Conclusions THIS CAUSE comes before the Agency For Health Care Administration (the "Agency") concerning Certificate of Need ("CON") Application No. 10131 filed by The Shores Behavioral Hospital, LLC (hereinafter “The Shores”) to establish a 60-bed adult psychiatric hospital and CON Application No. 10132 The entity is a limited liability company according to the Division of Corporations. Filed March 14, 2012 2:40 PM Division of Administrative Hearings to establish a 12-bed substance abuse program in addition to the 60 adult psychiatric beds pursuant to CON application No. 10131. The Agency preliminarily approved CON Application No. 10131 and preliminarily denied CON Application No. 10132. South Broward Hospital District d/b/a Memorial Regional Hospital (hereinafter “Memorial”) thereafter filed a Petition for Formal Administrative Hearing challenging the Agency’s preliminary approval of CON 10131, which the Agency Clerk forwarded to the Division of Administrative Hearings (“DOAH”). The Shores thereafter filed a Petition for Formal Administrative Hearing to challenge the Agency’s preliminary denial of CON 10132, which the Agency Clerk forwarded to the Division of Administrative Hearings (‘DOAH”). Upon receipt at DOAH, Memorial, CON 10131, was assigned DOAH Case No. 12-0424CON and The Shores, CON 10132, was assigned DOAH Case No. 12-0427CON. On February 16, 2012, the Administrative Law Judge issued an Order of Consolidation consolidating both cases. On February 24, 2012, the Administrative Law Judge issued an Order Closing File and Relinquishing Jurisdiction based on _ the _ parties’ representation they had reached a settlement. . The parties have entered into the attached Settlement Agreement (Exhibit 1). It is therefore ORDERED: 1. The attached Settlement Agreement is approved and adopted as part of this Final Order, and the parties are directed to comply with the terms of the Settlement Agreement. 2. The Agency will approve and issue CON 10131 and CON 10132 with the conditions: a. Approval of CON Application 10131 to establish a Class III specialty hospital with 60 adult psychiatric beds is concurrent with approval of the co-batched CON Application 10132 to establish a 12-bed adult substance abuse program in addition to the 60 adult psychiatric beds in one single hospital facility. b. Concurrent to the licensure and certification of 60 adult inpatient psychiatric beds, 12 adult substance abuse beds and 30 adolescent residential treatment (DCF) beds at The Shores, all 72 hospital beds and 30 adolescent residential beds at Atlantic Shores Hospital will be delicensed. c. The Shores will become a designated Baker Act receiving facility upon licensure and certification. d. The location of the hospital approved pursuant to CONs 10131 and 10132 will not be south of Los Olas Boulevard and The Shores agrees that it will not seek any modification of the CONs to locate the hospital farther south than Davie Boulevard (County Road 736). 3. Each party shall be responsible its own costs and fees. 4. The above-styled cases are hereby closed. DONE and ORDERED this 2. day of Meaich~ , 2012, in Tallahassee, Florida. ELIZABETH DEK, Secretary AGENCY FOR HEALTH CARE ADMINISTRATION
The Issue Whether Certificate of Need Application No. 8614, filed by Vencor Hospitals South, Inc., meets, on balance, the applicable statutory and rule criteria. Whether the Agency for Health Care Administration relied upon an unpromulgated and invalid rule in preliminarily denying CON Application No. 8614.
Findings Of Fact Vencor Hospital South, Inc. (Vencor), is the applicant for certificate of need (CON) No. 8614 to establish a 60-bed long term care hospital in Fort Myers, Lee County, Florida. The Agency for Health Care Administration (AHCA), the state agency authorized to administer the CON program in Florida, preliminarily denied Vencor's CON application. On January 10, 1997, AHCA issued its decision in the form of a State Agency Action Report (SAAR) indicating, as it also did in its Proposed Recommended Order, that the Vencor application was denied primarily due to a lack of need for a long term care hospital in District 8, which includes Lee County. Vencor is a wholly-owned subsidiary of Vencor, Inc., a publicly traded corporation, founded in 1985 by a respiratory/physical therapist to provide care to catastrophically ill, ventilator-dependent patients. Initially, the corporation served patients in acute care hospitals, but subsequently purchased and converted free-standing facilities. In 1995, Vencor merged with Hillhaven, which operated 311 nursing homes. Currently, Vencor, its parent, and related corporations operate 60 long term care hospitals, 311 nursing homes, and 40 assisted living facilities in approximately 46 states. In Florida, Vencor operates five long term care hospitals, located in Tampa, St. Petersburg, North Florida (Green Cove Springs), Coral Gables, and Fort Lauderdale. Pursuant to the Joint Prehearing Stipulation, filed on October 2, 1997, the parties agreed that: On August 26, 1996, Vencor submitted to AHCA a letter of intent to file a Certificate of Need Application seeking approval for the construction of a 60-bed long term care hospital to be located in Fort Myers, AHCA Health Planning District 8; Vencor's letter of intent and board resolution meet requirements of Sections 408.037(4) and 408.039(2)(c), Florida Statutes, and Rule 59C-1.008(1), Florida Administrative Code, and were timely filed with both AHCA and the local health council, and notice was properly published; Vencor submitted to AHCA its initial Certificate of Need Application (CON Action No. 8614) for the proposed project on September 25, 1996, and submitted its Omissions Response on November 11, 1996; Vencor's Certificate of Need Application contains all of the minimum content items required in Section 408.037, Florida Statutes; Both Vencor's initial CON Application and its Omissions Response were timely filed with AHCA and the local health council. During the hearing, the parties also stipulated that Vencor's Schedule 2 is complete and accurate. In 1994, AHCA adopted rules defining long term care and long term care hospitals. Rule 59C-1.002(29), Florida Administrative Code, provides that: "Long term care hospital" means a hospital licensed under Chapter 395, Part 1, F.S., which meets the requirements of Part 412, Subpart B, paragraph 412.23(e), [C]ode of Federal Regulations (1994), and seeks exclusion from the Medicare prospective payment system for inpatient hospital services. Other rules distinguishing long term care include those related to conversions of beds and facilities from one type of health care to another. AHCA, the parties stipulated, has no rule establishing a uniform numeric need methodology for long term care beds and, therefore, no fixed need pool applicable to the review of Vencor's CON application. Numeric Need In the absence of any AHCA methodology or need publication, Vencor is required to devise its own methodology to demonstrate need. Rule 59C-1.008(e) provides in pertinent part: If no agency policy exists, the applicant will be responsible for demonstrating need through a needs assessment methodology which must include, at a minimum, consideration of the following topics, except where they are inconsistent with the applicable statutory or rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, subdistrict, or both; Medical treatment trends; and Market conditions. Vencor used a numeric need analysis which is identical to that prepared by the same health planner, in 1995, for St. Petersburg Health Care Management, Inc. (St. Petersburg). The St. Petersburg project proposed that Vencor would manage the facility. Unlike the current proposal for new construction, St. Petersburg was a conversion of an existing but closed facility. AHCA accepted that analysis and issued CON 8213 to St. Petersburg. The methodology constitutes a use rate analysis, which calculates the use rate of a health service among the general population and applies that to the projected future population of the district. The use rate analysis is the methodology adopted in most of AHCA's numeric need rules. W. Eugene Nelson, the consultant health planner for Vencor, derived a historic utilization rate from the four districts in Florida in which Vencor operates long term care hospitals. That rate, 19.7 patient days per 1000 population, when applied to the projected population of District 8 in the year 2000, yields an average daily census of 64 patients. Mr. Nelson also compared the demographics of the seven counties of District 8 to the rest of the state, noting in particular the sizable, coastal population centers and the significant concentration of elderly, the population group which is disproportionately served in long term care hospitals. The proposed service area is all of District 8. By demonstrating the numeric need for 64 beds and the absence of any existing long term care beds in District 8, Vencor established the numeric need for its proposed 60-bed long term care hospital. See Final Order in DOAH Case No. 97-4419RU. Statutory Review Criteria Additional criteria for evaluating CON applications are listed in Subsections 408.035(1) and (2), Florida Statutes, and the rules which implement that statute. (1)(a) need in relation to state and district health plans. The 1993 State Health Plan, which predates the establishment of long term care rules, contains no specific preferences for evaluating CON applications for long term care hospitals. The applicable local plan is the District 8 1996-1997 Certificate of Need Allocation Factors Report, approved on September 9, 1996. The District 8 plan, like the State Health Plan, contains no mention of long term care hospitals. In the SAAR, AHCA applied the District 8 and state health plan criteria for acute care hospital beds to the review of Vencor's application for long term care beds, although agency rules define the two as different. The acute care hospital criteria are inapplicable to the review of this application for CON 8614 and, therefore, there are no applicable state or district health plan criteria for long term care. (1)(b) availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization and adequacy of like and existing services in the district; and (1)(d) availability and adequacy of alternative health care facilities in the district. Currently, there are no long term care hospitals in District 8. The closest long term care hospitals are in Tampa, St. Petersburg, and Fort Lauderdale, all over 100 miles from Fort Myers. In the SAAR, approving the St. Petersburg facility, two long term care hospitals in Tampa were discussed as alternatives. By contract, the SAAR preliminarily denying Vencor's application lists as alternatives CMR facilities, nursing homes which accept Medicare patients, and hospital based skilled nursing units. AHCA examined the quantity of beds available in other health care categories in reliance on certain findings in the publication titled Subacute Care: Policy Synthesis And Market Area Analysis, a report submitted to the Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, on November 1, 1995, by Levin-VHI, Inc. ("the Lewin Report"). The Lewin Report notes the similarities between the type of care provided in long term care, CMR and acute care hospitals, and in hospital-based subacute care units, and subacute care beds in community nursing homes. The Lewin Report also acknowledges that "subacute care" is not well-defined. AHCA has not adopted the Lewin Report by rule, nor has it repealed its rules defining long term care as a separate and district health care category. For the reasons set forth in the Final Order issued simultaneously with this Recommended Order, AHCA may not rely on the Lewin Report to create a presumption that other categories are "like and existing" alternatives to long term care, or to consider services outside District 8 as available alternatives. Additionally, Vencor presented substantial evidence to distinguish its patients from those served in other types of beds. The narrow range of diagnostic related groups or DRGs served at Vencor includes patients with more medically complex multiple system failures than those in CMR beds. With an average length of stay of 60 beds, Vencor's patients are typically too sick to withstand three hours of therapy a day, which AHCA acknowledged as the federal criteria for CMR admissions. Vencor also distinguished its patients, who require 7 1/2 to 8 hours of nursing care a day, as compared to 2 1/2 to 3 hours a day in nursing homes. Similarly, the average length of stay in nursing home subacute units is less than 41 days. The DRG classifications which account for 80 percent of Vencor's admissions represent only 7 percent of admissions to hospital based skilled nursing units, and 10 to 11 percent of admissions to nursing home subacute care units. Vencor also presented the uncontroverted testimony of Katherine Nixon, a clinical case manager whose duties include discharge planning for open heart surgery for patients at Columbia-Southwest Regional Medical Center (Columbia-Southwest), an acute care hospital in Fort Myers. Ms. Nixon's experience is that 80 percent of open heart surgery patients are discharged home, while 20 percent require additional inpatient care. Although Columbia-Southwest has a twenty-bed skilled nursing unit with two beds for ventilator-dependent patients, those beds are limited to patients expected to be weaned within a week. Finally, Vencor presented results which are preliminary and subject to peer review from its APACHE (Acute Physiology, Age, and Chronic Health Evaluation) Study. Ultimately, Vencor expects the study to more clearly distinguish its patient population. In summary, Vencor demonstrated that a substantial majority of patients it proposes to serve are not served in alternative facilities, including CMR hospitals, hospital-based skilled nursing units, or subacute units in community nursing homes. Expert medical testimony established the inappropriateness of keeping patients who require long term care in intensive or other acute care beds, although that occurs in District 8 when patients refuse to agree to admissions too distant from their homes. (1)(c) ability and record of providing quality of care. The parties stipulated that Vencor's application complies with the requirement of Subsection 408.035(1)(c). (1)(e) probable economics of joint or shared resources; (1)(g) need for research and educational facilities; and (1)(j) needs of health maintenance organizations. The parties stipulated that the review criteria in Subsection 408.035(1)(e), (g) and (j) are not at issue. (f) need in the district for special equipment and services not reasonably and economically accessible in adjoining areas. Based on the experiences of Katherine Nixon, it is not reasonable for long term care patients to access services outside District 8. Ms. Nixon also testified that patients are financially at a disadvantage if placed in a hospital skilled nursing unit rather than a long term care hospital. If a patient is not weaned as quickly as expected, Medicare reimbursement after twenty days decreases to 80 percent. In addition, the days in the hospital skilled nursing unit are included in the 100 day Medicare limit for post-acute hospitalization rehabilitation. By contrast, long term care hospitalization preserves the patient's ability under Medicare to have further rehabilitation services if needed after a subsequent transfer to a nursing home. (h) resources and funds, including personnel to accomplish project. Prior to the hearing, the parties stipulated that Vencor has sufficient funds to accomplish the project, and properly documented its source of funds in Schedule 3 of the CON application. Vencor has a commitment for $10 million to fund this project of approximately $8.5 million. At the hearing, AHCA also agreed with Vencor that the staffing and salary schedule, Schedule 6, is reasonable. (i) immediate and long term financial feasibility of the proposal. Vencor has the resources to establish the project and to fund short term operating losses. Vencor also reasonably projected that revenues will exceed expenses in the second year of operation. Therefore, Vencor demonstrated the short and long term financial feasibility of its proposal. needs of entities serving residents outside the district. Vencor is not proposing that any substantial portion of it services will benefit anyone outside District 8. probable impact on costs of providing health services; effects of competition. There is no evidence of an adverse impact on health care costs. There is preliminary data from the APACHE study which tends to indicate the long term care costs are lower than acute care costs. No adverse effects of competition are shown and AHCA did not dispute the fact that Vencor's proposal is supported by acute care hospitals in District 8. costs and methods of proposed construction; and (2)((a)-(c) less costly alternatives to proposed capital expenditure. The prehearing stipulation includes agreement that the design is reasonable, and that proposed construction costs are below the median in that area. past and proposed service to Medicaid patients and the medically indigent. Vencor has a history of providing Medicaid and indigent care in the absence of any legal requirements to do so. The conditions proposed of 3 percent of total patient days Medicaid and 2 percent for indigent/charity patients proposed by Vencor are identical to those AHCA accepted in issuing CON 8213 to St. Petersburg Health Care Management, Inc. Vencor's proposed commitment is reasonable and appropriate, considering AHCA's past acceptance and the fact that the vast majority of long term care patients are older and covered by Medicare. services which promote a continuum of care in a multilevel health care system. While Vencor's services are needed due to a gap in the continuum of care which exists in the district, it has not shown that it will be a part of a multilevel system in District 8. (2)(d) that patients will experience serious problems obtaining the inpatient care proposed. Patients experience and will continue to experience serious problems in obtaining long term care in District 8 in the absence of the project proposed by Vencor. Based on the overwhelming evidence of need, and the ability of the applicant to establish and operate a high quality program with no adverse impacts on other health care providers, Vencor meets the criteria for issuance of CON 8614.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration issue CON 8614 to Vencor Hospitals South, Inc., to construct a 60-bed long term care hospital in Fort Myers, Lee County, District 8. DONE AND ENTERED this 3rd day of March, 1998, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of March, 1998. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Paul J. Martin, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Kim A. Kellum, Esquire Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 R. Terry Rigsby, Esquire Geoffrey D. Smith, Esquire Blank, Rigsby & Meenan, P.A. 204 South Monroe Street Tallahassee, Florida 32301
The Issue The issues in this case are whether the statement contained in Respondent's letter dated September 9, 1997 (1997 Letter), establishing a $24.00 payment for hospital outpatient services billed as revenue code 451 constitutes a rule as defined by Subsection 120.52(15), Florida Statutes (2010),1 and, if so, whether Respondent violated Subsection 120.54(1), Florida Statutes, by not adopting the statement in accordance with applicable rulemaking procedures.
Findings Of Fact AHCA is the state agency responsible for the administration of the Florida Medicaid Program. § 409.902, Fla. Stat. Petitioners are acute care hospitals that are and were enrolled as Medicaid providers of outpatient services in Florida, at all times relevant to this proceeding. On September 9, 1997, AHCA issued a letter to hospital administrators, which provided the following: This letter is to inform you that Medicaid coverage for hospital emergency room screening and examination services is now in effect. Hospitals will be reimbursed a $24.00 flat fee for providing these services to Medipass and Medicaid fee-for-service recipients who do not require further treatment beyond the screening and examination services. This policy is retroactive to July 1, 1996. The letter further provides that the $24.00 reimbursement would be billed under the revenue code 451. The statement in the letter applies to hospitals which are Medicaid providers and, therefore, is a statement of general applicability. The statement meets the definition of a rule. AHCA concedes that the statement, which provides "payment of a $24 rate for Medicaid Hospital Outpatient Services billed under Revenue Code 451, constitutes a rule under s. 120.52(16), Fla. Stat." AHCA concedes that the statement has not been adopted as a rule by the rule adoption procedures provided in Section 120.54, Florida Statutes. AHCA has discontinued all reliance on the challenged statement.
The Issue Whether the Agency for Health Care Administration (AHCA or the Agency) should approve the application for certificate of need (CON) 7700 filed by Miami Beach Healthcare Group, LTD. d/b/a Miami Heart Institute (Miami Heart or MH).
Findings Of Fact The Agency is the state agency charged with the responsibility of reviewing and taking action on CON applications pursuant to Chapter 408, Florida Statutes. The applicant, Miami Heart, operates a hospital facility known as Miami Heart Institute which, at the time of hearing, was comprised of a north campus (consisting of 273 licensed beds) and a south campus (consisting of 258 beds) in Miami, Florida. The two campuses operate under a single license which consolidated the operation of the two facilities. The consolidation of the license was approved by CON 7399 which was issued by the Agency prior to the hearing of this case. The Petitioner, Mount Sinai, is an existing health care facility doing business in the same service district. On February 4, 1994, AHCA published a fixed need pool of zero adult inpatient psychiatric beds for the planning horizon applicable to this batching cycle. The fixed need pool was not challenged. On February 18, 1994, Miami Heart submitted its letter of intent for the first hospital batching cycle of 1994, and sought to add twenty adult general inpatient psychiatric beds at the Miami Heart Institute south campus. Such facility is located in the Agency's district 11 and is approximately two (2) miles from the north campus. Notice of that letter was published in the March 11, 1994, Florida Administrative Weekly. Miami Heart's letter of intent provided, in pertinent part: By this letter, Miami Beach Healthcare Group, Ltd., d/b/a Miami Heart Institute announces its intent to file a Certificate of Need Application on or before March 23, 1994 for approval to establish 20 hospital inpatient general psychiatric beds for adults at Miami Heart Institute. Thus, the applicant seeks approval for this project pursuant to Sections 408.036(1)(h), Florida Statutes. The proposed capital expenditure for this project shall not exceed $1,000,000 and will include new construction and the renovation of existing space. Miami Heart Institute is located in Local Health Council District 11. There are no subsdistricts for Hospital Inpatient General Psychiatric Beds for Adults in District 11. The applicable need formula for Hospital General Psychiatric Beds for Adults is contained within Rule 59C-1.040(4)(c), F.A.C. The Agency published a fixed need of "0" for Hospital General Psychiatric Beds for Adults in District 11 for this batching cycle. However, "not normal" circumstances exist within District which justify approval of this project. These circumstances are that Miami Beach Community Hospital, which is also owned by Miami Beach Healthcare Group, Ltd., and which has an approved Certificate of Need Application to consol- idate its license with that of the Miami Heart Institute, has pending a Certificate of Need Application to delicense up to 20 hospital inpatient general psychiatric beds for adults. The effect of the application, which is the subject of this Letter of Intent, will be to relocate 20 of the delicensed adult psychiatric beds to the Miami Heart Institute. Because of the "not normal" circumstances alleged in the Miami Heart letter of intent, the Agency extended a grace period to allow competing letters of intent to be filed. No additional letters of intent were submitted during the grace period. On March 23, 1994, Miami Heart timely submitted its CON application for the project at issue, CON no. 7700. Notice of the application was published in the April 8, 1994, Florida Administrative Weekly. Such application was deemed complete by the Agency and was considered to be a companion to the delicensure of the north campus beds. On July 22, 1994, the Agency published in the Florida Administrative Weekly its preliminary decision to approve CON no. 7700. In the same batch as the instant case, Cedars Healthcare Group (Cedars), also in district 11, applied to add adult psychiatric beds to Cedars Medical Center through the delicensure of an equal number of adult psychiatric beds at Victoria Pavilion. Cedars holds a single license for the operation of both Cedars Medical Center and Victoria Pavilion. As in this case, the Agency gave notice of its intent to grant the CON application. Although this "transfer" was initially challenged, it was subsequently dismissed. Although filed at the same time (and, therefore, theoretically within the same batch), the Cedars CON application and the Miami Heart CON application were not comparatively reviewed by the Agency. The Agency determined the applicants were merely seeking to relocate their own licensed beds. Based upon that determination, MH's application was evaluated in the context of the statutory criteria, the adult psychiatric beds and services rule (Rule 59C-1.040, Florida Administrative Code), the district 11 local health plan, and the 1993 state health plan. Ms. Dudek also considered the utilization data for district 11 facilities. Mount Sinai timely filed a petition challenging the proposed approval of CON 7700 and, for purposes of this proceeding only, the parties stipulated that MS has standing to raise the issues remaining in this cause. Mount Sinai's existing psychiatric unit utilization is presently at or near full capacity, and MS' existing unit would not provide an adequate, available, or accessible alternative to Miami Heart's proposal, unless additional bed capacity were available to MS in the future through approval of additional beds or changes in existing utilization. Miami Heart's proposal to establish twenty adult general inpatient psychiatric beds at its Miami Heart Institute south campus was made in connection with its application to delicense twenty adult general inpatient psychiatric beds at its north campus. The Agency advised MH to submit two CON applications: one for the delicensure (CON no. 7474) and one for the establishment of the twenty beds at the south campus (CON no. 7700). The application to delicense the north campus beds was expeditiously approved and has not been challenged. As to the application to establish the twenty beds at the south campus, the following statutory criteria are not at issue: Section 408.035(1)(c), (e), (f), (g), (h), (i), (j), (k), (m), (n), (o) and (2)(b) and (e), Florida Statutes. The parties have stipulated that Miami Heart meets, at least minimally, those criteria. During 1993, Miami Heart made the business decision to cease operations at its north campus and to seek the Agency's approval to relocate beds and services from that facility to other facilities owned by MH, including the south campus. Miami Heart does not intend to delicense the twenty beds at the north campus until the twenty beds are licensed at the south campus. The goal is merely to transfer the existing program with its services to the south campus. Miami Heart did not seek beds from a fixed need pool. Since approximately April, 1993, the Miami Heart north campus has operated with the twenty bed adult psychiatric unit and with a limited number of obstetrical beds. The approval of CON no. 7700 will not change the overall total number of adult general inpatient psychiatric beds within the district. The adult psychiatric program at MH experiences the highest utilization of any program in district 11, with an average length of stay that is consistent with other adult programs around the state. Miami Heart's existing psychiatric program was instituted in 1978. Since 1984, there has been little change in nursing and other staff. The program provides a full continuum of care, with outpatient programs, aftercare, and support programs. Nearly ninety-nine percent of the program's inpatient patient days are attributable to patients diagnosed with serious mental disorders. The Miami Heart program specializes in a biological approach to psychiatric cases in the diagnosis and treatment of affective disorders, including a variety of mood disorders and related conditions. The Miami Heart program is distinctive from other psychiatric programs in the district. If the MH program were discontinued, the patients would have limited alternatives for access to the same diagnostic and treatment services in the district. There are no statutes or rules promulgated which specifically address the transfer of psychiatric beds or services from one facility owned by a health care entity to another facility also owned by the same entity. In reviewing the instant CON application, the Agency determined it has the discretion to evaluate each transfer case based upon the review criteria and to consider the appropriate weight factors should be given. Factors which may affect the review include the change of location, the utilization of the existing services, the quality of the existing programs and services, the financial feasibility, architectural issues, and any other factor critical to the review process. In this case, the weight given to the numeric need criteria was not significant. The Agency determined that because the transfer would not result in a change to the overall bed inventory, the calculated fixed need pool did not apply to the instant application. In effect, because the calculation of numeric need was inapplicable, this case must be considered "not normal" pursuant to Rule 59C-1.040(4)(a), Florida Administrative Code. The Agency determined that other criteria were to be given greater consideration. Such factors were the reasonableness of the proposal, the ability to afford access, the applicant's ability to provide a quality program, and the project's financial feasibility. The Agency determined that, on balance, this application should be approved as the statutory and other review criteria were met. Although put on notice of the other CON applications, Mount Sinai did not file an application for psychiatric beds at the same time as Miami Heart or Cedars. Mount Sinai did not claim that the proposed delicensures and transfers made beds available for competitive review. The Agency has interpreted Rule 59C-1.040, Florida Administrative Code, to mean that it will not normally approve an application for beds or services unless the statutory and rule criteria are met, including the need determination criteria. There is no list of circumstances which are routinely considered "not normal" by the Agency. In this case, the proposed transfer of beds was, in itself, considered "not normal." The approval of Miami Heart's application would allow an existing program to continue. As a result, the overhead to maintain two campuses would be reduced. Further, the relocation would allow the program to continue to provide access, both geographically and financially, to the same patient service area. And, since the program has the highest utilization rate of any adult program in the district, its continuation would be beneficial to the area. The program has an established referral base for admissions to the facility. The transfer is reasonable for providing access to the medically under-served. The quality of care, while not in issue, would be expected to continue at its existing level or improve. The transfer would allow better access to ancillary hospital departments and consulting specialists who may be needed even though the primary diagnosis is psychiatric. The cost of the transfer when compared to the costs to be incurred if the transfer is not approved make the approval a benefit to the service area. If the program is not relocated, Medicaid access could change if the hospital is reclassified from a general facility to a specialty facility. The proposed cost for the project does not exceed one million dollars. If the north campus must be renovated, a greater capital expenditure would be expected. The expected impact on competition for other providers is limited due to the high utilization for all programs in the vicinity. The subject proposal is consistent with the district and state health care plans and the need for health care facilities and services. The services being transferred is an existing program which is highly utilized and which is not creating "new beds." As such, the proposal complies with Section 408.035(1)(a), Florida Statutes. The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing services in the district will not be adversely affected by the approval of the subject application. The proposed transfer is consistent with, and appropriate, in light of these criteria. Therefore, the proposal complies with Section 408.035(1)(b), Florida Statutes. The subject application demonstrates a full continuum of care with safeguards to assure that alternatives to inpatient care are fully utilized when appropriate. Therefore, the availability and adequacy of other services, such as outpatient care, has been demonstrated and would deter unnecessary utilization. Thus, Miami Heart has shown its application complies with Section 408.035(1)(d), Florida Statutes. Miami Heart has also demonstrated that the probable impact of its proposal is in compliance with Section 408.035(1)(l), Florida Statutes. The proposed transfer will not adversely impact the costs of providing services, the competition on the supply of services, or the improvements or innovations in the financing and delivery of services which foster competition, promote quality assurance, and cost-effectiveness. Miami Heart has taken an innovative approach to promote quality assurance and cost effectiveness. Its purpose, to close a facility and relocate beds (removing unnecessary acute care beds in the process), represents a departure from the traditional approach to providing health care services. By approving Miami Heart's application, overhead costs associated with the unnecessary facility will be eliminated. There is no less costly, more efficient alternative which would allow the continuation of the services and program Miami Heart has established at the north campus than the approval of transfer to the south campus. The MH proposal is most practical and readily available solution which will allow the north campus to close and the beds and services to remain available and accessible. The renovation of the medical surgical space at the south campus to afford a location for the psychiatric unit is the most practical and readily available solution which will allow the north campus to close and the beds and services to remain available and accessible. In totality, the circumstances of this case make the approval of Miami Heart's application for CON no. 7700 the most reasonable and practical solution given the "not normal" conditions of this application.
Recommendation Based on the foregoing, it is, hereby, RECOMMENDED: That the Agency for Health Care Administration enter a final order approving CON 7700 as recommended in the SAAR. DONE AND RECOMMENDED this 5th day of April, 1995, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of April, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-4755 Note: Proposed findings of fact are to contain one essential fact per numbered paragraph. Proposed findings of fact paragraphs containing multiple sentences with more than one statement of fact are difficult to review. In reviewing for this case, where all sentences were accurate and supported by the recorded cited, the paragraph has been accepted. If the paragraph contained mixed statements where one sentence was an accurate statement of fact but the others were not, the paragraph has been rejected. Similarly, if one sentence was editorial comment, argument, or an unsupported statement to a statement of fact, the paragraph has been rejected. Proposed findings of fact should not include argument, editorial comments, or statements of fact mixed with such comments. Rulings on the proposed findings of fact submitted by Petitioner, Mount Sinai: Paragraphs 1 through 13 were cited as stipulated facts. Paragraph 14 is rejected as irrelevant. With regard to paragraph 15 it is accepted that Miami Heart made the business decision to move the psychiatric beds beds from the north campus to the south campus. Any inference created by the remainder of the paragraph is rejected as irrelevant. Paragraph 16 is rejected as irrelevant. Paragraph 17 is rejected as irrelevant. Paragraph 18 is accepted. Paragraph 19 is rejected as irrelevant. Paragraph 20 is rejected as contrary to the weight of the credible evidence. Paragraph 21 is rejected as contrary to the weight of the credible evidence. Paragraph 22 is accepted. Paragraph 23 is rejected as irrelevant. Paragraph 24 is accepted. Paragraph 25 is rejected as repetitive, or immaterial, unnecessary to the resolution of the issues. Paragraph 26 is rejected as irrelevant or contrary to the weight of the credible evidence. Paragraph 27 is rejected as comment or conclusion of law, not fact. Paragraph 28 is accepted but not relevant. Paragraphs 29 and 30 are accepted. Paragraphs 31 through 33 are rejected as argument, comment or irrelevant. Paragraph 34 is rejected as comment or conclusion of law, not fact. Paragraph 35 is rejected as comment or conclusion of law, not fact, or irrelevant as the FNP was not in dispute. Paragraph 36 is rejected as irrelevant. Paragraph 37 is rejected as repetitive, or comment. Paragraph 38 is rejected as repetitive, comment or conclusion of law, not fact, or irrelevant. Paragraph 39 is rejected as argument or contrary to the weight of credible evidence. Paragraph 40 is accepted. Paragraph 41, 42, and 43 are rejected as contrary to the weight of the credible evidence and/or argument. Paragraph 44 is rejected as argument and comment on the testimony. Paragraph 45 is rejected as argument, irrelevant, and/or not supported by the weight of the credible evidence. Paragraph 46 is rejected as argument. Paragraph 47 is rejected as comment or conclusion of law, not fact. Paragraph 48 is rejected as comment, argument or irrelevant. Paragraph 49 is rejected as comment on testimony. It is accepted that the proposed relocation or transfer of beds is a "not normal" circumstance. Paragraph 50 is rejected as argument or irrelevant. Paragraph 51 is rejected as argument or contrary to the weight of credible evidence. Paragraph 52 is rejected as argument or contrary to the weight of credible evidence. Paragraph 53 is rejected as argument, comment or recitation of testimony, or contrary to the weight of credible evidence. Paragraph 54 is rejected as irrelevant or contrary to the weight of credible evidence. Paragraph 55 is rejected as irrelevant, comment, or contrary to the weight of credible evidence. Paragraph 56 is rejected as irrelevant or argument. Paragraph 57 is rejected as irrelevant or argument. Paragraph 58 is rejected as contrary to the weight of credible evidence. Paragraph 59 is rejected as irrelevant. Paragraph 60 is rejected as contrary to the weight of credible evidence. Paragraph 61 is rejected as argument or contrary to the weight of credible evidence. Paragraph 62 is rejected as argument or contrary to the weight of credible evidence. Paragraph 63 is accepted. Paragraph 64 is rejected as irrelevant. Mount Sinai could have filed in this batch given the not normal circumstances disclosed in the Miami Heart notice. Paragraph 65 is rejected as irrelevant. Paragraph 66 is rejected as comment or irrelevant. Paragraph 67 is rejected as argument or contrary to the weight of credible evidence. Paragraph 68 is rejected as argument or irrelevant. Paragraph 69 is rejected as argument, comment or irrelevant. Paragraph 70 is rejected as argument or contrary to the weight of credible evidence. Rulings on the proposed findings of fact submitted by the Respondent, Agency: Paragraphs 1 through 6 are accepted. With the deletion of the words "cardiac catheterization" and the inclusion of the word "psychiatric beds" in place, paragraph 7 is accepted. Cardiac catheterization is rejected as irrelevant. Paragraph 8 is accepted. The second sentence of paragraph 9 is rejected as contrary to the weight of credible evidence or an error of law, otherwise, the paragraph is accepted. Paragraph 10 is accepted. Paragraphs 11 through 17 are accepted. Paragraph 18 is rejected as conclusion of law, not fact. Paragraphs 19 and 20 are accepted. The first two sentences of paragraph 21 are accepted; the remainder rejected as conclusion of law, not fact. Paragraph 22 is rejected as comment or argument. Paragraph 23 is accepted. Paragraph 24 is rejected as argument, speculation, or irrelevant. Paragraph 25 is accepted. Rulings on the proposed findings of fact submitted by the Respondent, Miami Heart: Paragraphs 1 through 13 are accepted. The first sentence of paragraph 14 is accepted; the remainder is rejected as contrary to law or irrelevant since MS did not file in the batch when it could have. Paragraph 15 is accepted. Paragraph 16 is accepted as the Agency's statement of its authority or policy in this case, not fact. Paragraphs 17 through 20 are accepted. Paragraph 21 is rejected as irrelevant. Paragraph 22 is rejected as irrelevant. Paragraphs 23 through 35 are accepted. Paragraph 36 is rejected as repetitive. Paragraphs 37 through 40 are accepted. Paragraph 41 is rejected as contrary to the weight of the credible evidence to the extent that it concludes the distance to be one mile; evidence deemed credible placed the distance at two miles. Paragraphs 42 through 47 are accepted. Paragraph 48 is rejected as comment. Paragraphs 49 through 57 are accepted. COPIES FURNISHED: Tom Wallace, Assistant Director Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 R. Terry Rigsby Geoffrey D. Smith Wendy Delvecchio Blank, Rigsby & Meenan, P.A. 204 S. Monroe Street Tallahassee, Florida 32302 Lesley Mendelson Senior Attorney Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 Stephen Ecenia Rutledge, Ecenia, Underwood, Purnell & Hoffman, P.A. 215 South Monroe Street Suite 420 Tallahassee, Florida 32302-0551
Conclusions THE PARTIES resolved all disputed issues and executed a Settlement Agreement. The parties are directed to comply with the terms of the attached settlement agreement. Based on the foregoing, this file is CLOSED. f * fO DONE and ORDERED on this the IK day of Tallahassee, Florida. , 20Q'J, in {!J:L . THOMAS W. ARNOLD, ffcRETARY Agency for Health Care Administration Filed February 25, 2010 12:11 PM Division of Administrative Hearings. AP ARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO A JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY ALONG WITH FILING FEE AS PRESCRIBED BYLAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE AP ARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. Copies furnished to: Willis F. Melvin, Jr., Esquire Agency for Health Care Administration (Interoffice Mail) Keith Tulloch North Broward Radiologists, P.A. 2000 West Commercial Boulevard, Suite 115 Fort Lauderdale, Florida 33309 (U.S. Mail) Errol H. Powell Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 Ken Yon, Chief, Medicaid Program Integrity Finance and Accounting CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished to the above named addressees by U.S. Mail on this the f r Y ,2009. 7 $Richard Shoop, Esquire Agency Clerk State of Florida Agency for Health Care Administration 2727 Mahan Drive, Building #3 Tallahassee, Florida 32308-5403 (850) 922-5873
The Issue The issue presented is whether Petitioner's application for a certificate of need to establish a hospice with a six (6) bed component to be located in Dade County, Florida, should be approved.
Findings Of Fact The Parties Since 1975, Petitioner, Comprehensive Home Health Care, Inc., has been serving the elderly population of Dade County, primarily working with the Hispanic community to provide skilled nursing services and the services of physical therapy, speech pathology, occupational therapy, home health aide and medical social services. Petitioner currently provides its services as a home health care agency licensed by the Department. Respondent, Department of Health and Rehabilitative Services (Department), is a state agency which is responsible for administering Section 381.701 through 381.715, Florida Statutes, the "Health Facility and Services Development Act", under which applications for certificates of need (CON) are filed, reviewed and either granted or denied by the Department. Petitioner currently does not participate in an approved hospice program. Two hospice programs are licensed by the Department to serve Dade County: Catholic Hospice, Inc., and Hospice, Inc. Neither entity chose to intervene in the instant proceeding. The Application On or about March 27, 1989, Petitioner filed an application with the Department for a CON to implement a six (6) bed hospice service in Dade County, Florida, with no capital expenditure. The application was designated as CON Number 5871. No public hearing was requested. After the submittal of an omissions response, the Department deemed the application complete on May 16, 1989. The application was reviewed as the sole applicant in its batching cycle After review of the application, the Department issued its intent to deny the application in its state agency action report (SAAR) on June 29, 1989. In the application, Petitioner proposes to establish a not-for-profit, full service hospice which includes a six (6) bed inpatient component with beds to be located in the Northwest, Central West and Southwest Dade County, Florida, in three of the following hospitals: AMI Kendall Regional Medical Center Coral Gables Hospital North Gables Hospital Palmetto Hospital Pan American Hospital Westchester Hospital In addition to relying on its application as meeting pertinent statutory and rule criteria- Petitioner asserts that the application demonstrates mitigating and extenuating circumstances which would allow the approval of the application even if the numeric need prescribed by rule were not demonstrated by the application. Further, the application states that Hospice, Inc., as the only provider in Dade County, has a monopoly on the market in Dade County. Petitioner also intends to concentrate on providing service to the Hispanic population and those individuals suffering from AIDS. The application was not presented in the format which the Department usually receives applications for certificate of need. The usual format was not made part of the record in this proceeding. However, the application, as supported at hearing, shows Petitioner's desire to provide hospice services to the residents of Western Dade County. The witnesses testifying on behalf of Petitioner were Teresa Corba Rodriguez, Roger Lane and Rose Marie Marty. Ms. Rodriguez is an experienced registered nurse who worked for Hospice, Inc., from November, 1987, through June, 1989. She is currently employed at Victoria Hospital. Mr. Lane is the director of information and referral at Health Crisis Network in Miami, and Ms. Marty is the Vice President of Petitioner. The Department's primary bases for issuance of its intent to deny the application were the lack of need for additional inpatient hospice beds, and the failure to document sufficiently certain statutory and rule criteria, as discussed in the following paragraphs. The Department offered the testimony of Elizabeth Dudek, who is an employee of the Department, and is an expert in health planning. Compliance with Statutory Criteria In its proposed recommended order, the Department acknowledged that only six statutory criteria in Section 381.705(1), Florida Statutes (1987) are at issue, in addition to Rule 10-5.011(1)(j), Florida Administrative Code. State Health Plan Although the State Health Plan was not offered into evidence, the Department through testimony and the SAAR indicates that the Application conforms to the State Health Plan. Local Health Plan The applicable Local Health Plan is represented by the plan entitled, "1988 District XI Certificate of Need Allocation Factors", adopted on March 3, 1988. This plan, as it relates to hospice services, is composed of a Subsystem Description, a statement of Issues and of Recommendations. The SAAR chose to base its determination of Petitioner's compliance with the local health plan on an evaluation of whether the application fulfilled the several preferences within the recommendations portion of this plan. In so doing, the Department determined in its SAAR that the Petitioner was in partial compliance. The first preference reads as follows "Preference should be given to applicants having a workable plan for training and maintaining a corps of volunteers." Petitioner demonstrated its consistency with this preference by utilizing volunteers who are bilingual and who will assist in performing the clerical, visitation, counseling, public relations and community awareness aspects of the program. Petitioner also intends to rely on the volunteer efforts of the servicing hospital, churches, schools, community functions, educational efforts and media to enhance community awareness about the program. The second preference reads as follows, "Preference should be given to those applicants who propose to provide care for the indigent and medically needy." Petitioner demonstrated its consistency with this preference by proposing to provide ten (10) percent of its total patient day for Medicaid recipients, and five (5) percent of its total patient days to the medically indigent, at least, during the first year of operation. The third preference reads as follows, "Preference should be given to those applicants who propose a commitment to serving persons with AIDS." Petitioner demonstrated its consistency with this preference by stating both in the application and through the testimony of its witnesses that it intends to serve the ever-increasing number of patients diagnosed with AIDS. Further, it is one of Petitioner's long range objectives to seek funding sources and grants to provide additional services to AIDS patients. The fourth preference reads as follows: "Preference should be given to those applicants who can demonstrate or have entered contractual agreements with other community agencies to ensure a continuum of care far those in need." Petitioner's application is consistent with this preference by its claim that the hospitals set forth in paragraph 6 intend to participate in the program, and should supplement the home health care system which Petitioner currently maintains. However, no competent proof was offered in support of the proposed arrangements. The fifth preference reads as follows: "Preference should be given to those applicants who have developed specialized innovative services to special sub-population in need within the District." Petitioner demonstrated its partial consistency with this preference by showing its intent to service patients with AIDS, the elderly and the Hispanic sub-populations of Dade County. However, Petitioner failed to show that the service it would provide was different from the service provided by the existing hospices in Dade County, other than the intended geographical location of Petitioner's proposal. Siting in Western Dade County on its own was not shown to be a specialized, innovative offering. The sixth preference reads as follows: "Preference should be given to those applicants who will address specific needs of the culturally diverse minority populations in the District." Petitioner demonstrated its consistency with this preference by showing that it intends to serve the elderly, ethnic minorities, victims of AIDS, and the indigent populations of Dade County. Each of the groups Petitioner has singled out are indeed minority population groups within Dade County, and are elements of, and contribute to the cultural diversity of the area. The seventh preference reads as follows: "Preference should be given to those applicants who propose to have health care personnel on call during night and weekend hours." Petitioner demonstrated its consistency with this preference by showing its intent to provide for home care up to24 hours a day, 7 days a week, to control its patients' symptoms and respond to emergencies as needed. The eighth preference reads as follows: "Preference should be given to applicants who build quality assurance methods into the proposed program." Petitioner demonstrated its consistency with this preference by expressing its plan to install a quality assurance program which will include clinical records review by a registered nurse, ongoing clinical record review, and utilization review. On balance, the Petitioner's application is consistent with the Local Health Plan. Availability, Accessibility and Extent of Utilization Currently there are two hospices that serve the District. The two are located in the Eastern portions of the County. Petitioner intends to locate its beds in the Northwest and Southwest portions of Dade County, whereas the existing beds are housed in the Northeast and Southeast parts of the County. Thus, Petitioner's proposed beds are more geographically accessible to the residents of Western Dade County, which the application asserts is the fastest growing area of the County. By providing beds in the Western portion of the District, and in locations different from the existing beds, Petitioner would make the hospice services in the District more geographically accessible. Hospice, Inc., is currently licensed for twenty- five (25) beds, of which only between fourteen (14) to sixteen (16) are operable. The record is silent as to the availability of the thirty (30) beds approved for Catholic Hospice, Inc. The record does not indicate why the approved beds are not in service, or how the beds requested by Petitioner would improve the availability of hospice service in the District. Quality of Care, Efficiency, Appropriateness and Adequacy The Application suggested that patients suffering from acquired immune deficiency syndrome (AIDS) are underserved, and that Petitioner will fulfill that need. Testimony offered by Petitioner sought to establish that some patients suffering from AIDS, and those of Hispanic origin, had been refused service by the existing hospices, and made vague reference to some credit problems which Hospice, Inc., had experienced If proven, the statements might impact on the quality of care, efficiency, appropriateness and adequacy; however, without a more direct showing this testimony is not considered, substantial, or credible. As to other references concerning the quality of care, efficiency, appropriateness and adequacy, the record is again silent. Availability and Best Use of Resources Petitioner currently operates as a home health care agency. The hospice program would be an extension of the existing service offered by Petitioner and targeted to serve the Hispanic, elderly and terminally ill patients within the District, utilizing existing and voluntary personnel. Without demonstrating more about the current operations, and proof of the market demand for the proposed services, a determination of the best use of resources cannot be made. Financial Feasibility The application projects a financially sound forecast in the short-term through 1991 starting with $75,000 available. The Department through testimony and in the SAAR recognized the short- term financial feasibility of the project. However, the record is silent on financial projections past 1991. Accordingly, a determination of the long-term financial feasibility of the proposal has not been shown. Effects on Competition Petitioner asserted that eligible patients were not being served by the existing facilities, as discussed in above paragraph 24. To the extent these underserved patients exist and were to be provided for by the proposed program, the offering might have an impact on the costs of providing health services in the District. However, as discussed in paragraph 24, the evidence presented did not support Petitioner's claim. Compliance with Rule Criteria Rule 10-5.011(1)(j), Florida Administrative Code, sets forth the Department's methodology for calculating the numeric need for hospice services within a particular service area. Dade County is the pertinent service area for the evaluation of the application. The methodology provides a formula by which the total number of hospice patients for the planning horizon, in this case January, 1991, are to be estimated. The formula takes the cancer mortality rate in the district, and factors in a certain percentage to allow for any other types of deaths, and then factors in considerations of both long-term, and short-term hospital stays to yield the projected number of beds which will be needed in the horizon year. For the batching cycle in which Petitioner's application was reviewed, the projected bed need is fifty-nine (59). From that figure, the number of approved beds is subtracted. At the time Petitioner submitted its letter of intent, the inventory of licensed beds in the District indicated that Catholic Hospice, Inc. was approved for thirty (30) beds, and Hospice, Inc., for twenty-five (25) beds. In other words, the inventory of licensed approved beds applicable to this application is fifty-five (55) beds. Thus, the numeric need for the pertinent batching cycle is four (4) beds. As referenced in paragraph 5, Petitioner requested approval for six (6) hospice beds. The application contains no request for approval of less than six (6) beds, nor did Petitioner raise the issue of a partial award. The Department does not normally approve an application when numeric need is not met unless, in the instance of a request for hospice services, mitigating and extenuating circumstances are proven by demonstrating the following: (1) documentation that the population of the service area is being denied access to existing hospices because the existing hospices are unable to provide service to all persons in need of hospice care and service, and, (2) documentation that the proposed hospice would foster cost containment, discourage regional monopolies and promote competition for all providers in the health service area. Hospice Inc., frequently maintains a waiting list for its hospice beds; however, the reason or reasons for the list was not demonstrated. The census of the hospice beds at Catholic Hospice, Inc., was not discussed at the hearing, or in the application. All of Petitioner's witnessed testified that they believed that the existing hospices were unavailable to potential patients in need of hospice service who lived in the Western portion of the District because the existing hospices were located in the Eastern portion of the District. The travel time from the Southern portion of the District to the Northernmost existing facility can require up to two and one-half hours. The witnesses asserted that the patients and their families do not wish to travel for that period of time to receive the services or to visit patients in the existing hospices. However, no patient or family member testified that the travel time or location of the existing hospice were a hindrance to care. The testimony presented concerning the patients and their families is not competent or corroborated by competent evidence. Further, Petitioner's witnesses asserted that doctors who had treated patients eligible for hospice service had told the witnesses that the physicians hesitated to refer the patients to the existing hospices because the doctors might not have staff privileges at the hospitals which house the existing beds. Again, no physicians were available to corroborate the statements of the witnesses or offer competent testimony in support of these assertions. Although Hospice, Inc., is Licensed for twenty- five (25) beds, it has chosen to operate only between fourteen (14) to sixteen (16) of those beds. The reasons Hospice, Inc., has chosen not to operate all of its licensed beds were not offered in the record. The District has the largest number of AIDS diagnosed cases of any county in Florida. The number of cases in the District is doubling, more or less on a yearly basis. The incidence of AIDS cases adds to the number of person in need of hospice care in the District. Rule 10-5.011(1)(j) does not single out AIDS-related deaths in its calculation; however, deaths from other than cancer are factored into the formula. Again, no competent testimony was presented that the existing hospices were unable to serve patients suffering from AIDS. The methodology set out in Rule 10-5.011(1)(j) determines the initial need for hospice within the District. Once a hospice has been approved, it can increase the number of beds that it has without certificate of need approval as long as the hospice keeps a patient mix of twenty (20) percent inpatient to eighty (80) percent outpatient. The factors asserted in findings 33-37 would go to show mitigating and extenuating circumstances, if proven by competent substantial proof. However, from the evidence presented, it cannot be determined that the existing hospices are unable to provide service to those in need of hospice care. The evidence presented to document that the proposal would foster cost containment, discourage regional monopolies, and promote competition is discussed in paragraphs 25-28 above, and is lacking in substance to show the premise raised here.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED that the Department of Health and Rehabilitative Services issue a Final Order which denies CON Application Number 5871. DONE AND ENTERED in Tallahassee, Leon County, Florida,, this 13th day of February, 1990. JANE C. HAYMAN 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 13th day of February, 1990.
The Issue Whether the Certificate of Need application of the South Broward Hospital District (CON 9459) to establish a 100-bed hospital in Health Planning District 10, Broward County, should be granted by the Agency for Health Care Administration?
Findings Of Fact The Parties AHCA The Agency for Health Care Administration is the state agency with the authority to review and issue Certificates of Need in Florida. SBHD, the Applicant The applicant in this proceeding is South Broward Hospital District ("SBHD" or the "District"). Created by the Legislature in 1947 "at the request of voters to meet the healthcare needs of the South Broward community" (District No. 2, Vol. 1, pg. 7), SBHD is a special taxing district. The District receives tax revenues in order to support SBHD as the health care provider of last resort in South Broward County with a long demonstrated history of serving medically indigent patients. Id. From its inception in 1947 to today with the support of local tax revenue, the mission of SBHD has remained unchanged: to provide health care to all residents of the community regardless of ability to pay. There are three acute care hospitals in the "Memorial Health Care System" operated by SBHD: Memorial Regional, Memorial Pembroke Pines and Memorial West. These three hospitals make the District the dominant provider of health services in south Broward County. The District's market share of admissions to hospitals located in south Broward County is 85%. The other 15% of hospital admissions are to Hollywood Medical Center. (These percentages do not account for admissions of South Broward County residents to hospitals outside of the borders of SBHD.) Memorial Regional Hospital, a Medicaid disproportionate provider, is located 13.6 miles from the proposed Miramar hospital site. Without question, the predominant provider of care to indigent patients in south Broward County, Memorial Regional is licensed for 489 acute care beds. Memorial Regional had an acute care occupancy rate of 76.5% in 2000. From time-to-time in recent years, it has experienced unacceptably high occupancies particularly within individual units. It presently has patient care units that often operate above capacity, resulting in patient flow problems within the hospital. Memorial West Hospital, located 5.7 miles from the proposed Miramar site, is currently licensed for 164 acute care beds. It had an acute care occupancy rate of 88.9% in 2000. Memorial West currently operates 14 "labor-delivery- recovery" observation beds ("LDR" beds) that are not among the hospital's licensed beds. The hospital has recently received a CON for 36 additional beds to be utilized for acute care and further authorization via a CON exemption to add another 16 beds licensed for acute care provided certain occupancy levels are achieved. These additional 52 licensed beds are projected to become operational in 2002. Furthermore, Memorial West is adding 36 additional LDR beds and 20 acute care observation beds and doubling the size of its emergency room. When the expansion is complete, Memorial West will have 216 acute care beds, 20 acute care observation beds and 50 LDR beds. As matters stood at the time of hearing, peak occupancies in some departments at Memorial West such as obstetrics, routinely exceeded 100%. With the additional beds slated for opening in 2002, demand for acute care services in southwest Broward County will continue to produce high occupancy rates at Memorial West. It is reasonably projected that the growth in demand for acute care services in southwest Broward County with the additional beds will cause Memorial West to operate at 87% occupancy in 2005 and 99% occupancy in 2010 unless the hospital proposed by SBHD for Miramar is built. Memorial West opened in 1992 as a 100-bed hospital, in part fulfilling SBHD's vision to expand services into what was then projected to be a rapidly growing southwest part of the county, a suburban area more affluent than the District as a whole. Approved by AHCA's predecessor, SBHD's strategy in opening Memorial West was to gain access to this more affluent suburban market in order to help off-set the rising care of indigent care. The strategy has worked. Memorial West has made a profound contribution to the financial success and viability of the District. In 2001, Memorial Hospital West accounted for almost half of the District's bottom line profit. The profitability of Memorial West has allowed the District to continue to provide growing levels of indigent care, while at the same time decreasing tax millage rates. In fact, the millage rates levied by the District have decreased three times since Memorial West opened. During this same period of decreasing millage rates, the District has been able to increase its ratio of uncompensated care to tax revenues from 3-1 to 5-1. The District's third hospital, Memorial Hospital Pembroke was leased by the District for the first time in 1995. Now leased until June 2005 from HCA, Inc., HCA announced its intention at hearing to re-take the facility so that the District will lose Memorial Pembroke as one of its hospitals at the expiration of the lease. Licensed for 301 beds, Memorial Pembroke is located 10.6 miles from the proposed Miramar site. Memorial Pembroke's occupancy rate from July 1999 to June 2000 was 26.2%. This low rate of occupancy is due, at least in part, to significant physical plant constraints and deficiencies. Although licensed for 301 beds, the physical plant can only reasonably support 149 beds. When its daily census reaches 140 patients, the hospital's operational and support systems begin to fail. Prior to 1995, Memorial Pembroke was operated by a series of for-profit owners. Just as it does now, Memorial Pembroke suffered from chronically low utilization under all prior management. Before the District leased the facility from Columbia-HCA, the hospital had become stigmatized in the community; many patients and physicians were reluctant to use it. Due to a number of factors (some tangible, such as an out-of-date physical plant - others intangible) that stigma continues today. The District has invested considerable management and financial resources to improve the quality of care, the condition of the facility and the community reputation of Memorial Hospital Pembroke. Because the hospital serves as a "safety valve" for the high utilization at the District's other hospitals, especially Memorial West, Memorial Pembroke's census between 1995 and 2000 has been on the rise. Nonetheless, the facility continues to be regarded as a "second tier" hospital and to suffer a stigma within the community. Whatever the source of the stigma afflicting Memorial Pembroke, it is unlikely that occupancy rates at Memorial Pembroke will dramatically improve unless significant and substantial investment is made in the hospital. It does not make sense for SBHD to make such an investment since it will lose the facility in three years. Whether HCA will make the investment required to cure the facilities utilization woes remains an open question. (See paragraphs 103 and 104, below.) Through the three hospitals in the Memorial Healthcare system, Regional, West and Pembroke, and a number of clinics that are off-campus, the District provides a full range of health care services to residents of south Broward County. These include: general acute care; tertiary care; adult and pediatric trauma care under trauma center designation; a specialty children's hospital designated by the state as a Children's Medical Services provider for children with special needs for cardiac care, hematology and oncology, and craniofacial services; outpatient services; and primary care services. The District is the only provider, moreover, of many health care services within the boundaries of the South Broward Hospital District, all of Broward County south of SW 36th Street. (The North Broward Hospital District includes all of Broward County north of SW 36th Street.) These services include obstetrics, pediatrics, neonatal intensive care, adult and pediatric trauma at a Level I trauma center, and teen pregnancy prevention and education. Consistent with its mission, the District also operates the only system of primary care clinics for the indigent in the South Broward Hospital District. The District is clearly the safety net provider of acute care hospital and other services for south Broward residents. In 1999, the District provided 5.9% of its total revenue or approximately $63 million in charity care and 5.4% or approximately $58 million to Medicaid recipients. During the same time period, Cleveland Clinic in terms of total revenue provided 1% charity care and 1.8% to Medicaid recipients while Westside provided 0.6% charity and 2.3% Medicaid. In dollars worth of care devoted to indigent and Medicaid patients, SBHD provides over ten times more Medicaid and indigent care than Cleveland Clinic and Westside combined. Tax revenues, although supportive of the District's ability to maintain its mission, do not come close to compensating the District in full for the care it provides to charity and indigent patients. In fact, the District expends five dollars in uncompensated care for every dollar of tax revenue it receives. Still, as a significant source of income to the District, these tax dollars contribute to SBHD's robust financial health. Cleveland Clinic Cleveland Clinic Hospital is owned by TCC Partners, a partnership between the Cleveland Clinic Foundation and Tenet Healthcare Systems. Originally located in northeast Broward County in Pompano Beach, Cleveland Clinic obtained approval in 1997 to relocate its 150 beds to Weston near the intersection of I-75 and Arvida Parkway. Operation at the site of the relocation began in July of 2001. The new site is within one of the ten-zip codes SBHD has chosen as the proposed primary service area for its new hospital in Miramar, but it is outside the South Broward Hospital District. The new site of Cleveland Clinic is in the North Broward Hospital District, 1.5 miles to the north of the boundary line between the two hospital districts that divides Broward County into two distinct health care markets. Cleveland Clinic has an established history as a regional and national tertiary referral center. It is also an advanced research and education facility that benefits from the outstanding reputation of the Cleveland Clinic Foundation and the hospitals under its umbrella. Cleveland Clinic is not a typical community hospital. It follows a distinctive model of medicine based on a multi- disciplinary approach and a closed medical specialty staff. The medical staff is open to community primary care physicians but not to community specialists or sub-specialists. All of the specialists on its staff are salaried employees of the Cleveland Clinic. This means that physician specialists who are not employees of the Clinic do not have privileges to admit or treat patients at the Cleveland Clinic Hospital. The Cleveland Clinic offers tertiary acute care services, such as kidney transplantation and open-heart surgery. It also provides specialty services in colorectal surgery, voiding dysfunction and limb reattachment. Among its specialty programs are an adult spine program, an acute stroke program, an epilepsy clinic, and an orthopedic center of excellence in sports medicine. At the time of hearing and since opening, Cleveland Clinic's average daily census has been approximately 44 patients. Westside Founded 26 or so years ago in what was then considered western Broward Count from the standpoint of population (hence its name), Westside is a 204-bed acute care hospital. Slightly less than nineteen miles from the proposed Miramar site, the site of the hospital is "now somewhat central [to Broward County]" (Westside No. 39, p. 8), given the location of the population today and the growth that has occurred to the west of Westside. Westside, like Cleveland Clinic, is in the North Broward Hospital District. It is located in the City of Plantation on West Broward Boulevard. Among the variety of acute care services offered by Westside is open heart surgery ("OHS"). The OHS program, implemented two years ago has increased the hospital's occupancy rate to a near 70%. (In 2000, the hospital had an acute care occupancy rate of 69.3%). The occupancy rate is expected to increase as the open heart surgery program expands and matures. Recent capacity constraints in the ICU, for example, led to a capital project to expand the unit "about a year and a half ago." (Id. at 13). With regard to questions about whether the hospital had experienced capacity constraints or "bottlenecks" in units, Michael Joseph, the chief executive officer of Westside, answered this way: We did in tele, and that's when we did the overflow on the fifth floor. So at this time we are -- in the peak season of March, from time to time, sure. But on the annualized basis, we are in the 75 percent occupancy level. And sometimes there [are other issues] that all hospitals go through. (Id., at 14). At the time of Mr. Joseph's deposition, October 23, 2001, for the most recent year the average daily census has been "in the 175 range." (Id.) At present, therefore, Westside's occupancy is close to ideal. Westside is financially strong. It had strong financial performance in 2000 and at the time of hearing was expected to perform strongly in 2001. Replication of West Faced with both the potential loss in 2005 of Memorial Pembroke and the high occupancies at Memorial Regional and Memorial West, SBHD began investigating the opportunity to replicate the Memorial West model of success. During the investigation, the District came to believe what it suspected from obvious signs: there is a large and growing population to be served in the Miramar area. Although land was limited, the District was able to purchase within the City of Miramar a 138-acre parcel. The parcel is the site of the subject under consideration in this proceeding as detailed in CON Application 9459: SBHD's proposed project. SBHD's Proposed Project The District proposes to construct a 100-bed acute care hospital at the intersection of SW 172nd Avenue and Pembroke Road. The site is a large one. It has sufficient land available to serve ultimately as a "health park" with medical office buildings, outpatient facilities, and additional health care related facilities typical of a modern medical campus. If, on the other hand, the District decides it is in its best interest to "sell off balances" (tr. 486) of the property, it retains that option. The hospital will provide basic acute care services and be composed of 80 adult medical/surgical, 8 pediatric, and 12 obstetric beds. On the third floor, the hospital will have 28 observation status beds, in addition to its 100 licensed beds. The design of the hospital is cost efficient. It meets all license and life safety code requirements. All patient rooms are private and meet the square footage requirements of AHCA's license standards. The hospital design, costs, and methods of construction are reasonable. The project has several goals. First, it is intended to provide increased access to affordable and quality health care for the residents of southwestern Broward County. Second, the project will allow Memorial Regional and Memorial West the opportunity to decompress and operate at reasonable and efficient occupancies into the foreseeable future without the operational problems caused by the current over-utilization. Third, the project will replace the loss of Memorial Pembroke. Finally, the project will give the District a second financial "engine that drives the train" (tr. 141) in the manner of Memorial West. The project will enable the District to maintain its financial strength and viability and continue to serve so effectively as the safety net provider for the indigent in South Broward County. Stipulated Facts In their prehearing stipulation, filed on October 31, 2001, the parties stipulated to the following: On January 26, 2001, AHCA published a fixed need pool for zero additional acute care beds in District 10, Broward County, for the January 2001 batching cycle. The South Broward Hospital District ("SBHD" or "District") timely and properly filed a Letter of Intent, initial CON Application, and Omissions Response in the batching cycle. On May 16, 2001, AHCA filed a Notice of Intent to issue the CON together with a State Agency Action Report ("SAAR") recommending approval of the CON for the proposed hospital. AHCA's Notice of Intent to approve the CON for the proposed hospital was challenged by Cleveland Clinic and Westside. Hollywood Medical Center ("HMC") also filed a petition challenging the preliminary approval but later withdrew as a party from these proceedings. Broward County has been divided by the Florida Legislature into two hospital taxing districts. The SBHD includes all areas of the county south of SW 36th Street, and the North Broward Hospital District ("NBHD") includes all areas north of the demarcation line. SBHD, Cleveland Clinic, and Westside each have a history of providing high quality of care. All of SBHD's hospital facilities are JCAHO accredited. Accordingly, the quality of care provided by these parties is not at issue in this proceeding except as it may be impacted by staffing issues. The proposed staffing and salary projections included on Schedule 6 of CON Application No. 9459 are reasonable and are not in dispute, although the parties specifically preserved the right to present evidence concerning the SBHD's ability to recruit the staff projected, and whether the projected salaries will cause or accelerate the loss of staff at existing hospitals. The parties agree that the SBHD has available management personnel and funds for capital and operating expenditures. However, Petitioners assert that the District's use of such resources for this project is neither wise nor prudent and is not in keeping with appropriate health planning principles. The parties agree that the SBHD has a history of providing health care services to Medicaid patients and the medically indigent. (Section 408.035(11), Florida Statutes.) However, Petitioners do not agree that proposed Miramar Hospital can meet the levels of charity care proposed in the application for the Miramar Hospital. With regard to Schedule 1 of the Application, the parties stipulate that the Land Costs (lines 1-11) are reasonable and are not disputed; and the Project Development Costs (lines 26-31) are reasonable and not disputed. The parties agree that Schedule 3 of the Application (sources of funds) is reasonable and not disputed. The SBHD does not contest Petitioners standing in this proceeding. At hearing, the parties stipulated that SBHD has the ability to recruit and retain the staff needed for the proposed hospital. The parties also stipulated that the SBHD has in place the staff recruitment and retention programs described at pages 132-139 of the CON application. The stipulation at hearing did not preclude either Westside or Cleveland Clinic from presenting evidence with respect to the impact of the SBHD's recruitment on other programs and other hospitals. No Numeric Need As indicated by the AHCA Bed Utilization Data for CY 2000, the occupancy rate in Broward County was 48.42%. There is, moreover, a surplus of 1,786 beds. This surplus has been increasing over time and has grown by nearly 60 beds between the January 2001 and July 2001 planning horizons. The hospitals within the District's proposed primary service area had an occupancy rate of 53% in the July 2001 planning horizon and a surplus of 456 beds, a number "somewhat proportionate to the distribution of patient days as well as licensed beds within the district." (Tr. 1639.) If the 152 non- functional beds at Memorial Pembroke are deducted from the surplus then the surplus is 304 beds. Not surprisingly therefore, the Agency's fixed need formula for acute care beds produced a fixed need of zero beds in Health Planning District 10 for the January 2001 batching cycle. (Broward County composes all of Health Planning District 10). The fixed need pool of zero was published by the Agency in January of 2001. Again in July 2001, AHCA published a fixed need for zero acute care beds in Health Planning District 10. In light of the zero fixed need pool, SBHD bases its application for the proposed Memorial Hospital Miramar on "not normal circumstances." Not Normal Circumstances "Not normal circumstances" are not defined or limited by statute or rule. Nonetheless, a number of "not normal" circumstances have been recognized repeatedly by AHCA . These recognized "not normal circumstances" are generally grouped into categories of access, quality and cost-effectiveness. None of them are present in this case. "There [are] no financial access, geographic access or clinical access circumstances [in this case] that rise to the level of not-normal circumstances." (Tr. 1633). Nor are there any quality or cost-effectiveness deficiencies claimed by the District in its application. The District bases its claim of "normal circumstances" on eight factors. They are: 1) explosive population growth; 2) a mal-distribution of beds within the health planning district; the effects of not having a hospital facility in the area proposed; 4) continued and projected high occupancies at nearby hospitals; 5) inability to expand inpatient capacity at the nearby hospitals with high occupancy rates; 6) the limited functionality and uncertain future of one of the hospitals that might serve the area where the new hospital is proposed to be located; 7) the increasing retraction of access for residents to other hospitals; and, 8) the need to assure that the applicant will remain a strong competitor able to fulfill its unique role and mission that would be served by granting the application. Population Growth Broward County is one of the fastest growing counties in the United States. "According to the census 2000 data, [over the last decade] it was the fastest growing county in all of the United States based on total population gain . . . ." (Tr. 617.) The population growth was spurred in the latter part of the previous decade by the devastation wreaked by Hurricane Andrew in 1992. The hurricane's south Dade County victims used insurance proceeds to move to southwest Broward County. This migration helped to produce growth in southwest Broward County at a faster rate than the county as whole in the decade of the nineties. Growth in pockets of southwest Broward during this period of time has been phenomenal. For example, Pembroke Pines population increased 109 percent between 1990 and 2000. For the same time period, the population of Miramar (now the second fastest growing municipality in Florida) increased 78 percent. This growth was more than just steady during the 10 years before 2000; as the decade proceeded, the growth rate accelerated. In short, it is not a misnomer to describe the population increase in southwest Broward County and the Miramar area during the last decade as "explosive." (Tr. 626) With its attendant residential and commercial development, it has transformed southwest Broward County from a rural community into a suburban one. Population growth in southwest Broward County is expected to continue into the future. Substantial land in the area is under development or is available for residential development. By 2006, the population is projected to grow to 337,000, from the 2000 population of 289,000. This rate, while not comparable to the explosive rate in some pockets of the county in the last decade, is not insignificant. By way of contrast, the projected growth rate of 16.7% over the next five years in southwest Broward compares to a projected rate for the county as a whole of 8.4% and for Florida of 7.1%. In and of itself, the projected population growth in southwest Broward County is not a "not normal" circumstance. However one might characterize the projected growth rate in southwest Broward County, moreover, the acute care hospital bed need rule takes population into account in its calculations and projections. But, the bed need formula does not take into account the significant number of beds at Memorial Pembroke that are not functional. Nor does it take into account that Cleveland Clinic is not a typical community hospital. Nor does it take into account other factors such as that Memorial West and Memorial Regional are experiencing capacity problems or the division of the health planning district into two hospital taxing districts recognized as distinct medical markets, a recognition out of the ordinary for health planning districts in Florida. A geographical fact pertinent to arguments made by Cleveland Clinic and Westside with regard to the location of the population is that Memorial Miramar's proposed primary service area is divided by Interstate 75, a north-south primary travel corridor. On a percentage basis, there is faster population growth projected for areas west of I-75. But for the foreseeable future, the actual number of people populating the area west of I-75 will remain less than the number east of I-75. The area west of I-75, with the exception of one zip code in which a retirement center has been built, has a younger projected population that should produce lower use rates and average lengths of stay in hospitals than the area east of I-75. The support these facts lend to the District's opponent's arguments that bed need is greater east of I-75 than west is diminished by the absence of any hospitals west of I-75 in the South Broward Hospital District and the presence of four hospitals in the hospital district east of the interstate. Distribution of Beds Consistent with the recognition by the Legislature, AHCA, and its predecessor state agency, north and south Broward County are two distinct medical markets demarcated by the division of the county into two hospital districts. There are 3.52 beds per 1000 population in the North Broward Hospital District, 2.35 in the south. A greater number of under-utilized acute care beds are located in the northern half; a greater percentage of highly utilized hospitals are located in the southern half. Of the four hospitals located in south Broward County, both Memorial Regional and Memorial West had average annual occupancies in excess of 80% in the calendar year 2000. By contrast, of the 13 hospitals located in the northern half of the County, none had occupancy in excess of 80%, and only one had an average annual occupancy in excess of 70%. These statistics point toward an over-distribution within the health planning district of beds in the north and an under-distribution in the south. At the same time, beds are distributed between the two hospital districts in approximate proportion to the number of patient days experienced by each. In 2000, NBHD had 71% of the patient days for District 10 and 73% of the acute care beds. As one might expect, therefore, the relationship between patient days and acute care beds during the same period was similar for the SBHD: 28.9% of the patient days for District 10 and 27% of the beds. An analysis of bed to population ratio is only meaningful when occupancy rates are also considered. Occupancy rates are mixed in the south part of the county: very high for some, especially Memorial West, and very low for Memorial Pembroke. This breadth of this disparity is unusual. Effects of No Hospital in Miramar Thirty to 60 minutes to reach an acute care hospital is a reasonable driving time in an urban area. There are five existing acute care facilities within 30 minutes of southwest Broward County. In fact, most of the residents in Memorial Miramar's proposed service area are within 15 minutes or less of an existing acute care facility. Nonetheless, without a hospital in Miramar, residents must leave their immediate community to gain access to acute care services. As a matter of sound health planning, "[n]ot every city, town or hamlet can or should have its 'own' hospital." So correctly posit Cleveland Clinic and Westside. See pgs. 13-14, Cleveland Clinic and Westside PRO. But as the City Manager of Miramar wrote, "[t]he addition of a new hospital is one of the last missing links in the City [of Miramar]'s master plan . . . The city is looking to build the best possible future for its residents." District Ex. 2, Attachment G. A new hospital in Miramar would not only be a featured complement of the City of Miramar's plans for the future, it would also enhance access to acute care services and address access concerns caused by skewed utilization among the SBHD hospitals due to the unusual state of affairs at Memorial Pembroke and the high demand at West. Of great concern is that residents of southwest Broward County in need of emergency services are sometimes not able to gain access to those services at Memorial West, the closest available hospital. Memorial West operates the third busiest Emergency Department in Broward County with 65,000 visits in 2001. In Calendar Year 2000, Memorial West's emergency room went on diversion 123 times, averaging 7.7 hours per diversion. In the first months of 2001, the hospital went on diversion 89 times, with an average diversion time of 16.3 hours. These diversions have a dual effect. They mean that patients wait longer for beds. They also mean that providers of emergency medical services in ambulances are forced out of the community for extended periods of time unable to render services within the community that may be needed during that time. Diversions at Memorial West are becoming more and more problematic. Wait times are getting longer; the total time on diversion is growing. At first blush, the problems appear to be less significant at Memorial West than they might be elsewhere in District 10 because of its low "emergency room visits to hospital admissions" ratio. The Health Planning District average shows that about 20% of emergency room patients are admitted to the hospital. At Memorial West, the ratio is 8.7%, the lowest in the County. While normally this might reflect that patients visiting Memorial West have a lower acuity than patients visiting emergency rooms district-wide, the lower ratio for Memorial West is due, at least in part, to the high volume of pediatric patients seen at West who are transferred to Joe DiMaggio's Children's Hospital. The pediatric transfers, in the words of Frederick Michael Keroff, M.D., a Board-certified emergency physician who has worked in hospital emergency departments in South Florida for 24 years, create a false sense of what is actually being seen on the adult side of the emergency room department. On the adult side . . . [the ratio] varies somewhere between 12 and 16 and a half percent which is comparable with any other facility. . . . [W]hen you mix in such a large pediatric population into the adult population, obviously it dilutes out the number and drops [the ratio] down . . . . (Tr. 2568.) A solution to emergency room diversion at Memorial West and an alternative to the construction of Memorial Miramar proposed by Cleveland Clinic and Westside is more SBHD urgent care centers in the Miramar area. SBHD operates seven urgent care centers. Of these seven, the proposed Miramar PSA has only one. Additional urgent care centers more readily accessible in the 10 zip code area that comprises Memorial Miramar's PSA might reduce the number of visits to the ER at Memorial West. But they might not. Patients don't self-triage when they are presented with a problem. They go to the hospital. [Triage is a medical decision.] Patients usually come to the hospital, even [with] urgent care centers down the block, because they don't know what the problem is and they allow the hospital to make the decision about what the problem is. (Tr. 2571.) Additional urgent care centers would not solve the problem created when diversion is a result of the lack of acute care beds for Memorial West ER patients who need to be admitted to the hospital for treatment beyond that provided in the ER. Cleveland Clinic hospital is not likely to offer much of an alternative. Because of the closed nature of the Cleveland Clinic specialty staff, it will not be a hospital of choice for community physicians in the South Broward Hospital District. Nor will it be a hospital of choice for patients able to elect the hospital at which to seek emergency services. It is apparent from the demand on Memorial West, despite the number of beds and other emergency departments within acceptable reach, that a Memorial West-type facility is what the residents of southwest Broward County prefer and opt for even if it means they have will have to wait for emergency services. In cases of patients transported from southwest Broward County via ambulances forced to go to Cleveland Clinic in Weston to deliver patients in need of emergency services, the transport presents difficulties of their own. It is not efficient management of emergency services due to their very nature to require ambulances to leave their service areas. There are no clear solutions to the problems emergency room diversions present for patients, their families, physicians, and the emergency medical system in general in southwest Broward County other than construction of new acute care hospital in Miramar. Construction of a new acute care hospital in Miramar will help to alleviate the high occupancies and emergency room diversions currently experienced at Memorial West. It will reduce disruptions to Miramar residents and will provide an easily accessible alternative to southwest Broward County residents, thereby enhancing access to emergency services. High Occupancy Rates at West and Regional The current and reasonably-projected high occupancies at Memorial West and Memorial Regional are extraordinary circumstances for a health planning district with as many excess beds as District 10. The calculation under AHCA's formula for hospital bed need for the January 2001 batching cycle yielded an excess of 1,717 beds. Calculation by the Agency using the same formula for the July 2001 batching cycle showed an excess of 1,786 beds or 59 more excess beds than just six months earlier. The import of these results was described at hearing by Scott Hopes, Westside's expert health planner: Obviously when you have a situation like this, the default is a zero published fixed need which is what was published. But the importance here is that there are so many excess beds. And if you look also on the line [of Westside Ex. 23] that deals with occupancy rate, the occupancy rate is about 48 percent, and it hasn't varied much between the six-month period. In fact, the occupancy rate in Broward County has been under 50 percent for some quite sometime. (Tr. 2076-7). It is extraordinary that a health planning district with so many excess beds would also have two hospitals, Memorial West and Memorial Regional, with capacity problems. Memorial West, by any standard, is a successful hospital. Since it opened in 1992, the inpatient volume there has tripled. Opening as a 100-bed facility, Memorial West now has 184 licensed beds, an expansion aimed to meet the demand for its services. As alluded to elsewhere in this order, because there are often not enough available acute care beds at Memorial West, some patients have to wait in the ER six hours or more. It is not unusual for more than 40 patients to wait at one time. Despite these conditions, patients, when offered the opportunity for a transfer to another hospital, rarely accept the offer. More often than not the patients do not wish to go. The reputation of Memorial Hospital West, the loyalty factor, if you will, to Memorial, to the medical staff, the patients want to remain at the facility. (Testimony of Memorial West Administrator Ross, Tr. 152-3.) Memorial West plans expansion but even with its current planned bed expansion, it is reasonable to expect it to reach unacceptably high occupancy rates by 2006 if Memorial Miramar is not built. Furthermore, the only obstetric programs in south Broward are at Memorial West and Memorial Regional. Memorial West performed 4,400 births last year, and its obstetrics unit often operates in excess of 100% occupancy. The only constraint on additional births at West is the limited physical capacity of the facility. Memorial Regional experienced even more births last year than West with about 5,000 deliveries. Memorial Regional is operating at or exceeding its functional capacity in other departments. The current medical/surgical occupancy at Memorial Regional is approximately 80% year round. Some units experience much higher occupancies. The intensive care unit's occupancy frequently exceed 100%, as does the cardiac telemetry unit. In certain medical/surgical units, peak occupancy is as high as 125%. Memorial Regional's capacity to handle its high patient volume is limited by certain factors. Semi-private rooms are limited to use by members of the same sex. As a tertiary facility, there are specialty patients who must be served by nurses trained in that patient's specialty, with appropriate monitoring equipment. Without approval of Memorial Hospital Miramar, Memorial Regional will reach 85% occupancy by 2008 and 88% occupancy by 2010. These occupancy rates create an inefficient and untenable environment in which to deliver the mix of specialized and tertiary services offered by Memorial Regional. The overcrowding at Memorial West and Memorial Regional is dramatic and continuing. There are simply more patients seeking care at these hospitals than the hospitals can serve appropriately. This overcrowding exists despite the excess of acute care beds within the health planning district. In sum, despite the plentiful nature of the number of acute care beds in the health planning district, a need exists to either decompress Memorial Regional and Memorial West by some means such as the proposed new hospital in Miramar or to expand one or both of the two hospitals by way of new construction or conversion of LDR and observation beds. A decompression alternative to the new hospital is to transfer beds from existing hospitals to create a satellite hospital. Because of high occupancy rates at West and Regional and because Pembroke's lease will expire in 2005, transfer of existing beds is not a feasible option. That leaves expansion, as the only alternative to a new hospital in Miramar. Cleveland Clinic and Westside argue there are ample opportunities at the two hospitals for expansion. Expansion New Construction In pre-CON application evaluation, SBHD commissioned a study from Gresham, Smith and Partners, an architecture firm. The firm studied the three Memorial facilities to determine whether expansion of the acute care bed complement at any of them was feasible. In a "Memorial Health System Facility Expandability and Master Plan Review Report" the firm concluded that it was clearly not feasible to expand either Memorial Pembroke or Memorial Regional and there were problems with expanding Memorial West. With significant problems including its aged plant and its uncertain future, expansion at Memorial Pembroke would not be cost-effective. It would cost $31 million in capital improvements to maintain Pembroke's functional capacity at 149 beds. If the present location of nursing administration, hospice and other necessary services were moved out of the hospital, the hospital's function could be expanded to 215 beds. No evidence was presented with regard to the advisability of moving those services or the additional costs associated with this alternative. HCA's willingness to make the investment necessary to renovate the facility at Pembroke was not supported by any specifics. HCA's announced its intention, "to take the hospital back at the end of the lease and run it," (tr. 1511-2) but, in fact, the company has not taken any action to evaluate the potential for assuming operation of the hospital in 2005. Nor has it even begun the process it must go through before final decisions are made. The overarching intention to "re-take the hospital and run it," at this point in time, does not mean HCA will be willing to make the investment necessary to renovate the facility either during the term of SBHD's lease or afterward. It still needs to "do a very detailed discounted cash flow analysis to make a final decision on the investment needed and the return on that investment." (Tr. 1514.) Memorial Pembroke's uncertain future makes it an unlikely candidate for expansion. However unlikely such a result, with the problems that afflict Memorial Pembroke, there is, moreover, no guarantee that HCA's intended analysis will convince it even to continue operation of the hospital. Memorial Regional has different problems from Memorial Pembroke. It takes up an entire block surrounded by residential property and parking garages. There is almost no opportunity for growth on the site. Of the few areas that could be expanded vertically, only one would be conducive to bed addition. "[I]t is so remote, it doesn't tie back to the main nursing care areas." (Tr. 482.) Expansion at Regional would also be plagued with concurrency problems and zoning issues. Of the three hospitals, Memorial West presents the best option for expansion. A facility master plan for Memorial West provides for the addition of a patient tower on the north side of the facility ("the north tower"). The addition of the north tower could add as many as 50 beds to Memorial West at a cost substantially less than the construction of Memorial Miramar. Still, SBHD's architects, Smith and Gresham, concluded that expansion of the size necessary to alleviate the overcrowding at West was not cost-effective. The force of the Smith and Gresham opinion is tempered by the firm's standing to benefit financially to a much more significant degree if Memorial Miramar is built than if the planned-for tower is constructed to add 50 beds to Memorial West. But the opinion is not groundless. Put simply, construction of an additional tower at West is no simple solution to its capacity problems. The tower was planned for maternal services but like the minimal opportunity for expansion at Regional, it would be "remote from the rest of the nursing function . . . [it would, moreover] trigger huge upgrades to the infrastructure." (Tr. 480.) The hospital site is constricted already because of additions that have almost completely built out the campus. A new north tower would add inefficiencies in hospital operations because of the increase in travel distance for materials delivery and meeting the dietary needs of patients. Despite the master plan for growth, an improvement the size of the north tower would begin to turn West into another Memorial Regional: a huge hospital, overdeveloped for its site. The improvement, like every improvement thereafter, would require patient shuffles and disruptions in patient care. Like Memorial Regional, expansion at West, too, would have concurrency issues and could create a land use dispute with neighbors, the outcome of which is uncertain. In light of these obstacles, SBHD prefers the option of constructing the new hospital in Miramar over expansion at West. There is, however, in the view of SBHD's opponents, another option for expansion of existing facilities: conversion of LDR and observation beds. Expansion through conversion of LDR and Observation Beds Cleveland Clinic and Westside contend that another option to relieve overcrowding is conversion of observation and LDR beds to acute care hospital beds. But these beds are used to meet the need of observation and maternity service patients. There are patients who need closely supervised medical care but whose care has not been determined to require admission to the hospital. Observation patients, sometimes referred to as "23 hour" patients, may suffer from various conditions, including chest pain, fever, abdominal pain, rectal bleeding or nausea. Given the high number of births at Memorial West, many obstetrical patients present at the hospital in "false labor" or for antipartum testing, complications of pregnancy, or symptoms that should be treated as observation or on an inpatient basis. It would be impractical for Memorial West to convert observation and maternity service beds, whether existing or still planned for, to inpatient acute care beds. If these beds were converted, Memorial West would find itself once again in its present straits of not enough beds for observation purposes particularly for obstetrical patients for whom there is little choice where to obtain obstetrical services in the South Broward Hospital District. Limited Functionality and Uncertain Future of Memorial Pembroke Memorial Pembroke has undergone seven ownership changes since it first opened. Perceived as a hospital where neither patients nor physicians want to go, it has suffered from a stigma within the community. Even with recent gains in utilization, it achieved an occupancy rate of only 24% in calendar year 2000. Pembroke suffers from physical and infrastructure limitations that reduce its functional bed capacity to 149 beds. Its mechanical and heating, ventilation and air conditioning systems are outdated and inadequate. For example, a primary generator is vented to the outside by a 6-foot hole in the ceiling. The electrical panels are at absolute capacity. The first floor has an outdated, plenum air return with no ducts in the ceiling. The generators have transfer switches that require them to be turned on manually. Facilities management personnel are reluctant to do so for safety reasons. The semi-private patient rooms at Pembroke are too small for modern care and do not have adequate space for the monitors, IV equipment, pumps and other technology required by today's health care delivery system. Many rooms do not have showers. The hospital has a number of three bed wards woefully outdated by the standards of modern care. It would cost $31 million in capital improvements to simply maintain Pembroke's functional capacity at 149 beds, to upgrade the facility to bring it into compliance with existing code and to otherwise modernize inadequacies. Whether Pembroke will continue to operate after 2004 is unknown. While HCA stated its intention to do so, it has not made a final decision to assume operations. It still needs to conduct a financial analysis sufficiently detailed to determine whether the necessary expenditures to bring the hospital up to par are practical. Any capital investment by HCA in excess of $1 million requires the approval of HCA's national office, approval that has not yet been provided. The level of capital investment required at Memorial Pembroke is significant and it cannot be assumed that HCA will make this investment. (See paragraph 89, above.) Increasing Retraction for Access in SW Broward Of the three hospitals located within the ten zip codes that constitute southwest Broward County: Memorial West, Memorial Pembroke and Cleveland Clinic, each poses some manner of access impediment for the residents of the area. Memorial West is overcrowded. Memorial Pembroke's future is uncertain, its present clouded by significant physical plant problems and stigma that keeps its occupancy low. Cleveland Clinic's distinctive character, its closed specialty staff and its regional, national and international draw discourages utilization by southwest Broward residents seeking routine acute care hospital services at a community hospital. The Cleveland Clinic medical staff is open to community primary care physicians. "[W]ith the qualification that if there's a specialty for some reason that is not adequately manned, the clinic can go out and contract with community physicians to provide the services" (District No. 55, p. 39), the Cleveland Clinic medical staff is not open to community specialists or sub-specialists. Its specialty and sub- specialty staff, therefore, is closed. The medical staff building, moreover, located on the campus is also closed to community practitioners even to those primary care physicians with privileges at the hospital to manage their patients care. Like the specialty medical staff, the building is restricted to Cleveland Clinic salaried specialists. Due to the closed nature of the specialty staff at Cleveland Clinic, any patient admitted to the Cleveland Clinic hospital will be seen by a Cleveland Clinic physician. This sets up reluctance on the part of community physicians to use the Cleveland Clinic hospital. As expressed by the hospital's CEO, "it's sometimes difficult to convince a primary care physician that he needs to change his referral patients, so yes, there is some concern [about the willingness of community physicians to utilize the hospital]." Id., p. 40. In multiple prior CON applications approved by AHCA, Cleveland Clinic projected that up to 30% of its patients would come from outside Broward County and that it would draw patients from throughout Broward County, rather than having a more traditional, limited service area typical of a community hospital. Patient origin data for Cleveland Clinic when at its old location in Pompano Beach shows the hospital, unique among Broward County hospitals, has a broad county-wide, regional and national draw. While all other hospitals in Broward County can identify fewer than 25 zip codes that generate the first 75% of patient admissions in 1999, 60 zip codes generated the first 75% of Cleveland Clinic's admissions. Similarly, while all other hospitals in Broward County can identify fewer than 25 zip codes that generate the first 90% of their patient admissions in 1999, the first 90% of patient admissions at Cleveland Clinic's hospital were generated by no less than 287 zip codes. Cleveland Clinic presented evidence of its intention to be available to the local community. It has marketed in Broward County by means of newspaper and television advertisements and various community programs. It has also conducted outreach and training programs with the emergency medical service providers in the Broward County area, not only to improve the quality of care for the patients of Broward County but also to educate the emergency medical service providers about Cleveland Clinic. The patient origin data for Cleveland Clinic's first three months of operation in Weston, however, verifies its continued broad draw. This data shows that within Broward County, only 30% of patients originated within the 9 southwest Broward zip codes that Cleveland Clinic identifies as its "immediate service area"; the other 70% of its patients come from outside the immediate service area. Cleveland Clinic is not a typical community hospital. Its previous CON applications have been granted in part on its unique characteristics. Whether its image or persona will change with the move to Weston to attract more patients from southwest Broward County is an open question. Given its nature and the focus of the health care it is likely to deliver, however, it is not likely that it will be utilized regularly by residents of southwest Broward County seeking routine hospital care either because not their hospital of choice or because of community physician referral patterns. h. Assurance that SBHD Can Fulfill its Mission The final "not normal" circumstance relied on by SBHD relates to the affluence of the patients in southwest Broward County and the profits that are reasonably expected to be generated by virtue of the proposed hospital's location in this affluent area. The expected profits will both subsidize SBHD's charity care and support its ability to be competitive. The importance of SBHD remaining competitive and able to serve the indigent in Broward County was explained at hearing by Jeffrey Gregg, Chief of AHCA's Bureau of Health Facility Regulation: [A]s a major indigent care provider for the State of Florida, [SBHD is] providing a service that extends far and wide that benefits everyone. In our state we have indigent care concentrated in relatively few facilities … [I]t is a very important resource that needs to be nurtured and protected to the greatest extent possible because it is fragile and vulnerable. We have many uninsured people in the state, somewhere between two and three million. It is reasonable to expect now with the economic downturn that we are going to be seeing an increase in uninsured people, so the value of hospitals that function as safety net providers is . . . very important. (Tr. 1240-1). This rationale supported the District's CON application for Memorial West. Because of SBHD's financial success to which Memorial West has been a major contributor, SBHD has achieved a significant degree of financial stability in this day of decreasing reimbursements, managed care, and increased health care costs. It is not contested that its financial position is sound. For fiscal year 2002, SBHD was running ahead of revenue and profit projections at the time of hearing. Nonetheless, if hospitals are constrained and the payor mix becomes less favorable, financial conditions can change quickly. Only three years ago, the District posted an $18 million debt. The capacity constraints at Memorial West will limit its ability to generate additional profits. At the same time, the District must accept all charity care patients. This requirement coupled with capacity constraints has the potential for an unfavorable payor mix for the District. The addition of Memorial Miramar will help to ensure that the District maintains its strong market position and will sustain a favorable payor mix. The profits expected to be generated by Memorial Miramar will ensure that the District can continue to provide care to the indigent without raising, and perhaps by lowering, the tax rate for the tax payers of Broward County. The Proposed Primary Service Area The District's proposed primary service area ("PSA") is a 10 zip code area in southwest Broward County. It excludes zip codes in Dade County that might have been included as well as the eight easternmost zip codes in south Broward County. Usually a set of contiguous towns or minor subdivisions or zip codes that represent a substantial majority of a hospital's patients, there is no single way of defining a hospital's primary service area. Some health planners use a region from which 75% of the patients come but a range of 60 to 80 percent is not unreasonable. There are other approaches to defining primary service areas: zip codes, for example, in which a threshold level of market share was achieved or that account for a minimum percentage of the hospital's patients. While one method may be more usual than another, any of a number of ways of defining a PSA may be reasonable. Cleveland Clinic's health planner, Ms. Patricia Greenberg sees Dr. Finarelli's PSA for the Miramar hospital as not rational from the perspective of health planning. The zip codes Dr. Finarelli chose include a number that are to the east of Memorial West. Ms. Greenberg asserts that it is unlikely that patients will drive from the east past Memorial West in order to reach Memorial Miramar. It would have made much more sense, in her view, for the PSA to have included three zip codes to the north of the PSA in western Broward County: zip codes 33327, 33326 and 33325. But these zip codes, entirely within North Broward Hospital District, are not South Broward Hospital District zip codes. Nor are three other zip codes that Ms. Greenberg sees for the Miramar PSA as more rational choices than zip codes east of Memorial West that Dr. Finarelli chose. Ms. Greenberg's other choices outside Dr. Finarelli's PSA are not only not in the hospital district, they are not in AHCA Health Planning District 10. They are in Dade County. Determinations of bed need do not always rise and fall on the selection of the primary service area. To the contrary, as Dr. Finarelli stated at hearing, "[h]ow and where the boundaries are drawn between the primary and secondary service area is less important [than] making sure that any analysis of bed need and demand incorporates both the primary and secondary service areas." (Tr. 724). This statement loses its potency, however, and the import of the choice of the primary service area is raised in light of the population-based bed need projections made by Dr. Finarelli within the PSA in support of the application. Population Based Bed Need Projections within the PSA Dr. Finarelli conducted a standard population based bed need analysis to determine the gross bed need within the PSA selected for the proposed hospital. His bed need calculations were computed separately for adult medical, surgical, pediatric and obstetric beds. The assumptions used by Dr. Finarelli were reasonable and appropriate. The level of detail in Dr. Finarelli's model was described by another of SBHD's expert health planners who testified in this case, Mr. Balsano and who has been qualified as an expert in health planning and health care financial feasibility approximately 20 times over the last decade, as the most detailed model he had ever seen. Dr. Finarelli's analysis accounted for the current and projected population as well as the current and projected hospital discharge rate per 1000 population within the PSA. Multiplying the population (in thousands) by the discharge rate yields the total number of current and projected hospital discharges by PSA residents for the planning horizon. The total number of hospital discharges was then multiplied by an appropriate average length of stay ("ALOS") to determine the total number of current and projected patient days by PSA residents. The total patient days were divided by 365 (days in the year) to arrive at the current and projected hospital average daily census ("ADC"). Finally, the ADC was divided by the desired 75% occupancy rate to arrive at a gross bed need for the PSA. The calculations result in a projected need in the 2006 planning horizon for a total of 457 acute care beds; including 386 adult medical surgical, 25 pediatric, and 46 obstetric beds. Based only on projected population growth within the PSA, there will be an incremental gross bed need for 75 acute care beds; 67 medical/surgical, 3 pediatric and 5 obstetric. Existing Inventory and Bed Supply The three hospitals located within the 10 zip code PSA have a total of 667 licensed acute care beds, existing or approved. Including the 36 approved and 16 conditionally approved beds at West, Memorial West has 216 beds. Memorial Pembroke has 301 and there are 150 licensed beds at Cleveland Clinic. This total, however, is "simply not a reasonable or realistic measure of how many beds in those three hospitals are truly available to the residents of Southwest Broward County . . . ." (Tr. 837-8.) Patient origin statistics and representations made by Cleveland Clinic in its certificate of need applications bear out that it is not a typical community hospital. Appropriate to its mix of tertiary services and its focus on education and research, it has a broad service area reaching far beyond Broward County. Consistent with the nature of the hospital, in its first three months of operation at Weston, 35% of its patients came from outside Broward County and only 16% have come from southwest Broward County or the 10 zip code PSA used by SBHD in its application for the Miramar hospital. Based on available data and information, it is reasonable to project that Cleveland Clinic will draw approximately 26% of its patients from within Memorial Miramar's PSA. It is reasonable, therefore, to allocate 26% of Cleveland Clinic's 150 beds to meet the population based demand for adult medical surgical beds in the PSA, for a net contribution of approximately 40 beds. With its functional capacity of 149 beds, it is not reasonable to consider all of the 301 beds at Memorial Pembroke. Fifty-four percent of its patients come from within the Memorial Pembroke PSA. The product of 149 beds multiplied by 54% is approximately 80 beds available to meet the population-based demand of the residents of southwest Broward County. There is, moreover, some doubt about whether any beds will be available at Memorial Pembroke after the expiration of SBHD's lease with HCA. Given the stigma Memorial Pembroke suffers and its uncertain future, an estimate of 80 beds is a reasonable projection for the number of beds at the hospital available to meet the needs of the residents of southwest Broward County. With 65% of its patients coming from within the proposed PSA for the Miramar Hospital, Memorial West is the hospital of choice for the residents of the proposed PSA. With 186 adult medical surgical beds, 120 meet the needs of patients coming from Miramar's PSA. Thus, there are approximately 240 adult medical surgical beds (120 at West, 80 at Pembroke and 40 at Cleveland Clinic) available to meet the projected need of 386 adult medical surgical beds in the 2006 planning horizon. Subtracting the 240 beds from the 386 needed yields a net need of 146 beds to serve residents of the Miramar PSA. Although some patients will continue to seek services outside the PSA, Dr. Finarelli's projection that there is a sufficient net need to support the 80 adult medical surgical beds proposed at Memorial Miramar is reasonable. Building Memorial Miramar will help reduce the percentage of people who leave the area for acute inpatient adult medical surgical services from its current level of about 50% to approximately 25%. This will improve access to health care for the residents of southwest Broward County. Memorial West is the only provider of obstetrical services in southwest Broward County, and only one of two in all of south Broward (the other being Memorial Regional). Both Memorial West and Memorial Regional are operating above capacity in their obstetrical units. In calendar year 2000, Memorial West's 24-bed obstetric unit operated at 130% occupancy. Hollywood Medical Center recently closed its obstetric unit thereby increasing the pressure on Memorial Regional and Memorial West to provide services to area patients. With a projected gross need for 46 obstetric beds in the planning horizon, there is a net need for at least 22 more obstetric beds. The proposed 12-bed unit at Memorial Miramar will help to meet that need. Memorial Hospital West's 6-bed pediatric unit is the only unit of its kind in southwest Broward County. The only other provider of pediatric services in all of south Broward is Memorial Regional's Joe DiMaggio Children's Hospital. Dr. Finarelli reasonably projects that one-half of the pediatric patient beds needed in southwest Broward would continue to be filled by Joe DiMaggio's Children Hospital. This leaves a net need for at least 7 pediatric beds in southwest Broward; the proposed 8-bed unit at Memorial Miramar will fill that need. Patient Days, Utilization and Market Share Projections To project utilization and market shares for the proposed hospital, Dr. Finarelli used a geographic area comprised of 28 zip codes that represent the primary and secondary service areas of the proposed hospital. The areas are expected to account for 90% of the hospital's admissions. The 28 zip codes were divided by Dr. Finarelli into four geographic clusters: the 10 zip code PSA or "Southwest Broward", 9 zip codes in "Other South Broward", 3 zip codes in "North Broward" and 6 zip codes in north Dade County or "Select North Dade." Based on historical and current data and market trends, Dr. Finarelli assigned current and projected inpatient market shares in each zip code cluster to each hospital in south Broward County and to select hospitals in north Broward County and north Dade County, with and without the existence of Memorial Hospital Miramar. He also assigned market shares and projected patient days separately by service category for adult medical/surgical, obstetric and pediatric services. Dr. Finarelli's market share assumptions for the proposed hospital were as follows: for Southwest Broward County in the Adult Service Category, 6% and 18%, in OB, 7% and 20%, in Pediatrics, 7% and 20%, all for the years 2005 and 2010, respectively; for Other South Broward County, in the Adult Service Category, 0.3% and 1%, for OB, 0.3% and 1%, for pediatrics, 0% and 0%, all for the years 2005 and 2010, respectively; for North Broward in the Adult Service Category, 0.6% and 2%, for OB, 0.8% and 3% and for pediatrics, 0.8% and 3%, all for the years 2005 and 2010, respectively; and for Select North Dade, in the Adult Service Category, 0.8% and 2.5%, for OB, 1% and 3%, and for pediatrics, 0.8% and 2.5%, all for the years 2005 and 2010, respectively. Taking into account available data and projected trends in each of the zip code clusters, these market share projections are reasonable. Dr. Finarelli applied his market share assumptions to overall projections of hospital discharges for each zip code cluster to arrive at the projected number of discharges for the proposed hospital in its first and second year of operation. He included an additional 9% to 10% in projected discharges to account for patients admitted from outside the 28 zip codes, such as patients from areas elsewhere in Broward, Dade, other parts of Florida and out of state. It is typical for hospitals in Broward County to receive approximately 10% of patients from outside of their primary and secondary service areas. By multiplying the projected number of hospital discharges by a reasonable length of stay for each category of service, Dr. Finarelli arrived at his projections of patient days. His "average length of stay" assumption was less than the District average. These calculations demonstrate that Memorial Miramar will have total acute care utilization of 19,958 patient days in its first full year of operation, and 25,503 patient days in its second full year of operation. Dr. Finarelli's projections of market shares, admissions and patient days for the new hospital appear to be reasonable. The Statutory Criteria Section 408.035, Florida Statutes, provides the review criteria for CON applications. The parties agree that subsections (3) and (4) are not in dispute. Section 408.035(1) concerns whether the proposed project is supported by and consistent with the applicable district health plan (the "Plan"). The Plan contains recommendations, preferences and priorities. The majority of the preferences and priorities contained in the Plan are not applicable to this application. The Plan recommends that there should be a reduction of licensed beds in Broward County until a ratio of 4.0 beds per 1,000 population is less than 4.0 beds per thousand and/or an overall occupancy rate of 85% is achieved. Although the bed population ratio is less than 4.0 beds per thousand, the annual occupancy rate is below 50%. This criterion, quite obviously, is not met by SBHD. But its importance diminishes in light of the "not normal" circumstances in support of the application, particularly the overcrowding at Memorial West and Regional. The Plan states that "priority consideration for initiation of new acute care services or capital expenditures shall be given to applicants with a documented history of providing services to medically indigent patients or a commitment to do so." SBHD promises to provide 3.21% of gross revenue for charity care and 4.14% of its patient days for Medicaid patients at Memorial Pembroke. These figures are not unattainable. Memorial West provided 3.2% of its revenues toward charity care in the most recent year. The effect of the expiration of SBHD' lease without renewal at Memorial Pembroke may increase pressure on Memorial Miramar's charity care services. On the other hand, in light of Memorial West's history in meeting its charity care commitment and the relative affluence of the Miramar's PSA, there is some question as to whether Memorial Miramar can meet the commitment contained in the application. West has fallen far short of its 7.0% commitment. Less than 1% of its admissions were charity care admissions between 1997 and 2000 and only 2.6% of its gross revenues were for charity care in 1999, for example. Whatever West's experience bodes for Miramar's future, it is clear that SBHD has a documented history of providing services to the medically indigent. It is committed, moreover, to do so throughout the hospital district whether it achieves its commitment at Memorial Miramar or not. The preferences of the Plan related to the provision of care for the indigent is clearly met by SBHD. Section 408.035(2) addresses the availability, quality of care, accessibility and extent of utilization of existing health care facilities and health services in the service district of the applicant. There is no problem with quality of care in the district. The extent of utilization of all the facilities in the district is not high. Nonetheless, there is an access problem that constitutes not normal circumstances. Memorial West, in particular, is overcrowded. A new hospital in Miramar will enhance access for the residents of the hospital district who want to access one of the District's hospitals and so directly meets the criterion in Section 408.035(7), the "extent to which the proposed services will enhance access to health care for residents of the service district." Section 408.035(5) addresses the needs of research and educational facilities including facilities with institutional training programs and community training programs for health care practitioners at the student, internship and residency training levels. The District's affiliation with medical schools provides some satisfaction with this criterion but on balance, SBHD receives little credit under this criterion. Section 408.035(6), Florida Statutes is "[t]he availability, of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation." The parties stipulated that SBHD has the ability to recruit and retain the staff needed for the proposed hospital. Cleveland Clinic and Westside argue that SBHD's recruitment of staff will have a detrimental impact on existing providers. A shortage of skilled nurses and other allied professionals exists nationally, in Florida and in Dade and Broward Counties. The nursing shortage has intensified in recent years due to the decline in the number of licensed nurses further compounded by a drop in the number of nurses enrolled in nursing schools. As a result it has become increasingly difficult for hospitals to fill nursing vacancies. In order to ensure adequate staffing in the midst of the nursing shortage, especially during the peak season of late fall and the winter months, Westside and Cleveland Clinic are forced to utilize "agency" or "pool" nursing personnel. These nurses command higher wages than non-agency nursing personnel. The District's application projects a need for 128 registered nurses who will be full-time employees ("FTE"s). This need increases to 167. New hospitals are usually able to attract staff from other facilities who prefer to work with new equipment in a new setting. Recruitment of personnel to staff the Miramar Hospital will come at the expense of existing providers such as Cleveland Clinic and Westside. Subsection (8) of the Review Criteria is "[t]he immediate and long-term financial feasibility of the proposal." The District has the financial resources to construct the hospital and meet start-up costs. There was no challenge to SBHD's demonstration of short-term financial feasibility. Projections of revenues and expenses were based on SBHD experience at Memorial West and its other hospitals. These projections are reasonable. Based on Dr. Finarelli's patient day projections, showing a net profit of $1.6 million in year 2, the project is feasible in the long-term. Subsection (9) of the Review Criteria is "[t]he extent to which the proposal will foster competition that promotes quality and cost-effectiveness." Aside from the impact the new facility will have on Cleveland Clinic and Westside's ability to recruit and retain staff, the evidence failed to show that either Cleveland Clinic or Westside would suffer significant impact if SBHD's application is approved. No matter which experts projections of lost case volume are accepted, both Cleveland Clinic and Westside should generate substantial net profits. The future of Memorial Pembroke, after the expiration of the current lease, is too speculative to factor into the impact to HCA. Subsection (10) of the Review Criteria relates to the costs and methods of the proposed construction. The District satisfies this criterion. (See paragraph 34, above). Subsection (11) addresses the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent. As stated above, while there is legitimate doubt whether or not SBHD can meet the conditions it proposes in its application, there is no question about its past provisions of services to Medicaid patients and the medically indigent. Rule Criteria There are two rule criteria that relate to the application. Rule 59C-1.038, acute care bed priority considerations and Rule 59C-1030, additional review criteria. Under the Rule 59C-1.038 there are two priorities, only the first of which (documented history of providing services to medically indigent patients or a commitment to do so) is applicable. Stated in the disjunctive, just as its corollary statutory criterion, SBHD clearly meets the criterion based on its documented history regardless of the case Cleveland Clinic and Westside present relative to doubts based on the history of condition compliance at Memorial West. The criteria in Rule 59C-1.030 generally address the extent to which there is a need for a particular service and the extent to which the service will be accessible to underserved members of the population. The application did not identify an underserved segment of the population that is in need of the services proposed for Memorial Miramar. As for the remainder of the criteria under the rule, there is a need for the proposed project as concluded below in this order's conclusions of law.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration grant South Broward Hospital District's CON Application 9459 to establish a 100-bed acute care hospital in southwest Broward County. DONE AND ENTERED this 3rd day of July, 2002, in Tallahassee, Leon County, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of July, 2002. COPIES FURNISHED: C. Gary Williams, Esquire Michael J. Glazer, Esquire Ausley & McMullen 227 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302 Stephen A. Ecenia, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551 Robert A. Weiss, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 F. Philip Blank, Esquire Geoffrey D. Smith, Esquire Blank, Meenan & Smith, P.A. 204 South Monroe Street Post Office Box 11068 Tallahassee, Florida 32302-3068 George N. Meros, Jr., Esquire Michael E. Riley, Esquire Gray, Harris & Robinson, P.A. Post Office Box 11189 Tallahassee, Florida 32302 Gerald L. Pickett, Esquire Agency for Health Care Administration 2727 Mahan Drive Building Three, Suite 3431 Tallahassee, Florida 32308-5403 William Roberts, Acting General Counsel Agency for Health Care Administration 2727 Mahan Drive Building Three, Suite 3431 Tallahassee, Florida 32308-5403 Virginia A. Daire, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Building Three, Suite 3431 Tallahassee, Florida 32308-5403
The Issue Whether there is need for a new hospital in AHCA Acute Care Subdistrict 5-2 (eastern Pasco County)? If so, whether AHCA should approve either CON 9975 or CON 9977?
Findings Of Fact The Applicants and Background Pasco-Pinellas Pasco-Pinellas, the applicant for CON 9975, is a joint venture between two nonprofit healthcare organizations: University Community Hospital, Inc. (UCH) and Adventist Health System Sunbelt Healthcare Corporation (Adventist). A not-for-profit healthcare system, UCH has served the Tampa Bay area for the last 40 years. It owns and operates two hospitals in Hillsborough County and one in Pinellas County. UCH has approximately $100 million available for capital expenditures to fund the hospital proposed by CON 9975. One of its Hillsborough County facilities, University Community Hospital, is located on Fletcher Avenue in northern Hillsborough County, AHCA Health Planning District VI. Across the street from the main campus of the University of South Florida (USF) and its College of Medicine, University Community Hospital has an agreement with USF for GME. University Community Hospital at present serves the Wesley Chapel area in eastern Pasco County. The other member of the joint venture, Adventist, is a financially successful not-for-profit healthcare organization. It operates 17 hospitals in the state of Florida. As of December 31, 2007, Adventist's cash on hand, including investments, exceeded $3.6 billion and net revenue for 2007 was approximately $368 million. The joint venture between UCH and Adventist was formed to establish a hospital to serve the Wesley Chapel area of Pasco County and to provide other healthcare services in the county. At present, the two members of the joint venture compete to serve the Wesley Chapel area through University Community Hospital and Adventist's Florida Hospital Zephyrhills (FHZ), a 154-bed general acute care hospital in Pasco County. The collaboration of competing hospitals in seeking approval for a new hospital through Florida's CON process is unusual. But by bringing the similar missions, strength in community interests and capable leadership of UCH and Adventist together, the Pasco Pinellas joint venture poses potential healthcare benefits to eastern Pasco County. BayCare The Applicant for CON 9977, BayCare of Southeast Pasco, Inc., is a not-for-profit corporation formed to develop the hospital proposed in the application. The sole member of BayCare is BayCare Health System, Inc. ("BayCare System"). BayCare System is the largest full-service community- based health care system in the Tampa Bay area. It operates 9 nonprofit hospitals and 11 ambulatory/outpatient centers in Hillsborough, Pasco and Pinellas counties. Initially organized in 1997 under a joint operating agreement between several hospitals, BayCare System's purpose has been to compete effectively in managed care operations in order to reduce the expenses of the individual organizations that are its members. In the first 5 years of operation, BayCare System saved its members a total of $90 million because of the enhanced cost efficiencies it achieved through business function consolidations and group purchasing. Its members are all not-for-profit hospitals. BayCare System's focus is on the treatment of one patient at a time. Its mission is to improve the lives of people in the community it serves, to operate effectively as a group of not-for-profit hospitals, and to provide high quality, compassionate healthcare. BayCare's application, because it provides potential for its proposal with its teaching aspects, draws significant and considerable support from USF, a national research university. USF has a College of Medicine, a College of Nursing, and a College of Public Health, collectively "USF Health." USF Health will collaborate with BayCare in the development of the hospital BayCare proposes, should it be approved and should its teaching functions come to fruition. The Agency The Agency for Health Care Administration is the state agency that administers the CON program pursuant to Section 408.034, Florida Statutes. It will make the final decisions to approve or deny the two CON applications at issue in this proceeding. Community Community Hospital is a general acute care for profit hospital with 386 beds. It is located within the City of New Port Richey in western Pasco County, Acute Care Subdistrict 5-1. With the exception of neonatal intensive care, open heart surgery and organ transplantation, Community is a full- service community hospital. It provides OB services. It is licensed for 46 adult psychiatric beds. It offers a variety of outpatient services including outpatient surgery, endoscopy, and outpatient procedures and lab testing. Its medical staff consists of approximately 400 physicians. Community serves patients without regard to ability to pay, and does not discriminate in any manner. Accredited by the Joint Commission on Accreditation of Hospital Organizations, it has received numerous awards and recognition for the quality of its health care services. Community's hospital facility is over 30 years old. Access to the campus from US 19, the closest major thoroughfare approximately 1.5 miles away, is gained via a two-lane street through a residential area. Land-locked but for the two-lane street, the campus is sandwiched between the residences and a high school. There are no medical office buildings ("MOB") owned by Community on the campus; less than 20 acres in size, it is completely built out. Community's Replacement Hospital Community has a replacement hospital facility currently under construction in Acute Care Subdistrict 5-2. Approximately five miles southeast of Community's New Port Richey location, the replacement facility is located at the intersection of Little Road and State Road 54. Expected to open in late 2010 at a cost in excess of $200 million, it is to be known as Medical Center of Trinity ("Trinity"). All current Community services will be offered at Trinity. At the same time, the new hospital will offer many advantages over the old facility. Trinity will initially be five stories in height, with fewer licensed beds, but constructed with the ability to expand. It will offer new medical equipment with the latest technology. Situated on 52 acres, with a new three-story MOB adjacent to the hospital, Trinity has plans to add a second MOB at some time in the future. Unlike existing Community Hospital, Trinity will have all private rooms. Its more efficient layout among service areas will improve efficiencies and patient satisfaction. Trinity's location is more accessible than Community's current location in New Port Richey. It is on State Road 54 (SR 54), a six-lane highway that runs east/west through Pasco County. The road has recently undergone major construction and expansion which was nearly complete at the time of hearing. Suncoast Parkway (a/k/a Veterans Expressway), furthermore, is an expressway toll road system that runs north/south from Hernando County through Pasco County to Tampa airport. From the intersection of Suncoast Parkway and SR 54, it takes approximately seven minutes to reach Trinity. Little Road runs north/south along the Trinity site, and north through Pasco County to Regional Medical Center Bayonet Point ("Bayonet Point"). Community's poor financial performance in recent years is expected to improve after the opening of Trinity. The Proposals Although both applicants propose a new hospital in roughly the same location in Subdistrict 5-2, the two are different both in scope and approach. Pasco-Pinellas' Proposal Pasco-Pinellas proposes to build an 80-bed acute care hospital on Bruce B. Downs Boulevard in the area known as Wesley Chapel in eastern Pasco County. If approved and constructed, the hospital will include 36 medical/surgical beds, 8 labor/delivery/recovery/post partum beds, 12 critical care beds, and 24 progressive care beds. The project would involve 184,000 gross square feet of new construction, at a total estimated cost of $121 million. Pasco-Pinellas proposes a typical primary service area (PSA). Five and one-half zip codes comprise the PSA; Pinellas- Pasco reasonably projects 82% of its admissions will come from the PSA. Two and one-half zip codes comprise the secondary service area (SSA). The zip code that is shared by the PSA and the SSA (33559) is split roughly in half between Pasco County and Hillsborough County. The half that is in Pasco County is in Pasco-Pinellas' PSA. The five full zip codes in the PSA are 33541, 33543, 33544, 34639, and 33576. The two full zip codes in the SSA are 33549 and 33647. Pasco-Pinellas' in-migration from outside its proposed service area (the PSA and the SSA) is forecast by Pasco- Pinellas's health planner at 12%. For a community hospital in the Wesley Chapel area without tertiary services, the in- migration percentage projected by Pasco-Pinellas is reasonable. BayCare's Proposal BayCare proposes to establish a general acute care hospital with 130 beds. The application proposes that it be collaboratively developed by BayCare System and USF Health so as to provide teaching functions associated with the USF College of Medicine and other health-related university components of USF Health. Consisting of approximately 476,000 square feet of new construction at an estimated total project cost of approximately $308 million, the hospital will have 92 medical/surgical beds, 24 critical care beds, and 14 post-partum beds. Like Pasco-Pinellas' proposal, BayCare's proposed hospital will be located on Bruce B. Downs Boulevard in the Wesley Chapel area of southeastern Pasco County. BayCare's proposed PSA is circular. The center point of the PSA is the proposed BayCare hospital site in the Wesley Chapel area. The circumference is along a series of seven-mile radii so that the diameter of the circular PSA is 14 miles. The seven-mile radius was chosen to approximate a fifteen-minute travel time by automobile from the outer edge of the circular PSA to the hospital site. BayCare's PSA includes some part of seven zip codes. Two are Wesley Chapel zip codes: 33543 and 33544. Two are Lutz area zip codes: 33549 and 33559. Two are Land O'Lakes zip codes: 34639 and 34638, and one is a zip code in Hillsborough County: 33647. Relative to typical PSAs for most proposed hospitals, the PSA proposed by BayCare's application was described at hearing by BayCare's health planner as "small." See Tr. 1855. For calendar years 2013 and 2014, BayCare projects that 19,0976 and 20,008 patient days, respectively, will be generated from within the PSA. These projections constitute a projection of 60% of all patient days projected for the two years, a percentage substantially lower than would be generated from a typical PSA. The remaining 40% of projected patient days is roughly double what would be expected from beyond a PSA under a more typical proposal. The high number of projected patient days for patients originating outside the PSA was explained at hearing by BayCare's health planner. The involvement of the USF Physician's Group and the "teaching" nature of the proposal "pumps up and provides an additive level of in-migration that would not be experienced without the USF combination with BayCare in [the] project." Tr. 1856-7. Pasco County Hospitals There are five hospitals in Pasco County. Two in western Pasco County will continue to remain in Subdistrict 5-1 in the near future: Regional Medical Center Bayonet Point, located in northwest Pasco County and Morton Plant North Bay Hospital, located in New Port Richey. Two are in eastern Pasco County, Subdistrict 5-2: Pasco Regional Medical Center in east central Pasco County, and FHZ, located in southeast Pasco. The fifth is Community/Trinity. No Need for Both Hospitals None of the parties contends there is need for both hospitals. Nor would such a contention be reasonable. Indeed, the record does not demonstrate need for both a new 80-bed community hospital as proposed by Pinellas-Pasco and a new 130- bed hospital that BayCare denominates a "teaching" hospital, each with an intended location on Bruce B. Downs Boulevard in the Wesley Chapel area of southeastern Pasco County in Subdistrict 5-2. The question remains: is there a need for one new hospital? If so, which of the two applications, if either, should be approved? Need for a New Hospital; Access Enhancement Among the counties in the Tampa Bay area, Pasco County has been the fastest growing in recent years. From 1990 to 2000, its population grew 22.6%. Three times higher than the state average, this represents tremendous growth for any locale. The Wesley Chapel area of south Pasco County roughly coincides with the PSAs of the two applicants. Dramatic growth over the last 20 years has marked the Wesley Chapel area's transformation from an agricultural area to a suburban community. North of Hillsborough County and its largest city, Tampa, improvements in the transportation network has made south Pasco County and in particular, the Wesley Chapel area, a bedroom community for workers commuting to Tampa. Claritas, a national demographic data service, is a generally accepted population projection source for CON applications. Claritas projects the growth in Pasco County to continue. For example, the projected population for Pasco- Pinellas' proposed PSA, which substantially overlaps with BayCare's proposed PSA, is 113,397 in 2011 and 118,505 in 2012. The Claritas projections are based on the most recent decennial U.S. Census, that is, 2000, and do not take into account data of impending population growth, such as new housing starts and new schools. Claritas, therefore, may understate projections in areas that have experienced more recent, rapid growth. The University of Florida Bureau of Economic and Business Research ("BEBR") also provides reliable population data by county. In the year 2000, the census for the Pasco County population was 344,765. By 2030, that population is projected by BEBR to grow to 526,100 based on low projections, 681,100 based on medium projections, and 876,900 based on high projections. For the high projection rate, this would constitute a 154% increase in population. Even assuming the low growth rate, the population would increase by 53%. According to BEBR data, the county can be expected to grow at a rate of 4.71% per year. Another source of population data relied upon by population experts is Demographics USA. The Demographics USA data shows a substantial growth in population for Pasco County. According to Demographics USA, the population for Pasco County can be expected to grow from 343,795 in the year 2000 to 440,527 in the year 2010 and then to 504,277 by the year 2015. Based on the Demographics USA data, the county can be expected to grow at a rate of 3.11% per year. The Wesley Chapel area is considered to be the area of Pasco County with the most development and development potential now and in the future. Of 175 major projects actively undergoing development in Pasco County, 76 are in the Wesley Chapel area. Between 2010 and 2012, the population in the area is projected to grow by 5,000 persons per year. With the increase in the general population in the area comes an expected increase in the need for schools. Of 37 schools identified by the Pasco County School Board to be built in the near future, 19 are to be located in the Wesley Chapel area. Whether the historic growth rate of the last few decades will continue for sure is an open question with the downturn in the economy and the housing market that commenced in Pasco County in mid-2007. Absent a major recession, however, it is reasonable to expect growth in the Wesley Chapel area to continue even if not at a rate as rapid as in the recent past. Whatever the future holds for Wesley Chapel's growth rate, there is clearly a demand for inpatient general acute care services in the Wesley Chapel area. The total non-tertiary discharges from the Pasco-Pinellas service area was 15,777, excluding newborns, for the 12-month period ending June 30, 2006. As a result, AHCA found the existing and growing population in the Wesley Chapel area warranted a new hospital. Along with significant growth in the Wesley Chapel area comes resulting traffic and healthcare and hospital access issues. Drive time analysis shows the average drive time from each of the Pasco-Pinellas PSA six area zip codes to the eight area hospitals in 2007 to be 46.11 minutes. The analysis shows that future drive time is expected to be lengthier, strengthening the need for a hospital in the Wesley Chapel area. In 2012, the average time increase is expected to 57.68 minutes. A Drive Time Study Report prepared by Diaz Pearson & Associates compared drive times to the proposed site for Pasco- Pinellas hospital to eight existing hospitals: UCH, Pasco Regional, FHZ, Tampa General, University Community Hospital on Dale Mabry in Tampa, St. Joseph's North, St. Joseph's in Tampa, and the site for Community's replacement hospital. The study concluded: The results of this travel study demonstrate that the vehicular travel times for access to the proposed PPHCHS Hospital [Pasco- Pinellas' Hospital] are consistently LESS for residents within the six Zip codes of the Primary Service Area for years 2007, 2011, and 2012 than for comparable trips to any of the eight area hospitals for alternate choice. Pasco-Pinellas 36, p. 27. Of particular note are the travel times from each of the six zip codes in Pasco-Pinellas' PSA to UCH, FHZ, and Tampa General. For example, a patient driving from the centroid point in zip code 33559 to UCH would take 24.28 minutes and to FHZ would take 37.97 minutes in 2007. This increases to 29.55 minutes and 50.94 minutes in 2012. Another example, the time it takes a patient to travel from zip code 33541 to Tampa General was 75.51 minutes in 2007. In 2012, the travel time is projected to increase approximately 20 minutes to 95.33 minutes. In contrast, a new hospital in the Wesley Chapel area would decrease travel times significantly for patients in the six zip code areas of the Pasco-Pinellas PSA. For example, in 2007, it would only take a zip code 33559 patient 11.41 minutes to reach the proposed site for Pasco-Pinellas. This represents a time savings of 12.87 minutes compared to the average driving time to UCH and 26.56 minutes compared to the average driving time to FHZ. In 2012, the reduction in time to drive to Pasco- Pinellas' proposed hospital site instead of UCH is 18.34 minutes and for FHZ, it is 39.53 minutes. The time savings for patients from the 33541 zip code traveling to Tampa General for non- tertiary services is even greater. Using Pasco-Pinellas' site in the Wesley Chapel area would save the patient 52.67 minutes in 2007 and is projected to save 63.88 minutes in 2012. Anecdotal evidence supports the need for a new hospital in the Wesley Chapel area. Dr. Niraj Patel practices obstetrics and gynecology in the Wesley Chapel area. A drive for him in good traffic is typically 20 minutes to UCH (the only hospital at which he practices because the distance between area hospitals is too great). In morning traffic during "rush" periods, the drive can exceed 40 minutes. Caught in such a drive in January of 2008, Dr. Patel missed the delivery of a patient's baby. He was required to appear before the UCH Medical Staff's credentials committee to "explain the situation . . . [because it] was the third or fourth [such] episode." Pasco-Pinellas 47, p. 11. As Dr. Patel explained in a pre- hearing deposition, "it doesn't fare well for me . . . credential and requirement wise but it doesn't fare well for the patient [who] had to be delivered by the nursing staff which [without a physician present] increases patient risk and [the chance] of complication[s]." Id. A new hospital in the Wesley Chapel area will provide residents of the Pasco-Pinellas PSA or the BayCare PSA with shorter travel time to a hospital compared to the time necessary to reach one of the eight existing hospitals in the region. In 2007, residents of the six zip codes in the Pasco-Pinellas' PSA could be expected to access Pasco-Pinellas' proposed hospital in a range of 10.9 to 21.8 minutes. For the year 2012, the time can be reasonably predicted to range from 17 to 31.4 minutes. In comparison the drive times to the eight hospitals in the region for residents of Pasco-Pinellas' PSA are significantly longer. In 2007, it took a resident in zip code 34639 approximately 55 minutes to get to UCH and 73 minutes to get to St. Joseph's Tampa. By 2012, those drive times are reasonably projected to increase to 64 minutes and 83 minutes, respectively. Simply put, travel times are expected to increase as the population increases in coming years. The site of Pasco-Pinellas' hospital is approximately one mile from the site of the proposed BayCare hospital. The travel times suggested for the residents of the Pasco-Pinellas PSA to the proposed Pasco-Pinellas hospital can be expected to be similar to travel times to the proposed BayCare hospital. Given the proximity of the two proposed sites, either will significantly reduce travel time to hospitals for patients in the Wesley Chapel area. The existence in the Wesley Chapel area of a community hospital with an emergency room and primary inpatient services will benefit doctors, patients and their families. Heightened driving concerns among elderly patients and traffic congestion and inadequate roadways that delay Emergency Medical services support the need for a Wesley Chapel area hospital. The support is based not only on 2007 travel times but also on the reasonable expectation that travel time will be greater in the future. Existing hospitals are capable of absorbing the increased need for acute care hospital services that result from the increased growth that is reasonably projected to occur in Subdistrict 5-2. If there is to be a new hospital in the subdistrict, the Wesley Chapel area is the best location for it. A new hospital in the Wesley Chapel area will enhance access to acute care services for residents of Subdistrict 5-2. Preliminary Agency Action; the SAAR The Agency determined that there is a need for a new hospital in the Wesley Chapel Area when it issued its State Agency Action Report on CONs 9975 and 9977. The Agency also determined that between the two applications, Pasco-Pinellas was superior and should therefore be approved over BayCare's. This determination was founded primarily on Pasco-Pinellas' application being more reasonable in terms of size and impacts on existing providers. The Agency maintained at hearing the position it took in it preliminary action memorialized by the SAAR. Jeffrey Gregg, Chief of AHCA's Bureau of Health Facility Regulation received in this proceeding as an expert in health planning and CON Review explained when called to the stand to testify: The proposal by [Pasco-Pinellas] was on the smaller side and gave us more comfort [than BayCare's] . . . [W]hile we . . . agree with these applicants that there is a hospital in the future of [the Wesley Chapel area], we are more comfortable with the conservative approach, the smaller approach [of Pasco- Pinellas], particularly given that should it be necessary in the future, any hospital can add beds, acute care beds, merely by notifying us. And we were more comfortable that [Pasco-Pinellas'] approach would be able to expand access and improve services for people in this area while at the same time minimally impacting all of the competitors. Tr. 1995. As detailed below, AHCA's determination that the Pasco-Pinellas application is superior to BayCare's is supported by the record even if the basis for the determination made on the state of the record is not quite the same as the basis advanced at hearing by AHCA. Size and Cost Pasco-Pinellas proposed hospital involves about 184,000 square feet of new construction at a cost of approximately $121 million dollars. It is much smaller and less costly than BayCare's proposed hospital of 476,000 square feet of new construction for about $308 million. The Pasco-Pinellas proposal is more reasonably sized to meet the needs of the Wesley Chapel area and, in turn, Subdistrict 5-2. The difference in size and cost of the two proposals, however, is a function of a major difference in approach in the applications. Pasco-Pinellas' proposal is for a typical community hospital that would start out with a bed size within a range that includes 80 beds. BayCare, on the other hand, proposes to serve not only the Wesley Chapel area and Subdistrict 5-2, but also a substantial population of patients to be drawn to the subdistrict particularly from Hillsborough County. Patients migrating to the hospital from outside the subdistrict will for the most part be the product of BayCare's affiliation with USF Health and its service to the USF College of Medicine in its proposal denominated in the application as a "teaching hospital." Need for a New Teaching Hospital "Teaching hospital" is a term defined in the Health Facility and Services Development Act, sections 408.031-408.045, Florida Statutes: "Teaching hospital" means any Florida hospital officially affiliated with an accredited Florida medical school which exhibits activity in the area of graduate medical education as reflected by at least seven different graduate medical education programs accredited by the Accreditation Council for Graduate Medical Education or the Council of Postdoctoral Training of the American Osteopathic Association and the presence of 100 or more full-time equivalent resident physicians. The Director of the Agency for Health Care Administration shall be responsible for determining which hospital meets this definition. § 408.07(45), Fla. Stat. The Agency has not determined that BayCare's proposal meets the statutory definition as directed by the statute for it to qualify as a "teaching hospital." The record indicates that the proposal is not a typical teaching hospital. For example, teaching hospitals in the United States are usually located near indigent populations to achieve the efficiency of training future practitioners with treating people who otherwise could not afford services. BayCare's proposal in a small county with a more affluent population does not serve that purpose. BayCare contends neither that it is a "statutory" teaching hospital nor that it should be determined by the Agency to meet the statutory definition of "teaching hospital." Instead it grounds its case for need in the teaching functions its proposal would fulfill for USF Health and in particular for the GME needs of the students of the USF College of Medicine and the results those teaching functions would produce. Considerable testimony was offered by BayCare at hearing with regard to GME and the needs and aspirations of the USF College of Medicine. The Dean of the College, Stephen K. Klasko, M.D., spiritedly and eloquently related a narrative of need which was supported and amplified by other witnesses including faculty members at the college. There were many elements to the narrative. Highlights include the hybrid nature of the USF College of Medicine, "acting like a research intensive medical school . . . in a community-based body" (tr. 1132)," its on-going successful striving towards becoming an academic center for world class physicians as evidenced by this year's receipt of a research grant from the National Institute for Health, "the largest . . . given to a medical school in the last four or five years," id., and the GME challenges the college faces in the Tampa Bay area such as the recent loss of its anesthesiology residency program. BayCare's opponents point out the many ways in which the proposal is not only not a statutory teaching hospital but does not fit a nationwide model for teaching hospitals. BayCare counters that its model is one of many different models for a teaching facility. Whatever the merits of the various assertions of the parties on the point, USF's need for a teaching facility will be filled at least in part by the BayCare proposal. It is not an exaggeration, moreover, to call USF's need in this regard compelling. USF's institution-specific need, however, does not fall under any of the CON review criteria. See paragraphs 167- 8, below, in the Conclusions of Law. Perhaps not unmindful of the limits of the criteria, BayCare's presented other evidence that flows from the teaching function of the BayCare proposal. Relevant to the general criterion of "need" in subsection (1) of the Statutory CON Review Criteria, the evidence relates to physician shortages. The Physician Shortage There is a shortage of physicians in the district as there is in Pasco County. The problem has statewide dimensions. The state is not doing enough to replace aging doctors in Florida with younger doctors. Nor are aging doctors providing sufficient emergency room call coverage. The physician shortage both in general and in emergency rooms in the state is likely to increase. Residents are more likely to remain and practice in the community in which they train. Residents in the Tampa Bay area, in particular, are more likely to remain in the Tampa Bay area to practice. Even 20 residents per year in training at BayCare's proposed hospital would make a difference in existing physician shortages. Should BayCare's proposed hospital be built and operated as contemplated, the teaching functions that BayCare's application proposes to offer at the hospital would serve as a step, however small, toward meeting Florida's physician shortage as well as the shortage in District V, Pasco County, Subdistrict 5-2 and the Tampa Bay area. Nonetheless, there is a feature of this case that undermines BayCare's claim that the proposal will aid the physician shortage and its denomination in the application of the proposal as a "teaching hospital." The feature is present in the agreement between USF and BayCare (the "BayCare and USF Agreement) to make the BayCare proposed hospital a University Hospital. The BayCare and USF Agreement The BayCare and USF Agreement contains a section devoted to implementation and termination. The following is excerpted from the section's six separately numbered paragraphs: The Parties [the University of South Florida Board of Trustees or USF and BayCare Health System, Inc.] shall negotiate in good faith all other terms and conditions relating to the execution and implementation of this Agreement, including, without limitation, any revisions to the provisions of the Articles of Incorporation and Bylaws of the Hospital Corporation, the terms and conditions of the Health Affiliation Agreement, the design and layout of the University Hospital . . . [etc.] and such other documents and instruments as the Parties may find necessary or desirable to implement the terms of this Agreement. In the event the Parties are unable to agree on all such terms and conditions and all such documents required to implement the terms and provisions of this Agreement despite their good faith efforts to do so, either Party shall have the option after a period of at least twenty four months from the Effective Date or six months after the final approval of the Certificate of Need for the University Hospital is received, whichever is longer, to terminate this Agreement on the terms described in this [s]ection . . . . BayCare 2, Appendix C, BayCare and USF Agreement, Section G, p. 8. (Emphasis supplied.) For USF to terminate, the terms include payment to BayCare of $500,000 and agreement that for five years after termination it will not enter into an affiliation or other agreement with any other provider for the establishment of a university hospital in Pasco County. See id. The ability of USF to terminate the agreement is not "at will." It requires good faith efforts to have been made at implementations that fail to work. Furthermore, termination is not without consequences. But the termination provision in the agreement is consistent with the lack of a condition in BayCare's application that the BayCare proposal be a teaching hospital, "one more detail that made [AHCA officials] scratch our heads about the characterization of this hospital as a teaching hospital." Tr. 2011. It is also consistent with USF's support for "legislation that would be statewide that would allow state medical schools at some point, if they chose to, to make it easier . . . to have a hospital or research hospital on campus . . . [of which] USF would be one . . . " Tr. 1190-91. Adverse Impact Providers Outside the District Evidence was produced at hearing about the adverse impact of approval of either of the two applications on providers outside the district. Objections to the evidence were taken under advisement pending consideration of post-hearing memoranda submitted by the parties. Upon consideration of the memoranda, the objections are sustained. See paragraphs 159-66, below, in the Conclusions of Law. Providers Within the District The Pasco-Pinellas proposal will have minimal impact on Community/Trinity Medical Center. Its impact on other hospitals will be minimal with the exception of its two partner hospitals--UCH and FHZ--and of those two, only FHZ is in the District. There will be no adverse impact on Community as a result of the BayCare proposal. There is little patient flow from eastern Pasco to the western Pasco hospitals. Only about 1% of the patients in eastern Pasco travel west for services at Community, Morton Plant or Bayonet Point. It is reasonable to project that there will be no material change in Community's patient draw as a result of the new Trinity Medical Center. The projections by Community's health care and financial experts of patient days that would be lost and adverse financial impact to Community/Trinity should the BayCare proposal be approved were based on faulty assumptions. The majority of the adverse impact from BayCare's proposal, as in the case of Pasco-Pinellas' proposal, will be on UCH and FHZ. Availability of Resources Nursing and Non-Nursing Staff Pasco-Pinellas should be able to recruit and retain nursing and other staff for its hospital based on the Adventist experience at FHZ. The nursing vacancy at FHZ is 1% lower than the vacancy rate reported by the Florida Hospital Association (7.5% and 8.5%, respectively.) The turn-over rate for nurses at FHZ is 12%, significantly lower than the national rate in the 18-19% range. Recruitment of nurses has been successful at FHZ particularly in the last few years. In 2007, FHZ hired 100 nurses and reduced its use of agency nursing staff by roughly 75%. Among its different recruitment tactics have been a foreign nursing program, education and training incentives, scholarships at local colleges and specialty pay programs. Pasco-Pinellas will use many of the same recruiting techniques that have been successful at FHZ. It is reasonably anticipated that the same recruitment practices employed by FHZ will work for Pasco-Pinellas. Many members of the current nursing staff at FHZ, moreover, live in the Wesley Chapel area and have expressed an interest in working at Pasco-Pinellas. Retention programs at FHZ have been aimed at retaining better nurses. These include the magnet concept and a self- governance program with "a unit based council and nursing council so nurses . . . practicing . . . at the bedside have the opportunity to help govern the practice of nursing." Tr. 225-6. Retention programs similar to those used at FHZ will be implemented at Pasco-Pinellas. Schedule 6 in Pasco-Pinellas application reflects anticipated staffing for its new hospital. The staffing model is consistent with staffing at other Adventist facilities, specifically FHZ. The average salaries and wages are based on actual salaries inflated forward to the projected date of opening. The FTEs per adjusted occupied bed are adequate and consistent with the staffing patterns at FHZ. All necessary staffing positions are accounted for and the number of FTEs and salaries are sufficient for the hospital to operate and provide high quality of care. The registered nurse FTEs, as opposed to LPNs and lower-level nursing care, in Schedule 6 offer optimal staffing to provide high quality care and positive patient safety. The nursing salaries are adequate for the time frame in which Pasco-Pinellas will open with a one-time 5% increase and a 4% increase per year from present until opening. Schedule 6 supports the reasonable expectation that Pasco-Pinellas will be able to recruit and hire nursing staff and retain an adequate staff. The proposed staffing pattern in Schedule 6 of the Pasco-Pinellas application, which includes nursing staff, moreover, is reasonable. BayCare has a comprehensive recruitment program for recruiting and retaining nursing personnel as well. The strategies include a partnership with the nursing programs at USF and St. Petersburg College. BayCare System provides additional training to its nurses and with regard to salaries has committed to remaining competitive in the market. BayCare's recruitment and retention initiatives have been successful. In the 2008 year to date at the time of hearing, BayCare System had been able to hire more experienced nurses that it did in 2007 for the same time period. Overall, the BayCare System has a turnover rate of about 15%. The RN vacancy is 10% with a 13% turnover rate. These figures are comparable to state and national figures; in some cases they are lower. With regard to non-nursing employees or team members, BayCare System also had developed recruitment initiatives that are targeted toward those individuals. BayCare System has a positive reputation in the community as a good place to work. As an example, the three St. Joseph's hospitals (St. Joseph', Women's and Children's) and South Florida Baptist received recognition among the "Best Work Places in Health Care" for the years 2005 and 2006. The award recognizes outstanding practices related to employees. BayCare has the ability to recruit and retain the staff necessary to staff the proposed BayCare SE Pasco hospital. The staffing projections in Schedule 6 of BayCare's application, which includes nursing staff, are reasonable. Physician Support Despite the physician shortage, both applicants should be able to adequately staff their hospitals with physicians as shown by the evidence with regard to physician support for the hospitals. Florida Medical Clinic (FMC), a multi-specialty physician group practice with 85 physicians, is the primary physician group that serves the Wesley Chapel area. Thirty percent of its members are family practitioners or specialists in internal medicine. The remainder of the members cover 20 or so specialties that include both secondary and tertiary specialties. FMC has determined that it will support the Pasco- Pinellas proposal through its physicians, admissions and outpatients activity. Ninety percent or more of the clinic's patients use the UCH and FHZ facilities. FMC has a long- standing relationship with the administrators, personnel, and strategic issues of FHZ and UCH and is comfortable developing future plans for a hospital facility in Wesley Chapel with the two organizations FMC is able to meet the needs of the Wesley Chapel community both today and in the future. In addition, there are numerous other individual physicians who practice in the Wesley Chapel area who "predominantly support University Community Medical Center and Florida Hospital in Zephyrhills." Tr. 63. Having relationships with physicians already in a market when a hospital is being developed is advantageous to the new hospital. Among other advantages, it minimizes resources used to recruit and move new physicians into the area. In contrast to support for the Pasco-Pinellas proposal, FMC has not made a commitment to BayCare as to its proposal because of lack of knowledge about the structure of the facility, its strategic plans and whether or not FMC's interests align with the BayCare proposal but it has not foreclosed such a commitment. The USF physicians group will be a source of many of the physicians who will staff the BayCare proposed hospital, a likely reason for FMC's lukewarm to non-existing support for BayCare's proposal. USF emergency physicians will staff the Emergency Department. The BayCare System has approximately 28 physicians with privileges at BayCare System facilities with offices in the Wesley Chapel area. The proposed BayCare hospital will be staffed by recruited physicians and USF faculty physicians. Other physicians from the Wesley Chapel area provided testimony of their support for the BayCare proposal. It is reasonable to anticipate that some local Wesley Chapel area physicians will join the medical staff of the proposed BayCare hospital. Despite the physician shortages in the subdistrict, District V and the Tampa Bay area, both Pasco-Pinellas and BayCare will be able to staff their hospitals adequately with physicians. Charity and Medicaid; Conditions Pasco-Pinellas committed to a number of conditions of its applications. These include a 12.6% commitment to charity and Medicaid; the establishment of funding for a clinic for the underserved, provision of educational programs for the community, and two neonatal transports and funding for local fire and rescue services. BayCare projects a 6.1% level of charity care, 2.4% higher than Pasco-Pinellas' charity care commitment. It projects 10.3% of its Medicaid and Medicaid HMO patients will be attributable to Medicaid and Medicaid HMO patients versus 8.9% at Pasco-Pinellas. BayCare System has a history of providing services to Medicaid and Charity Patients. In 2006, for example, as not- for-profit entities, BayCare System facilities and related entities provided a total community benefit of $135 million in uncompensated care. Approximately 50% was pure charity care. BayCare System facilities currently serve patients from the Wesley Chapel area, including, of course, Medicaid and charity patients. BayCare System facilities provide 57% of the charity care and 31% of the Medicaid in the market. St. Joseph's Children's Hospital and St. Joseph's Women's Hospital operate at approximately 50-to-60% Medicaid and un-reimbursed care. St. Joseph's Hospital currently serves approximately 20% of the patients from the Wesley Chapel area. St. Joseph's, however, provides 36% of the total charity, Medicaid, and Medicaid HMO care rendered to patients who reside in the Wesley Chapel area. Thus, the facilities within the BayCare System have a demonstrated track record of providing care without regard to a patient's resources. In light of the record, it is reasonable to expect BayCare to carry on in the same vein under the BayCare proposal. Utilization Schedule 5 relates to projected utilization after project completion. The projections in the schedule in Pasco- Pinellas' application were developed by looking at service area population, applying a use rate growth and taking a market share by individual zip code. They are based on the expectation that the hospital would be operating at approximately 70% occupancy in its third year of operation, which equates to an average census of approximately 56 patients. The assumptions contained in the schedule are reasonable. The utilization projections in Schedule 5 in Pasco- Pinellas' application are reasonable; they indicate that an 80- bed hospital is appropriate to meet the need for a new hospital in the Wesley Chapel area of the subdistrict. BayCare will able to achieve its projected utilization from its primary service area and from the 40% of its patients it expects to receive by way of in-migration. The population forecast and market share forecast for the primary service area are reasonable. While the support among local physicians is much stronger for the Pasco-Pinellas proposal, it is likely that they will admit patients to the BayCare proposed hospital since it will be in the Wesley Chapel area, the area of the subdistrict that is most suitable for a new hospital. The 40% projected in-migration from outside of the seven mile service area is a reasonable projection. It is reasonable to expect that the bulk of these admissions will come from USF physicians located at the USF north Hillsborough campus. Projected Revenues Schedule 7A governs projected revenues. The payor mix in Schedule 7A of Pasco-Pinellas' application is based on historic admission and patient days by payor class occurring in the proposed Pasco-Pinellas service area based on the most recent available AHCA data. Gross charges and net revenues were developed based on historical data from FHZ as reported to AHCA. These figures were inflated forward using a net increase over all in revenue payments of approximately 3%. The projected revenues including net revenues in Schedule 7A of Pasco- Pinellas' application are reasonable and consistent with the marketplace. The payor mix in BayCare's Schedule 7A was based on an analysis of patient discharge data from the proposed primary service area plus an analysis of the experience of other BayCare System facilities in the same market. It is a reasonable payor mix. It allows for consideration of the experience of BayCare System, including the high level of charity care and Medicaid and Medicaid HMO services and at the same time reflects that the Wesley Chapel area is more affluent and younger than other areas of Pasco and Hillsborough Counties. BayCare's revenue assumptions were based on an analysis of gross and net revenue per patient day from another BayCare System facility, South Florida Baptist. Financial class specific projected patient days were applied to derive a gross and net revenue number for each of the three pro forma years for the proposed project denominated by Schedule 7A as "Projected Operating Year 1, 2 and 3" and ending "12/31/11, 12/31/12 and 12/31/13" respectively as indicated by BayCare in the application. See BayCare 2, pp. 133-135. The 2006 South Florida Baptist gross and net revenue per patient day were trended forward for each of the three projected operating years to reach the projected revenue figures in Schedule 7A. The projected revenues in Schedule 7A of the BayCare application are reasonable. Projected Income and Expenses Schedule 8A in a CON application contains projected income and expenses for the proposal. Pasco-Pinellas' application used a methodology in Schedule 8 that its expert had used in other CON cases. The methodology is consistent with methodologies of other health care experts and has been accepted in recommended and final orders in CON cases. The projections in Schedule 8 of Pasco-Pinellas' application are appropriate and reasonable. BayCare's methodology used to project income and expenses in Schedule 8A is also appropriate and reasonable. BayCare's healthcare finance expert asked BayCare financial analysts to look at his initial projections. They recommended that expenses be increased in physical therapy, radiology lab and pharmacy and that expense be reduced in plant operations. The recommendations were accepted; the projections were adjusted. Medicare GME reimbursement in year 3 of operations was assumed to be $1.7 million. If no addition Medicare GME reimbursement were received, BayCare's proposal would still show a profit of $2.8 million by year 3. It is virtually certain, moreover, that some portion of the $1.7 million included in calculation of BayCare's income projections will be realized. However valid criticism of the inclusion of the $1.7 million, BayCare's proposal remains financially feasible in the long- term. Financial Feasibility Pasco-Pinellas proved the immediate and long-term financial feasibility of its proposal. The schedules in its application related to financial feasibility used reasonable methodologies that yielded reasonable projections. Analysis of capital costs and funding is contained in Schedules 1 through 3. Schedule 1 presents an accurate summation of total project cost. That figure, $121 million, is a reasonable and typical cost for a new 80-bed community hospital. The $149 million on Schedule 2 reflects an accurate summation of anticipated capital costs, including the hospital project and necessary capital expenditures for the first tow or three years of operation. Schedule 3 set forth the sources of funding, a combination of equity and debt financing, discussed below. Both UCH and Adventist are financially successful systems. They will have not difficulty funding the Pasco- Pinellas proposal. As of December 31, 2007, Adventist's net revenue was approximately $368 million. About $100 million in funds were available to UCH at the time of hearing to contribute to development of the project. Due to the financial strength of its members, Pasco- Pinellas will easily be able to fund the project through a combination of equity and debt. The equity, $45 million, will be provided equally by Adventist and UCH, $22.5 million each. The remaining $76 million will be financed through tax-free bonds issued by Ziegler Securities. The project is immediately financially feasible. The Pasco-Pinellas project is also financially feasible in the long-term. Schedule 8 in the application, year 3, shows the project will generate a return of approximately $5.3 million in revenue over expenses, an amount that "more than meet[s] the test for financial feasibility in the long-term." Id. Based on the sources of BayCare System, BayCare has access to the financial resources to implement its proposed hospital. Funding for the hospital will come from BayCare System on the basis of 50% debt and 50% equity investment. As of early 2008, BayCare System had approximately $1.2 billion in unrestricted cash on hand. BayCare System's financial strength will allow BayCare to obtain the financing it needs for the project. Schedule 3 of the BayCare application sets forth an accurate and reasonable statement of the sources of funds necessary to develop the project. The immediate financial feasibility of BayCare's proposal is demonstrated by the evidence presented by BayCare. By year three of the pro forma, the BayCare proposal is reasonably projected to generate a net income over expenses in the amount of $4,498,637. BayCare demonstrated that the proposal's long-term financial feasibility. Costs and Construction Methods The costs and methods of the proposed construction of the Pasco-Pinellas project are reasonable. The facility is adequately sized and programmed for the services included in the Pasco-Pinellas application. All of the departments, including central storage, fall within an appropriate benchmark range for community hospitals. The 2,300 square feet per bed is reasonable as are the construction costs when compared to similar community hospitals. The proposed Pasco-Pinellas facility meets the codes for all of the services included in the application. The design of the Pasco-Pinellas facility enable expansion. The designed expansion capabilities are reasonable, logical and appropriate to meet the needs of the Wesley Chapel community. The drawings contained in the CON application show an efficient community hospital. The departments allow for efficient intra-department circulation and department-to- department circulation. There are adequate separation of public and staff flow corridors. All of the areas and departments as shown in the Pasco-Pinellas plans are code compliant. The layout of the patient rooms is consistent with industry standards for the design of single patient rooms. The number and size of the operating rooms are adequate and appropriate for an 80-bed community hospital not offering tertiary services. The emergency department, including the trauma room, complies with code and its layout is adequate and appropriate for an 80-bed hospital. The ambulance entrance in relation to the trauma bay allows for efficient location of patients based on acuity level. The number of treatment beds, treatment bays, including observation areas, provide adequate emergency department capacity. The Schedule 1 costs set forth in the BayCare application are reasonable. These costs include projected costs associated with necessary medical equipment. The medical equipment costs set forth in Schedule 1 are reasonable and BayCare has properly accounted for the items and costs of equipment necessary to operate the hospital. The Schedule 9 construction costs of approximately $180 million are reasonable as are the construction costs per square foot ($347 versus $325 for Pasco-Pinellas). Contingencies and escalation factors have been built into the projected costs. Facilities, Sites, Related Costs At the time the UCH and Adventist joint venture was formed, UCH had a parcel of land under contract located on State Road 54 across from the Saddlebrook Resort (the "UCH Parcel"). When it filed its application, Pasco-Pinellas hoped the UCH Parcel would serve as the site of its hospital. In fact, Pasco- Pinellas touted the location of the parcel for meeting the need of the growing population in Pasco County when it represented in the application that the UCH Parcel is the center point of the Wesley Chapel area. Close to Interstate 75, the UCH Parcel is a good location for a hospital. Pasco-Pinellas' aspiration for the use of the parcel was defeated, however, when the Pasco County denied a request to re-zone the UCH Parcel for use as a hospital. After the inability to have the UCH Parcel re-zoned, Pasco-Pinellas changed the site for the hospital to a parcel owned by FHZ (the "Pasco-Pinellas Site"). Located on Bruce B. Downs Boulevard, a major north-south corridor in the Wesley Chapel area, the site is 51.5 acres. The Pasco-Pinellas Site had been purchased by FHZ in 2001 with the intention of using it for a hospital. Subject to a height variance to allow a seven-story building, the site is zoned for special use as a hospital and related medical uses. The site has good visibility and access from Bruce B. Downs Boulevard as evidenced by its compliance with the State Road 581 (Bruce B. Downs Boulevard) access management plan. It meets other regulatory requirements such as the minimum spacing criteria for Pasco County. The Pasco-Pinellas Site is governed by a development order associated with the Wiregrass Ranch Development of Regional Impact (the "Wiregrass DRI DO"). The Wiregrass DRI DO "indicates that the phasing schedule assumed 100 hospital beds would be developed within the building phase." Tr. 597. As explained at hearing by Lara Daly, Pasco-Pinellas' expert in civil engineering and property site development, there are other aspects of the Wiregrass DRI DO, "like trade-off matrices" and "entitlement advancements" that indicate "entitlements are not limited on a parcel-by-parcel basis." Tr. 598. The assumption, therefore, does not necessarily restrict the number of hospital beds on the Pasco-Pinellas Site; rather it allows impacts associated with 100 hospital beds. The number of allowable beds may be increased following action taken under other provisions of the Wiregrass DRI DO. A significant portion of the Pasco-Pinellas Site is wetlands: some of low quality, some of high quality. The higher quality wetlands, referred to in the record as "a high quality category 1 wetland as defined by Pasco County," tr. 552, (the "Category 1 Wetland") are on the north and east perimeter of the site. The project is designed so as to have no impacts on the Category 1 Wetland. The only potential impact to these high quality wetlands is if there were a county-mandated road to be built in their vicinity. The lesser quality wetlands located in the interior of the site are herbaceous in nature or an open water feature that is "an older borrow pit that naturalized over time." Tr. 552-53. These lower quality wetlands constitute roughly 11.5 acres of the site. They will be impacted by the project but it is reasonable to expect that the impacts will be permitted. As Ms. Daly put it at hearing, "[a]fter reviewing, running stormwater models, looking at the proposed wetland impacts, coming up with appropriate mitigation ratios based on our experience elsewhere on the Wiregrass site, the site will accommodate all the necessary wetland and floodplain historic basin compensation . . . ." Tr. 550. The costs contained in Schedule 1 of the application were arrived assuming the use of the UCH Parcel as the site for the Pasco-Pinellas project. The Pasco-Pinellas Site requires expenditures for site preparation and other expenditures, such as wetland mitigation, related to the site that were not required had the UCH Parcel been used. For example, three potential foundation systems have been suggested for the hospital because of the wetland and subsurface conditions on the Pasco-Pinellas Site had the UCH Parcel been the site. Using the most expensive of the three, however, would not cause Pasco- Pinellas to exceed the construction costs contained in Schedule 1 of the CON Application. The land acquisition costs were reasonably projected to be less for the Pinellas-Pasco Site than for the UCH Parcel as reflected in the application. All told, the estimated project cost using the Pasco-Pinellas site was not materially different from the cost projected in the application and presented the possibility of being less than the $121 million reflected in the application. Likewise, the equipment cost figure shown in Schedule 1 of the Pasco-Pinellas application is reasonable and achievable. The total of the costs for the project sited at the Pasco-Pinellas Site, despite the change of site that occurred after the filing of the application, should not exceed the total of the costs listed in the Pasco-Pinellas application. The preponderance of the evidence is that the Pasco- Pinellas Site should ultimately qualify as an appropriate, developable site for the Pasco-Pinellas project. The BayCare site, north of Highway 56 and bordering I-75, (the "BayCare Site") includes two parcels of 54 and 17 acres. The 54 contiguous acres will be used for the hospital, outpatient services, and a planned medical office building. The 17 acres will be used for research space, physician office space, and academic training space necessary for the research and education function at the project. BayCare has the appropriate zoning and approvals necessary to develop the hospital. The hospital will have all private beds. It will be fully digital and will rely on electronic medical records. The BayCare Site is well suited for construction of the hospital and related buildings. The available footprint and design of the hospital, which includes shelled-in space, will readily allow for future expansion of the hospital up to 300 beds. Design of the BayCare facility is based on principles of family-centered care, flexibility to allow for change and future growth, efficiency, a quality of environment for teaching, a sustainable, green building, and patient safety. A "health building" with improved environmental quality and energy efficiency, the facility will seek LEED certification given to facilities constructed to have minimal adverse environmental impact. In keeping with the teaching function intended by the application, the facility's design includes additional work space, reading areas, sleep areas and conference rooms to facilitate teaching. Overall, the BayCare facility is twice as large as the Pasco-Pinellas facility. Size has its advantages. For example, it allows for larger treatment patient areas. But the facility is much more expensive to build. It is reasonably projected to cost more than $180 million above the costs associated with the Pasco-Pinellas facility which is more than twice as much. The high expense associated with the BayCare facility is shown by its cost per bed: in excess of $2 million-- much more than the cost per bed of the Pasco-Pinellas facility.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Agency for Health Care Administration approve CON 9975, Pasco-Pinellas' application for a new hospital in AHCA Subdistrict 5-2, and deny CON 9977, BayCare's application for a new hospital in the same subdistrict. DONE AND ENTERED this 28th day of October, 2008, in Tallahassee, Leon County, Florida. S DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of October, 2008. COPIES FURNISHED: Richard J. Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Building 3 Mail Station 3 Tallahassee, Florida 32308 Craig H. Smith, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Building 3 Mail Station 3 Tallahassee, Florida 32308 Karin M. Byrne, Esquire Agency for Health Care Administration 2727 Mahan Drive, Building 3 Mail Station 3 Tallahassee, Florida 32308 Stephen K. Boone, Esquire Boone, Boone, Boone, Koda & Frook, P.A. 1001 Avenida Del Circo Post Office Box 1596 Venice, Florida 34284 Jonathan L. Rue, Esquire Parker, Hudson, Rainer & Dobbs, LLP 1500 Marquis Two Tower 285 Peachtree Center Avenue Northeast Atlanta, Georgia 30303 Robert A. Weiss, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 R. David Prescott, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551
