, and a unified medical staff, change upon implementation of the CON. Medicaid Windmoor asserted that Community would lose its eligibility to receive reimbursement for services under the Medicaid program if the CON were implemented. This assertion was not supported by the evidence presented by Windmoor. Moreover, the evidence presented by Community and AHCA negated Windmoor's assertion. Prior to the filing of the CON application omissions response, Community representatives met with AHCA personnel and confirmed its continued Medicaid reimbursement eligibility, which to Community was never an issue. Community's CON application proposed a Medicaid CON condition, and contained numerous statements of expected continued ability to serve Medicaid fee-for-service patients. AHCA accepted the proposed CON condition when recommending approval of the application. Community expects to satisfy the Medicaid CON conditions. AHCA's Deputy Secretary for Medicaid, Roberta Bradford, subsequently confirmed by letter to Community that, based upon Community's representations of satisfaction of certain applicable criteria, Community's proposed 46-bed inpatient psychiatric hospital would continue to be eligible for Medicaid participation. The determination of a facility's Medicaid reimbursement is a state determination, rather than a federal CMS decision. In Florida, that determination is ultimately made by AHCA's Deputy Secretary for Medicaid, Ms. Bradford. Windmoor elicited testimony from Community to show that each of the following services would not be physically present on the campus of the Class III psychiatric hospital portion of Community following CON implementation: ED, emergency cardiac catheterization and angioplasty services, surgical and operating suites, stroke center designation, CT equipment, and the full range of medical services currently available on site at Community. Community will, however, continue to operate all of these services in the Class I acute care hospital campus, which will be under the unified license with the psychiatric campus. Satisfaction of the Medicaid letter criteria from AHCA was confirmed at hearing. The criteria include: Community will own and operate both locations and be the licensee of both facilities; all components of patient care at the facilities will be controlled by a single governing body; one Chief Medical Officer will be responsible for all medical staff activities at both facilities; one Chief Executive Officer will control both facilities' administrative activities; and the two facilities are situated closely enough geographically that it is feasible to operate them as a single entity. Mr. Jeffrey N. Gregg, AHCA's head of CON review, is satisfied that the Class III licensed Community facility will maintain its Medicaid eligibility. Southern Winds, Halifax Psychiatric Center, and Shands at Vista receive Medicaid fee-for-service reimbursement, and are similarly situated to Community. Mr. Gregg also expects NB Recovery Center to receive this type of Medicaid reimbursement when it initiates its service. Ms. Greenberg has been aware for at least 10 years that Class III psychiatric facilities affiliated with general hospitals in Florida receive fee-for-service reimbursement. She testified that if AHCA determines that Community is Medicaid eligible, her scenario related to Community losing its Medicaid eligibility "would go away." Moreover, due to recent legislative changes that will expand the use of Medicaid HMOs, the majority of Medicaid reimbursement is soon going to be under Medicaid HMOs. Class III psychiatric hospitals that are not affiliated with or on the same campus as a general acute care hospital, such as Windmoor, are eligible for Medicaid HMO reimbursement versus Medicaid fee- for-service reimbursement. Summary of Impact Analysis Conclusions All of Windmoor's adverse impact claims are based on a series of false and erroneous assumptions, none of which is supported by the evidence of record. In fact, most of the claims in the form of four scenarios are based upon ignoring the fact that what Community proposes here is not so unique in Florida. Many Florida health care facilities currently operate both Class I general acute care hospitals and Class III specialty psychiatric hospitals under the same license, management, and receive Medicaid fee-for-service reimbursement, while maintaining two physically separate campuses. This should have been common knowledge for an existing provider such as Windmoor, which based its entire case, adverse impact scenario, and decision to go forward with the hearing in this case on a series of erroneous assumptions. Windmoor offered several theories about how it would suffer a substantial and adverse impact in the event Community's CON application is approved, yet offered no competent evidence to support its claims. Windmoor failed to demonstrate that Community would lose any psychiatric patient admissions and be forced to seek admissions from Windmoor's PSA or SSA to keep its beds full. Windmoor failed to provide competent evidence that it will be adversely affected by the approval of Community's CON. Community's CON will have no impact on Windmoor.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration issue a final order dismissing Windmoor's Petition for Formal Administrative Hearing due to lack of standing to challenge the award of CON No. 10074. DONE AND ENTERED this 6th day of July, 2011, in Tallahassee, Leon County, Florida. S ROBERT S. COHEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 6th day of July, 2011. COPIES FURNISHED: Timothy Bruce Elliott, Esquire Smith & Associates 2873 Remington Green Circle Tallahassee, Florida 32308 Richard Joseph Saliba, Esquire Agency for Health Care Administration 2727 Mahan Drive, Building 3, Mail Station 3 Tallahassee, Florida 32308 Stephen A. Ecenia, Esquire Rutledge, Ecenia & Purnell, P.A. 119 South Monroe Street, Suite 202 Tallahassee, Florida 32301 Richard J. Shoop, Agency Clerk Agency for Healthcare Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Justin Senior, General Counsel Agency for Healthcare Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Elizabeth Dudek, Secretary Agency for Healthcare Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308-5403
The Issue In its petition, Florida Psychiatric Centers (FPC) alleges that HRS seeks to grant a CON to Florida Residential Treatment Centers, Inc. (FRTC), based on the agency's unpromulgated policy that ". . . at least one residential treatment center should be approved in each of DHRS' eleven health planning districts in Florida, regardless of the need for such facilities." (Petition, page 2, paragraph 6.) FPC argues that the policy is a "rule" and is invalid as a rule because it has not been adopted pursuant to Section 120.54, F.S., and because it conflicts with Sections 381.493, F.S., and 381.494, regarding need criteria. Further, FPC argues the "rule" is arbitrary and violates due process because the agency predetermines need regardless of the availability of like and existing services. HRS and Intervenor, FRTC, argue that the policy is incipient and needs not be promulgated. Further, the policy does not obviate a determination of need. HRS and FRTC claim that FPC lacks standing to bring this action, as its facility is a hospital and not the same as an intensive residential treatment program. HRS admits that the alleged policy has not been promulgated under Section 120.54, F.S. The issues for determination in this proceeding are summarized as follows: Whether FPC has standing to bring this action; Whether HRS has a policy regarding CON approval of intensive residential treatment programs, and whether that policy is a "rule"; and If the policy is a rule, is it an invalid rule?
Findings Of Fact FPC is a partnership which has received CON #2654 to construct a 100- bed psychiatric hospital in the Plantation/Sunrise area of West Broward County. The facility is under construction and will include 80 short-term psychiatric beds (40 geriatric, 15 adolescent, and 25 adult beds) and 20 short-term substance abuse beds. FPC anticipates an average length of stay of approximately 28 days for adults and less than 60 days for adolescents. FRTC is owned by Charter Medical Corporation. It proposes to build and operate a 60-bed intensive residential treatment program for children and adolescents in Broward County. The proposed facility will treat children and adolescents in need of psychiatric services. Its anticipated average length of stay is approximately one year. If it is awarded a certificate of need, FRTC intends to obtain licensing by HRS pursuant to Chapter 395, F.S., and Chapter 10D-28 F.A.C. No other facility licensed as an intensive residential treatment program, as defined in subsection 395.002(8), F.S. (1987), is available in Broward County. On March 11, 1987, HRS issued CON #4851 to FRTC for its 60-bed facility. A challenge to that CON is pending in DOAH consolidated cases #87- 2046/87-2400/87-2401. FPC is a petitioner in the case, with Florida Medical Center and South Broward Hospital District. Section 395.002(8), F.S., defines "Intensive Residential Treatment Programs for Children and Adolescents as: . . . a specialty hospital accredited by the Joint Commission on Accreditation of Hospitals which provides 24-hour care and which has the primary functions of diagnosis and treatment of patients under the age of 18 having psychiatric disorders in order to restore such patients to an optimal level of functioning. When completed, FPC will be accredited by the Joint Commission on Accreditation of Hospitals; it will provide 24-hour care and will have the primary function of diagnosis and treatment of patients with psychiatric disorders and problems of substance abuse. Unlike the other psychiatric hospitals in Broward County, FPC will have a campus-like setting and separate buildings for the various services. FPC will not be a locked facility. With the exception of the length of stay, the services provided by FPC for its adolescent patients will be essentially the same as an intensive residential treatment program, as defined above. Until recently, HRS has had very few CON applications for intensive residential treatment programs. HRS has considered that these programs must undergo CON review only if they seek licensure as a specialty hospital. In considering need for intensive treatment programs, HRS does not consider unlicensed residential treatment programs to be like and existing services because HRS is not required to review unlicensed facilities; HRS would not have any way of knowing all the programs in operation and would have no control over the services offered. This policy is similar to the policy HRS employed in conducting CON review of ambulatory surgery centers. In those cases, HRS did not consider the outpatient surgery being performed in physicians' offices. Because the legislature has created a special definition of intensive residential treatment facility, and because the State Health Plan seeks a continuum of mental health services, HRS presumes there is a need for a reasonably sized intensive residential treatment facility in each planning district. This presumption can be rebutted with evidence in a given case, such as the fact that the district has few children with mental illnesses, or that such programs have been tried and failed, or that parents in the area prefer to send their children outside the district. Moreover, any applicant for a CON for an intensive residential treatment facility must evidence compliance with the myriad criteria in Section 381.705, F.S. (1987), and in Chapter 10-5, F.A.C. Although there is no specific bed need methodology adopted by HRS for intensive residential treatment facilities, other psychiatric services, such as long-term psychiatric care, are also evaluated without a numeric bed need methodology. HRS has applied its presumption of need policy in intensive residential treatment program CON reviews at least since 1983. One reason why the policy has not been adopted as a rule is that there have been so few applications in that category. In the experience of Elizabeth Dudek, Health Facilities and Services Consultant Supervisor, the first level supervisor for CON review, there were merely three applications of this type prior to a recent batch of three more applications. FPC's Petition to Determine Invalidity of Agency Rule(s) alleges that HRS' policy is ". . . at least one residential treatment center should be approved in each of DHRS' eleven health planning districts in Florida, regardless of the need for such facilities." (paragraph 6) FPC further alleges that HRS construes Chapter 395 as requiring it to ". . . automatically approve at least one residential treatment center in each DHRS health planning district regardless of whether the statutory criteria for need in Section 381.494(b), F.S. [renumbered and amended as Section 381.705, F.S., in 1987] would be met by the applicant." (paragraph #7) These allegations were not proven in this proceeding and are rejected in favor of the less rigid presumption of need policy described in findings of fact #7 and #8, above.
The Issue Whether the application of Petitioner Naples Community Hospital, Inc. for a Certificate of Need to add a total of 35 beds to Naples Community Hospital and North Collier Community Hospital should be approved based on peak seasonal demand for acute care beds in the relevant subdistrict.
Findings Of Fact Naples Community Hospital, Inc., ("NCH") holds the license for and operates Naples Community Hospital ("Naples"), a 331 bed not-for-profit acute care hospital, and North Collier Community Hospital ("North Collier"), a 50 bed acute care hospital. NCH also operates a 22 bed comprehensive rehabilitation facility and a 23 bed psychiatric facility. NCH is owned by Community Health Care, Inc., "(CHC"). Both Naples and North Collier are located within Agency for Health Care Administration ("ACHA") district 8 and are the only hospitals within subdistrict 2 of the district. Naples is located in central Collier County. North Collier is (as the name implies) located in northern Collier County approximately 2-3 miles from the county line. NCH's primary service area is Collier County from which approximately 85-90 percent of its patients come, with a secondary service area extending north into Lee County. Neither Naples nor North Collier are teaching hospitals as defined by Section 407.002(27), Florida Statutes (1991). NCH is not proposing a joint venture in this CON application. NCH has a record of providing health care services to Medicaid patients and the medically indigent. NCH proposes to provide health care services to Medicaid patients and the medically indigent. Neither Naples nor North Collier are currently designated by the Office of Medicaid as disproportionate share providers. NCH has the funds for capital and initial operating expenditures for the project. NCH has sufficient financial resources to construct and equip the proposed project. The costs and methods of the proposed construction are reasonable. The Agency for Health Care Administration ("AHCA") is the state agency charged with responsibility for administering the Certificate of Need program. Southwest Florida Regional Medical Center ("Southwest") is a 400 bed for-profit acute care hospital located in Fort Myers, Lee County. Lee County is adjacent to and north of Collier County. Southwest is owned by Columbia Hospital Corporation ("Columbia"), which also owns Gulf Coast Hospital in Fort Myers, and two additional hospitals in AHCA District 8. Southwest's primary service area is Lee County. Although Southwest asserts that it would be negatively impacted by the addition of acute care beds at NCH, the greater weight of the credible evidence fails to support the assertion. The primary market services areas of NCH and Southwest are essentially distinct. However, the facilities are located in such proximity as to indicate that secondary service areas overlap and that, at least during peak winter season periods, approval of the NCH application could potentially impact Southwest's operations. Southwest has standing to participate in this proceeding. Southwest offered evidence to establish that it would be substantially affected by approval of the NCH application. The NCH length-of-stay identified in the Southwest documents is inaccurate and under-reports actual length-of-stay statistics. The documentation also includes demographic information from a zip code (33912) which contributes an insignificant portion of NCH patients, and relies on only two years of data in support of the assertion that utilization in the NCH service area is declining. Southwest's chief operating officer testified that he considers Gulf Coast Hospital, another Columbia-owned facility, to offer more competition to Southwest that does NCH. Further, a physician must have admitting privileges at a hospital before she can admit patients to the facility. Of the physicians holding admitting privileges at Southwest, only two, both cardiologists, also have admitting privileges at NCH. Contrary to Southwest, NCH does not have an open heart surgery program. Accordingly, at least as to physician-admitted patients, approval of the NCH application would likely have little impact. On August 26, 1991, NCH submitted to AHCA a letter of intent indicating that NCH would file a Certificate of Need ("CON") application in the September 26, 1991 batching cycle for the addition of 35 acute care beds to the Naples and North Collier facilities. The letter of intent did not specify how the additional beds would be divided between the two facilities. The determination of the number of beds for which NCH would apply was solely based on the fact that the applicant had 35 observation beds which could be readily converted to acute care beds. The observation beds NCH proposes to convert are equipped identically to the acute care beds at NCH and are currently staffed. The costs involved in such conversion are minimal and relatively insignificant. Included with the letter of intent was a certified corporate resolution which states that on July 24, 1991, the NCH Board of Trustees authorized the filing of an application for the additional beds, authorized NCH to incur related expenses, stated that NCH would accomplish the proposed project within time and budget allowances set forth in the application, and that NCH would license and operate the facility. By certification executed August 7, 1991, the NCH secretary certified that the resolution was enacted at the July 24, 1991 board meeting and that the resolution did not contravene the NCH articles of incorporation or bylaws. Article X, Sections 10.1 and 10.1.3 of the NCH bylaws provides that no CON application shall be legally effective without the written approval of CHC. On September 26, 1991, NCH filed an application for CON No. 6797 proposing to add 31 acute care beds to Naples and 4 acute care beds to North Collier. The CON application included a copy of the NCH board resolution and certification which had been previously submitted with the letter of intent as well as the appropriate filing fee. NCH published appropriate public notice of the application's filing. As of the date of the CON application's filing, CHC had not issued written approval of the CON application prior to the action of the NCH Board of Directors and the filing of the letter of intent or the application. On October 2, 1992, four days prior to the administrative hearing in this case, the board of CHC ratified the actions of NCH as to the application for CON at issue in this case. The CHC board has previously ratified actions of the NCH in such fashion. There is uncontroverted testimony that the CHC board was aware of the NCH application and that no reservation was expressed by any CHC board member regarding the CON application. Although NCH's filing of the CON application without appropriate authorization from its parent company appears to be in violation of the NCH bylaws, such does not violate the rules of the AHCA. There is no evidence that the AHCA requested written authorization from the CHC board. After review of the application, the AHCA identified certain deficiencies in the application and notified NCH, which apparently rectified the deficiencies. The AHCA deemed the application complete on November 8, 1991. As required by statute, NCH included a list of capital projects as part of the CON application. The list of capital projects attached to the application was incomplete. The capital projects list failed to identify approximate expenditures of $370,000 to construct a patio enclosure, $750,000 to install an interim sprinkler system, $110,000 to construct emergency room triage space, and $125,000 to complete electrical system renovations. At hearing, witnesses for NCH attempted to clarify the omissions from the capital projects list. The witnesses claimed that such omitted projects were actually included within projects which were identified on the list. When identifying the listed projects within which the omitted projects were supposedly included, the witnesses testified inconsistently. For example, one witness testified that the patio project was included in the emergency room expansion project listed in the application. Another witness claimed that the patio enclosure was included in an equipment purchase category. Based on the testimony, it is more likely that the patio enclosure was neither a part of an emergency room expansion nor equipment purchase, but was a separate construction project which was omitted from the CON application. Similarly inconsistent explanations were offered for the other projects which were omitted from the capital projects list. The testimony was not credible. The capital projects omitted from the list do not affect the ability of NCH to implement the CON sought in this proceeding. The parties stipulated to the fact the NCH has sufficient financial resources to construct and equip the proposed project. As part of the CON application, NCH was required to submit a pro forma income statement for the time period during which the bed additions would take place. The application failed to include a pro forma statement for the appropriate time period. Based on the stipulation of the parties that the costs and methods of the proposed construction are reasonable, and that NCH has adequate resources to fund the project, the failure to include the relevant pro forma is immaterial. Pursuant to applicable methodology, the AHCA calculates numeric acute care bed need projections for each subdistrict's specific planning period. Accordingly, the AHCA calculated the need for additional acute care beds in district 8, subdistrict 2 for the July, 1996 planning horizon. The results of the calculation are published by the agency. The unchallenged, published fixed need pool for the planning horizon at issue in this proceeding indicated that there was no numeric need for additional acute care beds in district 8, subdistrict 2, Collier County, Florida, pursuant to the numeric need methodology under Rule 59C-1.038 Florida Administrative Code. The CON application filed by NCH is based on the peak seasonal demand experienced by hospitals in the area during the winter months, due to part-time residents. NCH asserts that the utilization of acute care beds during the winter months (January through April) results in occupancy levels in excess of 75 percent and justifies the addition of acute care beds, notwithstanding the numerical need determination. Approval of the CON application is not justified by the facts in this case. The AHCA's acute care bed need methodology accounts for high seasonal demand in certain subdistricts in a manner which provides that facilities have bed space adequate to accommodate peak demand. The calculation which requires that the average annual occupancy level exceed 75 percent reflects AHCA consideration of occupancy levels which rise and fall with seasonal population shifts. The applicant has not challenged the methodology employed by the AHCA in projecting need. Peak seasonal acute care bed demand may justify approval of a CON application seeking additional beds if the lack of available beds poses a credible threat of potentially negative impact on patient outcomes. The peak seasonal demand experienced by NCH has not adversely affected patient care and there is insufficient evidence to establish that, at this time, such peak demand poses a credible threat of potential negative impact on patient outcomes in the foreseeable future. There is no dispute regarding the existing quality of care at Naples, North Collier, Southwest or any other acute care hospital in district 8. The parties stipulated that NCH has the ability to provide quality of care and a record of providing quality of care. In this case, the applicant is seeking to convert existing beds from a classification of "observation" to "acute care". The observation beds NCH proposes to convert are equipped identically to the acute care beds at NCH. Approval of the CON application would result in no net increase in the number of licensed beds. NCH offered anecdotal evidence suggesting that delays in transferring patients from the Naples emergency room to acute care beds (a "logjam") was caused by peak seasonal occupancy rates. There was no evidence offered as to the situation at the North Collier emergency room. The anecdotal evidence is insufficient to establish that "logjams" (if they occur at all) are related to an inadequate number of beds identified as "acute care" at NCH facilities. There are other factors which can result in delays in moving patients from emergency rooms to acute care beds, including facility discharge patterns, delays in obtaining medical test results and staffing practices. NCH asserted at hearing that physicians who refer patients to NCH facilities will not refer such patients to other facilities. The evidence fails to establish that such physician practice is reasonable or provides justification for approval of CON applications under "not normal" circumstances and further fails to establish that conditions at NCH are such as to result in physicians attempting to locate other facilities in which to admit patients. The rule governing approval of acute care beds provides that, prior to such approval, the annual occupancy rate for acute care beds in the subdistrict or for the specific provider, must exceed 75 percent. This requirement has not been met. Applicable statutes require that, in considering applications for CON's, the AHCA consider accessibility of existing providers. The AHCA- established standard provides that acute care bed accessibility requirements are met when at least 90 percent of the residents in an urban subdistrict are within a 30 minute automobile trip to such facilities. At least 90 percent of Naples residents are presently within a 30 minute travel time to NCH acute care beds. The number of acute care beds in the subdistrict substantially exceed the demand for such beds. Additional beds would result in inefficient utilization of existing beds, would further increase the current oversupply of beds, would delay the time at which need for additional beds may be determined and, as such, would prevent competing facilities from applying for and receiving approval for such beds. The financial feasibility projections set forth in the CON application rely on assumptions as to need and utilization projections which are not supported by the greater weight of the evidence and are not credited. Accordingly, the evidence fails to establish that the addition of 35 acute care beds to NCH facilities is financially feasible in the long term or that the income projections set forth in the CON application are reasonable. As to projections related to staffing requirements and costs, the beds are existing and are currently staffed on a daily, shift-by-shift basis, based on patient census and acuity of illness. There is reason to believe that the staffing patterns will remain fairly constant and accordingly the projections, based on historical data, are reasonable. Generally stated, where there is no numeric or "not normal" need for the proposed addition of 35 acute care beds in the relevant subdistrict, it could be predicted that the addition of acute care beds would exacerbate the oversupply of available beds and could cause a slight reduction in the occupancy levels experienced by other providers. In this case, the market service areas are sufficiently distinct as to suggest that such would not necessarily be the result. However, based on the lack of need justifying approval of the CON application under any existing circumstances, it is unnecessary to address in detail the impact on existing providers. The state and district health plans identify a number of preferences which should be considered in determining whether a CON application should be approved. The plans suggest that such preferences are to be considered when competing CON applications are reviewed. In this case there is no competing application and the applicability of the preferences is unclear. However, in any event, application of the preferences to this proposal fail to support approval of the application.
Recommendation RECOMMENDED that a Final Order be entered DENYING the application of Naples Community Hospital, Inc., for Certificate of Need 6797. DONE and RECOMMENDED this 19th day of March, 1993 in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of March, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-1510 To comply with the requirements of Section 120.59(2), Florida Statutes, the following constitute rulings on proposed findings of facts submitted by the parties. Petitioner The Petitioner's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 3-4, 6-8, 16-20, 29-36, 38, 41, 44, 47, 49-61, 80, 88, 95-96, 100, 104, 108, 117-119, 122-125, 127, 134-138. Rejected as unnecessary. 15. Rejected as irrelevant. Peak seasonal demand is accounted for by the numeric need determination methodology. There is no credible evidence which supports a calculation of three years of four month winter occupancy to reach a 12 month average occupancy rate. 21-27, 37, 42-43, 62-64, 66, 97, 99, 101-103, 105-107, 109, 120-121, 126. Rejected as not supported by the greater weight of credible and persuasive evidence. 28. Rejected as not supported by the greater weight of credible and persuasive evidence and contrary to the stipulation filed by the parties. Rejected as not supported by greater weight of credible and persuasive evidence which fails to establish that the transfer of patients from emergency room to acute care beds is delayed due to numerical availability of beds. Rejected as not supported by greater weight of credible and persuasive evidence which fails to establish that the alleged lack of acute care beds is based on insufficient number of total beds as opposed to other factors which affect bed availability. Rejected as immaterial and contrary to the greater weight of the evidence Rejected as immaterial and contrary to the greater weight of the evidence which fails to establish reasonableness of considering only a four month period under "not normal" circumstances where the period and the peak seasonal demand are included within the averages utilized to project bed need. 86. Rejected as cumulative. 114. Rejected as unsupported hearsay. Respondent/Intervenor The Respondent and Intervenor filed a joint proposed recommended order. The proposed order's findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 6, 45, 51, 53, 59-67, 69-70, 94-113. Rejected as unnecessary. 16. Rejected as to use of term "false", conclusion of law. 58. Rejected as not clearly supported by credible evidence. 71-93, 114-124. Rejected as cumulative. COPIES FURNISHED: Douglas M. Cook, Director Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, Esquire Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 W. David Watkins, Esquire Oertel, Hoffman, Fernandez, & Cole Post Office Box 6507 Tallahassee, Florida 32314-6507 Edward G. Labrador, Esquire Thomas Cooper, Esquire Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308 John D.C. Newton, II, Esquire Aurell, Radey, Hinkle, Thomas & Beranek Monroe Park Tower, Suite 1000 101 North Monroe Street Post Office Drawer 11307 Tallahassee, Florida 32302
The Issue The issue in these consolidated cases is whether proposed amendments to Rule 10-5.011(1)(o), and (p) F.A.C. relating to certificates of need for hospital inpatient general psychiatric services, are invalid exercises of delegated legislative authority, as defined in Section 120.52(8), F.S.
Findings Of Fact Metamorphosis of the Rules Prior to 1983, hospitals were not separately licensed, and certificates of need (CON) were not required for the designation of beds for psychiatric and substance abuse services. In 1983, statutory amendments to Chapter 381, F.S. addressed psychiatric beds as reviewable projects in the CON program. In 1983, HRS adopted rules establishing four new categories of beds, now found in Rules 10-5.011(1)(o), (p), and (q), F.A.C.: Short-term psychiatric, long-term psychiatric, and short and long-term substance abuse. At the time that the categories were created, HRS conducted an inventory of the hospitals, asking how many beds were designated in each category. Based on the responses, published in the Florida Administrative Weekly, future projections of need were made and applications were considered for CONs. Another category of psychiatric beds was not included in the 1983 rules. Intensive residential treatment programs for children and adolescents were created by statute in 1982, and are defined in Section 395.002(8), F.S. as: a specialty hospital accredited by the Joint Commission on Accreditation of Hospitals which provides 24-hour care and which has the primary functions of diagnosis and treatment of patients under the age of IS having psychiatric disorders in order to restore such patients to an optimal level of functioning. These facilities, called IRTFs, may become licensed as hospitals pursuant to Section 395.003(2)(f), F.S., but as hospitals they must obtain CON approval pursuant to Sections 381.702(7) and (12), F.S. and Section 381.706(1) (b), F.S. IRTFs have no statutory or regulatory restrictions on length of stay and were approved by HRS at one time under an unwritten policy that there be one such facility available in each HRS planning district, without regard to the availability of other long or short term psychiatric programs. In 1985, HRS proposed a rule amendment which would have eliminated the short and long term distinction, as well as the distinction between psychiatric services and substance abuse services. Six months later, the proposed rule amendment was withdrawn. It was highly controversial; several challenges were filed; objections were made by various local health councils; and a new administrator took over. The agency decided to rework its proposed change~;. The agency next began the process of revision in 1987, and in 1988 convened a workshop group to review an issue paper prepared by agency staff. Another work group met in 1989 to consider the consolidation of psychiatric and substance abuse rules. HRS staff reviewed literature on the subjects of substance abuse and psychiatric services, including literature relating to access by indigent patients and the provision of services to children and adolescents. Staff prepared rule drafts which were circulated in- house, including the alcohol, drug abuse and mental health program office; and to such outside groups as the Association of Voluntary Hospitals of Florida, the Florida Hospital Association and the League of Hospitals. The proposed rule amendments which are the subject of this proceeding were filed on January 19, 1990 (substance abuse), and on January 26, 1990 (inpatient psychiatric services) in the Florida Administrative Weekly. The Parties HRS administers the CON program pursuant to Section 381.701, et seq., F.S. (1989). The CON program regulates entry into the Florida health care market by providers through review and approval of certain capital expenditures, services and beds. The petitioner, Florida League of Hospitals, Inc. is a nonprofit corporation which is organized and maintained for the benefit of investor-owned hospitals which comprise its membership. The remaining petitioners and intervenors are current providers of hospital inpatient psychiatric services, long and short term, and of inpatient substance abuse services, long and short term. The petitioners and intervenors are all substantially affected by the proposed rules and have stipulated to the standing of all parties in this proceeding. Abolishing Distinctions Between Long-Term & Short-Term Psychiatric Beds "Short term hospital inpatient psychiatric services" is defined in existing rule 10-5.011(1)(o)1, FAC, as follows: Short term hospital inpatient psychiatric services means a category of services which provides a 24-hour a day therapeutic milieu for persons suffering from mental health problems which are so severe and acute that they need intensive, full-time care. Acute psychiatric inpatient care is defined as a service not exceeding three months and averaging length of stay of 30 days or less for adults and a stay of 60 days or less for children and adolescents under 18 years. "Long term psychiatric services" is defined in existing rule 10- 5.011(1)(p)1., FAC as a category of services which provides hospital based inpatient services averaging a length of stay of 90 days. Neither rule addresses services to adults with an average length of stay (ALOS) of 30-90 days, or services to children and adolescents with a 60-90 day ALOS. Because of this, and the "averaging" process, long term hospitals legitimately serve "short term" patients and short term hospitals may serve "long term" patients. One party has calculated than a long term facility could legally provide short term services for 80% of its patients, and long term services for only 20% of its patients and still have an ALOS of 90 days. Under the existing rules a facility must file a CON application to convert from long term to short term beds, or vice versa, and is subject to sanctions for failure to comply with the designation on its CON. The proposed changes would repeal rule 10-5.011(1) (p), FAC regarding long term services, and would amend rule 10- 5.011(1) (o), FAC to delete the definition of short term services, thereby permitting facilities to serve patients without regard to length of stay. The proposed changes are supported by several factors upon which a reasonable person could rely. Substantial changes have occurred in the last decade in clinical practices and in third party reimbursement to reduce the ALOS for hospital inpatient psychiatric care. Prior to the 1960s, there was no distinction between long and short term care, as all hospital based care was long term with an emphasis on psychoanalytic therapy. Beginning in the 1960s, the concept of community mental health programs evolved with an emphasis on deinstitutionalization of patients in large public "asylums" and with a goal of treatment in the least restrictive environment. In more recent years the trend has spread to the private sector. Improvements in the availability and use of psychiatric drugs, the use of outpatient care or partial hospitalization, and improved follow up care have led to a dramatic decrease in ALOS. Long term care is costly, and whether third party payors have been a driving force, or are merely responding to the trends described above, long term inpatient reimbursement is virtually nonexistent. During the 19805, most insurance companies imposed a 30-day limit on psychiatric inpatient care or imposed monetary limits which would have effectively paid for less than a 90-day term. CHAMPUS, the program providing insurance to military dependents, was providing long term coverage in 1982, but by 1986 its coverage was rarely available for more than 30-60 days, and today, under CHAMPUS' case management system, 30 days is a "luxurious amount". Other large third-party payors such as Blue Cross/Blue Shield have similar limits or aggressively use case management (the close scrutiny of need on a case by case basis) to limit reimbursement for inpatient care. Of the two or three long term facilities in existence at the time that HRS' rules were originally adopted, only one, Anclote Manor still reported an ALOS of over 90 days by 1989, dropping from an ALOS of 477.9 days in 1986 to 145.4 days in 1989. At the same time its occupancy rate dropped below 50%. There is an interesting dialogue among experts as to whether there still exists a clinical distinction between long term and short term inpatient psychiatric care. Studies at the Florida Mental Health Institute found no difference in rate of rehospitalization over a 12 month period between patients who were in a nine week program and patients from Florida State Hospital with a 500 day length of stay. Some mental health practitioners are looking now at treating the chronic psychiatric patient with repeated short term hospital stays and less intensive care between episodes, rather than a single long term inpatient stay. Other practitioners maintain that a long term psychiatric problem is behavioral in nature and requires a total life readjustment and longer length of stay. Whichever practice may be preferable, the facts remain that fewer and fewer mental patients are being treated with long term hospitalization. The proposed rules would not foreclose any facility from providing long term care, if it finds the need. To the extent that a clinical distinction exists between short and long term care, the existing rules do not address that distinction, except from a wholly arbitrary length of stay perspective. The existing rules no longer serve valid health care objectives. Existing providers with short term CONs are concerned that the allowing long term facilities to convert will further glut an underutilized market and will result in an increase in vacant beds and a rise in the cost of health services, contrary to the intent of the CON program. Intensive residential treatment facilities (IRTFs), which will be folded into the need methodology for children and adolescent beds, have no current restrictions on length of stay and may already compete with impunity with the short term providers. Moreover, long term facilities are also providing substantial short term care as a result of the trends discussed above. HRS has not consistently enforced the length of stay restrictions of long term providers' CONs. Whether those CONs were improvidently granted is beside the point. The capital costs have already been incurred; the beds are available; and the beds are being used, in part, for short term services. Abolishing the distinction is a rational approach to current conditions. And in determining that all existing providers would be placed in the same position regarding length of stay, HRS avoids the regulatory nightmare of trying to enforce limitations on existing providers and approving new beds without limitations. Creating a Distinction Between Adult and Children/Adolescent Beds Rule 10-5.011(1)(o)3.c. creates a CON distinction between general psychiatric services for adults, and those services for children and adolescents. Rule 10-5.011(1)(o)4., as proposed, would create separate need criteria for hospital inpatient general psychiatric services for adults and for children/adolescents. Adolescents are defined in Rule 10- 5.011(1)(o)2.a., as persons age 14 through 17 years. Persons over 17 years are adults, and under 14 years are children. There are valid clinical reasons to distinguish between programs fob the separate age groups. Although there is some overlap, differing therapies are appropriate with different ages. The types of services offered to adults are not the same as those which are offered to children. Children, for example, often receive academic educational services while being hospitalized. Adults receive career or vocational counseling and marriage counseling. The required separation by age categories would remove some flexibility from providers. However, this is offset by the Department's valid need to track for planning purposes inpatient services to children and adolescents separately from those provided to adults. Based on anecdotal evidence, HRS' Office of Alcohol, Drug Abuse and Mental Health Program Office is concerned about the possible overutilization of hospital inpatient services for children and adolescents and the potential that when insurance reimbursement expires they are discharged without clinical bases. Taking Inventory Under the proposed rule, in order to separately regulate adult and children/adolescent beds, HRS will fix an inventory of uses as of the time that the rule takes effect. For facilities with CONs which already allocate beds between the two groups, the proposed rule will have no effect. For facilities without a designation, as long as adults and children/adolescents are kept in separate programs, the allocation can now be mixed and changed at will. The rule amendment will freeze that use in place. HRS has conducted a preliminary survey to determine the existing uses of psychiatric, substance abuse and residential treatment program beds. The survey of approximately 120 facilities is complete, but is not intended to limit those facilities unless their CON already provides a limit. A final inventory will be taken after the proposed rules become effective. The inventory will be published, and providers will be given an opportunity to contest its findings. The ultimate outcome will be amended CONs and licenses which reflect each facility's mix of adult and children/adolescent beds. The process is a fair and reasonable means of commencing separate regulation of services to these age groups. The Definitions Proposed rules 10-5.011(1)(o)2.1., 2.p., and 2.t.) define "hospital inpatient general psychiatric services", "psychiatric disorder" and "substance abuse", respectively. Each of these provisions defines the terms by reference to classifications contained in the Diagnostic and Statistical Manual of Mental Diseases (DSM-III-R Manual) and equivalent classifications contained- in the International Classification of Diseases (ICD-9 Codes). The rule as originally proposed included the phrase "or its subsequent revisions", after incorporating the manuals by reference. In testimony, and in the parties second agreement (Hearing Office exhibit 3) the phrase is deleted. However, it still appears in proposed rule 10-5.011(1) (o)2.1., perhaps inadvertently. The DSM-III-R is a generally recognized manual for the classification of mental disorders and is widely used by clinicians and medical records professionals to categorize the conditions of patients. The ICD-9 codes are broader than just mental disorders, but they have a section on mental disorders with numbers that are identical to those in the DSM-III-R. Although the manuals are complex and subject to interpretation, clinicians are accustomed to their use and they provide a reasonable guide as to the services which may be provided in an inpatient substance abuse program, as distinguished from an inpatient psychiatric program. Advertising Limited Proposed rule 10-5.011(1)(o)3.d. (as amended in the parties second agreement, Hearing Officer exhibit #3), provides: D. Advertising of services. The number of beds for adult or for children and adolescent hospital inpatient general psychiatric services shall be indicated on the face of the hospital's license. Beds in intensive residential treatment programs for children and adolescents which are licensed as specialty hospital beds will be indicated as intensive residential treatment program beds on the face of the hospital's license. Only hospitals with separately-licensed hospital inpatient general psychiatric services, including facilities with intensive residential treatment programs for children and adolescents which are licensed as specialty hospitals, can advertise to the public the availability of hospital inpatient general psychiatric services. A hospital with separately licensed hospital inpatient general psychiatric services that does not have a certificate of need for hospital inpatient substance abuse services may advertise that they [sic] provide services for patients with a principal psychiatric diagnosis excluding substance abuse and a secondary substance abuse disorder. The Department does not currently have CON, licensure, or other rules which limit the ability of a health care provider to advertise its services, and has never used advertising as a factor in conducting CON review for any proposed services. HRS included provisions regarding advertising in its proposed rules because it had evidence that existing facilities have used misleading advertisements. The evidence came from other providers, rather than consumers. However, it is the consumer whom the agency feels may be confused by advertising which implies that services are available when such services cannot be legally provided under the facility's license. The advertising provision is prospective in nature, seeking to prevent licensed providers from advertising services for which they are not licensed. The provisions do not relate to CON review, and the staff is unclear as to how the rule would be implemented. Licensing and CON review are two separate functions within the agency. Although the term is not defined in the proposed rule, advertising broadly includes word of mouth referrals and public presentations by professionals in the community, as well as traditional media and written advertisements. Properly utilized, advertising helps consumers exercise choice and gain access to needed services. Improper advertising is subject to the regulation of federal and state agencies other than the department. New Need Methodology, with Preferences Proposed Rule 10-5.011(1)(o)4., deletes the existing population ratio methodology and creates a need formula based upon use rate, for adult and children/adolescent inpatient psychiatric services. Certain preferences are also described. 34. Rule 10-5.011(1) (o)4.e.(III) provides: In order to insure access to hospital inpatient general psychiatric services for Medicaid-eligible and charity care adults, forty percent of the gross bed need allocated to each district for hospital inpatient general psychiatric services for adults should be allocated to general hospitals. The same provision for children and adolescent services is found in rule 10-5.011(1)(o)4.h.(III). Medicaid reimbursement is not available for inpatient services in a specialty hospital. 35. Rule 10-5.011(1)(o)4.i. provides: Preferences Among Competing Applicants for Hospital Inpatient General Psychiatric Services. In weighing and balancing statutory and rule review criteria, preference will be given to applicants who: Provide Medicaid and charity care days as a percentage of its total patient days equal to or greater than the average percentage of Medicaid and charity care patient days of total patient days provided by other hospitals in the district, as determined for the most recent calendar year prior to the year of the application for which data are available from the Health Care Cost Containment Board. Propose to serve the most seriously mentally ill patients (e.g. suicidal patients; patients with acute schizophrenia; patients with severe depression) to the extent that these patients can benefit from a hospital-based organized inpatient treatment program. Propose to service Medicaid-eligible persons. Propose to service individuals without regard to their ability to pay. Provide a continuum of psychiatric services for children and adolescents, including services following discharge. The preferences are similar to those in CON rules relating to other types of health services and are intended to implement, in part, the legislative mandate that the agency consider an applicant's ". . . past and proposed provision of health care services to medicaid patients and the medically indigent." Section 381.705(1) (n), F.S. Under Medicaid reimbursement general hospitals are paid a set per diem based on a variety of services provided to all Medicaid patients, regardless of actual cost of the individual service. As psychiatric services are generally less costly than other services on a per diem basis, hospitals may recoup a greater percentage of their costs in serving Medicaid psychiatric patients. This and the fact that public hospitals receive some governmental subsidies do not obviate the need for incentives in the CON program. Not all of the charity care provided by these hospitals is funded and a large amount is written off. Although Petitioners argue that the preferences are not needed, or are too generous, none provide competent evidence that the facilities who do not enjoy the preferences are unduly prejudiced. The 40% allocation of bed need to general hospitals is a guideline, not a maximum, as applied by the agency, and presumes that there are general hospitals competing in any batch in question. It is not intended to frustrate a separate section of the rule which allows a hospital with at least an 85% occupancy rate to expand regardless of need shown in the formula and the occupancy rate district-wide. See 10- 5.011(1) (o)4.d. and g. "Evaluation of Treatment Outcomes" The proposed rules contain three provisions relating to a hospital's evaluation of its patients' treatment outcomes. Rule 10-5.011(1) (o)3.i, includes among "required services", ". . . an overall program evaluation of the treatment outcomes for discharged patients to determine program effectiveness." Rule 10-5.011(1)(o)8.j., requires in the application, A description of the methods to be used to evaluate the outcome of the treatments provided and to determine the effectiveness of the program, including any summary evaluation outcome results for hospital inpatient psychiatric services provided at other facilities owned or operated by the applicant in Florida and other states. The data shall exclude patient specific information. Rule 10-5.011(1)(o)9.e., imposes a similar additional requirement in applications from providers seeking more beds: A summary description of any treatment outcome evaluation of the hospital inpatient general psychiatric services provided at the facility for which additional beds are requested, for children, adolescents or adults as applicable to the facility for the 12-month period ending six months prior to the beginning date of the quarter of the publication of the fixed bed need pool. The purpose of these requirements, according to HRS, is to insure that hospitals will know whether its patients are better off when they leave than when they were admitted to the program. Most hospitals have such knowledge. The terms, "outcome determination", "summary evaluation outcome results", "summary description of treatment outcome evaluation" and "overall program evaluation of treatment outcomes", are nowhere defined in the proposed rules, and the department intends to leave to each applicant or provider the methodology for determining whether its patients are "better off" for having been in its program. Hospitals do not routinely evaluate their patients after discharge and such follow up would be difficult and costly. Most hospitals do, however, establish a treatment plan upon admission, continue to review and revise that plan as needed throughout treatment, and determine the patients' readiness for discharge based on the goals successfully attained. This is the process described by Florida Hospital's Center of Psychiatry Administrative Director. The rules require no more than a description similar to that provided by Florida Hospital. The rules set no standards and do not dictate that follow- up of discharged patients be accomplished, even though post discharge evaluation may be of value and is generally accepted as the best tool for measuring treatment effectiveness. The measurement of treatment outcome is an inexact process and relies on a series of subjective standards which need to be described. HRS does not intend to set those standards and, other than have its applicants demonstrate that a process is in place, the agency has no idea how the required information will impact its CON review. Without definitions and standards, the agency will have no way of comparing one applicant's information with another's. Without specificity and more guidance the rules fail to apprise the applicant of what is required and will provide no meaningful information to the agency in its CON review function. Miscellaneous Provisions The Non-Physician Director. The proposed definition of "Hospital Inpatient General Psychiatric Services" in Rule 10-5.011(1) (o)2.1. includes services provided under the direction of a psychiatrist or clinical psychologist In drafting this definition, agency staff relied on advice from experts at their workshops and on advice from the agency's own Alcohol, Drug Abuse and Mental Health Program Office, to the effect that professionals, other than physicians, are qualified to direct the units. Interpretation and Application. It is not the intention of HRS that its rules be interpreted to override good medical practice or the sound judgement of treating physicians. Thus, the rules would not prohibit stabilization of a patient who is presented to the emergency room of a hospital without a CON for substance abuse or psychiatric services. Stabilized Alzheimers patients may be housed in nursing homes. Nor do the rules prohibit or subject to sanctions the occasional admission of a psychiatric or substance abuse patient to a non-substance abuse or psychiatric bed so long as this occurs infrequently in a hospital without psychiatric or substance abuse programs. "Scatter" beds are not eliminated. Those beds would continue to be licensed as acute-care beds, as they would not be considered part of an organized program, with staff and protocols, to provide psychiatric or substance abuse services. Proposed rule 10-5.011(1)(o)4.h.(v) provides that applicants for IRTPs for children and adolescents seeking licensing as a specialty hospital must provide documentation that the district's licensed non-hospital IRTPs do not meet the need for the proposed service. The department is not seeking specific utilization data in this regard, as such is not available. General information on the availability of alternatives to inpatient hospital services is obtainable from local health councils and mental health professionals in the community. Quarterly Reports. Proposed rule 10-5.011(1)(o)10. requires: Facilities providing licensed hospital inpatient general psychiatric services shall report to the department or its designee, within 45 days after the end of each calendar quarter, the number of hospital inpatient general psychiatric services admissions and patient days by age and primary diagnosis ICD-9 code. The Health Care Cost Containment Board (HCCCB) is already collecting similar quarterly data from providers. The reporting system is being updated and improved but in the meantime HRS is experiencing problems with the type and accuracy of the data it receives from HCCCB. One problem is that HCCCB collects its data with regard to all discharges in a psychiatric or substance abuse diagnostic category, whereas HRS is interested only in data from a psychiatric or substance abuse program. Until the system improves, HRS needs the information it seeks from the providers in order to plan and apply the need methodology. The agency intends to designate local health councils to collect the data and has already worked with them to set up a system. If reports provided to the HCCCB comply with the proposed requirement, HRS has no problem in receiving a duplicate of those reports. The Economic Impact Statement Pursuant to Section 120.54(2), F.S., HRS prepared an economic impact statement for the proposed rule. It was authored by Elfie Stamm, a Health Services and Facilities Consultant Supervisor with HRS. Ms. Stamm has a Masters degree in psychology and has completed course work for a Ph.D. in psychology. She has been employed by HRS for 13 years, including the last ten years in the Office of Comprehensive Health Planning. She is responsible for developing CON rules, portions of the state health plan, and special health care studies. It was impossible for Ms. Stamm to determine how the rule could impact the public at large. The economic impact statement addresses generally the effect of abolishing the distinction between long and short term services and acknowledges that the rule will increase competition among short term service providers. The impact statement also addresses a positive impact on current long term providers.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Based upon an agreement between the petitioner and the respondent, and a later addendum, petitioner received Certificate of Need Number 1460 in February of 1981 granting the petitioner the authority to construct 126 additional general medical/surgical beds but to only license and operate 72 of such beds. The instant proceeding involves petitioner's application for a Certificate of Need to license and operate the remaining 54 beds which have been previously constructed under Certificate of Need Number 1460. St. Joseph's Hospital is a 649-bed full service major referral hospital in Hillsborough County owned and operated by the Franciscan Sisters of Allegheny. Its services include a comprehensive community mental health center, a comprehensive pediatric unit with 88 beds, a radiation therapy center, a 60- bed community cancer center, cardiac catheterization, cardiac surgery and a large and active emergency room. It serves a considerable number of indigent patients and participates in the Medicaid and Medicare programs. Petitioner is now requesting permission to license the regaining 54 beds which were authorized to be constructed pursuant to Certificate of Need Number 1460. The project involves no additional construction or renovation inasmuch as all 126 beds previously authorized have been completed. No capital expenditure will be required in order to place the 54 beds into operation. If the Certificate of Need is granted, petitioner intends to create two specialty medical/surgical units: a 32-bed cardiac surgical unit to accommodate patients from the open heart surgical program and a 22-bed medical unit for psychiatric patients requiring medical treatment. There currently are no other beds available in the hospital to convert for use for the psychiatric patient or for the cardiac surgical unit. Petitioner has been operating, on occasion, at occupancy levels in excess of 90 percent. At times, it has been necessary to place non-emergency patients in the emergency room and have them remain there until beds become available. There are sometimes up to 40 patients on the waiting list for elective surgery. Due to the shortage of empty beds, petitioner cannot now admit new members to its medical staff. Steady operation of the hospital at occupancy levels exceeding 90 percent can have an adverse effect upon the efficiency of the nursing staff and the quality of care offered to patients. Because the bulk of projected growth in Hillsborough County is expected to occur in the center and northwestern area of the county, it is anticipated that the pattern of utilization of petitioner's facility will continue. While the licensing of the 54 additional beds involves no capital expenditure on petitioner's part, it is estimated that, if petitioner is not permitted to license these beds, a total yearly loss of over $3.8 million will be experienced. This figure is the sum of lost net revenues from the beds in the amount of $87,339 and lost net ancillary revenues in the amount of $2.36 million, as well as the absorption of $232,750 in yearly depreciation costs and $1.14 million in committed indirect costs. Petitioner anticipates a loss per patient day, calculated at 100 percent occupancy, of $16.82 if the licensing of the beds is not approved. This would result in an increase of current patient charges by 9.1 percent in order to maintain petitioner's budgeted profit margin. Petitioner is located in HRS District VI which, at the time of the hearing, was composed of Hillsborough and Manatee Counties. Some 81 percent of all beds in the District are located in Hillsborough County. As of the time of the hearing, the District had 3,899 licensed acute care beds, with 606 additional beds having been approved but not yet operational. The generally accepted optimum utilization rate for acute care beds is 80 to 85 percent. For District VI, the overall utilization rate is below the optimum level. In Manatee County, utilization of acute care beds is at 78.3 percent. In Hillsborough County, the utilization level is at 77.4 percent, with the major referral hospitals experiencing a higher level of utilization than the smaller community hospitals. Rule 10-5.11(23), Florida Administrative Code, contains the governing methodology for determining acute care bed needs of the various Districts. Applications for new or additional acute care hospital beds in a District will not normally be approved if approval would cause the number of beds in that District to exceed the number of beds calculated to be needed. Application of the Rule's formula to District VI results in a total acute care bed need of 3,622 projected for the year 1988. Given the 4,505 existing and approved beds in the District, there are 883 excess beds in District VI under the Rule's formula methodology for projecting need. The 1982 Health Systems Plan adopted by the Florida Gulf Health Systems Agency makes no bed need projections for other specialty medical/surgical beds," but shows no need for medical/surgical beds. Rule 10-5.11(23), Florida Administrative Code, provides that other criteria may result in a demonstration of bed need even when the formula approach illustrates no need for beds. When additional beds are approved pursuant to other criteria, those beds are counted in the inventory of existing and approved beds in the area when applying the bed need formula to review future projects. The formula methodology does account for the inflow and outflow of patients in a specific area. While Rule 10-5.11(23) permits the Local Health Councils to adopt subdistrict bed allocations by type of service, the Council for District VI had not adopted its local health plan as of the date of the hearing in this matter. The Rule itself simply addresses the need for general acute care bed needs in the future.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the application of St. Joseph's Hospital, Inc. for a Certificate of Need to license 54 acute care medical/surgical beds be DENIED. Respectfully submitted and entered this 10th day of November, 1983, in Tallahassee, Florida. DIANE D. TREMOR, 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 10th day of November, 1983. COPIES FURNISHED: Ivan Wood, Esquire David Pingree Wood, Lucksinger & Epstein Secretary One Houston Center Department of Health and Suite 1600 Rehabilitative Services Houston, Texas 77010 1323 Winewood Boulevard Tallahassee, Florida 32301 Steven W. Huss, Esquire 1323 Winewood Boulevard, Suite 406 Tallahassee, Florida 32301
The Issue At issue in this proceeding is whether petitioner's request to modify its certificate of need from a 60-bed child/adolescent psychiatric hospital to a 45- bed child/adolescent and 15-bed adult psychiatric facility should be approved.
Findings Of Fact Case status In February 1993, petitioner, Martin H.M.A., Inc., d/b/a SandyPines Hospital (SandyPines), filed an application with the respondent, Agency for Health Care Administration (AHCA), for a modification of its certificate of need (CON) from a 60-bed child/adolescent psychiatric hospital to a 45-bed child/adolescent and 15-bed adult psychiatric hospital. Upon review, AHCA concluded that SandyPines' request could not be accommodated under the modification provisions of Rule 59C-1.019, Florida Administrative Code, and required certificate of need review. Accordingly, AHCA proposed to deny SandyPines' request, and these formal proceedings to review, de novo, the agency's decision were commenced at SandyPines' request. The applicant SandyPines is the holder of certificate of need number 4004 which authorized it to construct a 60-bed child/adolescent psychiatric facility. That facility was constructed and is currently in operation in Tequesta, Martin County, Florida. SandyPines is now, and has been since it commenced operations in January 1990, licensed as a Class III Special Psychiatric Hospital with 60 psychiatric child/adolescent beds. It has never provided adult inpatient psychiatric services and, until approximately October 18, 1993, had never provided any adult outpatient psychiatric services. The adult outpatient psychiatric services currently provided by SandyPines are not subject to CON review. SandyPines's fiscal problems When SandyPines opened in January 1990, no managed care organizations existed in its local market; however, with each passing year managed care has become more prevalent such that currently 45-50 percent of SandyPines admissions are covered by some form of managed care. This has significantly adversely affected SandyPines' revenues such that it lost approximately $600,000 last fiscal year and, absent increased occupancy levels, its continued viability is, at best, questionable. Indeed, if SandyPines continues to operate as currently configured, it projects a loss for the fiscal year ending September 30, 1994, of $1,099,777. Occupancy levels are low, however, for District IX as a whole, due in large measure to the demands for managed care. For the six-month period ending June 1993, the average occupancy rate for child/adolescent psychiatric beds was 35 percent and for adult psychiatric beds 65 percent. To address its faltering business, SandyPines has, as heretofore noted, begun to provide adult psychiatric services on an outpatient basis; however, unless it can combine inpatient adult psychiatric services with the program it is doubtful that its adult program will prove successful. In this regard, SandyPines offered proof, which is credited, that patients and their physicians are looking for what has been termed "one-stop shopping." The patient does not want to go to one facility for outpatient care and another facility for inpatient care, and the referring physicians would rather send all of their patients to one facility that offers a full spectrum of services. Therefore, from a marketing perspective, the addition of adult inpatient psychiatric services at SandyPines would have a positive effect. Whether modification of SandyPines' CON to allow inpatient adult psychiatric services will increase the hospital's daily census and utilization sufficiently to assure its viability is, at best, fairly debatable. To analyze the impact of redesignating 15 child/adolescent beds to 15 adult psychiatric beds, SandyPines made an assumption of an average daily census of 10.5 patients on the 15-bed adult psychiatric unit. Based on such assumption, SandyPines calculated a net income from that unit, for the fiscal year ending September 30, 1994, assuming it opened April 1, 1994, of $589,664, and a net loss for the facility as a whole of $510,113, as opposed to a net loss of $1,099,777 without the adult unit. Based on the same assumptions, SandyPines calculated a net income for the fiscal year ending September 30, 1985, for the adult unit at $1,111,008, and a net income for the facility as a whole with an adult unit at $44,980. As heretofore noted, SandyPines' ability to achieve an average daily census of 10.5 patients is, at best, fairly debatable. To SandyPines' credit, it has an active advertising and marketing department comprised of six people and its director of marketing and business development. This marketing group is constantly striving to develop relationships with referral sources and to develop programs to meet market needs and demands. There was, however, no proof of record to demonstrate any existent commitments in the community or any objective data to support the conclusion that SandyPines could reasonably expect to attain an average daily census of 10.5 patients. Moreover, four of SandyPines' potential competitors for adult psychiatric patients exhibited more than a 78 percent occupancy rate for the first six months of 1993, which may be reflective of among other attributes, a strong existent referral pattern, and the overall District average was only 65 percent, which reflects significant unused capacity. On balance, the proof is not compelling that SandyPines could achieve the occupancy levels it projected. Whether SandyPines achieved its projected occupancy levels for adult services or some lesser level would not, however, significantly adversely impact existing providers. Moreover, the redesignation of beds and the necessary modification of the facility to meet required legal standards of separation of adult and child/adolescent units would require no more than $50,000-$80,000; a capital expenditure well below that which would require CON review. Is modification appropriate Pertinent to this case, Rule 59C-1.109, Florida Administrative Code, provides: A modification is defined as an alteration to an issued, valid certificate of need or to the condition or conditions on the face of a certificate of need for which a license has been issued, where such an alteration does not result in a project subject to review as specified in . . . subsection 408.036(1) . . ., Florida Statutes. Subsection 408.036(1), Florida Statutes, provides in pertinent part: . . . all health-care-related projects, as described in paragraphs (a)-(n), are subject to review and must file an application for a certificate of need with the department. The department is exclusively responsible for determining whether a health-care-related project is subject to review under [ss.408.031-408.045]. * * * (e) Any change in licensed bed capacity. * * * (h) The establishment of inpatient institutional health services by a health care facility, or a substantial change in such services . . . * * * (1) A change in the number of psychiatric . . . beds. Finally, pursuant to the Legislature mandate of Section 408.034(3), Florida Statutes, to "establish, by rule, uniform need methodologies for health services and health facilities," AHCA has promulgated Rule 59C-1.040, Florida Administrative Code, which establishes discrete methodologies for calculating the need for the establishment of inpatient adult psychiatric services and inpatient child/adolescent psychiatric services, and provides for the identification of the number of hospital inpatient psychiatric beds for adults and children/adolescents by facility. As heretofore noted, SandyPines' license designates it as a "Class III Special Psychiatric hospital with 60 Psychiatric Child/Adolescent beds," and the inventory established pursuant to Rule 59C- 1.040(11), Florida Administrative Code, has identified SandyPines' beds as child/adolescent. Resolution of the parties' dispute as to whether SandyPines' proposed conversion of beds from child/adolescent to adult is subject to CON review under Section 408.036(1)(e), (h) and (l), Florida Statutes, and therefore not susceptible to modification under Rule 59C-1.109(1), resolves itself to an interpretation of Section 408.306(1), Florida statutes, and the provisions of Chapter 59C-1, Florida Administrative Code. SandyPines contends that hospital inpatient psychiatric services, as used in Chapter 408, Florida Statutes, and Chapter 59C-1, Florida Administrative Code, is a generic term for the treatment of psychiatric disorders and that its proposal to treat adults, as opposed to children/adolescents, is not a change in health services. Accordingly, SandyPines concludes that the proposed conversion does not constitute "[a] change in licensed bed capacity," "the establishment of inpatient institutional health services by a health care facility, or a substantial change in such services," or " change in the number of psychiatric beds," such that CON review would be required under Section 408.306(e), (h) and (l), Florida Statutes. Contrasted with SandyPines' position, AHCA interprets the foregoing provisions of law, when read in para materia, and with particular reference to Rule 59C-1.040, Florida Administrative Code, as establishing two discrete types of inpatient psychiatric services, to wit: child/adolescent and adult. The separate CON review criteria established by Rule 59C-1.040, Florida Administrative Code, for child/adolescent and adult inpatient psychiatric services is consistent with AHCA's interpretation. Indeed, the rule, among other things, establishes separate bed need methodologies, fixed need pools, bed inventories, utilization thresholds, and minimum unit sizes for child/adolescent and adult services. Granting SandyPines' request would run counter to these CON review criteria by, among other things, altering the District IX inventory of child/adolescent and adult psychiatric beds, as well as awarding adult psychiatric beds when there is no need under the established methodology. Finally, consistent with the provisions of Section 395.003(4), Florida Statutes, the agency has issued SandyPines a license "which specifies the service categories and the number of hospital beds in each bed category [60 psychiatric child/adolescent beds] for which [the] license [was issued]." Granting SandyPines' request would constitute a change in its "licensed bed capacity." Considering the foregoing provisions of law, it is concluded that the interpretation advanced by SandyPines is strained, and the interpretation advanced by AHCA is reasonable. Accordingly, it is found that SandyPines' proposed conversion of 15 child/adolescent psychiatric beds to 15 adult psychiatric beds is subject to CON review because such conversion constitutes "[a] change in licensed bed capacity," "the establishment of inpatient institutional health services by a health care facility, or a substantial change in such services," or "a change in the number of psychiatric beds." Section 408.036(e), (h) and (l), Florida Statutes
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be rendered denying SandyPines' request to modify its certificate of need from a 60-bed child/adolescent psychiatric hospital to a 45-bed child/adolescent and 15-bed adult psychiatric facility. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 14th day of March 1994. WILLIAM J. KENDRICK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of March 1994.
The Issue Whether Petitioner's application for a Certificate of Need for a 50-bed addition to the Ormond Beach Hospital should be approved, pursuant to Chapter 381, Florida Statutes. This case involves petitioner's application for a certificate of need to expand, renovate, and consolidate ancillary service areas, and a 50-bed addition to its hospital. Respondent approved the application and issued a certificate of need for all aspects of the project except the 50-bed addition which it found would be inconsistent with the current health systems plan of Health Systems Agency of Northeast Florida, Inc., and because it determined that there was not a need for the additional beds in Volusia County. Petitioner filed its request for a Chapter 120 hearing. Thereafter, Intervenor Daytona Beach General Hospital, Inc., an orthopedic hospital located in Daytona Beach, petitioned for and was granted intervention in the proceeding over the objection of petitioner. During the course of the extensive hearing in this case, 15 witnesses testified in behalf of Petitioner, two were called by respondent, and four by the Intervenor. Eighty-seven exhibits were admitted in evidence. Exhibit 68 was withdrawn by stipulation of the parties.
Findings Of Fact Petitioner is a licensed 81-bed non-profit osteopathic general acute care hospital located at 264 South Atlantic Avenue, Ormond Beach, Florida. It is located on a site of approximately 4.6 acres bordered by Highway A1A on the east and Ormond Parkway on the north. The hospital plant consists of three buildings which have been joined together. One is a one-story dietary building that was originally a restaurant. A two-story building was built in 1970, and a one-story structure was built in 1954 and added to in 1960 and 1967. Other buildings owned by the hospital are adjacent residential homes on the premises which are used for storage, laundry, and other purposes. (Testimony of Hull, Exhibits 1-2, 13, 30, 59, 70) By a series of letters commencing on January 25, 1979, Petitioner advised Respondent's Office of Community Medical Facilities and the Health Systems Agency of Northeast Florida Area 3, Inc. (HSA) of its intent to expand and modernize its hospital and increase bed capacity. The last letter of intent was dated July 24, 1979. On September 21, 1979, Petitioner submitted its Certificate of Need Project Review Application to Respondent which included a request to increase the hospital's bed capacity from 81 to 161 beds. By letter of September 25, 1979, Respondent requested further information and, on December 11, 1979, Petitioner complied with the request and revised its application to seek only 50 additional beds. The proposed expansion and modernization plan included construction of a two-story addition to provide approximately 39,500 additional square feet, and renovation of approximately 22,000 square feet. Completion of the project would raise the hospital's total square footage of 39,350 to approximately 79,000 square feet. Incident to its request for additional beds, Petitioner proposes to initiate a 6-bed obstetrical unit at the hospital. (Exhibits 1-2, 7, 45-48) Petitioner's application was considered by various components of the HSA in January 1980, which resulted in a report and recommendations on the application which was filed with Respondent on February 25, 1980. During the course of the HSA's consideration of Petitioner's application at its several levels, representatives of Petitioner and the Intervenor appeared at the various meetings and presented their respective views regarding the application. The HSA report recommended approval of Petitioner's application for the renovation of its existing facilities and ancillary services, and approval of 44 additional beds. It further recommended that the state should take actions necessary to delicense a like number of beds within Petitioner's service area. The recommendation of 44 instead of 50 beds resulted from a finding that the proposed 6-bed obstetrical unit was not needed in the community in view of the probability that osteopathic physicians would likely be granted obstetric privileges in the future at allopathic facilities as a result of the enactment of legislation prohibiting the discrimination by particular provider professions against osteopathic physicians. The HSA found that although "Goal" DTS 1 in its Health Service Plan (HSP) which is used as a "guide" for health planning called for less than 4.3 acute care hospital beds per 1000 population with an overall average annual occupancy rate of at least 80 percent by 1984 in Health Service Area 3, it could approve additional beds for opening prior to 1984 if "extraordinary circumstances" exist as identified in "Goal" EA 2. It further found that Area 3 then had 5255 civilian acute care hospital beds, or a rate of 5.4 beds per 1000 population, with an average occupancy of 61 percent, and that, therefore, approval of additional beds, without cause, would be contrary to "Goal" DTS 1. However, the agency determined that extraordinary circumstances existed in Petitioner's case due to the fact that it had been operating for the past several years at an average occupancy of near or above 90 percent and that within its service area there existed in excess of 200 licensed medical surgical beds which were not staffed or used. The HSA therefore concluded that the situation denied ready access to acute care facilities to the citizens residing in Petitioner's service area. The HSA also considered that approval of the project would improve the effective and geographic distribution of beds and patient and physician accessibility in Volusia County because it was the only hospital located on the beach peninsula. It further found that the great number of elderly patients living in Volusia County and seasonal population fluctuations due to large numbers of tourists living in the area could be denied access to inpatient facilities if the project was not approved. As other extenuating factors, the HSA report stated that Petitioner had been granted prior certificates of need to expand its bed capacity, but that they had expired prior to implementation, that its inpatient facilities were antiquated, that denial of the beds would serve to deny access to patients of osteopathic facilities, and that federal law (PL 96-79) recognized that the need for additional or expanded osteopathic facilities should be determined on the basis of the need for and availability in the community for such services and facilities. (Testimony of Floyd, Hull, Exhibits 4, 8-12, 14, 59) By letter of March 28, 1980, Respondent's Administrator, Office of Community Medical Facilities, informed Petitioner that its application for certificate of need to expand, renovate and consolidate ancillary service areas at a total project cost of four million dollars was approved, and Certificate of Need Number 1236 was attached. The letter further advised petitioner that the proposed 50-bed addition was denied as being inconsistent with the current Health Systems Plan of the HSA, that there was not a need for the additional 50 beds in Volusia County as evidenced by facts contained in an attached State Agency Action Report, and that the extraordinary circumstances upon which the HSA recommended approval were not valid as evidenced by the same report. However, the referenced report was not submitted in evidence at the hearing, nor was any testimony adduced as to the rationale for the agency decision. By letter of May 28, 1980, Petitioner requested Respondent to increase the amount of the issued certificate of need to ten million dollars due to anticipated additional costs of construction and, by letter of July 24, 1980, Respondent advised Petitioner that the "cost over-run" had been approved and an amended copy of the Certificate of Need Number 1236 reflecting the additional cost was attached. (Testimony of Hull, Exhibits 57-58) Volusia County has eight hospitals of which six are allopathic and two are osteopathic. There are five hospitals in the Daytona Beach/Ormond Beach "coastal area" of the county which include Petitioner, Intervenor Daytona Beach General Hospital, Inc. (osteopathic), Ormond Beach Memorial Hospital, Daytona Community Hospital, and Halifax Hospital Medical Center. Two other hospitals in the county are Fish Memorial and West Volusia located in Deland. The remaining hospital is Fish Memorial at New Smyrna Beach. Petitioner is the only hospital on the beach peninsula which is connected to the mainland by several drawbridges. Daytona Beach General Hospital and Ormond Beach Memorial Hospital are located on the mainland in the northern "coastal area" several miles in distance from Petitioner. The remaining two hospitals in the area are within an average of 30 minutes driving time from Petitioner except during the peak tourist season of February to July each year, or when undue delays are experienced at the drawbridges. The HSA recognizes Petitioner's health service area to be Volusia County. In June 1979, the eight hospitals in Volusia County had a total of 1675 licensed beds, of which 1395 were open and staffed for use. Of the 378 osteopathic beds, only 178 were open and staffed. Occupancy of the licensed beds during the period July 1978 to June 1979 ranged from a low of 13.8 percent for Daytona Beach General Hospital to a high of 92 percent for Petitioner. The average occupancy of all licensed hospital beds was 51.2 percent. For the month of July, 1980, 1418 beds were open and staffed with 65.2 percent occupancy. Fish Memorial Hospital of New Smyrna Beach has a certificate of need for an additional 45 beds. In June 1979, all of Petitioner's licensed beds were staffed, but only 97 of Daytona Beach General Hospital's 297 licensed beds were staffed and available for use. Its patient population, however, has increased during the past year. In July 1978, Volusia County had a population of approximately 230,000 and therefore had about 7 acute care beds per 1,000 population. The 1980 preliminary census figures for the county showed the population to be 249,434 and it is projected that the final census figures will increase from one to two percent which would place the county population at between 252,000 and 254,000. If the higher figure is utilized, the bed ratio for the county at the present time would still be over 6 beds per 1,000 population. It is projected that the population of Volusia County will increase to 275,900 by 1984. If the current 1675 licensed beds remain the same, there would then be approximately 6 beds per 1,000 population. Approximately 25 percent of the Volusia County population consists of individuals who are 65 years of age or older whereas only some 9 percent of the population in the other six counties in HSA Area 3 are in that category. Although the HSA's plan arrived at its goal of 4.3 beds per 1,000 population for Area 3 in accordance with federal guidelines which allowed for adjustments in areas with referral hospitals, high tourism rates, and areas with greater than 12 percent of the population being 65 years of age or older, no further adjustment was made for Volusia County in spite of the fact that the Area 3 rate of about 13 percent of elderly population is about half that of the county. Further, the seasonal fluctuation as a result of tourists was not quantified on the basis of available statistics. However, in its justification for the 4.3 beds goal, the HSP makes note of the fact that Volusia County has 22 percent more patients per day during the high tourist months than during the lowest occupancy months of he year. On an average day in 1979, 73,000 tourists were in Volusia County which equated to approximately an additional 30 percent of the county population of 240,421. During the year 1979-80, about 22 percent of Petitioner's patients were residents of places other than Volusia County. However, there are no available statistics on the numbers of such persons who were inpatients. Most of the tourists seek only outpatient treatment for sunburn and minor injuries, although some undergo surgery during the months they are visiting the coastal area. (Testimony of Schwartz, Floyd, Smith, Hull, Clapper, Exhibits 3, 5-6, 18-26, 29, 51) Petitioner's application reflected that its 81 licensed beds were then utilized as medical/surgical (69 beds), intensive care (6 beds), and pediatrics (6 beds). The proposed additional 50 patient beds would be utilized as medical/surgical (29), intensive care (6), progressive care (4), pediatrics (3), obstetrical (6), and isolation (2). However, subsequent to filing its application, Petitioner discontinued its pediatric ward, and created 3 additional medical/surgical beds from the 6 former pediatric beds. (Testimony of Hull, Exhibit 2) The need for six additional intensive care beds and the initiation of a four-bed progressive care unit is to eliminate the past practice of prematurely transferring intensive care patients to other patient beds due to an insufficient number of intensive care beds. Such transfers required the conversion of semi-private into private rooms with additional equipment and nursing care which also reduced the total number of available beds within the hospital. Transfers of this nature were made extensively during the past fiscal year. (Testimony of Hull, Schwartz, Nargelovic, D'Assaro, Exhibit 2) The request in the application for two beds to serve as isolation rooms is based upon the fact that petitioner does not maintain any such rooms at the present time and it requires them to meet acceptable standards of health care. Currently, when isolation is necessary, a semi-private room is converted for the single patient requiring isolation, thus reducing the number of available beds. (Testimony of Schwartz, Hull, Nargelovic, Exhibit 2) Petitioner's request to establish a six-bed obstetrical unit is based upon its claim that such a unit is necessary to properly provide patients of osteopathic physicians with such a service and to provide full health care services which would not only attract new physicians to the hospital, but also enable Petitioner to conduct an intern training program. In addition, Petitioner is of the opinion that such a unit is necessary to provide service to patients living on the peninsula because the closest hospital providing obstetrical care is Halifax Hospital which is located on the mainland. The other obstetrical units are located at Fish Memorial Hospital at New Smyrna Beach and West Volusia Hospital at Deland which are some thirty miles away and do not conduct approved intern or residence programs for osteopathy. Halifax Hospital restricts staff privileges to those physicians who have met American Medical Association criteria and, therefore, osteopathic physicians generally are not eligible to utilize the obstetrical unit there. The HSA found that Petitioner projected 375 deliveries in its proposed obstetrics department during the third year of operation. The agency's HSP goal DTS 4.2 provides that no additional obstetrical departments should be approved in Volusia County until each existing department in the county is performing at least 1,000 deliveries annually. Only Halifax Hospital exceeds the 1,000 annual delivery standard. The HSA disapproved the requested obstetrical beds based upon its view that obstetrical beds at Halifax Hospital would eventually become available for use by osteopathic physicians. (Testimony of Schwartz, Hull, Rees, Exhibit 2-3, 6, 14, 54-55) Petitioner primarily bases its request for the additional 29 medical/surgical beds on the fact that it is the only hospital on the peninsula, has extreme seasonal demands placed on it by tourist population, and that the hospital census has been over 92 percent average occupancy during the past fiscal year. At times, the hospital has been filled to capacity, and has found it necessary to use "hall beds" to meet the need for emergency admissions. The crowded conditions have necessitated frequent delays in patient admissions or the referral of patients to other hospitals. A patient occupancy rate averaging 80-85 percent is normally acceptable, but Petitioner experiences a certain amount of inefficiency and lessened quality of care when over 80 percent of its beds are occupied. This is reflected in the difficulty of staffing and providing support services, and possible premature patient discharge. (Testimony of Schwartz, Hull, D'Assaro, Draper, Mason, Shoemaker, Exhibits 2, 51, 69) Although approximately 80 percent of Petitioner's patients reside in the coastal area of Volusia County, only some 29 percent reside in the northeastern part of the county where Petitioner's hospital is located. Petitioner currently has 27 osteopathic physicians on its staff, 18 of whom admit their patients principally to Ormond Beach Hospital and 7 admit there exclusively. Nineteen of the osteopathic physicians have staff privileges at other hospitals. Twenty-four allopathic physicians have staff privileges at Ormond Beach Hospital, but most are specialty consultants who admit less than one percent of Petitioner's patients. (Testimony of Schwartz, Floyd, Hull, D'Assaro, Exhibits 16-17, 60, 67) The quality of care provided patients at Ormond Beach Hospital is excellent, particularly in view of the antiquated physical plant and prevailing crowded conditions. These problems have led to the existence of a number of existing beds which do not conform to state fire, safety and other standards. It is planned that the majority of the existing beds will be located in a new building to provide room in the present buildings for expansion of ancillary and support facilities. The hospital is accredited by the American Osteopathic Association and by the Joint Commission on Accreditation of Hospitals. Accreditation by the Joint Commission indicates that a hospital provides an excellent standard of Health care. (Testimony of Draper, Boxx, Hull, Wisely, Mason, Shoemaker, D. Smith, Exhibits 1-2, 28-42, 49-50, 71-77) Petitioner is an osteopathic hospital whose Board of Directors is composed of osteopathic physicians. There are no physical differences between allopathic and osteopathic hospitals with the minor exception that the latter utilizes a table for manipulative therapy for some 20 to 30 percent of the patients. The primary difference between the two concepts is philosophical in nature. Osteopathy emphasizes a "wholistic" approach to medicine which stresses the importance of the musculoskeletal structure and manipulative therapy in the maintenance and restoration of health. It is family practice-oriented with about 75 percent of osteopathic physicians engaged in general practice rather than specialty medicine. Emphasis is placed upon personal attention by the physician to the patient. These factors produce a certain amount of patient preference for treatment in an osteopathic facility. (Testimony of Floyd, Schwartz, Wisely, Hull, Mason, Shoemaker, D. Smith, D'Assaro, Exhibit 78) Although the bylaws of two of the three allopathic hospitals located in the coastal area of Volusia County have recently been amended to permit osteopathic physicians to obtain staff privileges, certain vestiges of prior discrimination still exist due to the fact that hospital control is exercised by allopathic physicians, and that board certification is required which excludes many osteopathic physicians. The third hospital, Halifax, requires board certification in an American Medical Association approved specialty or residence program. As a consequence, only one osteopathic physician is on its staff. (Testimony of Draper, Hull, Porth, Helker, Rees, D. Smith, Exhibits 54, 63, 66) Daytona Beach General Hospital, Inc. is the other osteopathic hospital in the area which is located on the mainland several miles away from Ormond Beach Hospital. It has 297 licensed beds, but only 107 were staffed and open for use in July 1980. Its rate of occupancy in June 1979 was 13.8 percent of the licensed beds. The hospital has experienced past difficulties due to a substandard physical plant and inadequate staffing in certain areas. Although many osteopathic physicians decline to admit patients to the hospital, they generally agree that the standard of care is adequate, except for critical care cases. The hospital has sought in the past to attract additional patients by accepting staff applications from qualified area physicians. Daytona Beach General is accredited by The American Osteopathic Association and has pending an application for accreditation by the Joint Commission on Accreditation of Hospitals. (Testimony of Draper, Wisely, Boxx, Hull, D. Smith, Clapper, Solomon, Exhibits 27, 29-80) Petitioner has exerted efforts to acquire licensed hospital beds from other area hospitals to alleviate its shortage, but has been unsuccessful. Hospitals are reluctant to give up licensed beds even though they are not currently being utilized because they normally anticipate a need for them in future years. Although Daytona Beach General Hospital has been the subject of negotiations for sale with various entities, including Petitioner, in recent years, they have not been successful. None of the hospitals, including Petitioner, desires to share space in other hospitals due to the resulting lack of control over operations and procedures. Petitioner held a certificate of need for 84 beds in 1976 which it was forced to relinquish when it received a certificate of need for the proposed purchase of Daytona Beach General Hospital. (Testimony of Boxx, Hull, Porth, Hilker, Clapper, Rees, Draper, Exhibits 15, 28, 21-37, 43-44, 55-56) It is estimated that the renovation and expansion of Ormond Beach Hospital will take from 18 to 24 months to complete. Approval of additional beds will result in dividing construction expenses among a greater number of patients, thus lowering costs of health care. On the other hand, without the addition of hospital beds, an increase in patient costs is to be expected. The addition of new beds will be a positive factor in Petitioner's recruitment of osteopathic physicians to the area and in initiating an intern training program. It should also serve to increase Petitioner's competitive position among other area hospitals and provide a better quality of care for its patients. (Testimony of Draper, Boxx, Hull, D. Smith, Clapper)
Recommendation That the application of Petitioner for a certificate of need for a 50 acute-care bed addition to its facility be approved in part for 38 additional acute-care beds. DONE and ENTERED this 6th day of April, 1981, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of April, 1981. COPIES FURNISHED: Eric J. Haugdahl, Esquire Department of HRS 1323 Winewood Boulevard Tallahassee, Florida 32301 Bernard H. Dempsey, Jr., Karen L. Goldsmith, Esquires Suite 610 Eola Office Center 605 East Robinson Street Orlando, Florida 32801 L. LaRue Williams, and Glenn R. Padgett, Esquires Kinsay, Vincent, Pyle, Williams and Tumbleson 52 South Peninsula Drive Daytona Beach, Florida 32018 Honorable Alvin Taylor Secretary, Department of HRS 1323 Winewood Boulevard Tallahassee, Florida 32301 =================================================================
The Issue Whether there is a need for an additional 31 short-term psychiatric beds for Broward County?
Findings Of Fact I. General. History of Case. In June of 1984, the Petitioner filed an application with the Respondent for a certificate of need to add 31 short- term psychiatric beds to its existing facility. The certificate of need sought by the Petitioner was assigned certificate of need #3372 by the Respondent. The Respondent denied the Petitioner's application for certificate of need #3372. On October 25, 1984, the Petitioner filed a Petition for Formal Administrative Hearing with the Respondent challenging its proposed denial of the Petitioner's application. The Petition was filed with the Division of Administrative Hearings by the Respondent and was assigned case number 84-4037. Biscayne, Memorial and Charter were granted leave to intervene by Orders dated January 28, 1985, April 26, 1985 and July 9, 1985, respectively. The final hearing was held on November 19 and 21, 1985 in Ft. Lauderdale, Florida and February 24 and 25, 1986 in Tallahassee, Florida. The Petitioner's Proposal. The Petitioner originally sought to add 31 short-term psychiatric beds to its existing facility. If approved, the additional beds would have increased its current licensed beds from 334 to 365 beds. The Petitioner proposed to meet projected need for short-term psychiatric beds in Broward County for 1989. In its original application, the Petitioner proposed to provide services to children, adolescents, adults and the elderly. No distinct psychiatric units were proposed. The total cost of the original proposal was estimated to be $209,368.00. At the final hearing, the Petitioner proposed to relinquish 31 medical/surgical beds and to add 31 short-term psychiatric beds to meet projected need for short-term psychiatric beds in Broward County for 1989. The Petitioner will end up with a total of 334 licensed beds, the same number it now has, if its application is approved. The total cost of the proposal presented at the final hearing was $337,169.00, which is accurate and reasonable. The 31 proposed beds will be divided into a 15-bed dedicated adolescent unit and a 16-bed dedicated geropsychiatric unit. Adults will generally not be treated by the Petitioner. Involuntary admissions will be treated by the Petitioner, although there was some evidence to the contrary. The sixth floor of the Petitioner's existing facility will be converted into space for the new psychiatric units. The Petitioner changed the estimated staffing for its proposal between the time it filed its original application and the final hearing. The changes were not significant. During the 1985 legislative session, the Florida Legislature enacted Section 394.4785(1)(b), Florida Statutes (1985). This,, Section requires that most adolescents be separated from other patients for purposes of psychiatric treatment. Some of the modifications of the Petitioner's application which were made at the final hearing were made in order to conform with this Section. The changes in the Petitioner's proposal which were made between the time it filed its original application with the Respondent and the time of the final hearing are not substantial enough to require that the Petitioner's application, as modified, be remanded to the Respondent for further consideration. The Parties; Standing. The Petitioner is a 334-bed, for-profit, general acute-care hospital. The Petitioner is a full service hospital providing general medical services. The Petitioner has a medical staff of more than 400 physicians, including a department of psychiatry. The Petitioner is owned by National Medical Enterprises, one of the largest health care providers in the country. The Petitioner is located in Hollywood, Florida, which is located in the southern portion of Broward County, Florida. Broward County is the only County in the Respondent's service district 10. The Petitioner's primary service area consist of the southern portion of Broward County from State Road 84 in the North to the Broward-Dade County line in the South. Memorial is a not-for-profit general acute care hospital located in southern Broward County. Memorial holds License #1737, issued on June 1, 1985, which authorizes Memorial to operate 74 short-term psychiatric beds. This license is valid for the period June 1, 1985 to May 31, 1987. Memorial was also authorized to operate 74 short-term psychiatric beds in its license issued for the 2-year period prior to June 1, 1985. Memorial is located a short distance from where the Petitioner is located in southern Broward County. Memorial and the Petitioner share the same general primary service area. Most of the physicians on the staff at Memorial are also on the Petitioner's staff. Memorial is subsidized by tax revenues for providing indigent care for southern Broward County. About 17 percent of Memorial's revenue is attributable to bad debt and indigent care. If the Petitioner's application is approved it is likely that the Petitioner will take patients from Memorial. It is also likely that the patients taken from Memorial will be other than indigent patients. If the Petitioner were to achieve a 75 percent occupancy rate and 50 percent of its patients come from Memorial, Memorial would lose a little over $1,000,000.00 in terms of 1985 dollars. It is unlikely, however, that the Petitioner will achieve an occupancy rate of 75 percent and, more importantly, it is unlikely that 50 percent of the Petitioner's patients will come from Memorial. The loss of patients from Memorial which would be caused by approval of the Petitioner's application will, however, result in a financial loss to Memorial which may effect its ability to provide quality care. Additionally, the loss in paying patients could increase the percentage of indigent patients at Memorial and, because a portion of the cost of caring for indigents is covered by paying patients at Memorial, could result in a further loss in revenue and an increase in tax support. The public may have difficulty accepting a public hospital, such as Memorial, as a high-quality hospital if the public hospital is perceived to be a charity hospital. It is therefore important for a public hospital to attract a significant number of paying patients to its facility to avoid such an image. It is unlikely that the number of patients which may be lost to the Petitioner by Memorial is sufficient to cause the public to perceive that Memorial is a charity hospital. Biscayne is a 458-bed, general acute-care hospital located on U.S. 1 in northern Dade County, Florida, just south of the Broward County line. Biscayne's facility is located within about 5 miles of the Petitioner's facility. Biscayne is about a 5 to 10 minute drive from the Petitioner. Dade County is not in service district 10. It is in service district 11. Of the 458 licensed beds at Biscayne, 24 are licensed as short-term psychiatric beds and 24 are licensed as substance abuse beds. The rest are licensed as medical/surgical beds. Ten of the medical/surgical beds at Biscayne are used as a dedicated 10-bed eating disorder (anoxeria nervosa and bulimirexia) unit. These 10 beds are not licensed for such use. A separate support staff is used for the 10-bed eating disorder unit. Approximately 60 percent of Biscayne's medical staff of approximately 400 physicians are residents of Broward County. Most of these physicians are also on the medical staff of other hospitals, principally the Petitioner, Memorial and Parkway Regional Medical Center, which is located in northern Dade County. Most of its staff have their business offices in southern Broward County. Biscayne's service area includes southern Broward County and northern Dade County. Approximately 60 percent of Biscayne's patients are residents of southern Broward County. Biscayne markets its services in southern Broward County. Eighty percent of Biscayne's psychiatric patients are elderly. Many types of psychotic and psychiatric disorders are treated at Biscayne. Biscayne offers psycho-diagnostic services, crisis stabilization services, shock therapy services, individual therapy services and group therapy services. Biscayne has had difficulty in recruiting qualified staff for its psychiatric unit. Biscayne currently has 4 vacancies for registered nurses, 4 vacancies for mental health assistants and 1 vacancy for an occupational therapist in its psychiatric unit. Biscayne recruits nurses who are certified in mental health nursing. They have not always been successful in finding such nurses. Therefore, Biscayne provides educational programs to help train its nursing staff. These programs are necessary because of the unavailability of experienced nurses for its psychiatric unit. The Petitioner has projected that most of its patients for its proposed psychiatric units will come from southern Broward County, where Biscayne gets approximately 60 percent of its patients. The Petitioner plans to try to convince psychiatrists currently using existing providers, except Hollywood Pavilion, to refer their patients to the proposed psychiatric units. Since Biscayne and the Petitioner share some of the same physicians, it is likely that many of the patients cared-for by the Petitioner will come form Biscayne and other providers in southern Broward County, including Memorial. The loss of patients at Biscayne, if the Petitioner's proposal is approved, will result in a loss of revenue to Biscayne which may affect its ability to provide quality care. Charter was an applicant for a certificate of need to construct a free-standing psychiatric facility in Broward County. In its application Charter sought approval of long-term and short-term psychiatric beds. Charter's application was filed with the Respondent in August of 1983. It was filed for review by the Respondent in a batching cycle which preceded the batching cycle in which the Petitioner's application was filed. In December of 1983, the Respondent proposed to approve Charter's application and authorize a project consisting of 16 short-term adolescent psychiatric beds, 16 long-term adolescent psychiatric beds, 16 long-term substance abuse beds and 12 long-term children's psychiatric beds. The Respondent's proposed approval of Charter's application was challenged. Following an administrative hearing, it was recommended that Charter's application be denied. Final agency action had not been taken as of the commencement of the hearing in this case. Subsequent to the date on which the final hearing of this case commenced, the Respondent issued a Final Order denying Charter's certificate of need application. This Final Order is presently pending on appeal to the First District Court of Appeal. Charter does not have an existing facility offering services similar to those proposed by the Petitioner in Broward County or anywhere near the Petitioner's facility. When the Orders allowing Memorial, Biscayne and Charter to intervene were issued by Hearing Officer Sherrill, Mr. Sherrill determined that if the Intervenor's could prove the facts alleged in their Petition to Intervene they would have standing to participate in this case. Memorial and Biscayne have in fact proved the allegations contained in their Petitions to Intervene. Based upon all of the evidence, it is therefore concluded that Memorial and Biscayne have standing to participate in this proceeding. Both Memorial and Biscayne will probably lose patients to the Petitioner if its proposal is approved resulting in a loss of revenue. This loss could affect quality of care at Memorial and Biscayne. Also, it is possible that both would lose some of their specialized nursing personnel to ;the Petitioner to staff its proposed psychiatric units. Charter has failed to establish that it has standing to participate in this proceeding. The potential injury to Charter is too speculative. II. Rule 10-5.11(25), F.A.C. A. General. Whether a certificate of need for short-term psychiatric beds should be approved for Broward County is to be determined under the provisions of Section 381.494(6)(c), Florida Statutes (1985), and the Respondent's rules promulgated thereunder. In particular, Rule 10-5.11(25), F.A.C., governs this case. Under Rule 10-5.11(25)(c), F.A.C., a favorable determination will "not normally" be given on applications for short-term psychiatric care facilities unless bed need exists under Rule 10-5.11(25)(d), F.A.C. B. Rule 10-5.11(25)(d) , F.A.C. Pursuant to Rule 10-5.11(25)(d)3, F.A.C., bed need is determined 5 years into the future. In this case, the Petitioner filed its application with the Respondent in 1984, seeking approval of additional short-term psychiatric beds for 1989. The Petitioner did not change this position prior to or during the final hearing. Therefore, the planning horizon for purposes of this case is 1989. Under Rule 10-5.11(25)(d)3, F.A.C., bed need is determined by subtracting the number of "existing and approved" beds in the service district from the number of beds for the planning year based upon a ratio of .35 beds per 1,000 population projected for the planning year in the service district. The population projection is to be based on the latest mid-range projections published by the Bureau of Economic and Business Research at the University of Florida. Bed need is determined under the Respondent's rules on a district-wide basis unless the service district has been sub- divided by the Respondent. District 10 has not been subdivided by the Respondent. Therefore, bed need for purposes of this case under Rule 10-5.11(25)(d), F.A.C., is to be determined based upon the population projections for all of Broward County for 1989. The projected population for Broward County for 1989 is 1,228,334 people. Based upon the projected population for Broward County for 1989, there will be a need for 430 short-term psychiatric beds in Broward County in 1989. The evidence at the final hearing proved that there are currently 427 licensed short-term psychiatric beds in Broward County. During the portion of the final hearing held in November of 1985, evidence was offered that proved that there were also 16 approved short-term psychiatric beds for Broward County. These short-term beds were part of the application for the certificate of need sought by Charter. Subsequently, however, a Final Order was issued by the Respondent denying Charter's application. Therefore, the 16 short-term psychiatric beds sought by Charter do not constitute "existing and approved" short-term psychiatric beds in Broward County for purposes of this case. Subsequent to the conclusion of the final hearing in this case, the First District Court of Appeal reversed a Final Order of the Respondent denying an application for a certificate of need for a free-standing 10 -bed psychiatric facility, including 80 additional short-term psychiatric beds, for Broward County. Balsam v. Department of Health and Rehabilitative Services, So.2d (Fla. 1st DCA 1986). As indicated in Finding of Fact 23, Memorial is licensed to operate 74 short-term psychiatric beds. Memorial is in fact operating all 74 of these licensed beds. Memorial filed an application with the Respondent for certificate of need #1953 in October of 1981 in which Memorial indicated that it planned to reduce the number of short-term psychiatric beds it had available by 24 beds. Memorial's certificate of need application involved an expenditure of capital and did not specifically involve an application for a change in bed inventory at Memorial. Memorial also represented that it would reduce the number of its available short-term psychiatric beds by 24 in a bond prospectus it issued in September of 1983. The Respondent approved Memorial's certificate of need application. Despite Memorial's representations that it would reduce its short-term psychiatric bed inventory, the beds are still in use in Broward County. Memorial has no plans to close any beds and the Respondent does not plan to take any action against Memorial to require it to stop using 24 of its short-term psychiatric beds. Hollywood Pavilion is licensed to operate 46 short- term psychiatric beds in Broward County. In 1985, 475 patients were admitted to Hollywood Pavilion and its occupancy rate was 62.3 percent. In fact, Hollywood Pavilion had more admissions than Florida Medical Center had to its psychiatric unit. It therefore appears that other physicians find Hollywood Pavilion acceptable. Hollywood Pavilion is accredited by the Joint Commission on Accreditation of Hospitals. The Petitioner presented the testimony of a few physicians who questioned the quality of care at Hollywood Pavilion. These physicians indicated that they did not use Hollywood Pavilion. At least one of the physicians indicated, however, that he did refer patients to other physicians whom he knew admitted patients to Hollywood Pavilion despite his feeling that the quality of care at Hollywood Pavilion was poor. This action is inconsistent with that physician's opinion as to the lack of quality of care at Hollywood Pavilion. His opinion is therefore rejected. The other physicians' opinions are also rejected because very little evidence was offered in support of their opinions and because of the contrary evidence. Based upon a consideration of all of the evidence concerning the quality of care at Hollywood Pavilion, it is concluded that the Petitioner failed to prove that the 46 short-term psychiatric beds licensed for use and available for use at Hollywood Pavilion should not be counted as existing short- term psychiatric beds in Broward County. Coral Ridge Hospital is licensed to operate 74 short- term psychiatric beds in Broward County. The average length of stay at Coral Ridge Hospital during 1984 and 1985 was almost 80 days. The average length of stay at Coral Ridge Hospital has been in excess of 40 days since 1980 and in excess of 60 days since 1983. The average length of stay at Coral Ridge Hospital is in excess of the average length of stay for which short-term psychiatric beds are to be used under the Respondent's rules. Rule 10-5.11(25)(a), F.A.C., provides that short-term beds are those used for an average length of stay of 30 days or less for adults and 60 days or less for children and adolescents under 18 years of age. Rule 10-5.11(26)(a), F.A.C., provides that long-term beds are those used for an average length of stay of 90 days or more. The psychiatric beds at Coral Ridge Hospital, based upon an average length of stay for all of its beds, falls between the average length of stay for short-term beds and long-term beds. The occupancy rate at Coral Ridge Hospital for 1985 was between 40 percent and 50 percent. Therefore, it is possible that a few patients at Coral Ridge Hospital with a very long length of stay could cause the overall average length of stay of the facility to be as long as it is. Coral Ridge Hospital will probably take short-term psychiatric patients because of its low occupancy rate. Therefore, there are at least 29 to 37 short-term psychiatric beds available for use as short-term psychiatric beds at Coral Ridge Hospital. The Petitioner failed to prove how many of the licensed short-term psychiatric beds at Coral Ridge Hospital are not being used for, and are not available for use by, short-term psychiatric patients in Broward County. It cannot, therefore, be determined how many, if any, of the licensed short-term beds at Coral Ridge Hospital should not be treated as existing short-term psychiatric beds in Broward County. Based upon the foregoing, the 427 licensed short-term psychiatric beds in Broward County should be treated as "existing" beds for purposes of determining the need for short- term psychiatric beds under Rule 10-5.11(25)(d), F.A.C. There is a net need for short-term psychiatric beds in Broward County for 1989 of only 3 additional beds under Rule 10- 5.11(25)(d)3, F.A.C. If the 80 short-term psychiatric beds approved by the First District Court of Appeal in Balsam are taken into account, there will be a surplus of 77 short-term psychiatric beds in Broward County for 1989 under Rule 10- 5.11(25)(d)3, F.A.C. Based upon an application of Rule 10-5.11(25)(d)3, F.A.C., there is no need for the additional 31 short-term psychiatric beds sought by the Petitioner. Rule 10-5.11(25)(d)1, F.A.C., provides that a minimum of .15 beds per 1,000 population should be located in hospitals holding a general license to ensure access to needed services for persons with multiple health problems. Some patients who need psychiatric care also need other medical services which can better be obtained in an acute care hospital. This fact is taken into account by the requirement of Rule 10-5.11(25)(d)1, F.A.C. Based upon the projected population for Broward County in 1989, there should be a minimum of 184-short-term psychiatric beds in hospitals holding a general license in Broward County. There are currently 243 short-term psychiatric beds in hospitals holding a general license in Broward County. Therefore, the standard of Rule 10-5.11(25)(d)1, F.A.C., has been met without approval of the Petitioner's proposal. There is no need for additional short-term psychiatric beds in general hospitals in Broward County for 1989. Rule 10-5.11(25)(d)4, F.A.C., provides that applicants for short-term psychiatric beds must be able to project an occupancy rate of 70 percent for its adult psychiatric beds and 60 percent for its adolescent and children's psychiatric beds in the second year of operation. For the third year of operation, the applicant must be able to project an 80 percent adult occupancy rate and a 70 percent adolescent and children's occupancy rate. The beds sought by the Petitioner will be managed by a professional psychiatric management company: Psychiatric Management Services (hereinafter referred to as "PMS"). PMS is owned by Psychiatric Institutes of America, a subsidiary of National Medical Enterprises. Because of the lack of need for additional short-term psychiatric beds in Broward County, it is doubtful that the Petitioner can achieve its projected occupancy rates as required by Rule 10-5.11(25)(d)4, F.A.C. Rules 10-5.11(25)(d)5 and 6, F.A.C., require that certain occupancy rates normally must have been met in the preceding 12 months before additional short-term psychiatric beds will be approved. The facts do not prove whether the occupancy rates provided by Rule 10-5.11(25)(d)5, F.A.C., have been met because the statistics necessary to make such a determination are not available. The evidence failed to prove that the occupancy rates of Rule 10- 5.11(25)(d)6, F.A.C. have been met. The average occupancy rate for short-term psychiatric beds in Broward County for 1985 was between 64.8 percent and 68.4 percent. Occupancy rates in Broward County for short-term psychiatric beds have not reached 71 percent since 1982. These rates are well below the 75 percent occupancy rate provided for in Rule 10-5.11(25)(d)6, F.A.C. This finding is not refuted by the fact that Florida Medical Center added 59 beds in 1984 and the fact that occupancy rates at most general hospitals exceeded 75 percent in 1985. Based upon the average occupancy rate in Broward County for 1985, there were approximately 100 empty short-term psychiatric beds in Broward County on any day. Rule 10-5.11(25)(d)7, F.A.C. requires that short-term psychiatric services provided at an inpatient psychiatric hospital should have at least 15 designated beds in order to assure specialized staff and services at a reasonable cost. The Petitioner's proposal to add 31 short-term psychiatric beds meets this requirement of the rule. C. Rule 10-5.11(25)(e), F.A.C. Rule 1O-5.11(25)(e)1, F.A.C., requires that an applicant prove that its proposal is consistent with the needs in the community as set out in the Local Health Council plans, local Mental Health District Board plans, State Mental Health Plan and needs assessment data. The Petitioner has failed to meet this requirement. The Petitioner's proposal is inconsistent with the District 10 Local Health Plan, the Florida State Health Plan and State and Local Mental Health Plans. In particular, the Petitioner's proposal is inconsistent with the following: The District 10 Local Health Plan's recommendation that applications not be approved if approval would result in an excess number of beds under the Respondent's bed need methodology; The District 10 Local Health Plan's recommendation concerning occupancy standards for the district (75 percent during the past 12 months); The position of the Florida State Health Plan that inpatient psychiatric services are a setting of last resort; The recommendation of the District 10 Mental Health Plan that alternatives to hospitalization for psychiatric services should be encouraged; and The recommendation of the Florida State Mental Health Plan that less restrictive treatment alternatives should be encouraged. Rule 10-5.11(25)(e)3, F.A.C., requires that applicants indicate the amount of care to be provided to underserved groups. The Petitioner's representations concerning its plans to provide indigent care contained in its application are misleading, in that the Petitioner represented that it would not turn away indigents. At the final hearing, the Petitioner indicated that it will generally provide care to indigents only on an emergency basis. Patients who need indigent care on a non-emergency basis will be referred to Memorial. Also, once an indigent patient who needs emergency care has stabilized, that patient will be transferred to Memorial for care. The Petitioner accepts few Medicaid and indigent patients. During 1985, the Petitioner treated 21 Medicaid patients out of a total of 6,800 patients. Only 1.5 percent of its total revenue was for uncompensated care. During 1984, the Petitioner treated 22 Medicaid patients out of a total of 7,321 patients. Only 1.2 percent of its total gross revenue was for uncompensated care. Memorial is subsidized by tax revenues for providing indigent care, or southern Broward County. Because Memorial provides indigent care, indigent patients are usually referred to Memorial if they do not need emergency care or are transferred to Memorial after they stabilize if they do need emergency care. There are other hospitals in northern Broward County which provide similar indigent care. It is therefore common practice to refer patients to those hospitals. Rule 10-5.11(25)(e)5, F.A.C., provides that development of new short- term psychiatric beds should be through the conversion of underutilized beds in other hospital services. The Petitioner's proposal to convert 31 medical/surgical beds for use as short-term psychiatric beds meets this provision. Rule 10-5.11(25)(e)7, F.A.C., provides that short- term psychiatric services should be available within a maximum travel time of 45 minutes under average travel conditions for at least 90 percent of the service area's population. There is no geographic access problem in Broward County. At least 90 percent of the population of Broward County is within a maximum of 45 minutes driving time under average driving conditions to existing short-term psychiatric services in Broward County. The Petitioner's proposal will not significantly enhance geographic access in Broward County. III. Statutory Criteria. Need for Services. The Respondent has approved two certificates of need authorizing the addition of a total of 135 long-term psychiatric beds for Broward County. The addition of 135 long-term beds probably means that additional short-term beds in Broward County which have been used for patients requiring longer treatment will be available. If the additional long-term beds free up short-term beds, the occupancy rate of short-term psychiatric beds in Broward County would be even less than it has been during the past 12 months, if other things remain equal. Both Memorial and Florida Medical Center have been using short-term psychiatric beds for the care of long-term patients. Once the new long-term psychiatric beds are operational, more short-term psychiatric beds will be available in Broward County. Existing Providers. In addition to the short-term psychiatric beds available at Coral Ridge Hospital and Hollywood Pavilion, short- term psychiatric beds are available at the following existing facilities in the service district: Ft. Lauderdale Hospital: 64 beds Florida Medical Center: 74 beds Imperial Point: 47 beds Broward General Medical Center: 48 beds There is no geographic distribution problem in district 10. Generally, the Petitioner did not prove that existing short-term psychiatric beds in Broward County are not available, efficient, appropriate, accessible, adequate or providing quality of care. The Petitioner also did not prove that existing facilities are over-utilized. No new services are proposed by the Petitioner. The evidence did prove that there is usually a waiting list for short-term psychiatric beds at Memorial and that physicians have resorted to various devices to get their patients into short-term psychiatric beds at Memorial. Specialized adolescent psychiatric services are available in the service district at Ft. Lauderdale Hospital and at Florida Medical Center. Ft. Lauderdale Hospital has 24 short- term psychiatric beds dedicated to the treatment of adolescents. Florida Medical Center has 20 short-term psychiatric beds dedicated to the treatment of adolescents. Broward General Medical Center and Imperial Point also provide children/adolescent services. Treatment for eating disorders is provided and available at Imperial Point and Florida Medical Center. Florida Medical Center solicits patients from all parts of the service district. Geropsychiatric short-term psychiatric beds are available in the service district at Hollywood Pavilion, Imperial Point and Ft. Lauderdale Hospital. Florida Medical Center has a closed adult psychiatric unit and often treats persons over 60 years of age. It also has a 26-bed adult short-term psychiatric unit with 2 specialized treatment programs: one for eating disorders and the other for stress and pain management. The Petitioner has proposed to provide a dedicated geropsychiatric unit to meet the needs of geriatric patients which are different from those of adults generally. Although there are no such dedicated geropsychiatric units in the service district, the Petitioner failed to prove that geriatrics are not receiving adequate care from existing providers. Quality of Care. The Petitioner is accredited by the Joint Commission on Accreditation of Hospitals. The Petitioner has established adequate quality control procedures, including educational programs and a quality assurance department. These quality control procedures will also be used to insure quality of care in the proposed psychiatric units. The psychiatric units will be managed by PMS. PMS specializes in the management of psychiatric units in acute care hospitals. PMS has programs for adolescents and geriatrics. These programs will be available for use in the proposed psychiatric units. PMS also has a large variety of programs, services and specialists available to establish and maintain quality of care at the Petitioner. The Petitioner will be able to provide quality of care. Alternatives. The Petitioner did not prove that available and adequate facilities which may serve as an alternative to the services it is proposing do not exist in Broward County. Economies of Scale. The Petitioner's parent corporation, National Medical Enterprises has purchasing contracts available for use by the Petitioner in purchasing items needed for the proposed psychiatric units. These contracts can result in a reduction of costs for the proposed project. Staff Resources. PMS will help in recruiting staff for the proposed psychiatric units. Recruiting will be done locally but the Petitioner also has the ability to recruit specialized staff on a broader geographic scale. There is a shortage of nursing personnel for psychiatric services in southern Broward County and northern Dade County. Since the Petitioner plans to recruit locally, this could cause existing providers to lose specialized nursing personnel to the Petitioner. If the Petitioner causes vacancies at existing facilities, this could adversely affect quality of care. Financial Feasibility. The total projected cost of the project ($337,169.00) can easily be provided by National Medical Enterprises, the parent corporation of the Petitioner. The Petitioner's financial projections are unrealistic to the extent of the projected utilization and revenue for the proposed psychiatric units. Based upon the projected need of only 3 short-term psychiatric beds (or possibly a surplus of 77 beds) for 1989, the Petitioner's projected utilization and revenue for its proposal is rejected. The Petitioner has proved immediate financial feasibility but has failed to prove the proposal is financially feasible in the long-term. Impact of Proposal. The Petitioner's proposal could adversely effect the costs of providing health services in Broward County. This is especially true in light of the lack of need for additional short-term psychiatric beds in Broward County. Because of the high quality of the services the Petitioner proposes to provide, competition in Broward County could be enhanced and ultimately benefit consumers, if there was a need for the proposed additional beds. If a hospital has an image of being a charity hospital serving the needs of underserved groups, the hospital can experience difficulty in attracting paying patients and have difficulty in getting consumers to accept the high quality of the services of the hospital. Although it is likely that the Petitioner will take paying patients away from Memorial, it is unlikely that the number of patients lost could substantially affect the public's image of Memorial. The effect the Petitioner's proposal will have on Memorial is limited by the fact that the Petitioner is only seeking 31 beds and they are only short-term psychiatric beds. Memorial provides a variety of services and psychiatric services are only a small part of those services. I. Construction. It the Petitioner's proposal is approved, 11,500 square feet on the sixth floor of the Petitioner's hospital will be renovated and converted for use for the two proposed psychiatric units. The renovations can be made quickly. There will be space for 16 beds in a geropsychiatric unit and 15 beds in an adolescent unit. There will be a separate lobby for the psychiatric units and the elevators to the lobby will be strictly controlled. The two units will be separated and adequate security precautions will be taken to keep the two units separate. The ceilings in both units will be modified to insure security. Nurse stations will be provided for both units. Visibility from the nurse stations will be fair. Space is provided for a dayroom for each unit and there will be a class room and four rooms for therapy. These spaces will barely be adequate to meet the various needs of patients. With adequate planning and coordination, patients' needs can be met. There is inadequate space in the proposed facility for physical activities for patients.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the certificate of need application filed by the Petitioner for certificate of need #3372 should be denied. DONE and ENTERED this 15th day of May, 1986, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of May, 1986. COPIES FURNISHED: Michael J. Glazer, Esquire AUSLEY, McMULLEN, McGEHEE, CAROTHERS & PROCTOR Post Office Box 391 Tallahassee, Florida 32302 Lesley Mendelson, Esquire Assistant General Counsel Department of Health and Rehabilitative Services Building One, Suite 407 1323 Winewood Boulevard Tallahassee, Florida 32301 James C. Hauser, Esquire MESSER, VICHERS, CAPARELLO, FRENCH & MADSEN Post Office Box 1876 Tallahassee, Florida 32302 Kenneth G. Oertel, Esquire Eleanor A. Joseph, Esquire OERTEL & HOFFMAN, P.A. Post Office Box 6507 Tallahassee, Florida 32313-6507 Cynthia S. Tunnicliff, Esquire CARLTON, FIELDS, WARD, EMMANUEL SMITH & CUTLER, P.A. Post Office Drawer 190 Tallahassee, Florida 32302 Mr. William Page, Jr. Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
