The Issue The issue is whether Hialeah Hospital, Inc. may be licensed for a 21-bed psychiatric unit, without first obtaining a certificate of need, on the basis that it provided psychiatric services before a certificate of need was statutorily required.
Findings Of Fact Background of the Controversy The Parties The Department of Health and Rehabilitative Services (the Department) is responsible for determining whether health care projects are subject to review under the Health Facility and Services Development Act, Sections 381.701- 381.715, Florida Statutes. It also licenses hospitals under Chapter 395, Florida Statutes. The Department's Office of Community Medical Facilities renders decisions about requests for grandfather status which would exempt a psychiatric service offered at hospital from certificate of need review. The Department's Office of Licensure and Certification issues licenses but does not grant grandfather exemptions. A hospital will not receive separate licensure for psychiatric beds unless a certificate of need has been obtained for those beds, or the beds are in a psychiatric unit which had been organized before certificate of need review was required. See Section 381.704(2), Florida Statutes (1987). A hospital can provide inpatient psychiatric services to a patient in one of three ways: a) as a patient housed among the general hospital population, b) as a patient housed in a special unit organized within the hospital and staffed by doctors, nurses and other personnel especially to serve patients with psychiatric diagnoses, or c) in a hospital organized as a psychiatric specialty hospital. Serving patients through methods b and c requires special certificate of need approval and licensure. Most community hospitals place psychiatric patients among the general patient population; few hospitals create a distinct psychiatric unit; fewer hospitals still specialize as psychiatric hospitals. Hialeah Hospital, Inc. is a 411-bed general hospital in Hialeah, Florida. It does not currently hold a certificate of need for licensure of a distinct psychiatric unit. As a result, its reimbursement for psychiatric services from the Federal government for Medicare patients is limited. The Health Care Finance Administration (HCFA) generally reimburses hospitals for services based upon flat rates which are paid according to categories known as diagnostic related groups. Hialeah Hospital now receives reimbursement for services it renders to psychiatric patients on this basis. If it is entitled to a grandfather exemption from certificate of need review, and its distinct psychiatric unit is separately licensed by the Department, Hialeah Hospital will receive cost-based reimbursement for services to psychiatric patients, which will result in higher income to the hospital. Approval of the grandfathering request will not result in a) any capital expenditure by the hospital, b) the addition of staff, or c) a change in the type of services currently offered at the hospital. Just before July 1, 1983, the hospital had an average daily census of 16-17 psychiatric patients. If the psychiatric services the hospital has offered do not qualify for grandfathering, Hialeah Hospital may apply for a certificate of need for a distinct psychiatric unit. Even without a psychiatric certificate of need, Hialeah is still entitled to continue to serve patients with psychiatric diagnoses among its general population, and to receive the lower diagnostic related group reimbursement for those services from HCFA. Palmetto General Hospital is a licensed general hospital with 312 acute care beds and 48 separately licensed psychiatric short-term beds operated as a distinct psychiatric unit. It is located near Hialeah Hospital, and both hospitals serve the same geographic area. The primary markets of both hospitals overlap. They compete for patients, including psychiatric patients. Agency Action Under Review From 1973 to 1979 the license issued to Hialeah Hospital by the Department bore a designation for 21 psychiatric beds, based on information submitted in the hospital's licensure application. The hospital then dropped the psychiatric bed count from its licensure applications. This change probably was caused by a problem generated by an announcement from the Northwest Dade Community Health Center, Inc., the receiving facility for psychiatric emergencies in northwestern Dade County, which includes Hialeah. That center had written to the Hialeah Police Department, informing the police that when the center was not open, it had a crisis worker at the Hialeah Hospital emergency room, and that persons needing involuntary psychiatric hospitalization should be taken to the Hialeah Hospital emergency room. The only other hospital in Hialeah treating psychiatric patients was Palmetto General Hospital, which did not accept, as a general rule, patients who could not pay for care. The Hialeah Police Department thereafter began dropping psychiatric patients at Hialeah Hospital, much to the distress of the Hialeah Hospital emergency room staff. The Hospital thereafter dropped the designation of any of its beds as psychiatric beds on its annual licensure applications. It still received psychiatric patients from Jackson Memorial Hospital when that hospital reached its capacity for psychiatric patients. On its 1980 licensure application Hialeah Hospital collapsed all of its medical, surgical and psychiatric beds into a single figure. This was consistent with its practice of serving medical, surgical and psychiatric patients throughout the hospital. Hialeah Hospital filed similar licensure applications in 1981, 1982, 1983. In 1984 there was a dispute over the total number of beds to be licensed, which was resolved in early 1985. In 1985, after a change in the licensing statute which is discussed below, the Department informed Hialeah Hospital that its application for licensure was incomplete and could not be processed until Hialeah explained its basis for seeking separate licensure for 20 short-term psychiatric beds. In its response, Hialeah's Vice President stated: [W]e felt it was appropriate to indicate that Hialeah Hospital did accept psychiatric admissions. These patients have been randomly placed in the institution, many times based on other primary or secondary diagnoses. The application indicates bed usage, not that it is currently a discrete unit. Hialeah Hospital does currently have a Letter of Intent [on file] for establishment of a discrete med/psych unit. Hialeah Ex. 24a On August 1, 1985, the Department's Office of Licensure and Certification informed Hialeah Hospital by certified mail that the application for licensure of 20 short-term psychiatric beds was denied for failure to have obtained a certificate of need for them or to have obtained an exemption from review [both could only come from the Department's Office of Community Medical Facilities]. The hospital was provided a clear point of entry to challenge this determination through a proceeding under Chapter 120, Florida Statutes, but Hialeah filed no petition for review of that decision. Instead, Hialeah pursued the certificate of need application which it had filed in April, 1985 for separately licensed psychiatric beds. There was no reason to challenge the August 1, 1985, denial because the factual bases alleged by the Department were true--the hospital had no certificate of need for psychiatric beds and had not yet asked the Department's Office of Community Health Facilities to decide whether Hialeah qualified for grandfathered beds. On October 21 and 23, 1986, Hialeah Hospital wrote to the Office of Community Health Facilities seeking a determination that it was entitled to have 21 pyschiatric beds grandfathered on its license. In certificate of need application 4025 Hialeah Hospital sought the establishment of a distinct 69 bed psychiatric unit at Hialeah, with separately licensed beds. The application went to hearing and was denied on its merits on February 17, 1987, in DOAH Case 85-3998. In his recommended order, the Hearing Officer discussed the issue of whether Hialeah Hospital was exempt from certificate of need review because it already had a psychiatric unit. He found that the issue was not appropriately raised in the proceeding before him, which was Hialeah Hospital's own application for a certificate of need to establish a psychiatric unit. He therefore found he lacked jurisdiction to consider the grandfathering issue. Hialeah Hospital v. HRS, 9 FALR 2363, 2397, paragraph 5 (HRS 1987). The Department adopted that ruling in its May 1, 1987, final order. Id. at 2365. A letter dated December 5, 1986, from the Office of Community Medical Facilities denied Hialeah's request to grandfather 21 short-term psychiatric beds on its license and thereby exempt them from certificate of need review, as requested in Hialeah's letters of October 21 and 23, 1986. The Department denied the grandfathering request for four reasons: When the Department conducted a physical plant survey on June 1, 1980, there were no psychiatric beds in operation at the hospital; The hospital bed count verification form returned to the Department on January 31, 1984 by the Director of Planning for Hialeah, Gene Samnuels, indicated that the hospital had no psychiatric beds; An inventory of psychiatric beds had been published by the Department in the Florida Administrative Weekly on February 17, 1984 which showed that Hialeah Hospital had no psychiatric beds, and Hialeah never contested that inventory; The Department had not received evidence demonstrating that psychiatric services were provided "in a separately set up and staffed unit between 1980 and 1985." This letter again gave Hialeah a point of entry to challenge the Department's decision to deny licensure of psychiatric beds and it was the genesis of Hialeah's petition initiating this case. It is significant that the Department's Office of Community Health Facilities gave Hialeah a clear point of entry to challenge the December 5, 1986, grandfathering denial with full knowledge that the Department's Office of Licensure and Certification had denied a request from Hialeah Hospital on August 1, 1985, to endorse psychiatric beds on Hialeah's 1985 license. The Departmental personnel knew that those two denials involved different issues. Once the Office of Licensure and Certification told the hospital it had to produce either a certificate of need or a grandfathering approval to have psychiatric beds endorsed on its license, the hospital had to turn to the Office of Community Health Facilities to get a ruling on its grandfathering claim. The letter of December 5, 1986, was the first ruling on the merits of Hialeah Hospital's claim that it was entitled to have 21 beds grandfathered. History of the Department's Specialty Bed Recognition Psychiatric Beds in Florida Hospitals Before July 1, 1983 Before April 1, 1983 no state statute or Department rule required that psychiatric beds in a hospital be located in physically distinct units. Psychiatric patients could be located throughout a hospital. They were not required to be placed in rooms having distinguishing characteristics, or to use group therapy rooms, dining rooms, or other rooms exclusively dedicated to use by psychiatric patients. There were, of course, hospitals that had distinct psychiatric units, and some entire hospitals which were specifically licensed as psychiatric hospitals. After 1983, a hospital had to obtain a certificate of need to organize what had previously been diffuse psychiatric services into a distinct unit dedicated to serving patients with psychiatric diagnoses. Today no special certificate of need is required to serve psychiatric patients in the general hospital population, but without separate licensure the hospital receives Medicare reimbursement from the federal government for psychiatric patients at the level established by the diagnostic related groups, not cost based reimbursement. Before July 1, 1983 annual hospital licensure application forms asked hospitals to identify their number of psychiatric beds as an item of information. The hospital licenses issued, however, were based on the hospital's total number of general medical-surgical beds, a category which included psychiatric beds. The 1983 Amendments to the Florida Statutes and the Department's Rules on Specialty Beds In April of 1983, the Department adopted a rule which established a separate need methodology for short-term psychiatric beds, Rule 10-5.11(1)(o), Florida Administrative Code. Thereafter, the Legislature amended the statutes governing the hospital licensing, Section 395.003, Florida Statutes (1983) by adding a new subsection (4) which read: The Department shall issue a license which specifies the number of hospital beds on the face of the license. The number of beds for the rehabilitation or psychiatric service category for which the Department has adopted by rule a specialty bed need methodology under s. 381.494 shall be specified on the face of the hospital license. All beds which are not covered by any specialty bed need methodology shall be specified as general beds. Section 4, Chapter 83-244, Laws of Florida (underlined language was added). In the same Act, the Legislature amended the planning law to require hospitals to apply for certificates of need to change their number of psychiatric and rehabilitation beds. Section 2, Chapter 83-244, Laws of Florida, codified as Section 381.494(1)(g), Florida Statutes (1983). The Department's rules defined short-term psychiatric services as: [A] category of services which provide a 24- hour a day therapeutic milieu for persons suffering from mental health problems which are so severe and acute that they need intensive, full-time care. Acute psychiatric inpatient care is defined as a service not exceeding three months and averaging a length of stay of 30 days or less for adults and a stay of 60 days or less for children and adolescents under 18 years. Rule 10- 5.11(25)(a), Florida Administrative Code (1983), effective April 7, 1983. A minimum size for any new psychiatric unit was prescribed in Rule 10- 5.11(25)(d)7., which states: In order to assure specialized staff and services at a reasonable cost, short-term inpatient psychiatric hospital based services should have at least 15 designated beds. Applicants proposing to build a new but separate psychiatric acute care facility and intending to apply for a specialty hospital license should have a minimum of 50 beds. After the effective date of the rule, April 7, 1983, no hospital could organize its psychiatric services into a distinct psychiatric unit using specialized staff unless the unit would have at least 15 beds. This did not mean that a hospital which already had organized a distinct psychiatric unit using specialized staff had to have at least 15 beds in its unit to continue operation. Whatever the number of beds, whether fewer or greater than 15, that number had to appear on the face of the hospital's license. Section 395.003(4), Florida Statutes (1983). To change that number, the hospital had to go through the certificate of need process. Section 381.494(1)(g) Florida Statutes (1983). Those hospitals whose pre-existing units were endorsed on their licenses can be said to have had those units "grandfathered". There is no specific statutory exemption from certificate of need review for pre-existing units, but such treatment is implicit in the regulatory scheme. The Department's Grandfather Review Process To know which hospitals were entitled to continue to operate discrete psychiatric units without obtaining a certificate of need, the Department's Office of Community Medical Facilities had to identify hospitals which had separate psychiatric units before the July 1, 1983, effective date of Section 395.003(4), Florida Statutes (1983). An inventory of beds in the existing psychiatric units also was necessary to process new certificate of need applications. The Department's rule methodology authorized additional beds in psychiatric units based upon a projected need of 15 beds per 10,000 population. Rule 10-5.11(25)(d)1., Florida Administrative Code (1983). The Legislature approved the psychiatric service categories which the Department had already adopted by rule when it enacted Section 4 of Chapter 83- 244, Laws of Florida. The Legislature thereby validated a process the Department had initiated in 1976 with its Task Force on Institutional Needs. That group had developed methodologies to be used throughout the state to determine the need for different types of medical services, because local health systems agencies were reviewing CON applications based upon idiosyncratic methodologies. To develop review criteria for psychiatric services, the Task Force had to both define psychiatric services and determine how it should measure them. In doing so, the Department looked for assistance to publications of entities such as the American Hospital Association and the Joint Commission on Accreditation of Hospitals. According to the American Hospital Association, psychiatric services are services delivered in beds set up and staffed in units specifically designated for psychiatric services. In the Task Force report, a psychiatric bed was defined as: A bed in a clinical care unit located in a short-term, acute care hospital or psychiatric hospital which is not used to provide long-term institutional care and which is suitably equipped and staffed to provide evaluation, diagnosis, and treatment of persons with emotional disturbances. An inpatient care unit or clinical care unit is a group of inpatient beds and related facilities and assigned personnel in which care is provided to a defined and limited class of patients according to their particular care needs. HRS Exhibit 14 at 92 and 1-5. The definition of a psychiatric bed in the Report of the Department Task Force on Institutional Needs is compatible with the requirements of the Florida Hospital Cost Containment Board in its Florida Hospital Uniform Reporting Manual. Reports made by hospitals to the Hospital Cost Containment Board include information about services provided in separately organized, staffed and equipped hospital units. The information provided to the Board assisted the Department in determining which Florida hospitals already were providing psychiatric services in separately organized, staffed and equipped hospital units before separate licensure became necessary. The Department surveyed hospitals to determine the number of existing beds in distinct psychiatric units. It also looked to old certificates of need which referenced psychiatric services at hospitals, reports hospitals had made to the Florida Hospital Cost Containment Board, to past licensure applications the Department had received from hospitals, and to the Department's 1980 physical plant survey. These sources of information were, however, imperfect, for the reasons which follow: 1. Certificates of Need Issued 22. Before July 1, 1983, certificates of need were required for the initiation of new services which involved capital expenditures above a certain threshold dollar amount. Hospitals which had a long-standing psychiatric units would have had no occasion to request a certificate of need for psychiatric services. Review of certificates issued would not turn up a hospital with a mature psychiatric service. 2. Hospital Cost Containment Board Information 23. The reports from hospitals during the early years of the Hospital Cost Containment Board are not entirely reliable, because the hospitals did not yet have uniform accounting systems in place, despite the Board's attempt to establish uniform accounting methods through its reporting system manual. Hospitals commonly made errors in their reports. If the reports were prepared correctly, they would identify hospitals with discrete psychiatric units. Hialeah's HCCB Reports for 1981, 1982 and 1983 indicated that the hospital had no active psychiatric staff, no psychiatric beds and no psychiatric services. 3. Departmental Survey Letters 24. In Spring, 1983, the Department tried to verify the existing inventory of beds for specialty services such as psychiatric services, comprehensive medical rehabilitation services and substance abuse services. There is no record, however, that this survey letter was sent to Hialeah Hospital. In late 1983 or early 1984, the Department again attempted to establish inventories for psychiatric beds and rehabilitation beds. It distributed a cover letter and a form entitled "Hospital Bed Count Verification", which asked hospitals to confirm the Department's preliminary count of the hospital's "number of licensed beds". Hialeah's planner returned the form verifying that Hialeah Hospital was licensed for 411 "acute general" beds and that it had no short or long term psychiatric beds. The answer was correct, for that is the figure which appeared on Hialeah's license at that time. The Department did not ask the hospitals for an average daily census of short-term psychiatric patients. The cover letter for the survey form told hospital administrators that the Department was seeking to verify its preliminary bed count for services for which a special bed need methodology had been established, viz., long and short term psychiatric beds, substance abuse beds and comprehensive medical rehabilitation beds. The cover letter drew attention to the Department's intention to use the data collected from the responses to the form as a beginning inventory for short-term psychiatric beds. The cover letter also cautioned hospitals that when completing the form, they should "keep in mind the service definitions". Copies of the definitions were attached to the form. The appropriate inference to be drawn from the answer given by Hialeah Hospital to the survey form was that in January, 1984, the hospital had no beds organized into a short term psychiatric unit. This is consistent with the later letter from the hospital's vice president quoted in Finding of Fact 6, above. The Department published on February 17, 1984, its base inventory of psychiatric and rehabilitation beds in the Florida Administrative Weekly. The publication stated that "any hospital wishing to change the number of beds dedicated to one of the specific bed types listed will first be required to obtain a certificate of need." 10 Florida Administrative Weekly at 493. Hialeah was shown as having no psychiatric beds. Id. at 498. The notice did not specifically inform the hospitals of the right to petition for a formal hearing to challenge the inventory figures published. 4. Licensure Files 25. Although, the Department's licensure application form listed "psychiatric" as a possible hospital bed utilization category before 1983, these categories were set up for informational purposes only. No definitions were given to hospitals describing how beds should be allocated among the categories available on the form, making those figures unreliable. Before 1980 Hialeah Hospital had listed psychiatric beds on its licensure applications, see Finding of Fact 5, above. Since 1980 it listed no psychiatric beds. 5. Physical Plant Survey The Department performed a physical plant survey in 1980 to determine the total number of beds in service at each hospital. That survey did not attempt to make distinctions between different types of services listed on the survey form. The Department's architect who performed the survey did not attempt to evaluate the quality or intensity of the psychiatric services provided at any hospital. Each of the types of information the Department examined to determine the existing inventory of short-term psychiatric beds in 1983 had weaknesses, and no single source is dispositive. It is difficult to credit the assertion that Hialeah Hospital had a distinct psychiatric unit before July, 1983 which was not reflected in any of these sources of information. The use of multiple sources of information served as a cross-check on information from each source. It is understandable that Hialeah would not have applied for a certificate of need to operate a separate psychiatric unit. Before 1983, no such application was needed if the establishment of the unit entailed an expenditure of money below a threshold amount. All of its reports to the Hospital Cost Containment Board, however, indicate that there was no separate psychiatric service at the hospital and that the hospital had no active psychiatric staff. With respect to the Department's survey letters, while the 1984 survey form itself did not specifically inform hospital administrators that their responses would be used to establish a base inventory of psychiatric beds, the cover letter did make that clear. This should have put the hospital's planner, who filled out the form, on notice that if Hialeah had a discrete, short-term psychiatric service the number of beds in that unit should be listed. What is perhaps the most significant point is that the hospital reported no psychiatric beds on its licensure application at all from 1980 to 1985. Medical doctors in general practice can and do treat psychiatric patients, in addition to doctors who specialize in psychiatry. No doubt patients commonly were admitted to the hospital who had primary diagnoses of psychiatric illnesses. The hospital's licensure filings, however, since 1979 fail to record any psychiatric beds. This is important evidence that the hospital did not regard itself as having any distinct unit organized to provide psychiatric care. The Hospital's 1985 correspondence from the Hospital's vice president to the Department, quoted in Finding of Fact 6 confirms this. The failure to list any psychiatric beds at Hialeah on the Department's 1980 physical plant survey is not significant, since determining the number of psychiatric beds was not the focus of that survey. It is true that the Department never conducted site visits at all hospitals to determine whether they had a) distinct psychiatric units, b) psychiatric medical directors, c) written psychiatric admission and treatment policies, or d) psychiatric policy and procedures manuals. The efforts the Department did make to establish the beginning inventory of psychiatric beds were reasonable, however Hialeah Hospital's Licensure History and Efforts to Obtain Grandfather Status The entries on Hialeah's applications for annual licensure from the Department are cataloged above, and need not be repeated. During the years 1980-84, after it ceased listing psychiatric beds on its licensure application, psychiatric services were still being provided to patients throughout the hospital. In 1984, the hospital engaged in correspondence with the Department over the appropriate number of licensed beds for the hospital as a whole. Ultimately the hospital and the Department agreed that 411 beds should be licensed. In its 1985 licensure application, Hialeah then requested that 20 short-term psychiatric beds be listed on the license. The Office of Licensure and Certification questioned this. Ultimately, the Office of Licensure and Certification refused to endorse those 20 psychiatric beds on the license because there was no certificate of need on file for them, nor any statement from the Office of Community Medical Facilities granting the hospital an exemption from that licensure requirement. Hialeah Hospital did not challenge that decision in a proceeding under Chapter 120, Florida Statutes. The discussions between the hospital and the Department's Office of Community Medical Facilities continued, and by late October, 1986, Hialeah requested the Department to approve 21 short-term psychiatric beds at the facility, and sent the Department backup material which it believed justified a grandfather determination. After review, the Department denied the grandfather request by letter dated December 5, 1986. The Department's Action Regarding Other Grandfathering Requests Hialeah's is not the first request the Department received for grandfathering beds. After June of 1983, when the Legislature required CON approval for hospitals to change their number of psychiatric or rehabilitation beds, a number of institutions made similar requests. 1. Comprehensive Medical Rehabilitation Beds The rule on comprehensive medical rehabilitation beds was developed by the Department at the same time as the rule on psychiatric beds. The Department used a similar process to determine the existing inventory of both types of beds. The Department determined that preexisting comprehensive medical rehabilitation units at Parkway General Hospital, Naples Community Hospital, Orlando Regional Medical Center, Holy Cross Hospital, and University Community Hospital entitled those facilities to grandfathering of their comprehensive medical rehabilitation services. The Department has also determined that a preexisting distinct psychiatric unit at Palmetto General Hospital entitled that institution to grandfather status for its psychiatric beds. Parkway General Parkway General Hospital did not specify rehabilitation beds on its licensure applications for the years 1980 through 1984. The Department denied Parkway's request for endorsement of 12 comprehensive medical rehabilitation beds on its 1985 license because Parkway had not obtained a certificate of need for them or an exemption from review. The Department thereafter determined that Parkway had been providing comprehensive medical rehabilitation services before June, 1983 in a physically distinct and separately staffed unit consisting of 12 beds. It then endorsed 12 beds on Parkway's license, even though the rule which became effective in July, 1983 would require a minimum unit size of 20 beds for any hospital organizing a new comprehensive medical rehabilitation unit. See Rule 10-5.011(24), Florida Administrative Code. Naples Community Hospital The Department granted Naples Community Hospital a grandfather exemption for its rehabilitation beds in February, 1987. In had not listed the rehabilitation beds on its license application for the years 1983-1985, had not returned the Department's bed count verification form, nor did it challenge the bed count which the Department published in the Florida Administrative Weekly. The hospital had applied for and received a certificate of need in January of 1981 to establish a 22-bed rehabilitation unit and that unit began operation in late 1982. The Department ultimately determined that the hospital had provided rehabilitation services in a physically distinct unit and the services were organized and delivered in a manner consistent with applicable regulatory standards. It granted a grandfather request in February, 1987. Orlando Regional Medical Center A grandfather exemption for 16 rehabilitation beds was granted to Orlando Medical Center in 1986. The 16-bed brain injury unit had been authorized by the Department through certificate of need number 2114 before the Department had adopted its rule governing comprehensive medical rehabilitation beds in 1983. The services were provided in a physically distinct unit. The Department determined the 20-bed minimum size for a new unit did not apply to a unit which qualified for grandfathering. Holy Cross Hospital The Department granted a grandfather exemption for comprehensive medical rehabilitation beds to Holy Cross Hospital after a proceeding was filed with the Division of Administrative Hearings to require the Department to recognize the existence of a 20-bed comprehensive medical rehabilitation center. The Department determined by a site visit that Holy Cross had established a separate unit, probably in 1974, long before the Department's comprehensive medical rehabilitation unit rule became effective in July, 1983. The unit had its own policy manual, quality assurance reports, patient screening criteria, and minutes of multidisciplinary team staff conferences. The hospital had neglected to report the unit in its filings with the Hospital Cost Containment Board but the hospital contended that it never treated the unit as a separate unit for accounting purposes, and had not understood the need to report the unit as a distinct one under Hospital Cost Containment Board reporting guidelines. The hospital corrected its reporting oversight. The grandfathering is consistent with the hospital's actual establishment of the unit long before the Department's rules went into effect. University Community Hospital A dispute over whether to grandfather a comprehensive medical rehabilitation unit which went through a Chapter 120 administrative hearing and entry of a final order involved University Community Hospital (UCH). The Department initially determined that the nine comprehensive medical rehabilitation beds at UCH had been in existence before July, 1983 and were exempt from certificate of need review. That decision was challenged in a formal administrative proceeding by a competing hospital, Tampa General. The competitor was successful, for both the Hearing Officer in the recommended order and the Department in the final order determined that University Community Hospital's 9 bed rehabilitation unit was not entitled to be grandfathered. University Community Hospital v. Department of Health and Rehabilitative Services, 11 FALR 1150 (HRS Feb. 14, 1989). In determining that grandfathering was inappropriate, the Department found that the hospital had not prepared separate policies and procedures for its rehabilitation unit before the rule on comprehensive medical rehabilitation beds became effective, and that the unit did not have a physical therapy room on the same floor as the patients. The beds supposedly dedicated to rehabilitative care were mixed with non- rehabilitative beds, so that a semiprivate room might have one bed used for rehabilitative care and another for an unrelated type of care. This conflicted with the requirement that the rehabilitation unit be physically distinct, with all patients and support services located on the same area or floor, rather than scattered throughout the hospital. The Department also determined that many hospitals offer physical therapy, occupational therapy, or speech therapy, but that to qualify as a comprehensive medical rehabilitation center, these services had to be coordinated in a multidisciplinary approach to the patient's needs, which had not been the case at University Community Hospital. The common strand running through the grandfathering decisions on comprehensive medical rehabilitation beds is that grandfathering is appropriate when a hospital demonstrates that before the comprehensive medical rehabilitation rule became effective in July, 1983, it had a separate unit which met the standards and criteria for a comprehensive medical rehabilitation unit (other than the minimum size for new units). Psychiatric Beds Tampa General Hospital Only two cases involve a decision on whether psychiatric services at a hospital qualify for grandfathering. Tampa General Hospital, which was owned by the Hillsborough County Hospital Authority, operated 93 psychiatric beds in 1981, 71 at Hillsborough County Hospital and 22 at Tampa General Hospital. A certificate of need granted in 1981 authorized the expenditure of $127,310,000 for the consolidation of both hospitals and an overall reduction of 14 psychiatric beds after the hospitals were integrated. When the Hillsborough County Hospital Authority obtained its certificate of need, it was not necessary to differentiate between general acute care beds and psychiatric beds for licensure purposes. Increased demand for acute care beds led Tampa General to close its psychiatric unit and make those 22 beds available for ordinary acute care. After the 1983 statutory and rule changes regarding the separate licensure of psychiatric beds, the Hillsborough County Hospital Authority told the Department that Tampa General had no psychiatric beds in operation. On its 1985 licensure application, the Hillsborough County Hospital Authority applied for licensure for 22 psychiatric beds at Tampa General and 77 at Hillsborough Hospital. The Department denied the request for the psychiatric beds at Tampa General. The Final Order entered in Hillsborough County Hospital Authority v. HRS, 8 FALR 1409 (Feb. 16, 1986), determined that there had been a discontinuation in the use of psychiatric beds at Tampa General, and that to allow Tampa General to add psychiatric beds after the statutory and rule changes in 1983 would frustrate the certificate of need process and would be detrimental to good health care planning. Palmetto General Hospital Palmetto General Hospital participated in an administrative hearing in 1975 regarding the disapproval of its proposed expansion, which included the dedication of one floor and 48 beds as a psychiatric unit. The Hearing Officer found that there was a need for psychiatric beds in the community and recommended that the Secretary of the Department issue a certificate of need "for that portion of the applicant's proposed capital expenditures relating to the addition of a 48 bed psychiatric unit". Palmetto General Exhibit 32, at 12, paragraph 2. The order of the Hearing Officer was affirmed by the District Court of Appeal in Palmetto General Hospital, Inc. v. Department of HRS, 333 So.2d 531 (Fla. 1st DCA 1976). The approval of the 48 psychiatric beds is clear only from a review of the Hearing Officer's order. Certificate of Need 292X was issued for the 48 psychiatric beds. Palmetto General exhibit 45. Palmetto received Medicare certification for its psychiatric inpatient unit, and listed 48 short-term psychiatric beds on its licensure applications each year from 1979 to 1983. It failed to show its psychiatric beds on the bed count verification survey form sent by the Department. Palmetto General's chief financial officer told the Department on June 10, 1983 that Palmetto General did not have psychiatric beds in a separately organized and staffed unit. This resulted in the issuance of a license which showed no psychiatric beds. The Department itself wrote to the administrator of Palmetto to learn why the 48 short-term psychiatric beds had not been listed on Palmetto's application for licensure in 1985. Palmetto wrote back and acknowledged that it did have 48 short-term psychiatric beds. A license showing those 48 beds was then issued. Thereafter, staff from the HRS Office of Comprehensive Health Planning took the position that the 48 short-term psychiatric beds should not have been listed on the license, and the Department's Office of Licensure and Certification requested that the 1985 license containing the endorsement for those 48 psychiatric beds be returned to the Department for cancellation. Palmetto then sought an administrative hearing on the attempted cancellation of the license. Palmetto and the Department entered into a Final Order dated March 9, 1986 which agreed that Palmetto met all the requirements for the designation of 48 short-term psychiatric beds on its license. Palmetto, had, in fact, operated a 48 bed psychiatric unit on its third floor since 1981, but moved that unit to the sixth floor in 1985. It was dedicated exclusively to psychiatric patients and there were specific policy and procedure manuals developed and used in dealing with psychiatric patients since 1981. The history of Palmetto's licensure is certainly one replete with contradictions. It is inexplicable that the chief financial officer of the hospital would have told the Department in 1983 that it had no separately organized and staffed psychiatric unit when, in fact, it had such a unit. It was also unclear why it would have shown no psychiatric beds on the bed count verification form returned in late December or early January, 1984, or why its April, 1983, and its 1985/1986 license application forms listed no psychiatric beds. Nonetheless, it had obtained a certificate of need for a psychiatric unit after administrative litigation and an appeal to the District Court of Appeal. The unit was opened and remained continuously in existence. It had appropriate policies and procedures in place for a distinct psychiatric unit as the 1983 statutory and rule amendments required for separate licensure of psychiatric beds. History of Psychiatric Bed Services at Hialeah Hospital Since at least 1958, Hialeah Hospital has had psychiatrists on its medical staff, and the number of psychiatric physicians on staff has increased. Thirteen psychiatrists had admitting privileges at the hospital by 1983; there are now 23 psychiatrists with privileges. As is true with most community hospitals, physicians specializing in psychiatry would admit patients to the general population at Hialeah Hospital if they needed intensive psychotherapy or medication which needed to be monitored by nurses. Patients who were homicidal, suicidal or intensely psychotic were not admitted to Hialeah Hospital. Those patients need a more intensive psychiatric environment, either in a locked psychiatric unit or in a psychiatric specialty hospital. The persons physicians placed at Hialeah through 1983 did not need the intensive services of a discrete psychiatric unit. Hialeah Hospital indicated on its licensure application to the Department that it had 21 psychiatric beds throughout the 1970's, but ceased this listing in the 1980's as set forth in Finding of Fact 5 above. The nature of the services available at the hospital had remained constant. Under the psychiatric diagnosis coding system published in the Diagnostic Statistical Manual III, (which is commonly used by psychiatrists) Hialeah Hospital had an average daily census of 25 patients with primary or secondary psychiatric diagnoses in 1980, and 18 in 1981. Only about 25 percent of those patients had a primary psychiatric discharge diagnosis. The additional patients had secondary psychiatric diagnoses. Hialeah must rely on these secondary diagnoses to argue that its average daily census for psychiatric patients approached 21 beds. It was not until 1985 that Hialeah consolidated its psychiatric services to a medical/psychiatric unit. That unit serves patients with medical and psychiatric diagnosis as well as patients with solely psychiatric diagnoses. Before 1983, there was no medical director of psychiatry at Hialeah Hospital, and no separate policies and procedures for the admission of patients to a psychiatric unit, nor any staff dedicated to the care of psychiatric patients. To be sure, the hospital was in a position to provide quality psychiatric care to patients whose needs were psychotherapy, monitored medication, or individual counseling by psychiatric physicians and nurses. This reflects the reality that not all patients who need to be placed in the hospital for psychiatric care require the services of a separate medical/psychiatric unit. Patients with more acute psychiatric illness do need interdisciplinary approaches to their care. These interdisciplinary approaches are more expensive than serving psychiatric patients in the general hospital population. This is why the Federal government provides higher, cost-based reimbursement to the hospitals with specialty psychiatric licenses. Hialeah has not proven that the psychiatric services it was providing before 1983 were significantly different from those provided in typical community hospitals which did not have distinct psychiatric units. Hialeah's long-standing relationship with the Northwest Community Mental Health Center is not especially significant. Certainly, the Center was aware that Hialeah was a potential source of psychiatric care. Baker Act patients who needed hospitalization were taken there between 1980 and 1983. There was a flow of patients back and forth between the Center and the hospital's inpatient population, and discharge plans by Hialeah's social workers included referrals back to the Mental Health Center for follow-up and outpatient care. Similarly, the Dade-Monroe Mental Health Board knew that Hialeah was a potential provider of inpatient psychiatric services. The predecessor to the current local health council, the health systems agency of South Florida, recorded that there were psychiatric admissions at Hialeah Hospital in the early 1980's, and the health systems agency recommended a conversion of existing beds to psychiatric services because of a need for additional psychiatric services in the area. None of this, however, means that Hialeah had operated a distinct psychiatric unit before 1983 which entitles it to grandfather status.
Recommendation It is recommended that the application of Hialeah Hospital for grandfather status for 21 short-term psychiatric beds, and the inclusion of those short-term psychiatric beds on its license and on the Department's bed inventory be denied. DONE AND ENTERED this 6th day of October, 1989, in Tallahassee, Leon County, Florida. WILLIAM R. DORSEY Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of October, 1989.
The Issue Whether the application of Petitioner Naples Community Hospital, Inc. for a Certificate of Need to add a total of 35 beds to Naples Community Hospital and North Collier Community Hospital should be approved based on peak seasonal demand for acute care beds in the relevant subdistrict.
Findings Of Fact Naples Community Hospital, Inc., ("NCH") holds the license for and operates Naples Community Hospital ("Naples"), a 331 bed not-for-profit acute care hospital, and North Collier Community Hospital ("North Collier"), a 50 bed acute care hospital. NCH also operates a 22 bed comprehensive rehabilitation facility and a 23 bed psychiatric facility. NCH is owned by Community Health Care, Inc., "(CHC"). Both Naples and North Collier are located within Agency for Health Care Administration ("ACHA") district 8 and are the only hospitals within subdistrict 2 of the district. Naples is located in central Collier County. North Collier is (as the name implies) located in northern Collier County approximately 2-3 miles from the county line. NCH's primary service area is Collier County from which approximately 85-90 percent of its patients come, with a secondary service area extending north into Lee County. Neither Naples nor North Collier are teaching hospitals as defined by Section 407.002(27), Florida Statutes (1991). NCH is not proposing a joint venture in this CON application. NCH has a record of providing health care services to Medicaid patients and the medically indigent. NCH proposes to provide health care services to Medicaid patients and the medically indigent. Neither Naples nor North Collier are currently designated by the Office of Medicaid as disproportionate share providers. NCH has the funds for capital and initial operating expenditures for the project. NCH has sufficient financial resources to construct and equip the proposed project. The costs and methods of the proposed construction are reasonable. The Agency for Health Care Administration ("AHCA") is the state agency charged with responsibility for administering the Certificate of Need program. Southwest Florida Regional Medical Center ("Southwest") is a 400 bed for-profit acute care hospital located in Fort Myers, Lee County. Lee County is adjacent to and north of Collier County. Southwest is owned by Columbia Hospital Corporation ("Columbia"), which also owns Gulf Coast Hospital in Fort Myers, and two additional hospitals in AHCA District 8. Southwest's primary service area is Lee County. Although Southwest asserts that it would be negatively impacted by the addition of acute care beds at NCH, the greater weight of the credible evidence fails to support the assertion. The primary market services areas of NCH and Southwest are essentially distinct. However, the facilities are located in such proximity as to indicate that secondary service areas overlap and that, at least during peak winter season periods, approval of the NCH application could potentially impact Southwest's operations. Southwest has standing to participate in this proceeding. Southwest offered evidence to establish that it would be substantially affected by approval of the NCH application. The NCH length-of-stay identified in the Southwest documents is inaccurate and under-reports actual length-of-stay statistics. The documentation also includes demographic information from a zip code (33912) which contributes an insignificant portion of NCH patients, and relies on only two years of data in support of the assertion that utilization in the NCH service area is declining. Southwest's chief operating officer testified that he considers Gulf Coast Hospital, another Columbia-owned facility, to offer more competition to Southwest that does NCH. Further, a physician must have admitting privileges at a hospital before she can admit patients to the facility. Of the physicians holding admitting privileges at Southwest, only two, both cardiologists, also have admitting privileges at NCH. Contrary to Southwest, NCH does not have an open heart surgery program. Accordingly, at least as to physician-admitted patients, approval of the NCH application would likely have little impact. On August 26, 1991, NCH submitted to AHCA a letter of intent indicating that NCH would file a Certificate of Need ("CON") application in the September 26, 1991 batching cycle for the addition of 35 acute care beds to the Naples and North Collier facilities. The letter of intent did not specify how the additional beds would be divided between the two facilities. The determination of the number of beds for which NCH would apply was solely based on the fact that the applicant had 35 observation beds which could be readily converted to acute care beds. The observation beds NCH proposes to convert are equipped identically to the acute care beds at NCH and are currently staffed. The costs involved in such conversion are minimal and relatively insignificant. Included with the letter of intent was a certified corporate resolution which states that on July 24, 1991, the NCH Board of Trustees authorized the filing of an application for the additional beds, authorized NCH to incur related expenses, stated that NCH would accomplish the proposed project within time and budget allowances set forth in the application, and that NCH would license and operate the facility. By certification executed August 7, 1991, the NCH secretary certified that the resolution was enacted at the July 24, 1991 board meeting and that the resolution did not contravene the NCH articles of incorporation or bylaws. Article X, Sections 10.1 and 10.1.3 of the NCH bylaws provides that no CON application shall be legally effective without the written approval of CHC. On September 26, 1991, NCH filed an application for CON No. 6797 proposing to add 31 acute care beds to Naples and 4 acute care beds to North Collier. The CON application included a copy of the NCH board resolution and certification which had been previously submitted with the letter of intent as well as the appropriate filing fee. NCH published appropriate public notice of the application's filing. As of the date of the CON application's filing, CHC had not issued written approval of the CON application prior to the action of the NCH Board of Directors and the filing of the letter of intent or the application. On October 2, 1992, four days prior to the administrative hearing in this case, the board of CHC ratified the actions of NCH as to the application for CON at issue in this case. The CHC board has previously ratified actions of the NCH in such fashion. There is uncontroverted testimony that the CHC board was aware of the NCH application and that no reservation was expressed by any CHC board member regarding the CON application. Although NCH's filing of the CON application without appropriate authorization from its parent company appears to be in violation of the NCH bylaws, such does not violate the rules of the AHCA. There is no evidence that the AHCA requested written authorization from the CHC board. After review of the application, the AHCA identified certain deficiencies in the application and notified NCH, which apparently rectified the deficiencies. The AHCA deemed the application complete on November 8, 1991. As required by statute, NCH included a list of capital projects as part of the CON application. The list of capital projects attached to the application was incomplete. The capital projects list failed to identify approximate expenditures of $370,000 to construct a patio enclosure, $750,000 to install an interim sprinkler system, $110,000 to construct emergency room triage space, and $125,000 to complete electrical system renovations. At hearing, witnesses for NCH attempted to clarify the omissions from the capital projects list. The witnesses claimed that such omitted projects were actually included within projects which were identified on the list. When identifying the listed projects within which the omitted projects were supposedly included, the witnesses testified inconsistently. For example, one witness testified that the patio project was included in the emergency room expansion project listed in the application. Another witness claimed that the patio enclosure was included in an equipment purchase category. Based on the testimony, it is more likely that the patio enclosure was neither a part of an emergency room expansion nor equipment purchase, but was a separate construction project which was omitted from the CON application. Similarly inconsistent explanations were offered for the other projects which were omitted from the capital projects list. The testimony was not credible. The capital projects omitted from the list do not affect the ability of NCH to implement the CON sought in this proceeding. The parties stipulated to the fact the NCH has sufficient financial resources to construct and equip the proposed project. As part of the CON application, NCH was required to submit a pro forma income statement for the time period during which the bed additions would take place. The application failed to include a pro forma statement for the appropriate time period. Based on the stipulation of the parties that the costs and methods of the proposed construction are reasonable, and that NCH has adequate resources to fund the project, the failure to include the relevant pro forma is immaterial. Pursuant to applicable methodology, the AHCA calculates numeric acute care bed need projections for each subdistrict's specific planning period. Accordingly, the AHCA calculated the need for additional acute care beds in district 8, subdistrict 2 for the July, 1996 planning horizon. The results of the calculation are published by the agency. The unchallenged, published fixed need pool for the planning horizon at issue in this proceeding indicated that there was no numeric need for additional acute care beds in district 8, subdistrict 2, Collier County, Florida, pursuant to the numeric need methodology under Rule 59C-1.038 Florida Administrative Code. The CON application filed by NCH is based on the peak seasonal demand experienced by hospitals in the area during the winter months, due to part-time residents. NCH asserts that the utilization of acute care beds during the winter months (January through April) results in occupancy levels in excess of 75 percent and justifies the addition of acute care beds, notwithstanding the numerical need determination. Approval of the CON application is not justified by the facts in this case. The AHCA's acute care bed need methodology accounts for high seasonal demand in certain subdistricts in a manner which provides that facilities have bed space adequate to accommodate peak demand. The calculation which requires that the average annual occupancy level exceed 75 percent reflects AHCA consideration of occupancy levels which rise and fall with seasonal population shifts. The applicant has not challenged the methodology employed by the AHCA in projecting need. Peak seasonal acute care bed demand may justify approval of a CON application seeking additional beds if the lack of available beds poses a credible threat of potentially negative impact on patient outcomes. The peak seasonal demand experienced by NCH has not adversely affected patient care and there is insufficient evidence to establish that, at this time, such peak demand poses a credible threat of potential negative impact on patient outcomes in the foreseeable future. There is no dispute regarding the existing quality of care at Naples, North Collier, Southwest or any other acute care hospital in district 8. The parties stipulated that NCH has the ability to provide quality of care and a record of providing quality of care. In this case, the applicant is seeking to convert existing beds from a classification of "observation" to "acute care". The observation beds NCH proposes to convert are equipped identically to the acute care beds at NCH. Approval of the CON application would result in no net increase in the number of licensed beds. NCH offered anecdotal evidence suggesting that delays in transferring patients from the Naples emergency room to acute care beds (a "logjam") was caused by peak seasonal occupancy rates. There was no evidence offered as to the situation at the North Collier emergency room. The anecdotal evidence is insufficient to establish that "logjams" (if they occur at all) are related to an inadequate number of beds identified as "acute care" at NCH facilities. There are other factors which can result in delays in moving patients from emergency rooms to acute care beds, including facility discharge patterns, delays in obtaining medical test results and staffing practices. NCH asserted at hearing that physicians who refer patients to NCH facilities will not refer such patients to other facilities. The evidence fails to establish that such physician practice is reasonable or provides justification for approval of CON applications under "not normal" circumstances and further fails to establish that conditions at NCH are such as to result in physicians attempting to locate other facilities in which to admit patients. The rule governing approval of acute care beds provides that, prior to such approval, the annual occupancy rate for acute care beds in the subdistrict or for the specific provider, must exceed 75 percent. This requirement has not been met. Applicable statutes require that, in considering applications for CON's, the AHCA consider accessibility of existing providers. The AHCA- established standard provides that acute care bed accessibility requirements are met when at least 90 percent of the residents in an urban subdistrict are within a 30 minute automobile trip to such facilities. At least 90 percent of Naples residents are presently within a 30 minute travel time to NCH acute care beds. The number of acute care beds in the subdistrict substantially exceed the demand for such beds. Additional beds would result in inefficient utilization of existing beds, would further increase the current oversupply of beds, would delay the time at which need for additional beds may be determined and, as such, would prevent competing facilities from applying for and receiving approval for such beds. The financial feasibility projections set forth in the CON application rely on assumptions as to need and utilization projections which are not supported by the greater weight of the evidence and are not credited. Accordingly, the evidence fails to establish that the addition of 35 acute care beds to NCH facilities is financially feasible in the long term or that the income projections set forth in the CON application are reasonable. As to projections related to staffing requirements and costs, the beds are existing and are currently staffed on a daily, shift-by-shift basis, based on patient census and acuity of illness. There is reason to believe that the staffing patterns will remain fairly constant and accordingly the projections, based on historical data, are reasonable. Generally stated, where there is no numeric or "not normal" need for the proposed addition of 35 acute care beds in the relevant subdistrict, it could be predicted that the addition of acute care beds would exacerbate the oversupply of available beds and could cause a slight reduction in the occupancy levels experienced by other providers. In this case, the market service areas are sufficiently distinct as to suggest that such would not necessarily be the result. However, based on the lack of need justifying approval of the CON application under any existing circumstances, it is unnecessary to address in detail the impact on existing providers. The state and district health plans identify a number of preferences which should be considered in determining whether a CON application should be approved. The plans suggest that such preferences are to be considered when competing CON applications are reviewed. In this case there is no competing application and the applicability of the preferences is unclear. However, in any event, application of the preferences to this proposal fail to support approval of the application.
Recommendation RECOMMENDED that a Final Order be entered DENYING the application of Naples Community Hospital, Inc., for Certificate of Need 6797. DONE and RECOMMENDED this 19th day of March, 1993 in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of March, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-1510 To comply with the requirements of Section 120.59(2), Florida Statutes, the following constitute rulings on proposed findings of facts submitted by the parties. Petitioner The Petitioner's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 3-4, 6-8, 16-20, 29-36, 38, 41, 44, 47, 49-61, 80, 88, 95-96, 100, 104, 108, 117-119, 122-125, 127, 134-138. Rejected as unnecessary. 15. Rejected as irrelevant. Peak seasonal demand is accounted for by the numeric need determination methodology. There is no credible evidence which supports a calculation of three years of four month winter occupancy to reach a 12 month average occupancy rate. 21-27, 37, 42-43, 62-64, 66, 97, 99, 101-103, 105-107, 109, 120-121, 126. Rejected as not supported by the greater weight of credible and persuasive evidence. 28. Rejected as not supported by the greater weight of credible and persuasive evidence and contrary to the stipulation filed by the parties. Rejected as not supported by greater weight of credible and persuasive evidence which fails to establish that the transfer of patients from emergency room to acute care beds is delayed due to numerical availability of beds. Rejected as not supported by greater weight of credible and persuasive evidence which fails to establish that the alleged lack of acute care beds is based on insufficient number of total beds as opposed to other factors which affect bed availability. Rejected as immaterial and contrary to the greater weight of the evidence Rejected as immaterial and contrary to the greater weight of the evidence which fails to establish reasonableness of considering only a four month period under "not normal" circumstances where the period and the peak seasonal demand are included within the averages utilized to project bed need. 86. Rejected as cumulative. 114. Rejected as unsupported hearsay. Respondent/Intervenor The Respondent and Intervenor filed a joint proposed recommended order. The proposed order's findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 6, 45, 51, 53, 59-67, 69-70, 94-113. Rejected as unnecessary. 16. Rejected as to use of term "false", conclusion of law. 58. Rejected as not clearly supported by credible evidence. 71-93, 114-124. Rejected as cumulative. COPIES FURNISHED: Douglas M. Cook, Director Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, Esquire Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 W. David Watkins, Esquire Oertel, Hoffman, Fernandez, & Cole Post Office Box 6507 Tallahassee, Florida 32314-6507 Edward G. Labrador, Esquire Thomas Cooper, Esquire Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308 John D.C. Newton, II, Esquire Aurell, Radey, Hinkle, Thomas & Beranek Monroe Park Tower, Suite 1000 101 North Monroe Street Post Office Drawer 11307 Tallahassee, Florida 32302
The Issue Which, if any, of the four certificate of need applications for short-term psychiatric beds in Department of Health and Rehabilitative Services District 9 should be approved.
Findings Of Fact Description of the Parties The Department of Health and Rehabilitative Services ("HRS") is the agency charged under Chapter 381, Florida Statutes (1991), to make decisions regarding certificate of need ("CON") applications. HRS issued its intent to approve the CON applications of Glenbeigh Hospital of Palm Beach, Inc. ("Glenbeigh"), for 45 beds, and Boca Raton Community Hospital, Inc. ("Boca"), for 15 beds, pursuant to a published fixed need for 67 beds for HRS District IX. HRS also issued its intent to deny the CON applications of Wellington Regional Medical Center, Incorporation ("Wellington") to convert 15 acute care beds to 15 short term adult psychiatric beds, and Savannas Hospital Limited Partnership ("Savannas") to convert 20 substance abuse beds to 20 short term adult psychiatric beds and to add 10 new short term adult beds. District IX includes Palm Beach, Martin, St. Lucie, Okeechobee and Indian River Counties. As a result of Glenbeigh's Notice of Withdrawal filed on April 6, 1993, CON No. 6438 is no longer under consideration in this case. Boca is an existing 394-bed acute care hospital, located one mile north of the Broward County line, and is the applicant for CON No. 6442, to convert 15 medical/surgical beds to 15 adult psychiatric beds, and to delicense an additional 6 medical/surgical beds. Wellington is an existing acute care hospital in Palm Beach County, with 104 acute care medical/surgical beds and 16 substance abuse beds, and is the applicant for CON No. 6441 to convert 15 acute care beds to 15 short term adult psychiatric beds. Savannas is an existing 70 bed child/adolescent and adult psychiatric and substance abuse hospital in St. Lucie County, about 40 miles north of Palm Beach, and is the applicant for CON No. 6444, to convert its 20 substance abuse beds to 20 adult short-term psychiatric beds, and to add 10 new adult short-term psychiatric beds. Lake Hospital and Clinic, Inc., d/b/a Lake Hospital of the Palm Beaches ("Lake"), at the time of hearing, was a 98-bed psychiatric and substance abuse hospital, with 46 adult psychiatric beds, 36 child/adolescent psychiatric beds and 16 substance abuse beds, located in Lake Worth, Palm Beach County, between Boca Raton and West Palm Beach. The parties stipulated that Lake had standing to challenge the Boca application. Community Hospital of the Palm Beaches, Inc., d/b/a Humana Hospital Palm Beaches ("Humana") is an existing 250-bed acute care hospital, with 61 adult and 27 child/adolescent psychiatric beds, and is a Baker Act receiving facility, located directly across the street from Glenbeigh in Palm Beach. Florida Residential Treatment Centers, Inc., d/b/a Charter Hospital of West Palm Beach ("Charter") is an existing 60-bed psychiatric hospital with 20 beds for children and 40 beds for adolescents, located approximately 15 minutes travel time from Glenbeigh. Martin H.M.A., Inc., d/b/a SandyPines Hospital ("SandyPines") is an existing 60 bed child and adolescent psychiatric hospital, and a Baker Act receiving facility, located in Martin County, less than one mile north of the Palm Beach County line. By prehearing stipulation, the parties agreed that the statutory review criteria applicable to the CON application of Boca are those listed in Subsections 381.705(1)(a), (b), (d), (f), (i) - (l) and (n). If Rule 10- 5.011(1)(o) is applicable, the parties stipulated that the disputed criteria are those in Subsections 4.g. and 5.g. Background and Applicability of HRS Rules and Florida Statutes Rule 10-5.011(o) and (p), Florida Administrative Code, was in effect at the time HRS published the fixed need pool and received the applications at issue in this proceeding, the September 1990 batching cycle. The rule distinguished between inpatient psychiatric services based on whether the services were provided on a short-term or long-term basis. Similarly, Rule 10- 5.011(q), Florida Administrative Code, distinguished between short-term and long-term hospital inpatient substance abuse services. On August 10, 1990, HRS published a fixed need pool for 19 short-term psychiatric beds in HRS District IX, with notice of the right to seek an administrative hearing to challenge the correctness of the fixed need pool number. See, Vol. 16, No. 32, Florida Administrative Weekly. On August 17, 1990, HRS published a revised fixed need pool for a net need of 67 additional short-term hospital inpatient psychiatric beds in HRS District IX, based on the denial of a certificate of need application, subsequent to the deadline for submission of the August 10th publication. The local health plan formula, which has not been adopted by rule, allocates 62 of the additional 67 beds needed to the Palm Beach County subdistrict. The revised pool publication did not include notice of the right to an administrative hearing to challenge the revised pool number. See, Vol. 16, No. 33, Florida Administrative Weekly. There were no challenges filed to either the original or revised fixed need pool numbers. On December 23, 1990, HRS published new psychiatric and substance abuse rules, subsequently renumbered as Rule 10-5.040 and 10-5.041, Florida Administrative Code. These new rules abolished the distinction between short- term and long-term services, and instead distinguished psychiatric and substance abuse services by the age of the patient. Pursuant to Section 14 of the new psychiatric rule, that rule does not apply to applications pending final agency action on the effective date of the new rule. HRS will, however, license any applicant approved from the September 1990 batching cycle to provide services to adults or children and adolescents, using the categories in the new rule, not based on the distinction between short and long term services which existed at the time the application was filed. Approved providers will receive separate CONs for adult and child/adolescent services. Rule 10-5.008(2)(a), Florida Administrative Code, provides that the fixed need pool shall be published in the Florida Administrative Weekly at least 15 days prior to the letter of intent deadline and . . . shall not be changed or adjusted in the future regardless of any future changes in need methodologies, population estimates, bed inventories, or other factors which would lead to different projections of need, if retroactively applied. Humana, Lake, Charter and SandyPines allege that HRS incorrectly determined need under the old rule, by failing to examine occupancy rates pursuant to that rule. The rule provided, in relevant part, No additional short term inpatient hospital adult psychiatric beds shall normally be approved unless the average annual occupancy rate for all existing adult short term inpatient psychiatric beds in a service district is at or exceeds 75 percent for the preceding 12 month period. No additional beds for adolescents and children under 18 years of age shall normally be approved unless the average annual occupancy rate for all existing adolescent and children short term hospital inpatient psychiatric beds in the Department district is at or exceeds 70 percent for the preceding 12 month period. Hospitals seeking additional short term inpatient psychiatric beds must show evidence that the occupancy standard defined in paragraph six is met and that the number of designated short term psychiatric beds have had an occupancy rate of 75 percent or greater for the preceding year. (Emphasis added.) Rule 10-5.011(o)4(e), Florida Administrative Code. HRS' expert witness, Elizabeth Dudek, testified that the fixed need pool for 67 additional short term inpatient psychiatric beds was calculated pursuant to the formula in Rule 10-5.011(l)(o), Florida Administrative Code. Ms. Dudek also testified that since calculation resulted in a positive number, according to HRS policy, the publication of the fixed need pool indicates that the occupancy prerequisites must have also been met. To the contrary, the State Agency Action Report and the deposition of Lloyd Tribley, the HRS Health Facilities consultant who collected the data to support the publication of the fixed need pool, indicate that he did not determine existing occupancy separately for adults and for children/adolescents, as required by subsection (e) of the old rule. Rather, he determined, pursuant to subsection (f), that overall occupancy rates for licensed short-term psychiatric beds exceeded 75 percent. With the August 10, 1990 publication of the need for 19 additional short-term inpatient psychiatric beds, HRS provided a point of entry to challenge the published need, including the agency's apparent failure to make a determination of existing occupancy rates for separate age categories. No challenge was filed. In the August 17, 1990 publication, HRS failed to provide a point of entry, when it added 48 more beds to the pool as a result of the issuance of a final order denying a prior CON application. The August 10th publication of numeric need, according to HRS' representative should have been based on an analysis of separate and combined occupancy rates. There was no challenge to that publication, therefore the number of beds in the fixed need pool is not at issue in this proceeding. Like and Existing Facilities Humana, Lake and Charter assert that, as a result of the new rule abolishing separate licensure categories for short-term and long-term beds, all psychiatric providers within an applicant's service district are like and existing facilities. These parties also assert that there was not, even under the old rule, any practical difference between these categories of providers, particularly for children/adolescents. In support of this position, the evidence demonstrated that the average lengths of stay in short-term and long- term adolescent psychiatric beds in 1989 were 48.1 days and 53.02 days, respectively. In 1990, the average lengths of stay in short and long-term beds were 41.8 days and 41.9 days, respectively. The parties asserting that the effect of the new rule is to create an additional group of like and existing providers point to HRS' response to the application of Indian River Memorial Hospital in Vero Beach, Florida ("Indian River"). According to the testimony of HRS expert witness Elizabeth Dudek, Indian River was another District 9 applicant in this same batching cycle. Indian River applied for a CON to convert long-term psychiatric beds to short- term psychiatric beds. HRS denied the CON application of Indian River because, under the new rule, which had taken effect before the decisions on the batch were made, Indian River would receive a new license permitting it to treat psychiatric patients regardless of their projected lengths of stay. Glenbeigh asserted that the numeric need for 67 additional short term psychiatric beds cannot be challenged in this proceeding based on the failure of any party timely to challenge the August 10, 1990, publication of need. Similarly, Glenbeigh asserted that the comparison of "like and existing" facilities must be limited to those used in the inventory to compute need. Glenbeigh relied generally on Florida Administrative Code Rule 10-5.011(o), the old rule governing short term hospital inpatient psychiatric services, for the proposition that "like and existing" in Subsection 381.705(1)(b), Florida Statutes, is equivalent to the inventory of licensed and approved beds for short term psychiatric services, which was used in the computation of need. However, the rule also provides, in a list of "other standards and criteria to be considered in determining approval of a certificate of need application for short term hospital inpatient psychiatric beds," the following, Applicants shall indicate the availability of other inpatient psychiatric services in the proposed service area, including the number of beds available in crisis stabilization units, short term residential treatment programs, and other inpatient beds whether licensed as a hospital facility or not. In light of the rule directive that the consideration of like and existing services is not limited to licensed provider hospitals, Glenbeigh's assertion that the statutory review criteria is more restrictive and limited to the licensed and approved beds that were used to compute numeric need is rejected. The like and existing facilities are the hospitals or freestanding facilities which are authorized to provide the same psychiatric services, as the applicants seek to provide as a result of this proceeding. It was established at hearing that the following list of District 9 facilities provide psychiatric services comparable to those which the three remaining applicants seek to provide in these consolidated cases: DISTRICT 9 Hospital PSYCHIATRIC BEDS SUBSTANCE ABUSE BEDS Adult Child and Adult Child and Adolescent Adolescent Lic. App. Lic. App. Lic. App. Lic. App. Bethesda Hospital 20 0 0 0 0 0 0 0 Charter Palm (IRTF) 0 0 60 0 0 0 0 0 Fair Oaks 36 0 49 0 14 0 3 0 Forty Fifth Street 44 0 0 0 0 0 0 0 Glenbeigh Palm Beach 0 0 0 0 30 0 30 0 Humana Palm Beach 61 0 27 15 0 0 0 0 Humana Sebastian 0 0 0 0 16 0 0 0 Indian River Mem. 16 0 38 0 0 0 0 0 J.F. Kennedy Mem. 14 0 0 0 22 0 0 0 Lake Hospital 46 0 36 0 16 0 0 0 Lawnwood Regional 36 Res. Treat. Palm 0 24 0 0 0 0 0 (IRTF) 0 0 40 0 0 0 0 0 Sandy Pines 0 0 60 0 0 0 0 0 Savannas 35 0 15 0 20 0 0 0 St. Mary Hospital 0 40 0 0 0 0 0 0 Wellington Regional 0 0 0 0 16 0 0 0 Vol. 16, No. 52, Florida Administrative Weekly, (December 28, 1990) (Humana Exhibit 26). Need For Additional Beds An analysis of need beyond that of the numeric need, requires an analysis of the availability and accessibility of the like and existing facilties. One reliable indicator of need is the occupancy levels in the like and existing facilities. In addition to providing guidelines for the publication of need, Rule 10-5.011(o)(4)(e) also mandates a consideration of occupancy levels to determine if applicants are or are not required to demonstrate "not normal circumstances" necessitating the issuance of a CON. For all child/adolescent psychiatric programs in District 9, the expert for Lake and Humana calculated total average occupancy rates at 57.6 percent in 1988, 64.2 percent in 1989, and 53.2 percent in 1990. In support of the accuracy of the expert's calculations, the District 9 Annual Report for 1990 (Lake Exhibit 4) shows occupancy at 46.80 percent in general hospitals, 88.22 percent in specialty hospitals then categorized as short term and 38.22 percent in specialty hospitals then categorized as long term. In addition, during this same period of time, average lengths of stay in District 9 child/adolescent beds also declined by approximately 10 percent. Using the guidelines of the old rule, new short term psychiatric beds should not normally be approved when the child/adolescent rate is below 70 percent. In the new rule, child/adolescent beds should not normally be approved if occupancy is below 75 percent. Therefore, under either rule, applicants who will be licensed for child/adolescent beds, must demonstrate not normal circumstances for their CON applications to be approved. The expert for Lake and Humana, also computed the adult occupancy rates for 1988-1990 in District 9 as follows: 1988- 66.5 percent; 1989 - 73.1 percent; 1990 - 68.5 percent. The occupancy rates for adult beds for the 12- month period ending March, 1990 was 70.6 percent and 69.2 percent for the twelve months ending June, 1990. In evaluating the accuracy of the expert's calculations of occupancy rates for adult beds, a comparison can be made to the District 9 Annual Report for 1990 (Lake Exhibit 4). Occupancy rates were 57.75 percent in general hospitals and 79.45 percent in specialty hospitals. This data does not include Indian River Memorial or Lawnwood Regional which were also listed on the December 1990 inventory of licensed adult beds, nor St. Mary's Hospital which was listed as having 40 approved adult beds. The comparison indicates the accuracy of concluding that the highest occupancy level for District 9 adult psychiatric beds during the period 1988 to 1990 was approximately 70 percent. Using the guidelines of the old rule, 75 percent occupancy is required before new adult beds can be approved unless there is a not normal circumstance. Boca's Proposal Boca Raton Community Hospital ("Boca") is a 394-bed not-for-profit acute care hospital, accredited by the Joint Commission for the Accreditation of Hospitals and Health Organizations, which proposes to convert 21 of its medical/surgical to 15 adult psychiatric beds and to delicense an additional 6 acute care beds. Boca's CON would be conditioned on the provision of 10.8 percent total annual patient days to Medicaid patients and a minimum of 5 percent gross revenues generated, or 2 percent total annual patient days to medically indigent patients. Boca has proposed this alternative so that, if it fails to provide direct care to indigents, it may donate the revenues to further the objectives of the state and district mental health councils. Boca Raton Community Hospital Corporation has control and manages the Boca's property, policies and funds. The Boca Raton Community Hospital Foundation raises funds for Boca and has the funds necessary to accomplish the proposed project at a cost of $932,531. Boca's application asserts that a not normal circumstance exists in the need to serve Medicaid patients in the district, and that a need exists to serve geriatric psychiatric patients in an acute care hospital, due to their general medical condition. Medicaid reimbursement for psychiatric care is only available in acute care hospitals. Boca Historically serves in excess of 70 percent Medicare (geriatric) patients. In 1990, 72 percent of Medicaid psychiatric patients residing in Boca's service area sought psychiatric services outside District 9, as compared to the outmigration of 14.7 percent Medicare patients, and 11 percent commercial insurance patients. Boca supported its proposed 10.8 percent Medicaid CON condition, with evidence that 10.8 percent of all psychiatric discharges in its market area were for Medicaid patients. Boca's opponents dispute the claim that a disproportionate outmigration of District 9 Medicaid patients is, in and of itself, a not normal circumstance. Using the travel time standard for inpatient psychiatric services of 45 minutes under average driving conditions, the opponents argue that District 10 facilities should be considered as available alternatives to additional psychiatric beds in District 9. In fact, the parties stipulated that there are no geographic access problems in District 9. In contrast to the opponents position, Subsections 381.705(a), (b)(, (d), (f) and (h), Florida Statutes (1991), indicate that need, available alternatives and accessibility are evaluated within a district, as defined by Subsection 381.702(5). Therefore, using the statutory criteria as indicative of the situation which is normal, the disproportionate outmigration of medicaid patients can be considered a not normal circumstance with a showing of access hardships for this payor group. Boca's opponents also assert general acute care adult beds are adequate. In August 1991, the occupancy rate was 56.9 percent in the 171 licensed adult psychiatric beds in District 9 general acute care hospitals which are eligible for Medicaid reimbursement. Finally, Boca's opponents argue that Boca historically has not, and will not serve Medicaid patients in sufficient number to alter the outmigration. In 1990, Boca reported 671 Medicaid inpatient days from a total of 99,955. That is equivalent to 92 of the 16,170 admissions. Because Boca has a closed medical staff, only the psychiatrists on staff would be able to admit patients to a psychiatric unit. From the testimony and depositions received in evidence, Boca's psychiatrists who discussed their service to Medicaid patients treated less than 12 Medicaid patients a year. One psychiatrist, who had previously treated Medicaid patients at a mental health center, has been in private practice since 1983-84, but was not sure he had treated a Medicaid patient in his private practice and has received a new Medicaid provider number a few weeks prior to hearing. One Boca psychiatrist does not treat Medicaid patients on an inpatient basis. Two other Boca psychiatrists reported seeing 10 and "a couple" of Medicaid patients a year, respectively. The latter of these described the Medicaid billing procedure as cumbersome. Given the unavailability of Medicaid eligible beds in the District and the nature of the practices of its closed staff of psychiatrists, Boca has failed to establish that its CON application will alleviate the outmigration for psychiatric services of District 9 Medicaid patients. This conclusion is not altered by the subsequent closure of Lake's 46 adult psychiatric beds, because Medicaid reimbursement would not have been available at Lake which was not an acute care hospital. In fact, HRS takes the position that there are no not normal circumstances in this case. Wellington's Proposal Wellington, a 120 bed hospital in West Palm Beach, Florida, proposed to convert 15 acute care beds to 15 short term adult psychiatric beds which, if approved, will be licensed as adult psychiatric beds. Wellington's acute care beds are only 28 percent occupied. Wellington is located in the western portion of Palm Beach County, where no other inpatient psychiatric facilities are located. Wellington is a wholly owned subsidiary of Universal Health Services, Inc. ("UHS"), accredited by the Joint Commission for the Accreditation of Hospitals and Health Organizations (JCAHO) and the American Osteopathic Association (AOA), and offers clinical experience for students of the Southeastern College of Osteopathic Medicine (SECOM). Internships and externships for osteopathic students are also provided at Humana's psychiatric pavilion. Wellington proposes to fund the total project cost of $920,000 from funds available to UHS and intends to become a Baker Act receiving facility. Wellington is not a disproportionate share hospital, and projects 1 percent Medicaid service in its payor mix. Wellington proposes to serve adult psychiatric patients in 15 beds, and projects 53.3 percent and 70 percent occupancy in those beds in years one and two, but does not make a third year projection of at least 80 percent occupancy as required by Paragraph 4(d) of Rule 10-5.011(o). Because the average annual adult occupancy rate in the district is less than 75 percent, any applicant proposing to serve adults must demonstrate that a not normal circumstance exists for approval of its CON application. In addition, there appears to be no shortage of psychiatric beds in acute care hospitals in District 9. See Finding of Fact 39, supra. Not Normal Circumstance Wellington has not alleged nor demonstrated that any of the factors related to its current operations, location or proposed services are not normal circumstances in support of its CON application. Absent the showing of a not normal circumstance, Wellington's proposal cannot be approved, pursuant to Paragraph 4(e) and Rule 10-5.011(o), Florida Administrative Code. Savannas Proposal Savannas Hospital Limited partnership d/b/a Savannas Hospital ("Savannas") is a JCAHO accredited 70 bed psychiatric and substance abuse hospital located in Port St. Lucie, St. Lucie County, Florida, approximately 40 miles north of Palm Beach. Savannas, a Baker Act facility, proposes to convert all 20 of its licensed substance abuse beds to psychiatric beds and to add 10 new psychiatric beds, at a total project cost of $1,444,818. Savannas also proposes to commit to providing 7 percent indigent care. While not specifically describing its circumstances as not normal, Savannas does indicate that it is (1) the only applicant in the northern sub- district of District 9, and (2) could readmit to a segregated unit low functioning neurogeriatric patients of the type it previously served. Savannas also indicated that Medicare reimbursement is not available for patients who have substance abuse, rather than psychiatric primary diagnoses. As a freestanding provider, Savannas is not eligible for Medicaid reimbursement. Savannas demonstrates what services it would provide, if its CON is approved, but fails to identify a need for the services by District 9 psychiatric patients. Within the northern sub-district, the only other facility in St. Lucie County, Lawnwood, reported an occupancy rate of 65 percent in 1989. AHCA also argued that the substance abuse beds at Savannas are needed and should not be converted to psychiatric beds. That position is supported by the fact that Savannas substance abuse beds had a higher occupancy level than its psychiatric beds in 1989. Savannas' application and the evidence presented do not support the need for the services proposed by Savannas, nor does Savannas assert that any not normal circumstances exist.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered denying Certificate of Need Number 6438 to Glenbeigh Hospital of Palm Beach, Inc.; Certificate of Need Number 6442 to Boca Raton Community Hospital, Inc.; Certificate of Need Number 6441 to Wellington Regional Medical Center, Inc.; and Certificate of Need Number 6444 to Savannas Hospital Limited Partnership. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 18th day of June 1993. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 18th day of June 1993. APPENDIX The following rulings are made on the parties' proposed findings of fact: Humana Adopted in Finding of Fact 1. Subordinate to Finding of Fact 2. 3-6. Issues not addressed. 7-8. Adopted in Findings of Fact 3 and 4. Subordinate to Findings of Fact 44 and 46. Subordinate to Finding of Fact 10. 11-12. Adopted in Findings of Fact 6 and 7. 13-15. Subordinate to Finding of Fact 7. Adopted in Finding of Fact 7. Adopted in Finding of Fact 45. Subordinate to Findings of Fact 27 & 29. Issue not addressed. 20-21. Subordinate to Finding of Fact 25. 22. Issue not addressed. 23-24. Adopted in Findings of Fact 8 and 9. Accepted in relevant part in Finding of Fact 11. Accepted in relevant part in Finding of Fact 10. Subordinate to Finding of Fact 12 and Conclusions of Law 4. Subordinate to Finding of Fact 1. Adopted in Finding of Fact 22. Rejected in Finding of Fact 20. Rejected in Findings of Fact 12 and 18. Adopted in Findings of Fact 15 and 17. Rejected in Finding of Fact 38. Adopted in Findings of Fact 16 and 17. Adopted in Finding of Fact 26. Issue not addressed. Adopted in Finding of Fact 47. 38-47. Issues not addressed. Adopted in Findings of Fact 44 and 47. Issue not addressed. Rejected in Finding of Fact 46. Issue not addressed. 52-54. Adopted in Findings of Fact 46 and 47. 55-57. Issues not addressed. Adopted in Finding of Fact Issue not addressed. Adopted in Finding of Fact 46. Issue not addressed. Accepted in relevant part in Finding of Fact 21. Accepted in relevant part in Finding of Fact 22. Accepted in relevant part in Finding of Fact 21. Subordinate to Finding of Fact 25. Accepted in relevant part in Finding of Fact 25. Subordinate to Finding of Fact 25. Accepted in relevant part in Finding of Fact 25. Accepted in relevant part in Finding of Fact 54 Accepted in relevant part in Findings of Fact 26, 38, 39, 42, 43, 47, 48, 54, 55 and 57. Accepted in relevant part in Finding of Fact 26. Rejected in Findings of Fact 21 and 22. Accepted in relevant part in Finding of Fact 26. 74-75. Accepted in relevant part in Finding of Fact 27. 76-77. Subordinate to Finding of Fact 27. Subordinate to Finding of Fact 30. Subordinate to Findings of Fact 27 and 30. Subordinate to Finding of Fact 28. Subordinate to Finding of Fact 31. Accepted in relevant part in Finding of Fact 82. Subordinate to Finding of Fact 82. Accepted in relevant part in Finding of Fact 37. Accepted in relevant part in Finding of Fact 39. Issue not addressed. Subordinate to Finding of Fact 27 and 30. Accepted in relevant part in Findings of Fact 27, 29 and 30. Subordinate to Findings of Fact 27 and 30. Accepted in relevant part in Finding of Fact 31. Accepted in relevant part in Finding of Fact 42. Issue not addressed. Addressed in Preliminary Statement. Accepted in relevant part in Finding of Fact 1. 95-99. Issues not addressed Accepted in relevant part in Finding of Fact 10. Accepted in relevant part in Finding of Fact 25. 102-114. Issues not addressed Accepted in relevant part in Findings of Fact 27 and 30. Issue not addressed. Subordinate to Finding of Fact 25. Accepted in relevant part in Finding of Fact 37. Issue not addressed. Accepted in relevant part in Finding of Fact 10. 121-122. Issues not addressed. Accepted in relevant part in Findings of Fact 4 and 47. Issue not addressed. Irrlevant. Issue not addressed. Accepted in relevant part in Finding of Fact 10 Accepted in relevant part in Findings of Fact 10, 25, 47 and 48. Subordinate to Finding of Fact 11. Issue not addressed. Accepted in relevant part in Findings of Fact 47, 48 and 49. Accepted in relevant part in Finding of Fact 45. Accepted in relevant part in Finding of Fact 46. Issue not addressed. Accepted in relevant part in Findings of Fact 47 and 48. Issue not addressed. Accepted in relevant part in Findings of Fact 47 and 48. Accepted in relevant part in Finding of Fact 15. Accepted in relevant part in Findings of Fact 47, 48 and 49. Accepted in relevant part in Finding of Fact 11. Lake Adopted in Finding of Fact 1. Subordinate to Finding of Fact 1. 3-4. Adopted in Finding of Fact 3. Adopted in Finding of Fact 4. Adopted in Finding of Fact 5. Adopted in Finding of Fact 7. Adopted in Finding of Fact 8. Adopted in Finding of Fact 9. Adopted in Findings of Fact 6 and 43. 11-12. Issues not addressed. 13-19. Subordinate to Findings of Fact 27-43. 20-21. Issues not addressed. 22. Adopted in Finding of Fact 10. 23. Adopted in Finding of Fact 11. 24. Adopted in Finding of Fact 12. 25-26. Adopted in Finding of Fact 13. 27-28. Adopted in Finding of Fact 1. 29-31. Adopted in Finding of Fact 22. 32. Rejected in relevant part in Finding of Fact 13. 33. Issue not addressed. 34. Accepted in relevant part in Finding of Fact 25. 35. Subordinate to Finding of Fact 25. 36-37. Accepted in relevant part in Finding of Fact 25. 38-39. Subordinate to Finding of Fact 27. 40. Accepted in relevant part in Finding of Fact 25. 41. Accepted in relevant part in Finding of Fact 30. 42-43. Subordinate to Finding of Fact 30. 44. Accepted in relevant part in Finding of Fact 25. 45. Subordinate to Findings of Fact 27 and 30. 46-47. Issues not addressed. 48. Accepted in relevant part in Findings of Fact 27 and 30. 49-52. Issues not addressed. 53. Subordinate to Finding of Fact 42. 54-56. Issues not addressed. 57. Accepted in relevant part in Conclusions of Law 4. 58-59. Accepted in relevant part in Finding of Fact 26 and in Conclusions of Law 4. Accepted in relevant part in Finding of Fact 20. Adopted in Finding of Fact 20. Adopted in Finding of Fact 15. Subordinate to Finding of Fact 1. Subordinate to Finding of Fact 17. 65-66. Adopted in Finding of Fact 17. Adopted in Findings of Fact 18, 27 and 30. Adopted in Finding of Fact 17. Adopted in Findings of Fact 27 and 29. Adopted in Finding of Fact 30. Adopted in Finding of Fact 29. Adopted in Finding of Fact 31. Adopted in Findings of Fact 28 and 31. Adopted in Finding of Fact 38. Adopted in Findings of Fact 27, 39 and 42. Adopted in Finding of Fact 43. Adopted in Finding of Fact 38. Adopted in Finding of Fact 35. Adopted in Findings of Fact 37, 39 and 42. Adopted in Finding of Fact 42. Adopted in Findings of Fact 47, 48, 49, 53 and 57. Adopted in Finding of Fact 47. Adopted in Finding of Fact 1. 84-89. Issues not addressed. Adopted in Findings of Fact 27 and 30. Subordinate to Findings of Fact 27 and 30. 92-97. Issues not addressed. Subordinate to Finding of Fact 41. Subordinate to Finding of Fact 37. 100-102. Issues not addressed. Adopted in Findings of Fact 47 and 48. Adopted in Finding of Fact 26. Adopted in Finding of Fact 25. Subordinate to Finding of Fact 25. Adopted in Finding of Fact 30. Adopted in Finding of Fact 27. Subordinate to Finding of Fact 27. Adopted in Finding of Fact 27. 111-113. Subordinate to Finding of Fact 27. Subordinate to Finding of Fact 30. Adopted in Finding of Fact 29. Issue not addressed. Accepted in relevant part in Findings of Fact 27 and 30. Adopted. Adopted. Accepted in relevant part. Issue not addressed. Accepted in relevant part in Findings of Fact 3 and 32. Subordinate to Finding of Fact 3. Accepted in relevant part in Finding of Fact 41. Adopted in Finding of Fact 42. Subordinate to Finding of Fact 41. Issue not addressed. 128-132. Subordinate to Finding of Fact 32. 133-135. Issues not addressed. Adopted in Findings of Fact 32 and 41. Adopted in Finding of Fact 32. Subordinate to Finding of Fact 32. Issue not addressed. Adopted in Finding of Fact 10. Adopted in Finding of Fact 6. Adopted in Finding of Fact 10. Adopted in Finding of Fact 30. Adopted in Finding of Fact 44. Subordinate to Finding of Fact 45. Subordinate to Finding of Fact 47. Adopted in Finding of Fact 46. Subordinate to Finding of Fact 47. Adopted in Finding of Fact 44. 150-151. Adopted in Finding of Fact 46. 152-156. Issues not addressed. 157-158. Adopted in Finding of Fact 10. 159. Adopted in Findings of Fact 48 and 49. 160. Adopted in Finding of Fact 5. 161. Adopted in Finding of Fact 5. 162. Adopted in Finding of Fact 56. 163. Adopted in Finding of Fact 57. 164. Adopted in Finding of Fact 10. 165. Adopted in Finding of Fact 10. 166. Charter Adopted in Finding of Fact 57. 1. Accepted in relevant part in Finding of Fact 1. 2-3. Adopted. 4-10. Accepted in Preliminary Statement. 11. Adopted in Finding of Fact 1. 12-15. Issues not addressed. 16. Adopted in Finding of Fact 12. 17. Adopted in Finding of Fact 7. 18-19. Issues not addressed. 20. Adopted in Finding of Fact 8. 21-25. Subordinate to Finding of Fact 8. 26-38. Issues not addressed 39-40. Adopted in Finding of Fact 10. Subordinate to Finding of Fact 13. Adopted in Finding of Fact 13. 43-44. Adopted in Finding of Fact 22. Adopted in Finding of Fact 13. Adoped in Conclusion of Law 3. Adopted in Finding of Fact 13. Subordinate to Finding of Fact 25. Adopted in Findings of Fact 25 and 26. Adopted in Finding of Fact 23. Issue not addressed. 52-53. Adopted in Finding of Fact 25. 54-55. Issues not addressed. Adopted in Finding of Fact 26. Adopted in Finding of Fact 24. 58-73. Issues not addressed. Adopted in Finding of Fact 23. Adopted in Finding of Fact 38. Adopted in Finding of Fact 27. Adopted in Findings of Fact 27 and 30. 78-79. Subordinate to Findings of Fact 27 and 30. Subordinate to Finding of Fact 27. Issue not addressed. Adopted in Findings of Fact 27 and 30. Adopted in Finding of Fact 37. Adopted in Finding of Fact 39. Adopted in Finding of Fact 25. 86-94. Issues not addressed. Adopted in Finding of Fact 26. Issue not addressed. Adopted in Finding of Fact 15. Adopted in Findings of Fact 37, 39 and 42. 99-101. Issues not addressed. 102. Adopted in Finding of Fact 1. 103-134. Issues not addressed. 135. Adopted in Finding of Fact 4. 136-140. Issues not addressed. Boca Adopted in Finding of Fact 12. Adopted in Finding of Fact 11. Subordinate to Finding of Fact 11. Adopted in Finding of Fact 1. Adopted in Preliminary Statement. Adopted in Findings of Fact 3 and 32. Adopted in Finding of Fact 33. Subordinate to Finding of Fact 3. Adopted in Finding of Fact 32. 10. Subordinate to Finding of Fact 32. 11. Adopted in Finding of Fact 41. 12. Subordinate to Finding of Fact 32. 13. Adopted in Finding of Fact 32. 14. Adopted. 15-16. Subordinate to Finding of Fact 32. 17. Adopted in Finding of Fact 34. 18. Subordinate to Finding of Fact 32. 19. Issue not addressed. 20-21. Adopted in Finding of Fact 32. 22. Rejected in Finding of Fact 39. 23. Subordinate to Finding of Fact 32. 24. Adopted in Finding of Fact 32. 25. Subordinate to Finding of Fact 32. 26-27. Adopted in Finding of Fact 41. 28-30. Subordinate to Finding of Fact 41. 31. Adopted in Finding of Fact 34. 32. Adopted in Finding of Fact 39. 33. Subordinate to Finding of Fact 34. 34. Adopted in Finding of Fact 39. 35. Adopted in Finding of Fact 34. 36. Rejected in Finding of Fact 39. 37-42. Adopted in Finding of Fact 41. 43-47. Issues not addressed. 48. Subordinate to Finding of Fact 30. 49-50. Issues not addressed. Accepted in relevant part in Findings of Fact 27 and 30. Issue not addressed. 53-54. Rejected in Finding of Fact 30. 55-56. Issues not addressed. 57. Adopted in Finding of Fact 12. 58-59. Issues not addressed. Rejected in Findings of Fact 39 and 42. Adopted in Finding of Fact 12. Issue not addressed. Adopted in Finding of Fact 32. 64-65. Issues not addressed. Adopted in Findings of Fact 32, 35 and 38. Adopted in Finding of Fact 36. Adopted. Issue not addressed. Adopted in Finding of Fact 32. Adopted in Finding of Fact 12. Subordinate to Finding of Fact 32. Issue not addressed. Accepted in relevant part in Finding of Fact 34. Issue not addressed. Issue not addressed. Adopted in Finding of Fact 15. Issue not addressed. Adopted. Adopted in Finding of Fact 32. 81-82. Rejected in Finding of Fact 42. Issue not addressed. Adopted in Finding of Fact 32. Adopted in Finding of Fact 37. Rejected in Findings of Fact 25 and 42. Issue not addressed. Adopted in Finding of Fact 6. 89-97. Issues not addressed. Subordinate to Finding of Fact 25. Rejected in Finding of Fact 42. Issue not addressed. Adopted in Findings of Fact 25 and 26. Adopted in Finding of Fact 6. Sandy Pines 1. Issue not addressed. 2-3. Subordinate to Finding of Fact 1. 4. Issue not addressed. 5. Subordinate to Finding of Fact 9. 6-8. Adopted in Finding of Fact 9. 9-13. Subordinate to Finding of Fact 25. 14. Adopted in Finding of Fact 9. 15. Subordinate to Finding of Fact 9. Adopted in Finding of Fact 25. Adopted in Finding of Fact 27. Adopted in Finding of Fact 25. Adopted in Finding of Fact 27. 20-24. Subordinate to Finding of Fact 27. 25. Subordinate to Finding of Fact 9. 26-29. Issues not addressed. 30. Adopted. 31-33. Issues not addressed. Adopted in Findings of Fact 42, 43, 48, 49 and 54. Issue not addressed. Accepted in relevant part in Findings of Fact 27 and 30. Subordinate to Findings of Fact 28 and 31. Issue not addressed. 39-40. Subordinate to Findings of Fact 27 and 30. 41-42. Issues not addressed. Accepted in relevant part in Finding of Fact 12. Accepted in relevant part in Findings of Fact 12 and 17. Accepted in relevant part in Finding of Fact 17. 46-47. Accepted in relevant part in Finding of Fact 26. 48. Subordinate to Findings of Fact 25 and 26. 49-50. Issues not addressed. Adopted. Adopted. Accepted in relevant part in Finding of Fact 7. Accepted in relevant part in Finding of Fact 42. 55-56. Issues not addressed. 57. Adopted. 58-59. Issues not addressed. Accepted in relevant part in Conclusion of Law 3. Accepted in relevant part in Finding of Fact 26. 62-64. Accepted in relevant part in Finding of Fact 25. Accepted in relevant part in Findings of Fact 27 and 30. Subordinate to Findings of Fact 27 and 30. 67. Accepted in relevant part in Finding of Fact 22. 68-69. Accepted in relevant part in Finding of Fact 21. 70. Accepted in relevant part in Finding of Fact 26. 71. Accepted in relevant part in Finding of Fact 26 and in 72. Conclusion of Law 3. Accepted in relevant part in Findings of Fact 26 and 73. 38. Accepted in relevant part in Findings of Fact 25, 27 and 30. 74-75. Not legible. 76. Subordinate to Finding of Fact 25. 77-80. Subordinate to Finding of Fact 27. 81. Subordinate to Finding of Fact 25. 82-83. Subordinate to Finding of Fact 27. 84-95. Issues not addressed. Wellington 1-2. Adopted in Findings of Fact 4 and 44. Adopted in Finding of Fact 45. Adopted in Finding of Fact 44. Subordinate to Findings of Fact 4 and 44. Adopted in Finding of Fact 44. Adopted in Finding of Fact 45. 8-10. Subordinate to Finding of Fact 45. 11-12. Adopted in Finding of Fact 45. 13-19. Subordinate to Findings of Fact 4 and 44. 20. Adopted in Findings of Fact 4 and 46. 21-22. Adopted in Findings of Fact 4 and 44. Adopted in Finding of Fact 45. Subordinate to Findings of Fact 44 and 46. Subordinate to Findings of Fact 4 and 44. Subordinate to Finding of Fact 46. 27-28. Adopted in Finding of Fact 46. Adopted in Finding of Fact 30. Adopted in Finding of Fact 46. 31-32. Issues not addressed. Subordinate to Finding of Fact 25. Adopted. Issue not addressed. 36-37. Adopted in Finding of Fact 45. 38-42. Issues not addressed. 43. Adopted in Findings of Fact 34, 42 and 47. 44-63. Issues not addressed. 64-65. Subordinate to Finding of Fact 46. 66-67. Issues not addressed. 68. Adopted in Finding of Fact 10. 69-91. Issues not addressed. Accepted in relevant part in Finding of Fact 47. Accepted in relevant part in Finding of Fact 12. 94-103. Issues not addressed. Accepted in relevant part in Findings of Fact 1 and 44. Accepted in relevant part in Finding of Fact 45. 106-111. Issues not addressed 112. Rejected in Findings of Fact 25, 27 and 30. 113-115. Accepted in relevant part in Finding of Fact 45. Savannas Adopted in Finding of Fact 1. Adopted in Findings of Fact 2 and 7. Adopted in Finding of Fact 3. Adopted in Finding of Fact 4. Adopted in Finding of Fact 5. Adopted in Finding of Fact 6. Adopted in Finding of Fact 7. Adopted in Finding of Fact 8. Adopted in Finding of Fact 9. Adopted in Findings of Fact 5 and 50. Subordinate to Finding of Fact 5. Adopted in Finding of Fact 53. Subordinate to Finding of Fact 53. Subordinate to Finding of Fact 56. Subordinate to Findings of Fact 5 and 50. Adopted. Issue not addressed. Adopted in Finding of Fact 56. Issue not addressed. Adopted in Finding of Fact 53. Rejected in Finding of Fact 56. Issue not addressed. Adopted in Finding of Fact 51. Adopted in Finding of Fact 50. Issue not addressed. Adopted in Findings of Fact 5 and 51. Subordinate to Finding of Fact 51. Adopted in Finding of Fact 53. Subordinate to Finding of Fact 1. 30-33. Subordinate to Finding of Fact 12. 34. Adopted in Finding of Fact 12. 35-37. Issues not addressed. Adopted in Finding of Fact 53. Issue not addressed. 40-42. Rejected in Finding of Fact 54. 43. Adopted in Finding of Fact 50. 44-48. Subordinate to Finding of Fact 50. 49-51. Rejected in Findings of Fact 53 and 57. Adopted in Finding of Fact 53. Rejected in Findings of Fact 53 and 57. Adopted. Adopted. 56-57. Subordinate to Finding of Fact 50 Rejected in Findings of Fact 53 and 57. Issue not addressed. 60-61. Rejected in Findings of Fact 53 and 57. 62-63. Issues not addressed. 64. Adopted in Finding of Fact 56. 65-66. Issues not addressed. 67. Rejected in Findings of Fact 53 and 57. 68-70. Issues not addressed. 71. Adopted in Finding of Fact 52. 72-77. Issues not addressed 78. Adopted in Finding of Fact 1. 79-100. Issues not addressed. HRS Adopted in Finding of Fact 1. Adopted in Finding of Fact 11. Adopted in Finding of Fact 13. Adopted in Finding of Fact 12. Accepted in relevant part in Finding of Fact 16 and rejected in part in Finding of Fact 17. Adopted in Finding of Fact 16. Subordinate to Finding of Fact 16. Adopted in Finding of Fact 8. Adopted in Finding of Fact 9. 10-11. Subordinate to Finding of Fact 12. Accepted in relevant part in Finding of Fact 12. Issue not addressed. Accepted in relevant part in Finding of Fact 12. Subordinate to Finding of Fact 12. 16-17. Issues not addressed. Adopted in Finding of Fact 1. Subordinate to Findings of Fact 32, 46 and 52. Adopted in Finding of Fact 20. 21. Subordinate to Finding of Fact 1. 22. Subordinate to Finding of Fact 2. 23-33. Issues not addressed. 34. Adopted in Finding of Fact 3. 35-36. Subordinate to Finding of Fact 3. 37. Accepted in relevant part in Finding of Fact 32. 38. Subordinate to Finding of Fact 32. 39. Rejected in Findings of Fact 40, 41 and 42. 40. Adopted in Finding of Fact 32. 41. Issue not addressed. 42. Adopted in Finding of Fact 42. 43. Adopted in Finding of Fact 32. 44. Issue not addressed. 45-46. Adopted in Finding of Fact 32. 47. Adopted in Finding of Fact 47. 48. Accepted in relevant part in Finding of Fact 44. 49. Issue not addressed. 50. Accepted in relevant part in Finding of Fact 46. 51. Subordinate to Finding of Fact 47. 52. Accepted in relevant part in Finding of Fact 46. 53-54. Accepted in relevant part in Finding of Fact 45. 55. Issue not addressed. 56-57. Subordinate to Finding of Fact 46. 58. Subordinate to Finding of Fact 47. 59-61. Issues not addressed. 62-64. Adopted in Findings of Fact 50 and 51. 65. Subordinate to Finding of Fact 65. 66-68. Issues not addressed. 69. Accepted in relevant part in Finding of Fact 52. 70-71. Issues not addressed. 72. Accepted in relevant part in Finding of Fact 53. 73. Accepted in relevant part in Finding of Fact 53. 74. Adopted in Finding of Fact 56. 75-77. Subordinate to Finding of Fact 56. 78-80. Issues not addressed. 81-82. Subordinate to Finding of Fact 56. 83-89. Issues not addressed. COPIES FURNISHED: Thomas Cooper, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 2727 Mahan Drive Fort Knox Executive Center Tallahassee, Florida 32308 William B. Wiley, Esquire McFARLAIN, STERNSTEIN, WILEY & CASSEDY, P.A. Post Office Box 2174 Tallahassee, Florida 32316-2174 James C. Hauser, Esquire Foley & Lardner Post Office Box 508 Tallahassee, Florida 32302 Michael J. Cherniga, Esquire David C. Ashburn, Esquire Roberts, Baggett, LaFace & Richard Post Office Drawer 1838 Tallahassee, Florida 32301 Robert D. Newell, Jr., Esquire Newell & Stahl, P.A. 817 North Gadsden Street Tallahassee, Florida 32303-6313 Michael J. Glazer, Esquire C. Gary Williams, Esquire Ausley, McMullen, McGehee, Carothers & Proctor Post Office Box 391 Tallahassee, Florida 32302 Robert S. Cohen, Esquire John F. Gilroy, III, Esquire Haben, Culpepper, Dunbar & French, P.A. Post Office Box 10095 Tallahassee, Florida 32302 Charles H. Hood, Jr., Esquire MONACO, SMITH, HOOD, PERKINS, ORFINGER & STOUT 444 Seabreeze Boulevard, #900 Post Office Box 15200 Daytona Beach, Florida 32115 R. S. Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, General Counsel Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
The Issue Whether the certificate of need (CON) applications filed by New Port Richey Hospital, Inc., d/b/a Community Hospital of New Port Richey (Community Hospital) (CON No. 9539), and Morton Plant Hospital Association, Inc., d/b/a North Bay Hospital (North Bay) (CON No. 9538), each seeking to replace and relocate their respective general acute care hospital, satisfy, on balance, the applicable statutory and rule criteria.
Findings Of Fact The Parties AHCA AHCA is the single state agency responsible for the administration of the CON program in Florida pursuant to Chapter 408, Florida Statutes (2000). The agency separately reviewed and preliminarily approved both applications. Community Hospital Community Hospital is a 300,000 square feet, accredited hospital with 345 licensed acute care beds and 56 licensed adult psychiatric beds, located in southern New Port Richey, Florida, within Sub-District 5-1. Community Hospital is seeking to construct a replacement facility approximately five miles to the southeast within a rapidly developing suburb known as "Trinity." Community Hospital currently provides a wide array of comprehensive inpatient and outpatient services and is the only provider of obstetrical and adult psychiatric services in Sub-District 5-1. It is the largest provider of emergency services in Pasco County with approximately 35,000 visits annually. It is also the largest provider of Medicaid and indigent patient days in Sub-District 5-1. Community Hospital was originally built in 1969 and is an aging facility. Although it has been renovated over time, the hospital is in poor condition. Community Hospital's average daily census is below 50 percent. North Bay North Bay is a 122-bed facility containing 102 licensed acute care beds and 20 licensed comprehensive medical rehabilitation beds, located approximately one mile north of Community Hospital in Sub-District 5-1. It serves a large elderly population and does not provide pediatric or obstetrical care. North Bay is also an aging facility and proposes to construct a replacement facility in the Trinity area. Notably, however, North Bay has spent approximately 12 million dollars over the past three years for physical improvements and is in reasonable physical condition. Helen Ellis Helen Ellis is an accredited hospital with 150 licensed acute care beds and 18 licensed skilled nursing unit beds. It is located in northern Pinellas County, approximately eight miles south of Community Hospital and nine miles south of North Bay. Helen Ellis provides a full array of acute care services including obstetrics and cardiac catheterization. Its daily census average has fluctuated over the years but is approximately 45 percent. Mease Mease operates two acute care hospitals in Pinellas County including Mease Dunedin Hospital, located approximately 18 to 20 miles south of the applicants and Mease Countryside Hospital, located approximately 16 to 18 miles south of Community and North Bay. Each hospital operates 189 licensed beds. The Mease hospitals are located in the adjacent acute care sub-district but compete with the applicants. The Health Planning District AHCA's Health Planning District 5 consists of Pinellas and Pasco Counties. U.S. Highway 41 runs north and south through the District and splits Pasco County into Sub- District 5-1 and Sub-District 5-2. Sub-District 5-1, where Community Hospital and North Bay are located, extends from U.S. 41 west to the Gulf Coast. Sub-District 5-2 extends from U.S. 41 to the eastern edge of Pasco County. Pinellas County is the most densely populated county in Florida and steadily grows at 5.52 percent per year. On the other hand, its neighbor to the north, Pasco County, has been experiencing over 15 percent annual growth in population. The evidence demonstrates that the area known as Trinity, located four to five miles southeast of New Port Richey, is largely responsible for the growth. With its large, single- owner land tracts, Trinity has become the area's fuel for growth, while New Port Richey, the older coastal anchor which houses the applicants' facilities, remains static. In addition to the available land in Trinity, roadway development in the southwest section of Pasco County is further fueling growth. For example, the Suncoast Highway, a major highway, was recently extended north from Hillsborough County through Sub-District 5-1, west of U.S. 41. It intersects with several large east-west thoroughfares including State Road 54, providing easy highway access to the Tampa area. The General Proposals Community Hospital's Proposal Community Hospital's CON application proposes to replace its existing, 401-bed hospital with a 376-bed state- of-the-art facility and relocate it approximately five miles to the southeast in the Trinity area. Community Hospital intends to construct a large medical office adjacent to its new facility and provide all of its current services including obstetrical care. It does not intend to change its primary service area. North Bay's Proposal North Bay's CON application proposes to replace its existing hospital with a 122-bed state-of-the-art facility and also plans to relocate it approximately eight miles to the southeast in the Trinity area of southwestern Pasco County. North Bay intends to provide the same array of services it currently offers its patients and will not provide pediatric and obstetrical care in the proposed facility. The proposed relocation site is adjacent to the Trinity Outpatient Center which is owned by North Bay's parent company, Morton Plant. The Outpatient Center offers a full range of diagnostic imaging services including nuclear medicine, cardiac nuclear stress testing, bone density scanning, CAT scanning, mammography, ultrasound, as well as many others. It also offers general and specialty ambulatory surgical services including urology; ear, nose and throat; ophthalmology; gastroenterology; endoscopy; and pain management. Approximately 14 physician offices are currently located at the Trinity Outpatient Center. The Condition of Community Hospital Facility Community Hospital's core facilities were constructed between 1969 and 1971. Additions to the hospital were made in 1973, 1975, 1976, 1977, 1979, 1981, 1992, and 1999. With an area of approximately 294,000 square feet and 401 licensed beds, or 733 square feet per bed, Community Hospital's gross area-to-bed ratio is approximately half of current hospital planning standards of 1,600 square feet per bed. With the exception of the "E" wing which was completed in 1999, all of the clinical and support departments are undersized. Medical-Surgical Beds And Intensive Care Units Community Hospital's "D" wing, constructed in 1975, is made up of two general medical-surgical unit floors which are grossly undersized. Each floor operates 47 general medical-surgical beds, 24 of which are in three-bed wards and 23 in semi-private rooms. None of the patient rooms in the "D" wing have showers or tubs so the patients bathe in a single facility located at the center of the wing on each floor. Community Hospital's "A" wing, added in 1973, is situated at the west end of the second floor and is also undersized. It too has a combination of semi-private rooms and three-bed wards without showers or tubs. Community Hospital's "F" wing, added in 1979, includes a medical-surgical unit on the second and third floor, each with semi-private and private rooms. The second floor unit is centrally located between a 56-bed adult psychiatric unit and the Surgical Intensive Care Unit (SICU) which creates security and privacy issues. The third floor unit is adjacent to the Medical Intensive Care Unit (MICU) which must be accessed through the medical-surgical unit. Neither intensive care unit (ICU) possesses an isolation area. Although the three-bed wards are generally restricted to in-season use, and not always full, they pose significant privacy, security, safety, and health concerns. They fail to meet minimum space requirements and are a serious health risk. The evidence demonstrates that reconfiguring the wards would be extremely costly and impractical due to code compliance issues. The wards hinder the hospital's acute care utilization, and impair its ability to effectively compete with other hospitals. Surgical Department and Recovery Community Hospital's surgical department is separated into two locations including the main surgical suite on the second floor and the Endoscopy/Pain Management unit located on the first floor of "C" wing. Consequently, the department cannot share support staff and space such as preparation and recovery. The main surgical suite, adjacent recovery room, and central sterile processing are 25 years old. This unit's operating rooms, cystoscopy rooms, storage areas, work- stations, central sterile, and recovery rooms are undersized and antiquated. The 12-bay Recovery Room has no patient toilet and is lacking storage. The soiled utility room is deficient. In addition, the patient bays are extremely narrow and separated by curtains. There is no direct connection to the sterile corridor, and staff must break the sterile field to transport patients from surgery to recovery. Moreover, surgery outpatients must pass through a major public lobby going to and returning from surgery. The Emergency Department Community Hospital's existing emergency department was constructed in 1992 and is the largest provider of hospital emergency services in Pasco County, handling approximately 35,000 visits per year. The hospital is also designated a "Baker Act" receiving facility under Chapter 394, Florida Statutes, and utilizes two secure examination rooms for emergent psychiatric patients. At less than 8,000 total square feet, the emergency department is severely undersized to meet the needs of its patients. The emergency department is currently undergoing renovation which will connect the triage area to the main emergency department. The renovation will not enlarge the entrance, waiting area, storage, nursing station, nor add privacy to the patient care areas in the emergency department. The renovation will not increase the total size of the emergency department, but in fact, the department's total bed availability will decrease by five beds. Similar to other departments, a more meaningful renovation cannot occur within the emergency department without triggering costly building code compliance measures. In addition to its space limitations, the emergency department is awkwardly located. In 1992, the emergency department was relocated to the front of the hospital and is completely separated from the diagnostic imaging department which remained in the original 1971 building. Consequently, emergency patients are routinely transported across the hospital for imaging and CT scans. Issues Relating to Replacement of Community Hospital Although physically possible, renovating and expanding Community Hospital's existing facility is unreasonable. First, it is cost prohibitive. Any significant renovation to the 1971, 1975, 1977, and 1979 structures would require asbestos abatement prior to construction, at an estimated cost of $1,000,000. In addition, as previously noted, the hospital will be saddled with the major expense of complying with all current building code requirements in the 40-year-old facility. Merely installing showers in patient rooms would immediately trigger a host of expensive, albeit necessary, code requirements involving access, wiring, square footage, fireproofing columns and beams, as well as floor/ceiling and roof/ceiling assemblies. Concurrent with the significant demolition and construction costs, the hospital will experience the incalculable expense and loss of revenue related to closing major portions, if not all, of the hospital. Second, renovation and expansion to the existing facility is an unreasonable option due to its physical restrictions. The 12'4" height of the hospital's first floor limits its ability to accommodate HVAC ductwork large enough to meet current ventilation requirements. In addition, there is inadequate space to expand any department within the confines of the existing hospital without cannibalizing adjacent areas, and vertical expansion is not an option. Community Hospital's application includes a lengthy Facility Condition Assessment which factually details the architectural, mechanical, and electrical deficiencies of the hospital's existing physical plant. The assessment is accurate and reasonable. Community Hospital's Proposed Replacement Community Hospital proposes to construct a six- story, 320 licensed beds, acute care replacement facility. The hospital will consist of 548,995 gross square feet and include a 56-bed adult psychiatric unit connected by a hallway to the first floor of the main hospital building. The proposal also includes the construction of an adjacent medical office building to centralize the outpatient offices and staff physicians. The evidence establishes that the deficiencies inherent in Community Hospital's existing hospital will be cured by its replacement hospital. All patients will be provided large private rooms. The emergency department will double in size, and contain private examination rooms. All building code requirements will be met or exceeded. Patients and staff will have separate elevators from the public. In addition, the surgical department will have large operating rooms, and adequate storage. The MICU and SICU will be adjacent to each other on the second floor to avoid unnecessary traffic within the hospital. Surgical patients will be transported to the ICU via a private elevator dedicated to that purpose. Medical-surgical patient rooms will be efficiently located on the third through sixth floors, in "double-T" configuration. Community Hospital's Existing and Proposed Sites Community Hospital is currently located on a 23-acre site inside the southern boundary of New Port Richey. Single- family homes and offices occupy the two-lane residential streets that surround the site on all sides. The hospital buildings are situated on the northern half of the site, with the main parking lot located to the south, in front of the main entrance to the hospital. Marine Parkway cuts through the southern half of the site from the west, and enters the main parking lot. A private medical mall sits immediately to the west of the main parking lot and a one-acre storm-water retention pond sits to the west of the mall. A private medical office building occupies the south end of the main parking lot and a four-acre drainage easement is located in the southwest corner of the site. Community Hospital's administration has actively analyzed its existing site, aging facility, and adjacent areas. It has commissioned studies by civil engineers, health care consultants, and architects. The collective evidence demonstrates that, although on-site relocation is potentially an option, on balance, it is not a reasonable option. Replacing Community Hospital on its existing site is not practical for several reasons. First, the hospital will experience significant disruption and may be required to completely close down for a period of time. Second, the site's southwestern large four-acre parcel is necessary for storm-water retention and is unavailable for expansion. Third, a reliable cost differential is unknown given Community Hospital's inability to successfully negotiate with the city and owners of the adjacent medical office complexes to acquire additional parcels. Fourth, acquiring other adjacent properties is not a viable option since they consist of individually owned residential lots. In addition to the site's physical restrictions, the site is hindered by its location. The hospital is situated in a neighborhood between small streets and a local school. From the north and south, motorists utilize either U.S. 19, a congested corridor that accommodates approximately 50,000 vehicles per day, or Grand and Madison Streets, two-lane streets within a school zone. From the east and west, motorists utilize similar two-lane neighborhood streets including Marine Parkway, which often floods in heavy rains. Community Hospital's proposed site, on the other hand, is a 53-acre tract positioned five miles from its current facility, at the intersection of two major thoroughfares in southwestern Pasco County. The proposed site offers ample space for all facilities, parking, outpatient care, and future expansion. In addition, Community Hospital's proposed site provides reasonable access to all patients within its existing primary service area made up of zip codes 34652, 34653, 34668, 34655, 34690, and 34691. For example, the average drive times from the population centers of each zip code to the existing site of the hospital and the proposed site are as follows: Zip code Difference Existing site Proposed site 34652 3 minutes 14 minutes 11 minutes 34653 8 minutes 11 minutes 3 minutes 34668 15 minutes 21 minutes 6 minutes 34655 11 minutes 4 minutes -7 minutes 34690 11 minutes 13 minutes 2 minutes 34691 11 minutes 17 minutes 6 minutes While the average drive time from the population centroids of zip codes 34653, 34668, 34690, and 34691 to the proposed site slightly increases, it decreases from the Trinity area, where population growth has been most significant in southwestern Pasco County. In addition, a motorist's average drive time from Community Hospital's existing location to its proposed site is only 10 to 11 minutes, and patients utilizing public transportation will be able to access the new hospital via a bus stop located adjacent to the proposed site. The Condition of North Bay Facility North Bay Hospital is also an aging facility. Its original structure and portions of its physical plant are approximately 30 years old. Portions of its major mechanical systems will soon require replacement including its boilers, air handlers, and chillers. In addition, the hospital is undersized and awkwardly configured. Despite its shortcomings, however, North Bay is generally in good condition. The hospital has been consistently renovated and updated over time and is aesthetically pleasing. Moreover, its second and third floors were added in 1986, are in good shape, and structurally capable of vertical expansion. Medical Surgical Beds and ICU Units By-in-large, North Bay is comprised of undersized, semi-private rooms containing toilet and shower facilities. The hospital does not have any three-bed wards. North Bay's first floor houses all ancillary and support services including lab, radiology, pharmacy, surgery, pre-op, post-anesthesia recovery, central sterile processing and supply, kitchen and cafeteria, housekeeping and administration, as well as the mechanical, electrical, and facilities maintenance and engineering. The first floor also contains a 20-bed CMR unit and a 15-bed acute care unit. North Bay's second and third floors are mostly comprised of semi-private rooms and supporting nursing stations. Although the rooms and stations are not ideally sized, they are in relatively good shape. North Bay utilizes a single ICU with ten critical care beds. The ICU rooms and nursing stations are also undersized. A four-bed ICU ward and former nursery are routinely used to serve overflow patients. Surgery Department and Recovery North Bay utilizes a single pre-operative surgical room for all of its surgery patients. The room accommodates up to five patient beds, but has limited space for storage and pre-operative procedures. Its operating rooms are sufficiently sized. While carts and large equipment are routinely stored in hallways throughout the surgical suite, North Bay has converted the former obstetrics recovery room to surgical storage and has made efficient use of other available space. North Bay operates a small six-bed Post Anesthesia Care Unit. Nurses routinely prepare patient medications in the unit which is often crowded with staff and patients. The Emergency Department North Bay has recently expanded its emergency department. The evidence demonstrates that this department is sufficient and meets current and future expected patient volumes. Replacement Issues Relating to North Bay While it is clear that areas of North Bay's physical plant are aging, the facility is in relatively good condition. It is apparent that North Bay must soon replace significant equipment, including cast-iron sewer pipes, plumbing, boilers, and chillers which will cause some interruption to hospital operations. However, North Bay's four-page written assessment of the facility and its argument citing the need for total replacement is, on balance, not persuasive. North Bay's Proposed Replacement North Bay proposes to construct a new, state-of-the- art, hospital approximately eight miles southeast of its existing facility and intends to offer the identical array of services the hospital currently provides. North Bay's Existing and Proposed Sites North Bay's existing hospital is located on an eight-acre site with limited storm-water drainage capacity. Consequently, much of its parking area is covered by deep, porous, gravel instead of asphalt. North Bay's existing site is generally surrounded by residential properties. While the city has committed, in writing, it willingness to assist both applicants with on-site expansion, it is unknown whether North Bay can acquire additional adjacent property. North Bay's proposed site is located at the intersection of Trinity Oaks Boulevard and Mitchell Boulevard, south of Community Hospital's proposed site, and is quite spacious. It contains sufficient land for the facilities, parking, and future growth, and has all necessary infrastructure in place, including utility systems, storm- water structures, and roadways. Currently however, there is no public transportation service available to North Bay's proposed site. Projected Utilization by Applicants The evidence presented at hearing indicates that, statewide, replacement hospitals often increase a provider's acute care bed utilization. For example, Bartow Memorial Hospital, Heart of Florida Regional Medical Center, Lake City Medical Center, Florida Hospital Heartland Medical Center, South Lake Hospital, and Florida Hospital-Fish Memorial each experienced significant increases in utilization following the opening of their new hospital. The applicants in this case each project an increase in utilization following the construction of their new facility. Specifically, Community Hospital's application projects 82,685 total hospital patient days (64,427 acute care patient days) in year one (2006) of the operation of its proposed replacement facility, and 86,201 total hospital patient days (67,648 acute care patient days) in year two (2007). Using projected 2006 and 2007 population estimates, applying 2002 acute care hospital use rates which are below 50 percent, and keeping Community Hospital's acute care market share constant at its 2002 level, it is reasonably estimated that Community Hospital's existing hospital will experience 52,623 acute care patient days in 2006, and 53,451 acute care patient days in 2007. Consequently, Community Hospital's proposed facility must attain 11,804 additional acute care patient days in 2006, and 14,197 more acute care patient days in 2007, in order to achieve its projected acute care utilization. Although Community Hospital lost eight percent of the acute care market in its service area between 1995 and 2002, two-thirds of that loss was due to residents of Sub- District 5-1 acquiring services in another area. While Community Hospital experienced 78,444 acute care patient days in 1995, it projects only 64,427 acute care patient days in year one. Given the new facility and population factors, it is reasonable that the hospital will recapture half of its lost acute care market share and achieve its projections. With respect to its psychiatric unit, Community Hospital projects 16,615 adult psychiatric inpatient days in year one (2006) and 17,069 adult inpatient days in year two (2007) of the proposed replacement hospital. The evidence indicates that these projections are reasonable. Similarly, North Bay's acute care utilization rate has been consistently below 50 percent. Since 1999, the hospital has experienced declining utilization. In its application, North Bay states that it achieved total actual acute care patient days of 21,925 in 2000 and 19,824 in 2001 and the evidence at hearing indicates that North Bay experienced 17,693 total acute care patient days in 2002. North Bay projects 25,909 acute care patient days in the first year of operation of its proposed replacement hospital, and 27,334 acute care patient days in the second year of operation. Despite each applicant's current facility utilization rate, Community Hospital must increase its current acute care patient days by 20 percent to reach its projected utilization, and North Bay must increase its patient days by at least 50 percent. Given the population trends, service mix and existing competition, the evidence demonstrates that it is not possible for both applicants to simultaneously achieve their projections. In fact, it is strongly noted that the applicants' own projections are predicated upon only one applicant being approved and cannot be supported with the approval of two facilities. Local Health Plan Preferences In its local health plan for District 5, the Suncoast Health Council, Inc., adopted acute care preferences in October, 2000. The replacement of an existing hospital is not specifically addressed by any of the preferences. However, certain acute care preferences and specialty care preferences are applicable. The first applicable preference provides that preference "shall be given to an applicant who proposes to locate a new facility in an area that will improve access for Medicaid and indigent patients." It is clear that the majority of Medicaid and indigent patients live closer to the existing hospitals. However, Community Hospital proposes to move 5.5 miles from its current location, whereas North Bay proposes to move eight miles from its current location. While the short distances alone are less than significant, North Bay's proposed location is further removed from New Port Richey, is not located on a major highway or bus-route, and would therefore be less accessible to the medically indigent residents. Community Hospital's proposed site will be accessible using public transportation. Furthermore, Community Hospital has consistently provided excellent service to the medically indigent and its proposal would better serve that population. In 2000, Community Hospital provided 7.4 percent of its total patient days to Medicaid patients and 0.8 percent of its total patient days to charity patients. Community Hospital provided the highest percentage and greatest number of Medicaid patient days in Sub-District 5-1. By comparison, North Bay provided 5.8 percent of its total patient days to Medicaid patients and 0.9 percent of its total patient days to charity patients. In 2002, North Bay's Medicaid patients days declined to 3.56 percent. Finally, given the closeness and available bed space of the existing providers and the increasing population in the Trinity area, access will be improved by Community Hospital's relocation. The second local health plan preference provides that "[i]n cases where an applicant is a corporation with previously awarded certificates of need, preference shall be given to those which follow through in a timely manner to construct and operate the additional facilities or beds and do not use them for later negotiations with other organizations seeking to enter or expand the number of beds they own or control." Both applicants meet this preference. The third local health plan preference recognizes "Certificate of Need applications that provide AHCA with documentation that they provide, or propose to provide, the largest percentage of Medicaid and charity care patient days in relation to other hospitals in the sub-district." Community Hospital provides the largest percentage of Medicaid and charity care patient days in relation to other hospitals in Sub-District 5-1, and therefore meets this preference. The fourth local health plan preference applies to "Certificate of Need applications that demonstrate intent to serve HIV/AIDS infected persons." Both applicants accept and treat HIV/AIDS infected persons, and would continue to do so in their proposed replacement hospitals. The fifth local health plan preference recognizes "Certificate of Need applications that commit to provide a full array of acute care services including medical-surgical, intensive care, pediatric, and obstetrical services within the sub-district for which they are applying." Community Hospital qualifies since it will continue to provide its current services, including obstetrical care and psychiatric care, in its proposed replacement hospital. North Bay discontinued its pediatric and obstetrical programs in 2001, does not intend to provide them in its proposed replacement hospital, and will not provide psychiatric care. Agency Rule Preferences Florida Administrative Code Rule 59C-1.038(6) provides an applicable preference to a facility proposing "new acute care services and capital expenditures" that has "a documented history of providing services to medically indigent patients or a commitment to do so." As the largest Medicaid provider in Sub-District 5-1, Community Hospital meets this preference better than does North Bay. North Bay's history demonstrates a declining rate of service to the medically indigent. Statutory Review Criteria Section 408.035(1), Florida Statutes: The need for the health care facilities and health services being proposed in relation to the applicable district health plan District 5 includes Pasco and Pinellas County. Pasco County is rapidly developing, whereas Pinellas County is the most densely populated county in Florida. Given the population trends, service mix, and utilization rates of the existing providers, on balance, there is a need for a replacement hospital in the Trinity area. Section 408.035(2), Florida Statutes: The availability, quality of care, accessibility, and extent of utilization of existing health care facilities and health services in the service district of the applicant Community Hospital and North Bay are both located in Sub-District 5-1. Each proposes to relocate to an area of southwestern Pasco County which is experiencing explosive population growth. The other general acute care hospital located in Sub-District 5-1 is Regional Medical Center Bayonet Point, which is located further north, in the Hudson area of western Pasco County. The only other acute care hospitals in Pasco County are East Pasco Medical Center, in Zephyrhills, and Pasco Community Hospital, in Dade City. Those hospitals are located in Sub-District 5-2, east Pasco County, far from the area proposed to be served by either Community Hospital or North Bay. District 5 includes Pinellas County as well as Pasco County. Helen Ellis and Mease are existing hospital providers located in Pinellas County. Helen Ellis has 168 licensed beds, consisting of 150 acute care beds and an 18-bed skilled nursing unit, and is located 7.9 miles from Community Hospital's existing location and 10.8 miles from Community Hospital's proposed location. Access to Helen Ellis for patients originating from southwestern Pasco County requires those patients to travel congested U.S. 19 south to Tarpon Springs. As a result, the average drive time from Community Hospital's existing and proposed site to Helen Ellis is approximately 22 minutes. Helen Ellis is not a reasonable alternative to Community Hospital's proposal. The applicants' proposals are specifically designed for the current and future health care needs of southwestern Pasco County. Given its financial history, it is unknown whether Helen Ellis will be financially capable of providing the necessary care to the residents of southwestern Pasco. Mease Countryside Hospital has 189 licensed acute care beds. It is located 16.0 miles from Community Hospital's existing location and 13.8 miles from Community Hospital's proposed location. The average drive time to Mease Countryside is 32 minutes from Community Hospital's existing site and 24 minutes from its proposed site. In addition, Mease Countryside Hospital has experienced extremely high utilization over the past several years, in excess of 90 percent for calendar years 2000 and 2001. Utilization at Mease Countryside Hospital has remained over 80 percent despite the addition of 45 acute care beds in April 2002. Given the growth and demand, it is unknown whether Mease can accommodate the residents in southwest Pasco County. Mease Dunedin Hospital has 189 licensed beds, consisting of 149 acute care beds, a 30-bed skilled nursing unit, five Level 2 neonatal intensive care beds, and five Level 3 neonatal intensive care beds. Its former 15-bed adult psychiatric unit has been converted into acute care beds. It is transferring its entire obstetrics program at Mease Dunedin Hospital to Mease Countryside Hospital. Mease Dunedin Hospital is located approximately 18 to 20 miles from the applicants' existing and proposed locations with an average drive time of 35-38 minutes. With their remote location, and the exceedingly high utilization at Mease Countryside Hospital, neither of the two Mease hospitals is a viable alternative to the applicants' proposals. In addition, the construction of a replacement hospital would positively impact economic development and further attract medical professionals to Sub-District 5-1. On balance, given the proximity, utilization, service array, and accessibility of the existing providers, including the applicants, the relocation of Community Hospital will enhance access to health care to the residents. Section 408.035(3), Florida Statutes: The ability of the applicant to provide quality of care and the applicant's record of providing quality of care As stipulated, both applicants provide excellent quality of care. However, Community Hospital's proposal will better enhance its ability to provide quality care. Community is currently undersized, non-compliant with today's standards, and located on a site that does not allow for reasonable expansion. Its emergency department is inadequate for patient volume, and the configuration of the first floor leads to inefficiencies in the diagnosis and treatment of emergency patients. Again, most inpatients are placed in semi-private rooms and three-bed wards, with no showers or tubs, little privacy, and an increased risk of infection. The hospital's waiting areas for families of patients are antiquated and undersized, its nursing stations are small and cramped and the operating rooms and storage facilities are undersized. Community Hospital's deficiencies will be effectively eliminated by its proposed replacement hospital. As a result, patients will experience qualitatively better care by the staff who serve them. Conversely, North Bay is in better physical condition and not in need of replacement. It has more reasonable options to expand or relocate its facility on site. Quality of care at North Bay will not be markedly enhanced by the construction of a new hospital. Sections 408.035(4)and(5), Florida Statutes, have been stipulated as not applicable in this case. Section 408.035(6), Florida Statutes: The availability of resources, including health personnel, management personnel, and funds available for capital and operating expenditures, for project accomplishment and operation The parties stipulated that both Community Hospital and North Bay have available health personnel and management personnel for project accomplishment and operation. In addition, the evidence proves that both applicants have sufficient funds for capital and operating expenditures. Community Hospital proposes to rely on its parent company to finance the project. Keith Giger, Vice-President of Finance for HCA, Inc., Community Hospital's parent organization, provided credible deposition testimony that HCA, Inc., will finance 100 percent of the total project cost by an inter-company loan at eight percent interest. Moreover, it is noted that the amount to be financed is actually $20 million less than the $196,849,328 stated in the CON Application, since Community Hospital previously purchased the proposed site in June 2003 with existing funds and does not need to finance the land acquisition. Community Hospital has sufficient working capital for operating expenditures of the proposed replacement hospital. North Bay, on the other hand, proposes to acquire financing from BayCare Obligated Group which includes Morton Plant Hospital Association, Inc.; Mease; and several other hospital entities. Its proposal, while feasible, is less certain since member hospitals must approve the indebtedness, thereby providing Mease with the ability to derail North Bay's proposed bond financing. Section 408.035(7), Florida Statutes: The extent to which the proposed services will enhance access to health care for residents of the service district The evidence proves that either proposal will enhance geographical access to the growing population in the service district. However, with its provision of obstetrical services, Community Hospital is better suited to address the needs of the younger community. With respect to financial access, both proposed relocation sites are slightly farther away from the higher elderly and indigent population centers. Since the evidence demonstrates that it is unreasonable to relocate both facilities away from the down-town area, Community Hospital's proposal, on balance, provides better access to poor patients. First, public transportation will be available to Community Hospital's site. Second, Community Hospital has an excellent record of providing care to the poor and indigent and has accepted the agency's condition to provide ten percent of its total annual patient days to Medicaid recipients To the contrary, North Bay's site will not be accessible by public transportation. In addition, North Bay has a less impressive record of providing care to the poor and indigent. Although AHCA conditioned North Bay's approval upon it providing 9.7 percent of total annual patient days to Medicaid and charity patients, instead of the 9.7 percent of gross annual revenue proposed in its application, North Bay has consistently provided Medicaid and charity patients less than seven percent of its total annual patient days. Section 408.035(8), Florida Statutes: The immediate and long-term financial feasibility of the proposal Immediate financial feasibility refers to the availability of funds to capitalize and operate the proposal. See Memorial Healthcare Group, Ltd. d/b/a Memorial Hospital Jacksonville vs. AHCA et al., Case No. 02-0447 et seq. Community Hospital has acquired reliable financing for the project and has sufficiently demonstrated that its project is immediately financially feasible. North Bay's short-term financial proposal is less secure. As noted, North Bay intends to acquire financing from BayCare Obligated Group. As a member of the group, Mease, the parent company of two hospitals that oppose North Bay's application, must approve the plan. Long-term financial feasibility is the ability of the project to reach a break-even point within a reasonable period of time and at a reasonable achievable point in the future. Big Bend Hospice, Inc. vs. AHCA and Covenant Hospice, Inc., Case No. 02-0455. Although CON pro forma financial schedules typically show profitability within two to three years of operation, it is not a requirement. In fact, in some circumstances, such as the case of a replacement hospital, it may be unrealistic for the proposal to project profitability before the third or fourth year of operation. In this case, Community Hospital's utilization projections, gross and net revenues, and expense figures are reasonable. The evidence reliably demonstrates that its replacement hospital will be profitable by the fourth year of operation. The hospital's financial projections are further supported by credible evidence, including the fact that the hospital experienced financial improvement in 2002 despite its poor physical condition, declining utilization, and lost market share to providers outside of its district. In addition, the development and population trends in the Trinity area support the need for a replacement hospital in the area. Also, Community Hospital has benefited from increases in its Medicaid per diem and renegotiated managed care contracts. North Bay's long-term financial feasibility of its proposal is less certain. In calendar year 2001, North Bay incurred an operating loss of $306,000. In calendar year 2002, it incurred a loss of $1,160,000. In its CON application, however, North Bay projects operating income of $1,538,827 in 2007, yet omitted the ongoing expenses of interest ($1,600,000) and depreciation ($3,000,000) from its existing facility that North Bay intends to continue operating. Since North Bay's proposal does not project beyond year two, it is less certain whether it is financially feasible in the third or fourth year. In addition to the interest and depreciation issues, North Bay's utilization projections are less reasonable than Community Hospital's proposal. While possible, North Bay will have a difficult task achieving its projected 55 percent increase in acute care patient days in its second year of operation given its declining utilization, loss of obstetric/pediatric services and termination of two exclusive managed care contracts. Section 408.035(9), Florida Statutes: The extent to which the proposal will foster competition that promotes quality and cost-effectiveness Both applicants have substantial unused capacity. However, Community Hospital's existing facility is at a distinct competitive disadvantage in the market place. In fact, from 1994 to 1998, Community Hospital's overall market share in its service area declined from 40.3 percent to 35.3 percent. During that same period, Helen Ellis' overall market share in Community Hospital's service area increased from 7.2 percent to 9.2 percent. From 1995 to the 12-month period ending June 30, 2002, Community Hospital's acute care market share in its service area declined from 34.0 percent to 25.9 percent. During that same period, Helen Ellis' acute care market share in Community Hospital's service area increased from 11.7 percent to 12.0 percent. In addition, acute care average occupancy rates at Mease Dunedin Hospital increased each year from 1999 through 2002. Acute care average occupancy at Mease Countryside Hospital exceeded 90 percent in 2000 and 2001, and was approximately 85 percent for the period ending June 30, 2002. Some of the loss in Community Hospital's market share is due to an out-migration of patients from its service area to hospitals in northern Pinellas and Hillsborough Counties. Market share in Community's service area by out-of- market providers increased from 33 percent in 1995 to 40 percent in 2002. Community Hospital's outdated hospital has hampered its ability to compete for patients in its service area. Mease is increasing its efforts to attract patients and currently completing a $92 million expansion of Mease Countryside Hospital. The project includes the development of 1,134 parking spaces on 30 acres of raw land north of the Mease Countryside Hospital campus and the addition of two floors to the hospital. It also involves the relocation of 51 acute care beds, the obstetrics program and the Neonatal Intensive Care Units from Mease Dunedin Hosptial to Mease Countryside Hospital. Mease is also seeking to more than double the size of the Countryside emergency department to handle its 62,000 emergency visits. With the transfer of licensed beds from Mease Dunedin Hospital to Mease Countryside Hospital, Mease will also convert formerly semi-private patient rooms to private rooms at Mease Dunedin Hospital. The approval of Community Hospital's relocated facility will enable it to better compete with the hospitals in the area and promote quality and cost- effectiveness. North Bay, on the other hand, is not operating at a distinct disadvantage, yet is still experiencing declining utilization. North Bay is the only community-owned, not-for- profit provider in western Pasco County and is a valuable asset to the city. Section 408.035(10), Florida Statutes: The costs and methods of the proposed construction, including the costs and methods or energy provision and the availability of alternative, less costly, or more effective methods of construction The parties stipulated that the project costs in both applications are reasonable to construct the replacement hospitals. Community Hospital's proposed construction cost per square foot is $175, and slightly less than North Bay's $178 proposal. The costs and methods of proposed construction for each proposal is reasonable. Given Community Hospital's severe site and facility problems, the evidence demonstrates that there is no reasonable, less costly, or more effective methods of construction available for its proposed replacement hospital. Additional "band-aide" approaches are not financially reasonable and will not enable Community Hospital to effectively compete. The facility is currently licensed for 401 beds, operates approximately 311 beds and is still undersized. The proposed replacement hospital will meet the standards in Florida Administrative Code Rule 59A-3.081, and will meet current building codes, including the Americans with Disabilities Act and the Guidelines for Design and Construction of Hospitals and Health Care Facilities, developed by the American Institute of Architects. The opponents' argue that Community Hospital will not utilize the 320 acute care beds proposed in its CON application, and therefore, a smaller facility is a less- costly alternative. In addition, Helen Ellis' architectural expert witness provided schematic design alternatives for Community Hospital to be expanded and replaced on-site, without providing a detailed and credible cost accounting of the alternatives. Given the evidence and the law, their arguments are not persuasive. While North Bay's replacement cost figures are reasonable, given the aforementioned reasons, including the fact that the facility is in reasonably good condition and can expand vertically, on balance, it is unreasonable for North Bay to construct a replacement facility in the Trinity area. Section 408.035(11), Florida Statutes: The applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent Community Hospital has consistently provided the most health care services to Medicaid patients and the medically indigent in Sub-District 5-1. Community Hospital agreed to provide at least ten percent of its patient days to Medicaid recipients. Similarly, North Bay agreed to provide 9.7 percent of its total annual patient days to Medicaid and charity patients combined. North Bay, by contrast, provided only 3.56 percent of its total patient days to Medicaid patients in 2002, and would have to significantly reverse a declining trend in its Medicaid provision to comply with the imposed condition. Community Hospital better satisfies the criterion. Section 408.035(12) has been stipulated as not applicable in this case. Adverse Impact on Existing Providers Historical figures demonstrate that hospital market shares are not static, but fluctuate with competition. No hospital is entitled to a specific or historic market share free from competition. While the applicants are located in health planning Sub-District 5-1 and Helen Ellis and the two Mease hospitals are located in health planning Sub-District 5- 2, they compete for business. None of the opponents is a disproportionate share, safety net, Medicaid provider. As a result, AHCA gives less consideration to any potential adverse financial impact upon them resulting from the approval of either application as a low priority. The opponents, however, argue that the approval of either replacement hospital would severely affect each of them. While the precise distance from the existing facilities to the relocation sites is relevant, it is clear that neither applicants' proposed site is unreasonably close to any of the existing providers. In fact, Community Hospital intends to locate its replacement facility three miles farther away from Helen Ellis and 1.5 miles farther away from Mease Dunedin Hospital. While Helen Ellis' primary service area is seemingly fluid, as noted by its chief operating officer's hearing and deposition testimony, and the Mease hospitals are located 15 to 20 miles south, they overlap parts of the applicants' primary service areas. Accordingly, each applicant concedes that the proposed increase in their patient volume would be derived from the growing population as well as existing providers. Although it is clear that the existing providers may be more affected by the approval of Community Hosptial's proposal, the exact degree to which they will be adversely impacted by either applicant is unknown. All parties agree, however, that the existing providers will experience less adverse affects by the approval of only one applicant, as opposed to two. Furthermore, Mease concedes that its hospitals will continue to aggressively compete and will remain profitable. In fact, Mease's adverse impact analysis does not show any credible reduction in loss of acute care admissions at Mease Countryside Hospital or Mease Dunedin Hospital until 2010. Even then, the reliable evidence demonstrates that the impact is negligible. Helen Ellis, on the other hand, will likely experience a greater loss of patient volume. To achieve its utilization projections, Community Hospital will aggressively compete for and increase market share in Pinellas County zip code 34689, which borders Pasco County. While that increase does not facially prove that Helen Ellis will be materially affected by Community Hospital's replacement hospital, Helen Ellis will confront targeted competition. To minimize the potential adverse affect, Helen Ellis will aggressively compete to expand its market share in the Pinellas County zip codes south of 34689, which is experiencing population growth. In addition, Helen Ellis is targeting broader service markets, and has filed an application to establish an open- heart surgery program. While Helen Ellis will experience greater competition and financial loss, there is insufficient evidence to conclude that it will experience material financial adverse impact as a result of Community Hospital's proposed relocation. In fact, Helen Ellis' impact analysis is less than reliable. In its contribution-margin analysis, Helen Ellis utilized its actual hospital financial data as filed with AHCA for the fiscal year October 1, 2001, to September 30, 2002. The analysis included total inpatient and total outpatient service revenues found in the filed financial data, including ambulatory services and ancillary services, yet it did not include the expenses incurred in generating ambulatory or ancillary services revenue. As a result, the overstated net revenue per patient day was applied to its speculative lost number of patient days which resulted in an inflated loss of net patient service revenue. Moreover, the evidence indicates that Helen Ellis' analysis incorrectly included operational revenue and excluded expenses related to its 18-bed skilled nursing unit since neither applicant intends to operate a skilled nursing unit. While including the skilled nursing unit revenues, the analysis failed to include the sub-acute inpatient days that produced those revenues, and thereby over inflated the projected total lost net patient service revenue by over one million dollars.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that: Community Hospital's CON Application No. 9539, to establish a 376-bed replacement hospital in Pasco County, Sub- District 5-1, be granted; and North Bay's CON Application No. 9538, to establish a 122-bed replacement hospital in Pasco County, Sub-District 5- 1, be denied. DONE AND ENTERED this 19th day of March, 2004, in Tallahassee, Leon County, Florida. S WILLIAM R. PFEIFFER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of March, 2004. COPIES FURNISHED: James C. Hauser, Esquire R. Terry Rigsby, Esquire Metz, Hauser & Husband, P.A. 215 South Monroe Street, Suite 505 Post Office Box 10909 Tallahassee, Florida 32302 Stephen A. Ecenia, Esquire R. David Prescott, Esquire Richard M. Ellis, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551 Richard J. Saliba, Esquire Agency for Health Care Administration Fort Knox Building III, Mail Station 3 2727 Mahan Drive Tallahassee, Florida 32308 Robert A. Weiss, Esquire Karen A. Putnal, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 Darrell White, Esquire William B. Wiley, Esquire McFarlain & Cassedy, P.A. 305 South Gadsden Street, Suite 600 Tallahassee, Florida 32301 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Rhonda M. Medows, M.D., Secretary Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308
Findings Of Fact On April 1, 1986, a letter of intent was filed on behalf of Anthony J. Estevez to apply for a CON in the March 16, 1986, batching cycle for a 120-bed long-term psychiatric hospital in Dade County, Florida, HRS Service District XI. A long-term psychiatric hospital is defined in Rule 10-5.011(p), Florida Administrative Code, as a "category of services which provides hospital based inpatient services averaging a length of stay of 90 days." Subsequently, DHRS notified Mr. Estevez that his letter of intent was effective March 17, 1986; the application was to be filed by April 15, 1986; the application was to be completed by June 29, 1986; and the date for final department action was August 28, 1986. On April 15, 1986, Mr. Estevez filed his CON application with DHRS (designated action #4854). Anthony J. Estevez' name appeared along with Health Care Advisors Corporation on the line of the application which requested "legal name of project sponsor." Mr. Francis A. Gomez, Mr. Estevez' authorized representative, had the responsibility for the preparation and submission of the application. Mr. Estevez signed the CON application as the project sponsor. HCAC Psychiatric Hospital of Dade County was meant to be the name of the proposed facility. HCAC is an acronym for Health Care Advisors Corporation, Inc. HCAC was incorporated as of April 14, 1987, but the name had been reserved prior to that time. HCAC was initially intended to be a health care management corporation owned by Mr. Estevez. However, it is now anticipated that Flowers Management Corporation (Flowers) will manage the project under the HCAC corporate umbrella. Mr. Estevez owns 100 percent of the stock of HCAC and is also its sole director and sole shareholder. Mr. Estevez considered HCAC and himself to be one and the same for the purpose of the CON application. HCAC initially proposed to construct in Dade County, Florida, a freestanding 120-bed long-term psychiatric hospital. HCAC proposed to divide those beds into three groups: (1) 75 beds for adults; (2) 30 beds for geriatrics; and (3) 15 beds for adolescents. On May 15, 1986, DHRS requested additional information from HCAC regarding its CON application. On June 19, 1986, and June 23, 1986, HCAC in two separate filings provided DHRS with responses to its request for additional information which DHRS believed was omitted from the original application. The application was deemed complete effective June 29, 1986. On August 20, 1986, Francis Gomez, Paul McCall, a health care consultant employed by HCAC at that time, and HCAC's attorney, met with Islara Soto of DHRS regarding the CON application. At this meeting, HCAC advised DHRS of its intent to orient the facility programmatically to meet the needs of the Hispanic population of Dade and Monroe Counties. By letter dated August 29, 1986, DHRS notified Mr. Francis Gomez of its decision to deny CON application 4584. HCAC requested a formal administrative hearing to contest the denial. At the formal hearing, HCAC indicated a desire to abandon its proposal to provide 15 beds dedicated to serve adolescent patients and sought to introduce evidence relating to a down-sized 105-bed long-term psychiatric hospital serving only adult and geriatric patients. Charter renewed its prehearing motion to exclude any evidence concerning a 105-bed facility. (Approximately three or four weeks prior to the administrative hearing, HCAC had decided to go forward with a proposal for the 105-bed facility.) The undersigned ruled that HCAC would be allowed to present evidence concerning a down-sized 105-bed facility to the extent that such evidence related to a separate and identifiable portion of the original application. HCAC's Proposal The proposed building site for the facility, although not finally selected, is intended to be within the Northwest Dade Center cachement area which is in the northwest corner of Dade County. The ownership of the proposed facility will be by Mr. Estevez and/or his family or wife. The proposed area to be serviced by the facility is Dade and Monroe Counties (HRS Service District XI). HCAC proposes to offer at its facility a psychiatric inpatient unit, patient support services, diagnostic/treatment services, ambulatory care, administrative services, environmental/maintenance, educational and training services, and materials management. The HCAC facility will be managed by Flowers Management Corporation (Flowers), of which Mr. Estevez is a majority shareholder. Flowers was created approximately three and a half years ago for the purpose of providing management in the psychiatric field. Humana Hospital, a hospital chain, has selected Flowers to manage four of its facilities and is also considering Flowers for an additional two facilities. Those facilities are currently providing short-term psychiatric and substance abuse services. Nelson Rodney will be responsible for the design and implementation of the treatment programs in the HCAC facility. Rodney is employed as Regional Vice President of Flowers and is responsible for the management of the Florida hospitals affiliated with Flowers, including a chemical dependency unit at Humana-Biscayne Hospital and a psychiatric unit at Humana West Palm Beach Hospital. The HCAC facility is intended to provide specialty long-term psychiatric services for chronically mentally disturbed individuals requiring a 90-day or greater average length of stay. Many of the patients would be a danger to themselves and others and will require a very restrictive setting -- a locked facility. The programs proposed to be offered involve a range of inpatient diagnostic services, including an intensive diagnostic work-up done prior to admission for all patients. Each patient will have an individualized treatment plan updated every two weeks. The treatment program will include specialized therapy, such as art, music, milieu therapy and special education. There would also be specialized inpatient and outpatient treatment programs for family members and significant others. Discharge planning from the day of admission to assure continuity of care would be another aspect of the program. The proposed HCAC facility would offer a community-like atmosphere. It would provide both open and locked units. Flower's therapeutic model encourages patient participation in daily activities and in the many decisions of what is occurring at the hospital. One component of the project will be an initial screening process by a multi-disciplinary team who will employ a predetermined set of admissions criteria to assist in appropriate levels of care determination. The multi- disciplinary team would consist of a psychiatrist, psychologist, sometimes a neurologist, social worker, a family social assessment person, the patient, and others. The team will attempt to identify and admit only those patients who will have an expected length of stay greater than 90 days. The HCAC facility would provide seminars and workshops to practitioners in the community as well as its own staff. In-service training will also be offered. HCAC proposes to be flexible in the design of its treatment programs and allow new treatments to be utilized. A variety of therapies will be available to provide individualized treatment plans in order to optimize the chance of successful outcome in the patient's treatment. Currently, Flowers affords an in-house program of evaluation. Peer review serves this function in order to assess quality of care rendered to patients in the facility. The HCAC facility proposes to have an Hispanic emphasis. More than 50 percent of the staff will be bilingual. Upper management will consist of individuals who have an acute understanding of Hispanic culture and treatment implications of that culture. The facility will be more flexible in family visitation than is done in many facilities which is an important aspect of the Hispanic culture. The facility as managed by Flowers would have the required "patient's bill of rights" and will also seek JACH accreditation, although these items were not discussed in the application. The HCAC facility would offer each patient an attending psychiatrist who will be part of the multi-disciplinary team that will determine the individualized plan for each patient. Sufficient health manpower including management resources are available to HCAC to operate the project. Additionally, the facility will provide internships, field placements and semester rotations. PROJECT AND CONSTRUCTION COSTS HCAC's CON application, admitted into evidence as Petitioner's Exhibit 4, contains 26 tables concerning various aspects of the 120-bed project as well as Exhibit III.D.1., an operating pro forma. In response to a request for omissions by DHRS, HCAC submitted, among other things, a revised Table 7, revised Table 8, and a revised operating pro forma for the 120-bed project. The items making up HCAC's omission responses were admitted into evidence as Petitioner's Exhibit 5. In conjunction with its desire to complete a 105-bed facility only, HCAC submitted various new tables and a new operating pro forma (forecasted income statement), which were admitted into evidence as Petitioner's Exhibit 6. Table 1 - Source of Funds The estimated total project cost of the 120-bed facility would be $6,469,500. The estimated project cost of the 105-bed facility would be $5,696,940. The financing of the project is contemplated to be done through NCNB bank which has expressed its willingness to finance the project. It is reasonable to assume that HCAC would and could obtain the necessary financing for the proposed facility. Table 2 - Total Debt Table 2 for both the 120-bed project and the 105-bed project shows that 100 percent of the project costs would be financed by debt at an interest rate of 13 percent. The 13 percent interest rate was projected in 1986 and is higher than current rates. It is reasonable to assume that 100 percent of the costs can be financed at 13 percent for either the 120-bed or 105-bed project. Table 3 - New Purchase Equipment HCAC initially projected that $750,000 would be needed to equip the proposed 120-bed facility. The projected expenditure for the 105-bed facility is $500,000. The projected costs of $750,000 and $500,000 for the equipment needed for the 120-bed and 105-bed facility, respectively, are unreasonably low. For example, of the $500,000 projected for equipment costs for the 105-bed project, $80,000 is for mini-vans, $15,000 is for the security system, $40,000 is for a computerized medical records system, and $40,000 for a computerized on-line nurse care program. This would leave $325,000 for all other necessary equipment. Pharmacy, laboratory services and x-ray equipment would be on contract. The remaining $325,000 would be insufficient to equip the kitchen (which would require $80,000), furnish patient rooms (approximately $150,000) and equip the remainder of the 105-bed facility which would reasonably require housekeeping equipment, exam room equipment, chart racks for the nurses station, seclusion room beds, office furniture and equipment, laundry equipment, lockers or shelving, refrigerators, ice makers, day room furniture and lounge furniture. A more reasonable projection for equipment costs would be in the neighborhood of $850,000 to $900,000. Table 7 - Utilization by Class of Pay Tables 7 and 8 of the original application which dealt with utilization by class of pay and effect on patient charges, were revised by HCAC in their responses to DHRS' Omissions Request. Table 7 reflects estimations of the net revenues which HCAC expects to capture from specific payor mixes, namely, contract/indigent, Medicare and insurance/private pay. There is no Medicaid reimbursement available for psychiatric care rendered in a freestanding psychiatric facility. The proposed payor mix for the 120-bed facility is, in patient days, as follows: Year 1 -- Contract/Indigent 8.64 percent (1989) Medicare 26.10 percent Insurance and Private Pay 65.26 percent Year 2 -- Contract/Indigent 8.48 percent (1990) Medicare 26.15 percent Insurance and Private Pay 65.37 percent The proposed payor mix for the 105-bed facility is, in patient days, as follows: Years 1 and 2 - Medicare 3.3 percent Insurance and Private Pay 90.7 percent Indigent 6.0 percent The change in payor mix was not attributed to down-sizing of the facility, but rather was the result of HCAC's additional research and understanding of what the payor mix would most likely be. The change in payor mix does not represent a substantial change to the original application taken as a whole. Francis Gomez, who prepared the Table 7 and was designated as an expert for HCAC in the area of health care facilities management and financial and marketing operations, conceded that HCAC's Table 7 for the 120-bed facility is not reasonable. The Table 7 for the 105-bed facility is also not reasonable. HCAC's contractual allowances are not reasonable. HCAC projects 3.3 percent for Medicare and nothing for HMOs or PPOs. It is unreasonable for HCAC's proposal to make no provision for HMO and PPO type arrangements in view of its projection of 90.7 percent insurance and private pay. Because the proposed patient mix for the 105-bed project is adults and geriatrics, 20 to 25 percent would be a more reasonable Medicare projection. HCAC's projected 90.7 percent insurance and private patient days is unreasonably high in view of the project's intended emphasis of serving the Hispanic population in HRS Service District XI. In 1980, 27.8 percent of the Hispanics in Dade County had incomes less than 150 percent of the poverty level. The 1987 United States Hispanic market study establishes that 20 percent of the Hispanic adults who are heads of households are either retired, students or unemployed. These groups of individuals would not reasonably fit into the insurance and private pay category in most cases. Thus, the 90.7 percent figure for insurance and private pay would have to be reduced significantly. Table 8 - Effects on Patient Charges HCAC's revised Table 8 for the 120-bed facility lists net revenues rather than gross charges for the specific services listed. In year one (1989), the table lists the following projected charges/rates: daily room charge - $214.61; average daily ancillary charge - $25.00; contract/indigent - $125.00; and Medicare - $229.61. In year two (1990), the table lists the following projected charges: daily room charge - $223.19; average daily ancillary charge - $26.00; contract/indigent - $130.00; and Medicare - $238.79. The Table 8 for the 105-bed facility reflects an all-inclusive gross charge of $300 per day in both years (1989 and 1990) for the daily room charge, Medicaid and Medicare. The $300 per day figure would include ancillary charges but not physician fees. The projected patient charges fall within the range of charges currently in effect at psychiatric hospitals in Dade and Monroe Counties and are reasonable for both the 120-bed facility and the 105-bed project. Table 10 - Projected Utilization The financial feasibility of any proposed hospital is largely tied to the ability of the hospital to generate an adequate level of utilization. Absent an adequate level of utilization, a facility will not generate sufficient revenues to meet expenses. Table 10 for both the 120-bed facility and the 105- bed facility sets forth the projected utilization of the proposed facility, by month and year, in patient days, for the first two years of anticipated operation. Table 10 for the 120-bed facility projects the facility will exceed 80 percent occupancy for two of the last three months of the second year and be at 80 percent occupancy at the end of that year. Eighty percent occupancy of 120 beds yields an average daily census of about 96 patients. Table 10 for the 105- bed facility projects that the facility will arrive at 92 percent occupancy at the end of the first year of operation and remain at 95 percent throughout the second year. Ninety-five percent occupancy of the 105-bed facility equals an average daily census of about 99 or 100 patients. The Table 10 "fill-up" rates for both the 120-bed and 105-bed facilities are unreasonable and not practical to be achieved. There is presently an emphasis on providing psychiatric care in less restrictive settings, a trend favoring reduced lengths of stay and a trend in third-party payors to provide reimbursement for a shorter number of days. In addition, nationwide statistics show that only 4 percent of the patients admitted to psychiatric facilities require treatment longer than 90 days. Table 11 - Manpower Requirements For the 120-bed facility, HCAC projected in the Table 11 a staffing ratio of one full-time equivalent (FTE) per occupied bed of 1.625 for the first year of operation and 1.43 for the second year. For the 105-bed facility, HCAC projected in the Table 11 1.91 FTE per occupied bed ratio for the first year and 1.45 for the second year. The actual average of FTEs available for both facilities would be 1.8 to 2.0. The application figures are lower than the actual average because students and other non-paid personnel were not included. Thus, when all programmatic FTEs are included, the number of FTEs per occupied bed is higher than what is listed in the Table 11 for either project. There is a relationship between the number and quality of staff personnel and a facility's ability to provide quality psychiatric care. The industry standard for FTEs is 1.8 to 2.0 FTEs per occupied bed. HCAC's proposed staffing for both the 120-bed and 105-bed projects are reasonable. For both proposed facilities, HCAC projects 110.5 FTEs for the first year with a total annual salary of $1,932,000 which equals an average salary of approximately $17,400 per FTE. HCAC's projected total annual salary expense is unreasonably low. Specifically, the salary for the occupational therapist is too low and the nursing salaries are too low because of shortages. Table 16 - Areas and Square Feet / Table 18 - Space Requirements HCAC proposes a total 59,603 square feet of gross area for the 120-bed facility and a total of 56,050 square feet of gross area for the 105-bed facility. The decrease in size for the 105-bed facility is attributed to a reduction of the ground floor, a reduction of the second floor by removing the adolescent portion and an increase of ancillary services on the second floor for the geriatric population. HCAC projects 168 feet of net living space in the patient's bedroom for both the 120-bed facility and the 105-bed facility. HCAC's proposal of total area and square feet requirements for both the 120-bed and 105-bed facility are reasonable for the delivery of quality psychiatric care within the proposed facilities. There would be adequate land space for parking at HCAC's facility to forego the necessity of constructing a parking garage. Table 19 - Nursing Unit Area Summary HCAC proposes a total of 34,479 square feet of gross area for the nursing unit in the 120-bed facility and the 105-bed facility. The square footage figures under Table 19 for both the 120-bed facility and 105-bed facility are reasonable. Table 25 - Estimated Project Costs Project Advisors Corporation (PAC), of which Mr. Estevez is the Chief Executive Officer, will be responsible for the design and construction of the proposed facility. PAC is a design and construction company which employs a registered architect, several licensed general contractors, an engineer, two graduate architects and a registered graduate architect. The registered architect and basically 90 percent of the staff have previously been involved in the design and construction of health related facilities. HCAC's projected total cost for the 120-bed facility is $6,469,500 and the projected total costs for the 105-bed facility is $5,696,940. HCAC projected construction costs per square foot of $57.55 for the 120-bed facility and $60.00 per square foot for the 105-bed facility. Although the average construction cost of psychiatric facilities today is around $75 to $95 per square foot, HCAC's projected costs are reasonable and reflect reasonable charges given the fact that PAC, the company which would construct the facility, is controlled by Mr. Estevez. The projected costs of land acquisition are also reasonable. HCAC's projected equipment costs are contained in both Table 25 and Table 2. As previously discussed, the projected equipment costs for both projects are unreasonably low. Table 26 - Project Completion Forecast HCAC projects that construction for both the 120-bed facility and 105- bed facility would be completed approximately one year after DHRS' approval of the construction documents. The project completion forecasts for both projects are reasonable. Exhibit III.D.1.- Operating Pro Forma/Forecasted Income Statement Revised Exhibit III.D.1 sets forth the operating pro forma for the first two years of operation of the 120-bed facility (1989 and 1990). HCAC's pro forma for its 120-bed facility is not reasonable. The supplies and other expenses depicted in the pro forma (year one at $55.60 per patient day and year two at $58.10 per patient day) are unreasonably low. A more reasonable estimate would be approximately $100 per patient day. The pro forma for the 120-bed facility does not include any estimate for the Hospital Cost Containment Board (HCCB) tax. Similar facilities in Florida pay an HCCB tax which is composed of one and a half percent of net revenue. Utilizing the more reasonable estimate of $100 per patient day for supplies and other expenses, and including the appropriate HCCB tax, the total supplies and other expenses would increase approximately $1,100,000 and the HCCB tax would be approximately $85,000 in year one. Instead of showing a profit of $395,012, HCAC would potentially lose approximately $785,000 in that year. In year two, the total supplies and other expenses would increase approximately $1,400,000 and the HCCB tax would be approximately $115,000 to $117,000. Thus, in year two, instead of showing a profit of $919,036, HCAC would potentially lose approximately $617, 000. HCAC's "forecasted income statement" for the 105-bed project is also not reasonable. Specifically, the contractual allowances, the allowance for bad debt, and the salaries, wages and fringe benefits are unreasonable. Contractuals include such things as Medicare, Medicaid, HMOs and PPOs, which all generate discounts which are considered contractual allowances. HCAC estimates its bad debt factor at 1.6 percent. A more reasonable projection would be 6 to 8 percent of gross revenue. CONSISTENCY WITH THE DISTRICT XI HEALTH PLAN AND STATE MENTAL HEALTH PLAN The District XI local health council has produced the 1986 District XI Health Plan. The district plan contains the relevant policies, priorities, criteria and standards for evaluation of an application such as HCAC's. HCAC's application is consistent with some of the applicable sections of the District XI Health Plan but inconsistent with the plan taken as a whole. Policy No. 1 of the District XI health plan states that the district should direct its efforts toward a licensed bed capacity of 5.5 non-federal beds per thousand population ratio by 1989. Presently there are 11,294 beds in District XI which represents a number in excess of 5.5 non-federal beds. HCAC's application is inconsistent with this policy. Policy No. 1, Priority No. 1, states that proposals for the construction of new beds in the district should be considered only when the overall average occupancy of licensed beds exceeds 80 percent. Priority No. 1 refers to certain types of beds, specifically, acute care general beds, short- term psychiatric beds and substance abuse beds. HCAC's application is not inconsistent with this priority because long-term psychiatric beds are not mentioned. Policy No. 1, Priority No. 2 favors the encouragement of projects that meet specific district service needs through the conversion of existing beds from currently underutilized services. Because HCAC is not the operator of an existing hospital and it is not possible for HCAC to convert any beds from other services, HCAC's application is inconsistent with Policy No. 1, Priority No. 2. Policy No. 1, Priority No. 3 would only be relevant in the case of an existing hospital but not in the case of a new hospital where no comparative hearing is involved. HCAC's application is not inconsistent with Policy No. 1, Priority No. 3. Policy No. 1, Priority No. 4 allows for priority consideration for the initiation of new services for projects which have had an average occupancy rate of 80 percent for the last two years and which have a documented history of providing services to Medicaid and/or other medically indigent patients. HCAC's application is not entitled to priority consideration under Policy No. 1, Priority No. 4. Policy No. 2 is a broad policy which provides that service alternatives should be available within the district to meet the needs of community residents, while at the same time maintaining an efficient level of utilization. This policy is necessarily tied to the demonstration of overall need for the facility. If HCAC can show need for the proposed facility, its proposal would be consistent with this policy. Policy No. 2, Priority No. 1(f) (Psychiatric Bed Services) provides for priority consideration to be given to specific institutions which have achieved an 80 percent occupancy rate for the preceding year. HCAC's application is not entitled to priority consideration under Policy No. 2, Priority No. 1(f). Policy No. 2, Policy No. 3(f) states that a CON applicant should propose to provide the scope of services consistent with the level of care proposed in the application in accordance with appropriate accrediting agency standards. In the case of psychiatric bed services the appropriate accrediting agency is the Joint Commission for Accreditation of Hospitals (JCAH). Although HCAC neglected to address its ability to comply with JCAH standards in its application, it has established its intent to seek JCAH accreditation. HCAC's proposal is consistent with Policy No. 2, Priority No. 3(f). Policy No. 2, Priority No. 4 gives a preference to those applicants that propose innovative mechanisms such as various complimenting outpatient and inpatient services which are directed toward an ultimate reduction in dependency upon hospital beds. HCAC does not meet this priority because it has not proposed any mechanisms to complement outpatient services with inpatient services directed toward an ultimate reduction in the dependency on hospital beds. Policy No. 2, Priority No. 5 gives a preference to applicants who have based their project on a valid marketing research effort and have placed it in the context of a long-range plan. HCAC does not meet this priority because there was no evidence that the project was based on a valid marketing research plan or placed in the context of a long-range plan. Policy No. 2f Priority No. 6 states that existing facilities as well as applicants for new services should demonstrate a willingness to enter into cooperative planning efforts directed at establishing a system whereby duplication of specialized services is avoided while quality of such services is enhanced. HCAC presented no documentation of transfer agreements with other hospitals and did not substantiate its willingness to enter into cooperative planning efforts with letters of intent, referral agreements or memoranda of understanding. Policy No. 3 provides that services in the community should be made available to all segments of the resident population regardless of the ability to pay. HCAC's proposal is consistent with this policy because a provision for services to indigent patients has been made. Policy No. 3, Priority No. 1 provides that priority should be given to applications proposing services and facilities designed to include Medicaid (Baker Act) patients to the greatest extent possible based on documented history or proposed services. Although Medicaid does not reimburse for freestanding psychiatric services, and Baker Act is only available to short-stay facilities specifically chosen to receive a Baker Act contract, HCAC has not designed its project to include those patients to the greatest extent possible. Thus, HCAC's application is not consistent with Policy No. 3, Priority No. 1. Goal I of the 1986 District XI Goals and Policies for Mental Health and Substance Abuse Services is applicable to HCAC's application. This goal favors mental health services in the least restrictive setting possible. Long- term institutional care may be the least restrictive setting possible in the continuum of mental health care for the treatment of certain more serious types of patients. The concept of "continuum of care" means the full breadth of services available within a community, from least restrictive to most restrictive, from least intensive to most intensive. There must be settings along the full continuum of psychiatric care for patients to receive the level of care they may need. HCAC's application is not inconsistent with Goal I. Issues Relating to CON Recommendations and Priority for Inpatient Psychiatric Services (District XI Health Plan 1986, page 26). In this section of the district health plan, the Planning Advisory Committee states its recommendations and preferences for services for the comprehensive treatment of the mentally ill. The Committee recognizes that long-term hospitalization is a viable form of treatment for some mentally ill patients. However, the Committee expresses a preference for short hospital stays and applicants that project treatment modalities with an average length of stay under 20 days. In addition, the Committee emphasizes a preference for services to be obtained through the conversion of medical/surgical beds, because the district has a large surplus of such beds. Overall, HCAC's project is not consistent with the recommendations and priorities of the Planning Advisory Committee. HCAC's proposal is inconsistent with the goals, objectives and recommendations of the State Health Plan taken as a whole. The State Health Plan contains an important and significant goal that no additional long-term hospital psychiatric beds should be added in the area until the existing and approved beds in the district have achieved an 80 percent occupancy level. The existing long-term hospital psychiatric beds in the district have an occupancy level at approximately 67 percent. AVAILABILITY AND ADEQUACY OF ALTERNATIVES There are available, accessible and appropriate facilities within the service district which can be utilized for the services proposed by HCAC that are presently underutilized. Currently, there are short-term psychiatric providers, a long-term provider, residential facilities, nursing homes and adult congregate living facilities that are available as alternatives in the service district, and in many cases are significantly underutilized. Although the services to be offered by the HCAC facility would be in excess of what is provided in an adult residential treatment facility, nursing home or adult congregate living facility, those facilities could serve as viable alternatives in appropriate cases. In 1986, there were 6,513 existing nursing home beds in District XI and an additional 1,928 approved for opening. There are 24 adult congregate living facilities in District XI with 50 beds or more. The total number of beds for ACLFs in 1986 was 2,620. In addition, Grant Center Hospital has 140 existing and 20 approved long-term psychiatric beds; its occupancy rate is low. THE ABILITY OF THE APPLICANT TO PROVIDE QUALITY OF CARE AND THE APPLICANT'S RECORD OF PROVIDING QUALITY OF CARE The "Flowers Model," made a part of the application, is a description of how, from a clinical perspective, the proposal will be managed. Although Flowers does not presently operate any long-term psychiatric facilities, the Flowers Model is appropriate for a long-term psychiatric care facility. From a clinical and programmatic perspective, the HCAC facility would provide good quality of care. PROBABLE ECONOMIES AND IMPROVEMENTS IN SERVICE WHICH MAY BE DERIVED FROM OPERATION OF JOINT, COOPERATIVE OR SHARED HEALTH CARE RESOURCES HCAC has not demonstrated that there will be any improvements in service which may be derived from operation of joint, cooperative or shared health care resources. The Northwest Dade County proposed location of the HCAC facility would place the project within two hours travel of 90 percent or more of District XI population. Nevertheless, HCAC's facility would increase the number of people who would be within two hours of long-term adult psychiatric facilities by less than 1 percent. The patients in District XI will not experience serious problems in obtaining inpatient care of the type proposed in the absence of the service proposed by HCAC. There is presently adequate and accessible long-term hospital inpatient services for District XI population based on the existing and approved facilities in District X (Southwinds Hospital, Florida Medical Center) and District XI (Grant Center). There are two approved but not yet open long-term psychiatric facilities in District X, Broward County. Florida Medical Center holds a CON for 60 long-term adult psychiatric beds to be located in Lauderdale Lakes and Southwinds Hospital holds a 75-bed CON with 60 beds counted for long-term treatment of adult and geriatric patients to be located in Andy Town. In addition, there are 238 long-term state hospital beds at South Florida State Hospital in Broward County. Although the need for long-term psychiatric beds is assessed on a district-wide basis, it is reasonable to consider psychiatric beds in Broward County (District X) as an alternative to HCAC's proposal because they are within two hours access of individuals within the two counties. Likewise, it is reasonable to consider approved beds because need is projected for a future date. Not counting approved beds would overestimate need and result in duplication of services. FINANCIAL FEASIBILITY HCAC has not demonstrated that the 120-bed project or the 105-bed facility is financially feasible in the short or the long term. The projection of revenues and expenses in the pro forma (120-bed project) and the forecasted income statement (105-bed project) were flawed to such an extent that financial feasibility of the project was not shown. IMPACT ON COSTS AND COMPETITION If HCAC's project were to be built, a likely result is increased charges for the provision of services in the area. HCAC's proposed facility would negatively impact the availability of psychiatric nurses. There is a shortage of psychiatric nurses in Dade County and it is difficult to recruit and hire R.N.s with psychiatric experience. In order to hire nurses in a time of shortage, hospitals must recruit staff from other facilities. Shortages can increase the cost of recruitment and the cost of salaries. Charter is a hospital located in District XI and consists of 88 beds, 80 of which are licensed as short-term psychiatric beds and eight of which are licensed as short-term substance abuse beds. Short-term psychiatric inpatient care is defined in Rule 10-5.011(1)(o), Florida Administrative Code, as "a service not exceeding three months and averaging a length of stay of 30 days or less for adults." HCAC's proposed facility, if approved, would have a negative economic impact on Charter. It is very likely that many of the patients at the proposed HCAC facility would experience lengths of stay between 45 and 60 days. Charter treats a significant number of patients (approximately 15 percent) who stay longer than 30 days. Because of the difficulty of initially identifying patients who would require either short or long-term stays, many of Charter's patients could be lost to the HCAC project. Charter could suffer a loss of up to 657 patient days per year if HCAC's proposed facility is approved. This loss of patients would impair Charter's ability to have certain types of programs, equipment and staff. PROVISION OF HEALTH CARE SERVICES TO MEDICAID PATIENTS AND THE MEDICALLY INDIGENT HCAC's project does not propose a significant amount of indigent care and HCAC has no history of providing health care services to Medicaid patients and the medically indigent. OCCUPANCY RATE FOR EXISTING LONG-TERM HOSPITAL PSYCHIATRIC BEDS Grant Center Hospital is the only existing long-term psychiatric facility in District XI. It has 140 beds and specializes in treating children and adolescent patients. Its occupancy rate at the time of review for the preceding year was approximately 67 percent. The appropriate period to calculate occupancy rate of existing facilities in this case is July 1985 to July 1986 because this is the most recent 12-month period preceding application decision. The occupancy rate of all psychiatric beds within District XI was below 80 percent. HCAC'S PROPOSED NEED METHODOLOGY At the hearing, W. Eugene Nelson testified on behalf of HCAC on the need for the proposed long-term adult psychiatric beds. Mr. Nelson was accepted as an expert in the field of health care planning, including psychiatric bed need assessment. Mr. Nelson performed his analysis in District XI using the Graduate Medical Educational National Advisory Committee (GMENAC) methodology. The need methodology proposed by HCAC is inappropriate to adequately and accurately predict need for long-term adult psychiatric beds in District XI. The GMENAC study is a national study based on national data developed to determine physician requirements in 1990 for 23 medical specialities. GMENAC estimates the prevalence of certain psychiatric disorders among the general population and estimates the number of those persons who need care for their conditions in differing treatment settings ranging from outpatient services to 24-hour institutional care. HCAC's methodology, utilizing the GMENAC study, predicted a gross need of 895 beds in District XI in the applicable horizon (July 1991). The total number of existing long-term psychiatric beds in the entire State of Florida is only 836 beds, and the majority of those beds are experiencing occupancy levels under 65 percent. Many of these long-term facilities have been around for a period of at least three years and are still experiencing low occupancy. Therefore, the low levels are probably not based on the fact that the facilities are in a start-up mode. HCAC's bed need computation is as follows: Adult Long Term Psychiatric Bed Requirements (Excludes Alcohol, Drug Abuse, Mental Retardation, Organic Brain Syndrome and "other" Conditions) District XI: July 1991 Condition Admission Rate Schizophrenia & Other Psychoses 99 Affective Disorder Psychosis 20 Affective Disorder Neuroses 60 Neuroses and Personality Disorders 199 20 Projected 1991 Population Age 18+ 1,459,437 Total Projected Admissions 2,904 Average Length of Stay 90 Projected Patient Days Target Occupancy 80.00 261,385 percent Total Beds Required 895 Beds Currently Available 438 South Florida State Hospital (450 X .48) Residential Treatment Facilities 216 233 Net Beds Needed 496 The projected 1991 population for District XI for age 18 and above is 1,459,473. The population projections were received from the Office of the Governor. The anticipated admissions per 100,000 is calculated to be 199 for the conditions listed. The total projected admissions for 1991 is 2,904. The 2,904 projected long-term care admissions when multiplied by the average length of stay of 90 days generates 261,385 projected patient days in the 1991 horizon period in District XI. The 261,385 patient days is then divided by 365 days in the year, and then by 80 percent, the latter of which is contained in the rule as the optimum or desired occupancy for long-term psychiatric beds. This yields a total gross long-term psychiatric bed requirement for adults and geriatrics of 895 beds. In performing his analysis, Mr. Nelson used Table 4, page 22 of the GMENAC Study which lists information for mental disorders requiring care by treatment setting. The prevalence rate of 199 admissions per 100,000 population was based on the study's projection of the mental disorders listed requiring a "24-hour" treatment setting. Nelson used a projected 90-day length of stay in his computations. There is nothing in the GMENAC document that sets forth the average length of stay of persons reflected in the 24-hour column. Therefore, it is misleading to assume that persons admitted subject to the 199 per 100,000 admissions rate will actually experience an average length of stay as long as 90 days. For HCAC's admission rate to be valid, all of the facilities in District XI would have to average a 90-day length of stay. This is an unreasonable assumption. Nationwide, only a small percentage of all psychiatric admissions experience a length of stay as long as 90 days. In computing beds currently available in District XI, Mr. Nelson did not consider nursing home beds, adult congregate living facility beds, or the 135 long-term psychiatric beds that have been approved for two facilities in District X (Broward County). Nelson also did not consider whether short-term facilities were capable or willing to take additional patients for long-term treatment. Thus, the computation of beds currently available in the HCAC methodology is unreasonably low. HCAC's need methodology generated a long-term psychiatric bed to population ratio of .61 per thousand. DHRS' rule for short-term psychiatric beds was a population ratio of .35 per thousand. Short-term care facilities have admission rates two to three times greater than long-term facilities and nationwide statistics establish that only 4 percent of all psychiatric patients stay longer than 90 days. It is not reasonable for the bed rate for long-term adult psychiatric beds to be higher than the rate for short-term psychiatric beds. Mr. Nelson excluded organic brain syndrome diagnosis from his analysis and admission rate based on an assumption that many of those patients are in nursing homes. Nelson did not use nursing home beds in computing his need methodology because he believed that eliminating the organic brain syndrome category from the Table 4, page 22, 24-hour column in the GMENAC study eliminates the need for considering nursing home beds in the inventory. For that approach to be valid, the number of organic brain syndrome patients that go to long-term psychiatric facilities would need to cancel out the number of patients in other diagnostic categories who go to nursing homes. Nelson did not consult or review any data concerning the number or percentage rates of schizophrenics and other mentally ill patients in nursing homes or the number of organic brain syndrome people being treated in long-term psychiatric facilities. In addition, Nelson did not know what percentage, if any, of the GMENAC projected admissions were nursing home admissions. In computing existing beds, Nelson listed two types of facilities previously existing in District XI which were applicable to his methodology: the state hospital (216 beds) and residential treatment facilities (233 beds). The correct number of beds available for adults from District XI in the state hospital is 238. The actual number of beds for residential facilities is 335. Dr. Howard Fagin testified as an expert in health planning and feasibility analysis, including psychiatric bed need assessment and feasibility. In Dr. Fagin's opinion, Nelson's bed need methodology is incorrect and the conclusions drawn are wrong because Nelson used an inappropriate length of stay based on the GMENAC study and also incorrectly identified the applicable beds which should be considered for comparable facilities under the GMENAC study and, therefore, his total numbers in terms of gross and net beds needed are incorrect. Dr. Fagin's critique of Mr. Nelson's bed need methodology is persuasive and credible. HCAC has failed to show that its proposed need methodology could accurately project the need for long-term psychiatric beds in District XI.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that CON Application No. 4854 by Health Care Advisors Corporation, Inc. be DENIED. DONE and ORDERED this 1st day of March, 1988 in Tallahassee, Leon County, Florida. W. MATTHEW STEVENSON Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of March, 1988. COPIES FURNISHED: Lesley Mendelson, Esquire Assistant General Counsel Department of Health and Rehabilitative Services Fort Knox Executive Center 2727 Mahan Drive, Suite 308 Tallahassee, Florida 32308 H. Darrell White, Esquire Gerald B. Sternstein, Esquire Post Office Box 2174 Tallahassee, Florida 32302 William E. Hoffman, Esquire 2500 Trust Company Tower 25 Park Place Atlanta, Georgia 30303 George N. Neros, Jr., Esquire 101 North Monroe Street Monroe-Park Tower Suite 900 Tallahassee, Florida 32301 Donna H. Stinson, Esquire The Perkins House Suite 100 118 North Gadsden Street Tallahassee, Florida 32301 R. S. Power, Esquire Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
Findings Of Fact Introduction Orlando General Hospital applied in April, 1987, for a certificate of need to allow it to convert 24 existing medical-surgical beds to short term psychiatric beds. O.G. Ex. 2, p. 1. It did not explicitly apply for beds limited to serve adults. It did, however, state that adolescent care would not be provided "at this time," leaving open the use of the 24 beds in the future for possible adolescent use. Id. at p. 5. Charter Medical-Orange County, Inc., applied for a certificate of need for a 50 bed short term psychiatric specialty hospital. It explicitly applied for a specialty hospital having 50 beds of "short term adult psychiatric care." C.M. Ex. 1, application, section I. In the executive summary, it characterized its proposal as a specialty hospital "for adults." Id. at p. 1. Charter does not intend to treat child or adolescent short term psychiatric patients. T. 23. The applications were filed in early 1987 to meet need in the January, 1992, planning horizon. The rule that applies in this case is the one contained in the prehearing stipulation. T. 392. It is rule 10-5.011(1)(o), Fla. Admin. Code. A copy of the rule is contained in O.G. Ex. 7, p. 33. The provisions of the local health plan at issue in this case are accurately reproduced in the State Agency Action Report (SAAR) which is C.M. Ex. 5. Net Short Term Psychiatric Bed Need (Numeric Need) Rule 10-5.011(1)(o)4a-c, Fla. Admin. Code, provides that the projected number of beds shall be based on a bed need ratio of .35 beds per 1,000 population projected five years into the future and based, in this case, on the January, 1987, projections for January, 1992. That 1992 population for District VII is projected to be 1,505,564, and thus the gross short term psychiatric bed need is 527 beds. For this batching cycle, the inventory of licensed and approved short term psychiatric beds was 410. These were: General Hospitals Florida Hospital-Altamonte 20 Florida Hospital-Orlando 85 Orlando Regional Med. Center 32 Wuesthoff Memorial Hospital 25 Subtotal 162 Specialty Hospitals Brevard Mental Health Center 52 CPC Palm Bay (began 10/86) 40 Laurel Oaks (began 10/86) 60 Lynnhaven (approved only) 39 Park Place (approved only) 17 West Lake 40 Subtotal 248 TOTAL (Licensed and approved) 410 TOTAL (Licensed only) 354 Thus, there is a net need for 117 short term psychiatric beds In District VII by 1992. The rule further specifies that a minimum of .15 per 1,000 population should be allocated to hospitals holding a general license, and that .20 per 1,000 of the beds may be located in either speciality hospitals or hospitals holding a general license. HRS interprets the word "should" in the rule with respect to .15 per 1,000 allocated to hospitals with a general license as being mandatory. C.M. Ex. 5, pp. 13-14. This is a reasonable construction of the rule. By 1992 there must be 226 short term psychiatric beds located in hospitals holding a general license. Since currently there are 162 beds in such hospitals, there is a net need by January, 1992, for 64 short term psychiatric beds to be opened in hospitals holding a general license. The remainder of the net bed need, 53 beds, may be located in either a specialty hospital or a hospital holding a general license. T. 500-02. The Occupancy Rate for "All Existing Adult Short Term Inpatient Psychiatric Beds" Rule 10-5.011(1)(o)4e, Fla. Admin. Code, provides in part that "no additional short term inpatient hospital adult psychiatric beds shall normally be approved unless the average annual occupancy rate for all existing adult short term inpatient psychiatric beds in a service district is at or exceeds 75 percent for the preceding 12 month period." (E.S.). Calendar year 1986 is the period of time accepted by all parties as the "preceding 12 month period" as specified by the rule, that is, the period of time to calculate the occupancy rate for this batching cycle. See, e.g., T. 285; C.M. Ex. 5. The State Agency Action Report Occupancy Rate The State Agency Action Report computed the occupancy rate for all licensed short term psychiatric beds in District VII in calendar year 1986 at 70.13 percent. C.M. Ex. 5, p. 10. This figure was based upon data as to patient days as reported by District hospitals to the District VII local health council and was based upon 354 licensed beds in the District during the full calendar year, but excluded 56 beds the re approved but not opened. O.G. Ex. 7, p. 6. Exclusion of CPC Palm Bay and Laurel Oaks CPC Palm Bay and Laurel Oaks have been designated by certificate of need issued by HRS to serve only children and adolescents. T. 507. Since those facilities by law cannot serve adults, their beds are not "adult beds," their patient days are not adult patient days, and their occupancy rate is not an adult occupancy rate. T. 1128. If CPC Palm Bay and Laurel Oaks were excluded from the calculation of the occupancy rate in the SAAR, the occupancy rate would be 73.7 percent. This rate is a weighted average based upon a 86,779 patient days that were possible at 100 percent occupancy of all licensed short term psychiatric beds in District VII in 1986, excluding Palm Bay and Laurel Oaks. C.M. Ex. 17, p. 11, fn. 9. How Many Adult Patient Days and Beds? HRS often issues certificates of need without age restrictions, allowing the facility to provide short term psychiatric treatment to everyone, regardless of age. Such hospitals can and do serve all ages, and their licensed short term psychiatric beds are not designated as, or restricted to, adults. T. 1128-29. With the exception of Palm Bay and Laurel Oaks, none of the other licensed short term psychiatric hospitals in the District are restricted by HRS by patient age. HRS does not have data to enable it to determine which short term psychiatric beds were used by adult patients in the District in 1986. T. 1169. Use of beds for age cohorts can dramatically and continuously change during a calendar year, and 41 has no reliable means to know about such changes. T. 1229-30. Hospitals issued certificates of need without limitation as to the age of the patient are not required by HRS to report the number of patient days served by the hospital by age or age group of the patient. See T. 1218-19; HRS Ex. 2. HRS Ex. 2. Consequently, the reported short term psychiatric patient days for District VII for calendar year 1986 mix adult patient days with patient days for children and adolescents. Thus, with the exception of Laurel Oaks and Palm Bay, it is impossible in this case for the applicants and other parties in this batching cycle to untangle pure adult psychiatric patient days from the available data. T. 392, 353, 287, 291, 371, 1169-71. It is impossible on this record to make a finding of fact as to what would happen to the mixed occupancy rate all patient days attributable to adolescents and children could be excluded from the adult patient days. The only bit of evidence is found in C.M. Ex. 17, the data from Florida Hospital, which shows for that hospital that the 16 adolescent unit in 1986 had an occupancy rate of 60.92 percent, and the open adult unit had an occupancy rate of 82.42 percent. C.M. Ex. 17, p. 3. But that percentage is more a reflection of Florida Hospital's choice in how it set up the beds in the two programs than it is a reflection of need. For example, had Florida Hospital chosen to allocate only 12 beds to its adolescent program, instead of 16, the 1986 occupancy rate for that unit, based on 3,558 patients a day, would have been 81.23 percent. One wonders why Florida Hospital did not simply allocate a lower number of beds to the adolescent unit, since it had only 13 admissions to that unit in 1986. In any event, since a hospital like Florida Hospital has discretion as to how it sets up its beds with respect to the ages of patients. In those beds, the fact that it had an occupancy rate of 60.92 percent in the subunit it called the adolescent unit in 1986 is relatively meaningless when trying to predict which way a pure adult occupancy rate might change if adolescent and child patient days could be excluded. In summary, there is no accurate count of beds licensed only as adult beds, there is no accurate count of beds used only as adult beds, and there is no accurate count of adult patient days. The Problem of West Lake Hospital The record has an additional data problem with respect to calculation of the occupancy rate of adult short term psychiatric beds. West Lake Hospital is licensed for 40 short term beds (not restricted by age), and 30 long term psychiatric beds. Data for calendar year 1986, the only year relevant in this case, is a mixture of short term and long term patient days. C.M. Ex. 17. As will be discussed ahead, additional evidence as to the patient days at West Lake Hospital was excluded from evidence for failure to comply with the prehearing order. The Problem of Short Term Psychiatric Patient Days Occurring in General Hospitals Without Licensed Short Term Psychiatric Beds A general hospital with no licensed short term psychiatric care can lawfully provide temporary and sporadic short term psychiatric care in its medical-surgical beds. T. 1191. In calendar year 1986, Orlando General Hospital reported to the Hospital Cost Containment Board that it provided 4,969 psychiatric (MDC 19) patient days of care. O.G. Ex. 7, p. 11. By 1988, it had over 30 psychiatric patients in the hospital at any given time. T. 753. Orlando General Hospital does not have any beds licensed for short term psychiatric care, or for long term psychiatric care, for that matter. Orlando General Hospital's psychiatric patients are currently receiving inpatient psychiatric care that is substantially the same as would be provided in a licensed short term psychiatric bed, with the exception that the care is osteopathic in nature. See T. 797, 1355-58, 1360-62, 788-90, 792-93. HRS Policy as to the Data Problems HRS stated that it "... would not attempt to fix a specific occupancy for a specific age cohort" in this case, T. 1220. A good faith attempt was made, however. Following a new policy, HRS argued that the adult bed occupancy rate should exclude the beds and patient days of hospitals having certificates of need explicitly limited to service of the needs of children and adolescents (Palm Bay and Laurel Oaks), but should include all of the licensed short term psychiatric beds at any other facility that is not restricted by patient age. T. 1127-29. It was acknowledged that the information is faulty, but the Department urges that it is the best that it can do under the circumstances. T. 1174. With respect to patient days, HRS also urges that only the patient days reported to the local health council by hospitals having licensed adult short term psychiatric beds should be counted in the mixed rate. In particular, HRS argues that it should not use patient day data reported to the Hospital Cost Containment Board because such data is not limited to hospitals having "designated" psychiatric units. T. 1126-27. This argument is not reasonable. Hospitals that are legally authorized to provide short term psychiatric care to adults (i.e., having a certificate of need and a license) can provide such care in any licensed bed in the hospital, even though the bed is not licensed as a psychiatric bed. Moreover, a general hospital with no licensed short term psychiatric care, according to HRS witnesses, can lawfully provide temporary and sporadic short term psychiatric care in its medical-surgical beds. It may even provide such care on a continuous, ongoing basis, as in the case of Orlando General Hospital, although the legality of doing so is questioned by HRS. The critical question is not whether these licensed hospitals have legal authority to provide short term psychiatric care, but whether the care in fact given results in a short term psychiatric patient day in the District. If the care given is essentially the same as if the patient had been in a licensed short term psychiatric bed, it would be unreasonable not to treat the resulting statistic as a short term psychiatric patient day. What is at stake is a true measurement of District capacity. If tomorrow all of the District short term psychiatric patients and the patient days generated by such patients transferred to the District licensed short term psychiatric beds, these short term psychiatric patient days would certainly be counted in the occupancy rate. When trying to assess the real extent of availability of District capacity, a false picture of excess and unused capacity would be shown if real short term psychiatric patient days are occurring somewhere in the District, but are not counted in determining the occupancy rate. On the other hand, if the facility is not even a licensed hospital, it is presumptively providing an alternative kind of inpatient psychiatric care that is different from a licensed psychiatric hospital. Thus, its patient days are irrelevant absent some specific proof that the care given in such a bed is essentially the same as a short term psychiatric patient day in a licensed general or specialty hospital. What is an "Existing" Adult Short Term Bed? Rule 10-5.011(1)(o)4e, Fla. Admin. Code, calls for the occupancy rate for "all existing" adult short term psychiatric beds in the service district, and does not define the word "existing." Petitioners assert that "existing" adult beds of the facility for purposes of determining occupancy rate is the number of beds characterized by the facility as having been in fact used for psychiatric care during the year, but only if that number is less than the number of licensed short term psychiatric beds. T. 391, 354-55. The Respondent and the Intervenor argue that "existing" adult beds is fixed by the number of licensed short term psychiatric beds granted to the facility by the state if available to serve adult patients. Normally, to be licensed a bed must be available within 24 hours. T. 1121. Orlando Regional Medical Center In calendar year 1986, Orlando Regional Medical Center had 32 licensed short term psychiatric beds. T. 348. These 32 beds were not restricted by patient age. In calendar year 1986, Orlando Regional Medical Center characterized as "in service" 32 beds for the first 7 months of 1986, 22 beds for the month of August, 18 beds for the month of September, and 12 beds for the remaining 3 months of the year. The figure of 25 beds used by the Petitioners is the weighted average. T. 348. These licensed short term psychiatric beds at Orlando Regional Medical Center were temporarily not in service because of the construction of new facilities at the hospital. Orlando Regional Medical Facility intended to reopen those beds in the future because the hospital reminded the party seeking discovery that it had 32 licensed beds, and characterized the missing beds as having been "warehoused," that is, saved for future use. T. 509-10; O.G. Ex. 7, appendix 3. Thus, all 32 of Orlando Regional Medical Center's licensed beds would be available and would be used for adult short term psychiatric care if demand existed. Florida Hospital Florida Hospital has two facilities relevant to this case, one in Orlando, in Orange County, and one in Altamonte Springs, in Seminole County. In calendar year 1986, Florida Hospital had 105 beds licensed as short term psychiatric beds. Florida Hospital would serve patients of any age in these 105 beds. C.M. Ex. 18 is a document which was obtained from Florida Hospital through discovery. T. 286. The document is entitled "Florida Hospital Center for Psychiatry Monthly Operating Statistics," and thus was assumed by Charter's expert to be Florida Hospital's characterization of its data as psychiatric data. T. 289. C.M. Ex. 18 could not have been obtained by Charter at the time it made application. It was obtainable only through the discovery process after commencement of section 120.57(1), Fla. Stat., proceedings. T. 314-16, 386-87. Florida Hospital reported in discovery that in calendar year 1986, it had 113 beds operating in its "Center for Psychiatry." Of these, 16 were substance abuse beds, 13 were beds in an eating disorders unit, and 16 were adolescent beds. That left 24 beds in the intensive care unit, 24 beds in an open unit, and 20 beds at a unit at Altamonte Springs. C.M. Ex. 18. The 16 substance abuse beds clearly were not psychiatric beds. If the 13 eating disorders beds were short term psychiatric beds, Florida Hospital had 97 of its 105 licensed short term psychiatric beds in actual operation in 1986. If they were not, Florida Hospital had 84 of its 105 licensed short term psychiatric beds in actual operation in 1986. There is no evidence in this record that Florida Hospital could not and would not have readily opened 8 more short term psychiatric beds during 1986 if demand for those beds had existed, thus having "open" all 105 of its licensed beds. There is no evidence in this record that in 1986, Florida Hospital could not have closed its 16 bed adolescent unit and devoted all of those beds to adult short term psychiatric care, had there been a need. Indeed, it appears that generally speaking, that is how Florida Hospital operates: by shifting beds to other uses within its licensed authority according to demand. See T. 1322-26. Thus, all 105 of Florida Hospital's licensed beds would have been available and would have been used for adult short term psychiatric patients if the demand existed. Counting Patient Days - Are Eating Disorder Patient Days Psychiatric Patient Days? Florida Hospital reported in discovery that it had 2,982 patient days in its eating disorder unit, and that the unit operated with 13 beds. C.M. Ex. 18, P. 3, lines 8 and 26. The eating disorder unit reports to the administrative director of the Florida Hospital Center for Psychiatry. T. 977. The administrative director could not explain why the unit reported to the Center for Psychiatry. T. 977. The unit has co-directors, one a psychiatrist, and the other a specialist in internal medicine. Id. The administrative director of the Center for Psychiatry characterizes the 13 eating disorders beds as medical-surgical beds, and classifies patients in those beds as primarily having a medical problem, T. 976, but the psychiatrist co-director of the program hedged, and would not say whether the primary diagnosis is medical or psychiatric. T. 1315. The patients typically are, however, very ill from a medical point of view. T. 1314. Florida Hospital's characterization of the nature of the care given in its eating disorders unit, as summarized in the preceding paragraph, in view of the manner in which the witnesses were unclear as to how to characterize the eating disorder unit, is not evidence that the care given in that unit is not psychiatric care in view of Florida Hospital's interest in these cases in opposition to the applications. Charter's expert concluded from C.M. Ex. 18 that Florida Hospital was serving short term psychiatric patients in its eating disorders unit at Altamonte Springs. T. 287. He characterized this as a short term psychiatric service in medical-surgical beds. T. 289. But he also characterized the 13 beds as psychiatric beds. T. 287-88. HRS has issued a certificate of need to a short term psychiatric hospital limiting that certificate of need to treatment of eating disorders, thereby recognizing treatment of eating disorders in that case as a form of psychiatric treatment. T. 1191. From testimony at the hearing, it would appear that HRS's expert would view the eating disorder unit at Altamonte Springs as a short term psychiatric program. T. 1191-1192, 1194. It is concluded that the preponderance of the evidence shows that the care rendered to patients in the eating disorders unit was psychiatric care. The unit is administratively a part of the hospital's Center for Psychiatry. While the patients are very ill, medically speaking, they also have substantial mental health problems. Finally, and most persuasive, HRS has previously characterized such care as short term psychiatric care. If these 2,982 eating disorder patient days are counted as psychiatric patient days in 1986 for District VII, and if the number of beds at Florida Hospital remains as it was in the SAAR calculation (105 licensed beds), then the total patient days for the District changes from 63,976 to 66,958. The result is that the occupancy rate for District VII for 1986 for adult and mixed short term psychiatric beds changes from 73.72 percent to 77.16 percent. C.M. Ex. 17, p. 13. This calculation is the result of a weighted average discussed above. Psychiatric Patient Days Reported to the Hospital Cost Containment Board Orlando Regional Medical Center and Florida Hospital report patient days by Medicare major diagnostic categories (MDC). MDC 19 is the category for psychiatric care. T. 512; O.G. Ex. 7. The data collected in this record was for calendar year 1986. T. 603-604. Relying upon MDC 19 statistics for calendar year 1986, Florida Hospital (Orlando and Altamonte Springs combined) had 28,372 MDC 19 patient days, and Orlando Regional Medical Center had 7,328 MDC 19 patient days. The Florida Hospital MDC 19 patient days shown in table 6, O.G. Ex. 7, are very close to the number of patient days shown on C.M. Ex. 18, the operating statistics from the "Center for Psychiatry" obtained from Florida Hospital in discovery. The MDC 19 patient days, 28,372, exceed the "Center for Psychiatry" reported data by only 452. The Orlando Regional Medical Center's MDO 19 patient days, 7,328, is 618 patient days greater than the patient days reported by Orlando Regional Medical Center to the local health council. If these MDC 19 patient days are assumed to be short term adult psychiatric patient days, following the same mathematical calculation used by HRS both in the SAAR and in testimony during the hearing (with the same weighted averages), the occupancy rate for adult and mixed short term psychiatric care in District VII, using licensed beds, was 78.39 percent in calendar year 1986. O.G. Ex. 7, table 6. This calculation uses the same weighted average (86,779 patient days at 100 percent occupancy) as used by all the other parties. C.M. Ex. 17, p. 11, fn. 9. There is no evidence in the record that the foregoing MDC 19 patient days are limited to short term psychiatric days, or the extent to which the data considers long term patient days as well. Of course, there is also no evidence available to separate the MDC 19 patient days into adult patient days and patient days attributable to children and adolescents. Westlake Hospital Data as to Short Term Psychiatric Patient Days in 1986 The Intervenor, Florida Hospital, has renewed its effort to have F.H. Ex. 3, and testimony based upon that exhibit admitted, into evidence. The exhibit and testimony involves data as to short term psychiatric patient days for 1986 at Westlake Hospital, located in Seminole County. Florida Hospital argues that the ruling excluding F.H. Ex. 3 from evidence, as well as testimony related to that exhibit, is inconsistent with the ruling that allowed Charter Medical to introduce C.M. Ex. 19. It is argued that the only difference is that in the case of Charter Medical, the witness first testified as to the contents of the exhibit, whereas in Florida Hospital's case, the exhibit was admitted, the witness testified, and then the exhibit was excluded. Florida Hospital argues that as a result of this sequence of events, its witness was not afforded an opportunity to present the same evidence from memory without the exhibit. From a review of the sequence of events, it is apparent that there is a substantial difference between the two exhibits, as well as a substantial difference in the procedures used by counsel, and that difference necessitates the two rulings. C.M. Ex. 19 is nearly identical to C.M. Ex. 17, with three exceptions. In C.M. Ex. 19 the patient days at the Florida Hospital eating disorder unit were moved from the Orlando facility to the Altamonte Springs facility. C.M. Ex. 19 also excluded adolescent patient days from the Florida Hospital count changed the number of "existing" beds at Orlando Regional Medical Center to 25 instead of 32. T. 295. C.M. Ex. 19 made no other changes to C.M. Ex. 17 with respect to patient days or number of beds. Two objections were made by Florida Hospital to the admission of C.M. Ex. 19, that C.M. Ex. 19 had not been provided to opposing counsel at the exchange of exhibits, in violation of the prehearing order, and that C.M. Ex. 19 was an impermissible amendment to Charter Medical's application for certificate of need. T. 295-296. Only the first objection is the subject of Florida Hospital's renewed argument. The Hearing Officer at the time overruled the first objection because it was determined that C.M. Ex. 19 merely summarized the testimony of Dr. Luke as to changes he would make to C.M. Ex. 17. That ruling was correct, and should not be changed at this time. All of the underlying data for the expert analysis in C.M. Ex. 19 came into evidence without objection that it had not been exchanged among the parties. C.M. Ex. 18 contained the data as to adolescent patient days and eating disorder patient days at Florida Hospital in 196. That data came into evidence without objection that it had not been exchanged. T. 316. Dr. Luke's testimony that Orlando Regional Medical Center had only 25 beds operational in 1986 came into evidence without objection. T. 292. Dr. Luke's testimony concerning the location of the eating disorders unit at Altamonte Springs came into evidence without objection. T. 287, 291. Both of these latter evidentiary matters were of a type that easily could have been known to Dr. Luke without reference to a document to refresh his memory. Additionally, the parties were well aware of the argument that Orlando Regional Medical Center had only 25 operational beds in 1986, and that Florida Hospital had only 48 adult beds in operation in 1986, since that evidence and argument was a fundamental part of Orlando General Hospital's basic bed need exhibit, O.G. Ex. 7, and the testimony of Ms. Horowitz. Moreover, the type of analysis of the data contained in C.M. Ex. 19 is the same as that of Ms. Horowitz in O.G. Ex. 7. Thus, Florida Hospital was not caught by surprise by C.M. Ex. 19. The exhibit did not contain new data or new modes of analysis. Florida Hospital's attempt to introduce data as to the actual number of short term psychiatric patient days at Westlake Hospital in 1986 was quite different. The data as to patient days at Westlake had not been produced during the deposition of Florida Hospital's witness, although similar data for 1987 and 1988 was produced. T. 867. Had it been made available in discovery, the failure to exchange the data as an exhibit as required by the prehearing order would have been less serious. But the exhibit had not been given by Florida Hospital to opposing parties, in violation of the prehearing order. T. 869. F.H. Ex. 3 did not reorganize data that otherwise was exchanged between the parties. It attempted to introduce new raw statistical data that had not been furnished opposing counsel as required by the prehearing order. The Hearing Officer initially ruled that F.H. Ex. 3 should be admitted into evidence and allowed the witness to testify concerning the data contained in the document. T. 870-871. That initial ruling was in error. The data contained in F.H. Ex. 3 is not at all simple. The document consists of four pages of numbers representing monthly statistics in 1986 at Westlake Hospital for each of its units. It is highly unlikely that a witness could have remembered all of that data presented the data in testimony without reliance upon the exhibit. Indeed, the witness testified that all of his testimony was based upon F.H. Ex. 3. T. 907. The witness had apparently given a different impression as to Westlake's occupancy rate in 1986 during his deposition, and did so without the benefit of F.H. Ex. 3. T. 910. Florida Hospital could have asked the witness if he could have presented his testimony without reference to F.H. Ex. 3, but it did not ask the witness that critical question. In sum, the witness could not have presented his analysis from memory. He had to have F.H. Ex. 3 in front of him as he testified. On December 2, 1987, an order was entered setting this case for formal administrative hearing beginning on July 11, 1988. That order established prehearing procedures. Paragraph 3 of that order requires counsel to meet no later than 10 days before the hearing to, among other things, "examine and number all exhibits and documents proposed to be introduced into evidence at the hearing." Later in the same paragraph is the requirement that the parties file a prehearing stipulation containing a list of all exhibits to be offered at the hearing. Paragraph 3D of the prehearing order states in part that failure to comply with the requirements of the order "may result in the exclusion of testimony or exhibits." The first time that opposing counsel were given the opportunity to see the data in F.H. Ex. 3 was in the middle of the formal administrative hearing. The exhibit contained detailed raw statistical data. C.M. Ex. 19 did not try to present new raw statistical data. For these reasons, F.H. Ex. 3 and all testimony related to that exhibit by Mr. Menard was excluded from evidence. Later in the hearing, Florida Hospital sought to introduce the same data through the testimony of Wendy Thomas, the planning director and data manager for the local health council. T. 1050. Counsel for Florida Hospital first attempted to show the witness the document that had been excluded from evidence, and counsel for the other parties objected. T. 1047-1049. The Hearing Officer suggested to counsel that counsel should first ask the witness whether she had made a computation and then ask what was the basis of the computation, rather than show the witness the document. T. 1049. Counsel then attempted to do that. But when counsel asked the witness for her computation, it was still unclear whether the witness based her calculation upon data in the excluded document. T. 1053. After a number of other questions, it still was unclear whether the data in the excluded document was the basis for the calculation. T. 1053-1055. The Hearing Officer then asked the witness if she could identify F.H. Ex. 3. The witness said that F.H. Ex. 3 contained the exact type of information that she had in her own files, and that her document looked like F.H. Ex. 3, except it was photocopied smaller. T. 1056. During all of this exchange, the witness was never asked by counsel for Florida Hospital if she ever had an independent memory of the details of the underlying data, or whether, if that memory now had faded, looking at F.H. Ex. 3 would refresh her memory. Since it was apparent that the basis for the witness's calculation was the same raw statistical data as contained in F.H. Ex. 3, the Hearing Officer granted the motion to exclude the testimony. Later, in cross examination of the proffered testimony, the witness testified that the basis for her calculation was the use of a document containing the same data as F.H. Ex. 3. T. 1087-1088, 1091. Thus, counsel for Florida Hospital did not lay a proper predicate for attempting to use F.H. Ex. 3 to refresh the memory of either witness. As discussed above, had it done so, it is unlikely that either witness could have testified from memory as to the statistics because the data contained in F.H. Ex. 3 was too detailed to have ever been in the memory of either witness. Florida Hospital argued that Ms. Thomas's calculation should be admitted because the raw data had been in her possession for over a year. That argument is unpersuasive. The raw data was in the possession of Westlake Hospital as well. The issue is not whether opposing parties might have discovered the data on their own, but compliance with the prehearing order requiring exchange of important exhibits. For these reasons, the Hearing Officer's rulings as to exclusion of the foregoing evidence will remain unchanged. The Local Health Plan Applicability No part of the District VII local health plan was adopted by HRS as a rule when these applications were and reviewed. T. 1214. Several years ago, with respect to applications for certificates of need for short term psychiatric beds, HRS considered need and occupancy rates only on a district-wide basis. T. 1184. See e.g. C.M. Ex. 20, where HRS did not refer to the local health plan as to these issues in District VII. HRS has now changed that policy, however, and considers need and occupancy at the district level and by portions of the District if those issues are effectively required by the local health plan. T. 1184. For purposes of planning for short term psychiatric services, the local health plan divides District VII into county "planning areas." Orange County is thus a local health plan planning area. The local health plan does not use planning areas for substance abuse planning, and it does not explain why there is a difference in planning. Orlando General and Charter both propose to locate their proposed short term adult psychiatric beds in Orange County if granted certificates of need. Counties are convenient units for health planning purposes because population data exists by county. T. 1180. Census tracts and zip code areas are also convenient geographical units for health planning. T. 1180-81. If a proposed facility is to be located very close to the county line, it would make no difference which side of the line it was on with respect to the ability of the facility to serve patients originating in either county. T. 1181. Allocation of Net Need to Orange County The local health plan, policy 3, provides that if the application of rule 10-5.011(1)(o) indicates a need (at the District level), the need is to be allocated among the counties in the district using the state numeric need method by county. T. 1027-29; C.M. Ex. 5. Applying all of the age calculations for the projected populations and bed inventory of Orange County only, the local health plan allocates 55 new short term psychiatric beds to Orange County by 1992. However, applying the allocation ratios of the rule, there is an excess of 18 short term psychiatric beds in general hospitals, and thus none of the 55 beds would be mainly allocable to a general hospital. There is, nonetheless, a potential allocation of need of 73 beds in either a specialty or a general hospital, and the net need of 55 beds could be allocated to either a specialty hospital or a general hospital. The Orange County Mixed Occupancy Rate The local health plan, policy 4, applies the 75 percent occupancy standard to the county level. The policy explicitly calls for an average annual occupancy rate for all existing facilities in the planning area with respect to adult short term psychiatric beds. C.M. Ex. 5. Relying upon the calculation in the SAAR, but deleting Laurel Oaks, the mixed occupancy rate for Grange County in 1986 was less than 58.4 percent. This calculation only includes the beds at Florida Hospital (Orlando) and Orlando Regional Medical Center. The calculation is based upon 18,696 patient days at Florida Hospital (Orlando) in 85 beds, and 6,242 patient days in Orlando Regional Medical Center in 32 beds. There were 4,969 MDC 19 patient days occurring at Orlando General Hospital in 1986. There were 7,328 MDC 19 patient days occurring at Orlando Regional Medical Center in 1986. The eating disorder patient days occurred in Seminole County (Altamonte springs) and should not be counted in an Orlando occupancy rate. The only data as to patient days at Florida Hospital, Orlando only, is that found in C.M. Ex. 18, which is the same as the SAAR, which reports 18,696 patient days. (The MDC 19 data mixes the two units.) The number of licensed short term psychiatric beds in Orange County in 1986 was 117. All of these beds were licensed the entire year, and thus there was no need to do a weighted average of potential patient days for these beds. See C.M. Ex. 17, p. 11; O.G. Ex. 7, table 6. Using all of the foregoing patient days, the number of patient days was 30,993, the number of licensed short term psychiatric beds was 117, and the mixed occupancy rate for Orange County for 1986 was 72.6 percent. If it is not appropriate to count the 4,969 patient days at Orlando General Hospital in the Orange County occupancy rate, the 1986 Orange County occupancy rate was only 60.09 percent. Conversion of Existing Beds and Service to Indigent Patients Policy 5 of the local health plan states that excess bed capacity in, among other types of beds, medical/surgical beds, should be eliminated by reallocation of beds among the services, including psychiatric services. Policy 6 of the local health plan states that primary consideration should be given for project approval to applicants who satisfy to the greatest extent the following priorities: The first priority is to applicants who commit to serving "underserved client groups," including Medicaid, Baker Act, and medically indigent patients. The second priority is to applicants who convert underutilized existing beds. As will be discussed in the conclusions of law, Orlando General's application satisfies these priorities, and Charter Medical's application does not. Other Evidence as to Future Need Historically, health care providers have been reimbursed on a fee- for-service basis. The more services provided, the greater the payment. These insurance arrangements had little incentive to decrease the level of services. T. 720. In the last three or four years, the health insurance industry has changed its methods of providing insurance. A very large percentage of insured patient care is now managed by use of flat rates based upon a per person count (capitation). The rates do not increase related to utilization. Managed health care reimbursement uses a system whereby the health care provider is paid a flat rate annually for each insured person, and agrees to provide for the health care needs of all such persons generally without considering the degree of utilization during the year. T. 722-723. Under the capitation system, the provider has the incentive to provide only such care that, in intensity or duration, is the minimum that is clinically acceptable. T. 724. Psychiatric services have been included in the movement of the industry toward managed health care reimbursement rather than fee-for-service reimbursement. T. 722. The health care industry now offers competitive managed health care plans in central Florida, and the trend is for an increase in the availability of such methods of reimbursement in central Florida. T. 726-727. It is now 40 percent of the insurance market, and in the early 1990's, the percentage of managed health care may be twice that percentage. T. 727. The effect of the new reimbursement system is to substantially lower the length of stay, and to lower the rate of admission as well, at short term psychiatric hospitals. T. 724-725, 881-882, 1319-1320. Orlando General Hospital projected that its average length of stay would be 30 days in 1992. It has discovered from current experience that its average length of stay is about 15 days. T. 433, 464. District VII has recently experienced an increase in the availability of community based mental health facilities. These facilities provide a variety of mental health services, including brief inpatient care. The facilities do not require a certificate of need. T. 1046-1047, 1319. The Nature of the Proposed Programs Orlando General Hospital General Orlando General is a 197 bed acute care general osteopathic hospital located in Orlando, Florida, in Orange County. Orlando General proposes to convert a 35 bed medical-surgical unit to 24 short term psychiatric beds at a capital cost of $689,272. It would relocate 11 of its medical-surgical beds, and convert the remainder to short term psychiatric beds. Orlando General Hospital is located in the southeast portion of Orange County. T. 1107. It is the most eastward facility in Orange County with the exception of a long term psychiatric hospital now under construction. T. 1107. The primary service area of Orlando General by location of physicians offices is the southern half of Seminole County and the northern portion of Orange County. In particular, the hospital serves northeastern Orange County through the location of its physicians' offices. T. 412; O.G. Ex. 2, p. 27. The program of treatment described in Orlando General's application is no longer an accurate description of Orlando General's current program or of the intended program. T. 453. The treatment programs planned for the new short term psychiatric unit are comparable to the programs planned by Charter Medical-Orange County, Inc., and are adequate and appropriate programs for short term psychiatric care. Psychiatric Care for the Elderly Orlando General Hospital would provide adequate and appropriate specialized short term psychiatric care for elderly patients, but would not provide such care in a unit physically separated from other patients. There currently is a split of professional opinion as to whether or not geriatric patients should be treated in a psychiatric unit separated (physically as well as programmatically) from other patients. There are benefits from both approaches. T. 1315-1317, 68, 74-76, 43-45, 770. Various Charter Medical hospitals do it both ways. T. 70. Osteopathic Medicine at Orlando General Hospital Osteopathic medicine differs from allopathic medicine in its emphasis upon viewing the interaction of all parts of the body, rather than a single part, and the use of muscular and skeletal manipulation. T. 1349, 753-754. Orlando General Hospital is an osteopathic hospital and has been osteopathic in nature since the 1960's. It was founded by osteopathic physicians, and the hospital abides by osteopathic philosophies. The Board of Trustees at the hospital are all osteopathic physicians. Although it has medical doctors on staff, the majority are osteopathic physicians Orlando General Hospital is accredited by the American Osteopathic Association to train osteopathic physicians, and has such training programs, primarily in family medicine. T. 412-414, 755. There are about 80 osteopathic physicians in Orange County, and the vast majority are on the staff at Orlando General Hospital. T. 760. Patients who prefer osteopathy, and osteopathic physicians, prefer an osteopathic hospital. Osteopathic physicians believe that they deliver better care to their patients in an osteopathic facility rather than an allopathic facility. About 30 percent of the psychiatric patients treated by Dr. Greene at Orlando General Hospital receive manipulation as a therapy. T. 1351. There is a shortage of osteopathic psychiatrists. T. 756. Other than Randall Greene, D.O., there are no osteopathic psychiatrists in the Orange County area. Id. There is a shortage of places for psychiatric resident training. There is no osteopathic psychiatric residency in Florida, and only a few in the country. T. 764, 1349. Consequently, osteopaths seeking to become psychiatrists often have to go to allopathic hospitals for residencies. T. 1349 Residency in an allopathic hospital is often not approved by the American College of osteopathic psychiatrists. Thus the osteopath who has had his or her residency in an allopathic hospital and lacks such approval will not be readily accepted as an osteopathic psychiatrist on the staff of an osteopathic hospital. T. 1350. Orlando General Intends to have a residency program in osteopathic psychiatric for at least two positions if it is granted a certificate of need. T. 762, 415. The Evolution of Osteo-Psychiatric Care at Orlando General Hospital Dr. Randall Greene came to Orlando in 1982. He is an osteopathic physician and psychiatrist. He initially was on the staff at four hospitals but soon discovered that other osteopathic physicians were referring patients needing psychiatric care to Orlando General Hospital because it was an osteopathic hospital. These physicians frequently asked Dr. Greene to provide psychiatric care at Orlando General. T. 754. Osteopathic physicians who referred their patients to Dr. Greene and to Orlando General Hospital continued to treat the physical ailments of those patients at Orlando General Hospital. T. 760. Dr. Greene now limits his psychiatric practice to Orlando General Hospital because of the large number of psychiatric patients being treated at the hospital. T. 756. Thirty to forty percent of the psychiatric patients come to Orlando General via the emergency room. T. 421, 445. Additionally, patients admitted to the new substance abuse program often need psychiatric care. T. 407. Orlando General has difficulty transferring its psychiatric patients to other hospitals. A number of the patients have no insurance or have only Medicaid coverage. T. 420. Orlando General Hospital is located in a lower economic area, and thus attracts patients of this type. Id. Patients who prefer osteopathic treatment also prefer not to be transferred to an allopathic hospital. T. 759. The increase in numbers of psychiatric patients served at Orlando General Hospital in medical-surgical beds helped to offset the hospital's loss of medical-surgical patient days during the same period. T. 452 Due to the large number of psychiatric patients, and the decline in need for medical-surgical beds, Orlando General hospital decided to apply for the instant certificate of need. Due to the osteopathic nature of the hospital, physicians, patients and the hospital prefer to keep these patients at Orlando General Hospital rather than refer them to an allopathic hospital. It is HRS's position that if a hospital does not advertise itself as having a distinct psychiatric unit and does not organize within itself a distinct psychiatric unit, the admission and treatment of psychiatric patients to medical-surgical beds on an "random" and unplanned basis is proper even the hospital does not have licensed psychiatric beds. T. 1191. Orlando General hospital does not hold itself out to the public through advertising as having a separate psychiatric unit. T. 468. Patient Mix & Commitment to Charity Care Orlando General Hospital currently provides a large portion of charity care for Orange County. T. 1100. In its 26 bed chemical dependency unit, Orlando General reserves 2 beds for indigents. T. 785. The unit also sets aside, as needed, one bed for any Florida nurse whose license is in jeopardy due to chemical dependence and who has no financial means to pay for treatment. Id. Orlando General Hospital typically has a larger amount of bad debt and charity care (for people who do not pay) than other hospitals in the area. T. 423. In 1987, Orlando General Hospital reported to the Hospital Cost Containment Board that it had $141,404 in charity care, and that it had $3,244,530 in bad debt. T. 657, 660. Bad debt constituted 9.7 percent of gross revenue. T. 660. Since it is very difficult to determine at admission whether the patient realistically can pay for services, a lot of this bad debt is, in a functional sense, charity care. T. 659-660. It is concluded from the foregoing that Orlando General Hospital has a genuine commitment to providing health care to persons who cannot pay. T. 422, 662. Orlando General Hospital projects that it will in its proposed 24 bed short term psychiatric unit 5 percent indigent patients, 8 percent Medicaid patients, 20 percent Medicare patients, 50 percent insured patients, and 17 percent private pay patients. These projections are reasonable and are consistent with Orlando General Hospital's current experience. T. 662-664; O.G. Ex. 2, p. 16. Charter Medical-Orange County, Inc. General Charter Medical proposes to construct a 50 bed free standing short term psychiatric hospital in Orange County, Florida. The capital cost of the proposed project would $5,85,000. C.M. Ex. 1. Charter Medical would offer adult and geriatric short term psychiatric services in the proposed short term beds. As a free standing specialty hospital devoted entirely to short term psychiatric care, Charter Medical's proposal should be able to provide more space and additional therapies than would typically be found at a general hospital with a short term psychiatric unit. T. 47-50, 890-91. Charter Medical would provide adequate geriatric short term psychiatric care in a separate unit with separate programs consisting of the latest techniques for caring for the mentally ill elderly patient. Charter Medical's proposed facility would not be able to treat short term psychiatric patients who also have serious medical problems, which undoubtedly will include elderly patients. Charter Medical would have adequate transfer arrangements with a general hospital to serve the medical needs of its patients, and would have adequate staffing and equipment within the free standing specialty hospital to meet the routine and emergency medical needs of its patients. Staffing Orlando General and Charter Medical would be able to recruit, train, and retain adequate staff to operate its proposed short term psychiatric unit. T. 635-648, 849-852, T. 137-143. Lone Term Financial Feasibility Orlando General Hospital Charges When these applications were filed, HRS did not have standards for the contents of a pro forma of income and expenses. Orlando General Hospital initially projected a charge rate of $350 in 1987 and $375 in 1988. This charge rate was based upon the charge rate for Orlando General's substance abuse unit at that time, compared with a survey of five other hospitals having short term psychiatric beds. T. 425; O.G. Ex. 2, p. 24, 49. As of the summer of 1988, the Medicaid program reimbursed Orlando General Hospital for its MDC 19 (psychiatric) patients at the rate of $418 per day. T. 585. Charter Medical proposes to charge $475 per day during 1988. Florida Hospital currently charges between $425 and $445 per short term psychiatric patient day, and these charges do not include ancillary charges. T. 992. Westlake Hospital currently charges about $550 per short term psychiatric patient day. T. 888. Winter Park Pavilion is a freestanding psychiatric hospital with 39 adult psychiatric beds. The record does not indicate whether it is licensed for short or long term care. The facility charges about $500 per patient day, which does not include ancillary costs. T. 913, 918. Crossroads University Behavioral Center is a freestanding 100 bed long term psychiatric hospital that is under construction. T. 808. Crossroads has considered charges in the range of $500 to $600 per day, but has not definitely settled on the rate. T. 832-833. The charges proposed by Orlando General Hospital in its application are very reasonable, if not very conservative. Projected Utilization Orlando General Hospital's MDC 19 patient days (psychiatric patient days) have increased steadily from 1986. In 1986, the hospital had 4,969 MDC 19 patient days; in 1987, it had 7,779 MDC 19 patient days; and extrapolating (multiplying by 4) from the data for the first three months of 196, Orlando General could reasonably expect 11,804 MDC 19 patient days in 1988. O.G. Ex. 2, p. 11; T. 516. Since a 24 bed unit at 100 percent occupancy would only generate 8,760 patient days, it is unreasonable to use 11,804 as the estimate of patient days in 1988. However, it is concluded that Orlando General Hospital would have no difficulty at all in very quickly filling its proposed 24 bed unit to capacity. Expenses Orlando General Hospital's application estimated that direct expenses of the proposed 24 bed short term psychiatric unit would be $801,505 in 1987, $839,080. In 1988, and $887,030 in 1989. O.G. Ex. 2. These are reasonable projections of direct expenses. The pro forma filed by Orlando General Hospital in its application did not include an estimate of allocated expenses. The allocated expenses would typically have been 60 percent of total expenses, and the direct expenses only 40 percent of total expenses. T. 698. The projected direct expenses for 1988 in Orlando General Hospital's application were $839,080. Since that is only 40 percent of the total expense, the total projected expense (including 60 percent for indirect allocated expense) would be $2,097,700. Long Term Financial Feasibility If Orlando General Hospital charged $375 per patient day in 1988, and had 8,760 patient days, as is reasonable to expect, given its actual experience, Orlando General would have $3,285,000 in gross revenue for 1988. Assuming that net revenue, after additions and after accounting for contractuals and bad debt, will be the same percentage of gross revenue as shown in Orlando General's application, which was 76.74 percent, this would generate a net revenue of $2,520,909. This net revenue would entirely cover not only the direct expenses but also the allocated expenses, and would leave profit of $423,209. All of the remaining issues raised by the parties as to the accuracy of Orlando General's estimates of nursing expense or bad debt are irrelevant given the large amount of leeway Orlando General would have, if necessary, to raise its charges from $375 to something closer to the charges of other area hospitals. In summary, Orlando General Hospital's proposal is financially feasible in the long term. Charter Medical-Orange County, Inc. Charter Medical's proposed charges include charges for physicians who admit patients, perform histories and physicals, and make daily medical rounds. The proposed charges are reasonable. If there were need, Charter Medical's proposal would be financially feasible in the long term. The need for Charter Medical's proposed facility has not been proven by a preponderance of the evidence, however. See the Conclusions of Law herein. While the numerical need rule as applied to Orange County shows a need for 55 beds, in actual practice that need is a need for osteopathic psychiatric care. The thirty or so patients currently treated on a daily basis at Orlando General Hospital ended up at that hospital, rather than Orlando Regional Medical Center or Florida Hospital, primarily because the patients preferred osteopathic care and were admitted to Orlando General Hospital by osteopathic physicians. Absent action by HRS to stop Orlando General Hospital from treating these patients, the patients would not be available to Charter Medical in its proposed facility. This would leave Charter Medical in a situation of opening a new 50 bed facility when the county occupancy rate in 1986 was 60 percent in the only two licensed facilities in the area. It would also leave Charter Medical in a situation of opening a new facility in the face of the trend to managed health care and the certainty that the average length of stay for short term psychiatric care by 1992 will decrease from current levels. For these reasons, Charter Medical has not proven financially feasibility in the long term by a preponderance of the evidence. Quality of Care Orlando General Hospital Orlando General Hospital would provide care of good quality comparable to care that would be provided by Charter Medical. Charter Medical-Orange County, Inc. Charter Medical Corporation is a large corporation that has experience in the operation of a large number of psychiatric hospitals. That expertise would be available to insure that the care provided in Orange County would be of good quality. Charter Medical-Orange County, Inc., would provide care of good quality comparable to care that would be provided by Orlando General. Comparative Review as to Important Differences The Orlando General Hospital Application Orlando General Hospital intends to convert 24 underutilized medical and surgical beds to 24 short term psychiatric beds. T. 517. Since the project calls for conversion of existing facilities, the capital cost is $700,000, and does not include the construction of new buildings. T. 517. Since the capital cost is relatively low, the project will not drain away a large amount of reimbursement from reimbursement funding sources, thus making those funds available to other health care facilities. T. 1223. As a licensed general hospital, Orlando General Hospital's patients including the patients that would be served by the proposed short term psychiatric unit, would be eligible for Medicaid reimbursement T. 1224. Orlando General Hospital has a good record in Orange County of serving indigent patients, and currently is providing care to a large portion of the indigents cared for by Orange County. T. 1099-1100. As discussed in the section concerning osteopathic care, Orlando General Hospital's proposal for a short term psychiatric unit would have a number of benefits to the practice of osteopathic medicine in the region, and the availability of osteopathic care to patients desiring that form of care. Patients in the short term psychiatric unit at Orlando General Hospital could be transferred to a medical bed when a medical need arises without having to be transported by an ambulance. The Charter Medical Application Charter Medical-Orange County, Inc., is a wholly owned subsidiary of Charter Medical Corporation. Charter Medical Corporation has been in existence for 20 years and has 81 hospitals. Of these, 68 are psychiatric or substance abuse facilities. Charter Medical thus has extensive resources and experience to provide very good psychiatric care at the proposed facility. As a free standing hospital dedicated solely to short term psychiatric care, it is reasonable to expect that Charter Medical's facility will tend to provide more space, more varied programs, and more intensive patient care than a general hospital. This would occur because in a general hospital, the psychiatric unit must compete with medical units for allocation of resources, and in some hospitals, the psychiatric unit is given a lower priority due to the tendency of such hospitals to emphasize the medical aspect of their services. T. 47-49. Charter Medical's facility would not treat Medicaid patients, and it proposes to serve a very small percentage of indigent patients. Charter proposes in future years after the second year to provide 1.5 percent of gross revenue as charity care, and 5 percent as bad debt. T. 377-79, 197. Charter Medical's facility would serve primarily private pay and insured patients, thus draining away these paying patients from other hospitals, to the detriment of other hospitals. T. 971. The Substantial Interest of Florida Hospital If a certificate of need were granted to Charter Medical, Florida Hospital would suffer an adverse impact by loss of patients and additional competition for staff. T. 971-972, 1318-1321, 1327.
Recommendation For these reasons, it is recommended in case number 87-4748 that a final order be entered denying the application of Charter Medical-Orange County, Inc., to construct and operate a new 50 bed short term psychiatric hospital, and in case number 87-4753 that a final order be entered granting the application of Orlando General Hospital to convert 24 medical-surgical beds to short term psychiatric beds. DONE and ENTERED this 28th day of November, 1988, in Tallahassee, Florida. WILLIAM C. SHERRILL, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of November, 1988. APPENDIX 1 TO RECOMMENDED ORDER, CASE NOS. 87-4748 and 87-4753 The following are rulings upon proposed findings of fact which have either been rejected or which have been adopted by reference. The numbers used are the numbers used by the parties. Statements of fact in this appendix or proposed findings of fact adopted by reference in this appendix are additional findings of fact. Findings of fact proposed by Charter Medical: 3-5. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The need is for beds in either a specialty or a general hospital. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The operational use of the beds is not relevant to the occupancy rate. Had the beds been restricted as a matter of licensure to children, like Palm Bay or Laurel Oaks, the beds would not have been potentially available for adults. Only in that case would exclusion of these beds have been proper. The operational use of the beds is not relevant to the occupancy rate. The testimony regarding the use of the word "existing" in the health planning field has been rejected as not persuasive. The context of such use was not explained, and thus a finding cannot be made that the use of the word is properly applicable to the way HRS intends the word to be used in its occupancy rule. The equation of "existing" with "operational" confuses capacity and need as discussed elsewhere in this recommended order. The HRS interpretation is the most reasonable construction of the word, and leads to a meaning far more consistent with the purposes of the certificate of need regulatory law than does the equation of "existing" with merely being operational. The certificate of need law is aimed at determining need five years into the future. How a hospital may temporarily operate its licensed beds during that period to respond to fluctuations in demand and operational idiosyncrasies at the particular hospital is irrelevant to the question of whether HRS should grant certificates of need and additional licensed capacity within the District. Dr. Luke's calculation was conservative and correct, but a better calculation is the one by Orlando General's expert (78 percent) that uses MDC 19 patient days. The only relevant count is 105 licensed beds at the two facilities. The last sentence is rejected for lack of credible evidence from which to draw that inference, as explained elsewhere in this recommended order. 20-21. The only relevant count is licensed beds. 22. Orlando General's average daily census was 13.6 based upon 4,969 MDC 19 patient days in 1986. 23-24. The only relevant count is licensed beds. 28. These are matters of law, and thus not appropriate as proposed findings of fact. 30. It is true that the health care needs of the metropolitan Orlando impact counties adjacent to Orange County due to the sprawl of that urban area across several county lines. But there is sufficient expert evidence in this record to conclude that generally speaking, the local health council has not acted arbitrarily and capriciously in its choices of counties as health planning areas for purposes of allocation of bed need and for purposes of applying occupancy rates. Nonetheless, the that the urban extent of the metropolitan Orlando area is important has been accepted in this recommended order with respect to the conclusion that the factor that the Orange County occupancy rate is only slightly below 75 percent is entitled to less weight in this case. 32, 33, 35, 37-63. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 64 (first sentence). It is realistically expected that Charter Medical will devote 1.5 percent of its gross patient revenue to barity care. T. 377- 379. 65-70. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 71-72. Financial feasibility has not been shown due to lack of need. Lack of need will result in insufficient occupancy and revenue. 73-74. The extrapolation from the actual trend of increase in patient days in District VII for the years 1983-1987 to create a projection of patient days in 1988 through 1992 would have been a valid and important way to show need, and would have been accepted had the projection accounted for the trend in the industry toward shorter lengths of stay due to changes in methods of payments for mental health care. The extrapolation simply assumes that the past will continue. In this case, there is substantial reason to believe that the past will not continue, that the base data, 1983-1987, is not valid for predicting patient days in 1992 because the patient days in 1992 will largely be paid for under a new system, a system that discourages inpatient stays beyond that which is absolutely necessary from a clinical point of view. Charter Medical projects that it will rely upon insurance for payment 67 percent of the time, so the changes in insurance payments will substantially affect patient days in 1992 at its proposed facility. 75-85. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 89. While osteopathic psychiatric care is essentially the same as allopathic psychiatric care, there are two critical differences. Osteopathic medicine in general emphasizes consideration of the functioning of the body as a whole; allopathic medicine does not. Secondly, osteopathic medicine utilizes muscular and skeletal manipulation in treatment, including psychiatric treatment, and allopathic medicine does not. These two differences are sufficiently marked for patients to have a preference for one or the other approach. 91-92. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 93-94. These proposed findings are true and are adopted by reference, but the findings do not prove that the quality of care at Orlando General Hospital would not be adequate in 1992. It was apparent that Dr. Greene's heavy caseload was not an optimum circumstance. However, at the time of the , Orlando General had four staff psychiatrists. T. 1355. Dr. Greene testified that the care was "basically" the same, but his testimony clearly reflected his opinion that the "deeper" differences were significant. T. 756, 1350-1354. The record cited does not support a finding that the majority of the patients transferred were indigent. That question was not asked. This proposed finding places the cart before the horse. Osteopathic physicians gravitate to Orlando General Hospital to practice osteopathy. In the practice of osteopathy, they achieve many job satisfactions, including care of patients and making money. 98-99. These proposed findings of fact are irrelevant because based upon the past, not upon a future having more staff psychiatrists. Moreover, it is clinically acceptable for other professionals to provide therapy and counseling. These proposed findings of fact are irrelevant. The program description in the application was superseded by evidence during the formal administrative hearing. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. Orlando General Hospital is an existing hospital that already has these functions. It may need some augmentation of staff in these areas, but if it does, it would be an unreasonable conclusion to make that it would fail to add such 103-106. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The only exception is the last sentence in proposed finding 106. The number 18 is not supported by the record cited. This method has not been shown to be unreasonable. It is true that it was the method used. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. There was an accounting for bad debt. O.G. Ex. 2, p. 48. The point is essentially irrelevant. A 10 percent increase based upon 1987 salaries would be only about 20,000. Moreover, Charter Medical stipulated in the prehearing stipulation that the salaries of all personnel are reasonable. The proposed finding of fact is true but irrelevant. A pro forma does not have to comport with generally accepted accounting principles. Even with the addition of these charges, the resultant charge is comparable to charges of other area hospitals, including. Charter Medical's proposed charge of $475, which with inflation would increase rapidly to $500. 113-122, 124. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 125-127. Proof that an existing health care program is in sound financial condition is essentially irrelevant to the question of whether that program has a substantial interest sufficient to permit intervention into a section 120.57(1), Fla. Stat., formal proceeding. Proof of competition for the same patients in the same service area is sufficient to show that the existing program will be "substantially affected" to entitle it to intervene. Section 381.709(5)(b), Fla. Stat. (1987). Florida Hospital has proven its substantial interest by showing that the addition of new short term psychiatric beds, particularily a new facility like proposed by Charter Medical, will increase competition in Orange County for patients and staff. T. 881, 883, 649, 855-856. 128-129. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference 130. Mr. Holton's testimony was not only based upon consideration of the data mentioned in this proposed finding of fact, but also his experience in general with managed health care plans and the effect such plans have had upon the market place. The proposed finding that his testimony was not credible is rejected. 131 (first two sentences), 132-133. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. Findings of Fact proposed by Orlando General Hospital: 7-12, 17, 19, 29. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The statement is true only from the perspective of the osteopathic psychiatrist and with respect to osteopathic care. Allopathic physicians disagree. The second sentence is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 34. The second sentence is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 38-49, 51-60. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The proposition that separate geriatric units offer no benefits to geriatric patients is contrary to the preponderance of the evidence. The proposition that there is no problem in mixing the elderly with younger patients, or that an elderly patient does much better in a mixed population, is contrary to the preponderance of the evidence. The second and third sentences are contrary to the preponderance of the evidence. 67-71, 73-80. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 86-87. While these proposed findings of fact are true, they are only marginally relevant since the ratio is measured as of 1992, not 1988. These are matters of law, and thus not appropriate as proposed findings of fact. It is unclear when Dr. Greene meant when he testified that his census was 35 to 40 patients. For the first 90 days of 1988, the hospital had 2,951 MDC 19 patient days, or 32.8 patients per day. The analysis with respect to "existing" beds and the county analysis have been rejected as explained in this recommended order. The last sentence is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 97-102. The legal argument that beds temporarily not in operation are not "existing" has been rejected as explained in this recommended order. Thus, these findings are not relevant. 105, 107 (last sentence). These are matters of law, and thus not appropriate as proposed findings of fact. 109. The second sentence is rejected as a finding of fact because the health planning context was not adequately explained. 110-111. These are matters of law, and thus not appropriate as proposed findings of fact. 114-115. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 117. These are matters of law, and thus not appropriate as proposed findings of fact. 118-120. These proposed findings of fact are irrelevant. 122. These are matters of law, and thus not appropriate as proposed findings of fact. 123, 124, 126, 127, 129-131, 133. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The proposed finding of fact is true, but has not been shown to impact the financial feasibility of the Charter Medical proposal. The indirect costs within a single hospital are more relevant to long term financial feasibility of the proposed project than the indirect costs to a single hospital from a parent corporation that has over 60 such hospitals. 136, 147, 151, 152. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The patient body count for the first three months of 1988 was 32.8. O.G. Ex. 2, p. 11. The "consciousness" of a corporation is difficult . Orlando General Hospital was well aware that its medical-surgical census was decreasing and its psychiatric population was increasing. It is true that the increase of its psychiatric population was largely due to causes outside the control of the hospital, however, and not due to marketing efforts by the hospital. 161 (last sentence), 162. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. These are matters of law, and thus not appropriate as proposed findings of fact. This proposed finding of fact is only marginally relevant because the result could be an average caused a minority of states who do things differently. Moreover, there Is no evidence that Florida is like this. The third sentence is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 167. The statement is true only if HRS allows Orlando General Hospital to continue to serve this large number of psychiatric patients without having a certificate of need. If the practice were discontinued, some of the patients would be served by other hospitals in the District, including Florida Hospital. These are matters of law, and thus not appropriate as proposed findings of fact. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 174, 176. These are matters of law, and thus not appropriate as proposed findings of fact. 177. The current state of access to short term psychiatric services in eastern Orange County was not credibly proven. 179. These are matters of law, and thus not appropriate as proposed findings of fact. Findings of fact proposed by HRS: 1, 2, 3, 4. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 5, 6. These are matters of law, and thus not appropriate as proposed findings of fact. 13. The number should be 64, not 63. 22. The occupancy rate is a mathematical attempt to measure the degree to which the District VII capacity to serve adult short term psychiatric patients has been used up. The theory implicit in the rule is that, with respect to adult capacity, the decision to add new capacity should be delayed until the old capacity is at least 75 percent or more used up. The rate has a numerator (patient days) and a denominator (the real capacity). Any argument that tries to ignore real patient days occurring in the District, or real capacity to serve those patients, is unreasonable. Findings of fact proposed by Florida Hospital: The second sentence is true, but the issue is not she license of the beds is, but what type of patient day is generated by that service. The preponderance of the evidence is that those were short term psychiatric patient days. The first sentence is rejected for the reasons stated above. 19-21. These are matters of law, and thus not appropriate as proposed findings of fact. 20-27. F.H. Ex. 3 was excluded from evidence, and the testimony related to that exhibit was also excluded from evidence for the reasons stated elsewhere in this recommended order. 28. This proposed finding fails to consider the MDC 19 evidence of patient days at Florida Hospital and Orlando Regional Medical Center. 29-30. These proposed findings of fact are true, and the reasoning therein is part of the reason why the denominator of the fraction that is the occupancy rate must be licensed beds. 31. A correction to the number of patient days at Westlake Hospital is legally appropriate, but the evidence for such a correction has been excluded from the record for reasons having nothing to do with the legal propriety of such a correction. 33. These are matters of law, and thus not appropriate as proposed findings of fact. 34-39. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The fact that existing facilities may have beds available to treat future patients is not inconsistent with a decision to grant a certificate of need for additional licensed beds. The occupancy rate threshold in the rule is 75 percent occupancy, not 100 percent occupancy. It is to be expected that the District will have 25 percent or less of its beds unoccupied when new beds are approved. 41, 43-44, 46-47. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. This proposed finding of fact is contrary to the credible evidence. These proposed findings of fact are irrelevant. See section 381.705(1)(g) and (h), Fla. Stat. (1987). This proposed finding of fact is contrary to the credible evidence. This proposed finding of fact is contrary to the credible evidence. To the contrary, where need exists, these are grounds for determining which of the competing applicants should be approved. 60. A conclusion that the occupancy rates are "stable" cannot be made from data based only upon calendar year 1986, which was two years ago, and six years from 1992, the time when need is projected. 61-69. These findings of fact are true. Even where there is need, the opening of the new facility normally lures some patients away from existing facilities. But if need exists sufficient to grant a certificate of need, this short term harm to existing providers is irrelevant. Finally, health care costs would not increase if there is need. While it is true that the Charter Medical utilization projections were initially prepared without a close analysis of District VII, the projections are nonetheless reasonable as discussed elsewhere in this recommenced order. Inflation of expenses without projection of inflation in revenues is an incomplete and unreasonable mode of projection. T. 229-230. Given the size of the Charter Medical Corporation and the number of hospitals it owns and operates, the condition of one more hospital will not Increase home office expenses. Those expenses will exist whether this project exists or not. The financial feasibility of the project in Orlando, therefor, need not consider home office expenses. T. 242-244. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The quantitative relevancy of this proposed finding of fact has not been shown. The proposed finding of fact is otherwise true. Orlando General Hospital's current patient census is a sufficient basis for a finding that its projected occupancy rate is reasonable. Charges proposed in an application for a certificate of need are not promises binding upon the applicant. In future years, the applicant is reasonably expected to make substantial changes in its charge structure based upon market conditions. Proposed charges, as well as proposed changes to charges to meet altered contingencies beyond the control of the applicant, is entirely appropriate for analysis in a certificate of need case. The only relevant question is whether the altered charge compares favorably with competing applicants. 81-83. Florida Hospital proved that the market for staff is competitive and that hiring staff is difficult at the moment. But it did not prove that the applicants would fail to hire adequate staff to operate their proposed facilities. T. 1327. 92-102. These proposed findings of fact summarize proposed findings of fact which have previously been addressed. APPENDIX 2 TO RECOMMENDED ORDER, CASE NOS. 87-4748 and 87-4753 Rule 10-5.008(3), Fla. Admin. Code, provides that "[s]ubsequent to an application being deemed complete by the Office of Health Planning and Development, no further information or amendment will be accepted by the Department." (E.S.) The rule states that the Department will accept no information after the application is deemed complete. The words used are not ambiguous or unclear. Thus, if normal rules of construction were to be followed, the conclusion would be drawn $ha the Department is bound by its own clear rule, and cannot, by interpretation, add exceptions. But an equally valid rule of construction is that absurd results must be avoided. Certificate of need cases, particular ones like the case at bar, are highly competitive and complicated. It would be unreasonable to require the applicants to prove applications that have become erroneous due to the passage of time. While the question is a close one, the Hearing Officer has concluded that it would be better to ignore the clear words of the rule, and attempt to apply the evolving interpretative policy of the Department to avoid an absurd result. The following appear to be the existing final orders of the Department interpreting rule 10-5.008(3), and its predecessor, published in the Florida Administrative Law Reports. Health Care and Retirement Corporation of America, d/b/a Heartland of Palm Beach, 8 F.A.L.R. 4650 (September 24, 1986); Arbor Health Care Company, Inc., d/b/a Martin Health Center, Inc., v. Department of Health and Rehabilitative Services et al., 9 F.A.L.R. 709 (October 13, 1986); Mease Hospital and Clinic v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 159 (October 13, 1986); Health Care and Retirement Corporation of America, d/b/a Heartland of Collier County v. Department of Health and Rehabilitative Services, 8 F.A.L.R. 5883 (December 8, 1986); Health Care and Retirement Corporation of America, d/b/a Nursing Center of Highlands County, v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1081 (December, 1986); Manatee Mental Health Center, Inc. d/b/a Manatee Crisis Center v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 1430 (February 2, 1987); Health Care and Retirement Corporation of America, d/b/a Heartland of Hillsborouh, v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1630 (February 5, 1987); Manor Care, Inc. v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1628 (March 2, 1987); Psychiatric Institutes of America, Inc., d/b/a Psychiatric Institute of Orlando v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 1626a (March 5, 1987) ; Manor Care, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2139 (March 24, 1987); Wuesthoff Health Services, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2110 (April 17, 1987); Hialeah Hospital, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2363 (May 1, 1987); Palms Residential Treatment Center, Inc., d/b/a Manatee Palms Residential Treatment Center v. Department of Health and Rehabilitative Services, et al., 10 F.A.L.R. 1425 (February 15, 1988). These final orders contain the following statements concerning the Department's interpretation of rule 10-5.008(3) and its evolving policy with respect to changes to applications for certificates of need during section proceedings and admissibility of new information not contained in the original applications: Health Care and Retirement, supra, 8 F.A.L.R. 1081: During 120.57 proceedings, an application may be updated to address facts extrinsic to the application such as interest rates, inflation of construction costs, current occupancies, compliance with new state or local health plans, and changes in bed or service inventories. An applicant is not allowed to update by adding additional services, beds, construction, or other concepts not initially reviewed by HRS. Manatee Mental Health Center, supra, 9 F.A.L.R. at 1431: ... HRS has authority by statute to issue a CON for an identifiable portion of . Section 381.4C4(8), Florida Statutes. MMHC's "amended" proposal reduced the number of beds sought, and was properly considered during the 120.57 proceedings. Manor Care. Inc., supra, 9 F.A.L.R. at 1628: The amended applications [amended to address needs of Alzheimer's disease patients] changed the scope and character of the proposed facilities and services and thus, must be reviewed initially at HRS... [ limited the denovo concept by requiring that evidence of changed circumstances be considered only if relevant to the application. Hialeah Hospital, Inc., 9 F.A.L.R. at 2366: It is recognized that more than a year may pass between the free form decision by HRS and the final 120.57 hearing and this passage of time may require updating an application by evidence of changed circumstances such as the' effect of inflation on interest and construction costs. For the sake of clarity HRS would avoid the use of the word "amendment" to describe such updating. Such evidence of changed circumstances beyond the control of the applicant is relevant to the original application and is admissible at the 120.57 hearing. Taking the easiest first, those items explicitly listed by the Department in the first Health Care and Retirement case, "interest rates, inflation of construction costs, current occupancies, compliance with new state or local health plans, and changes in bed or service inventories," which change after the application is initially filed, are permitted. Not permitted are "additional services, beds, construction, or other concepts not initially reviewed by HRS." The remainder of the Department's incipient policy, as presently articulated, is obscure. The word "extrinsic" without the list of examples is of little guidance. The application is only an idea on paper. Anything new, other than the bare words on the paper as originally filed, is literally "extrinsic" thereto. The concept of whether the new information changes the "scope and character of the facilities and services" originally reviewed in free form action by the Department is similarly of little guidance because the phrase "scope and character" can mean practically anything. Of fundamental difficulty is whether this phrase is intended to select substantial changes to the original application, or all changes. For example, if the original application proposes separate shower stalls and tubs for double rooms, but the amended application proposes a combination shower and tub, has the "scope and character" of the "facilities and services" changed? The phrase "additional services, beds, construction, or other concepts not initially reviewed by HRS" is similarly vague. What is a service or construction or a concept not originally reviewed? Would this include the change in bathing equipment discussed above? The concept of "control" of the applicant over the information that goes into the original application is the only phrase that gives applicants any guidance. The word "control" probably is intended as a "knew or reasonably should have "known" standard. If the applicant reasonably should have known about the information and should have provided the Department with the information as a part of its original application, then the new information cannot be considered during the formal administrative hearing. The Hearing Officer will be guided, thus, by the explicit list of items provided by the Department in the Health Care and Retirement case, and by the concept of "control" provided by the Hialeah case. COPIES FURNISHED: For Agency HRS Theodore D. Mack. Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive Fort Knox Executive Building Tallahassee, Florida 32308 (904) 488-8673 Charter Medical-Orange County, Inc. Fred W. Baggett, Esquire Stephen A. Ecenia, Esquire Roberts, Baggett, LaFace & Richard 101 East College Avenue Post Office Drawer 1838 Tallahassee, Florida 32301 (904) 222-6891 William D. Hoffman, Jr., Esquire Deborah J. Winegard, Esquire King & Spalding 2500 Trust Company Tower Atlanta, GA 30303 (404) 572-4600 Orlando Regional Medical Center, Inc. Steven R. Bechtel, Esquire Mateer, Harbert & Bates, P. A. 100 East Robinson Street Post Office Box 2854 Orlando, Florida 32802 (305) 425-9044 Orlando General Hospital, Inc. Eric J. Haugdahl, Esquire 1363 East Lafayette Street Suite C Tallahassee, Florida 32301 (904) 878-0215 Florida Hospital Stephen K. Boone, Esquire Robert P. Mudge, Esquire Boone, Boone, Klingbeil & Boone, P. A. 1001 Avenida del Circo Post Office Box 1596 Venice, Florida 34284 (813) 488-6716 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
The Issue The issue in these consolidated cases is whether proposed amendments to Rule 10-5.011(1)(o), and (p) F.A.C. relating to certificates of need for hospital inpatient general psychiatric services, are invalid exercises of delegated legislative authority, as defined in Section 120.52(8), F.S.
Findings Of Fact Metamorphosis of the Rules Prior to 1983, hospitals were not separately licensed, and certificates of need (CON) were not required for the designation of beds for psychiatric and substance abuse services. In 1983, statutory amendments to Chapter 381, F.S. addressed psychiatric beds as reviewable projects in the CON program. In 1983, HRS adopted rules establishing four new categories of beds, now found in Rules 10-5.011(1)(o), (p), and (q), F.A.C.: Short-term psychiatric, long-term psychiatric, and short and long-term substance abuse. At the time that the categories were created, HRS conducted an inventory of the hospitals, asking how many beds were designated in each category. Based on the responses, published in the Florida Administrative Weekly, future projections of need were made and applications were considered for CONs. Another category of psychiatric beds was not included in the 1983 rules. Intensive residential treatment programs for children and adolescents were created by statute in 1982, and are defined in Section 395.002(8), F.S. as: a specialty hospital accredited by the Joint Commission on Accreditation of Hospitals which provides 24-hour care and which has the primary functions of diagnosis and treatment of patients under the age of IS having psychiatric disorders in order to restore such patients to an optimal level of functioning. These facilities, called IRTFs, may become licensed as hospitals pursuant to Section 395.003(2)(f), F.S., but as hospitals they must obtain CON approval pursuant to Sections 381.702(7) and (12), F.S. and Section 381.706(1) (b), F.S. IRTFs have no statutory or regulatory restrictions on length of stay and were approved by HRS at one time under an unwritten policy that there be one such facility available in each HRS planning district, without regard to the availability of other long or short term psychiatric programs. In 1985, HRS proposed a rule amendment which would have eliminated the short and long term distinction, as well as the distinction between psychiatric services and substance abuse services. Six months later, the proposed rule amendment was withdrawn. It was highly controversial; several challenges were filed; objections were made by various local health councils; and a new administrator took over. The agency decided to rework its proposed change~;. The agency next began the process of revision in 1987, and in 1988 convened a workshop group to review an issue paper prepared by agency staff. Another work group met in 1989 to consider the consolidation of psychiatric and substance abuse rules. HRS staff reviewed literature on the subjects of substance abuse and psychiatric services, including literature relating to access by indigent patients and the provision of services to children and adolescents. Staff prepared rule drafts which were circulated in- house, including the alcohol, drug abuse and mental health program office; and to such outside groups as the Association of Voluntary Hospitals of Florida, the Florida Hospital Association and the League of Hospitals. The proposed rule amendments which are the subject of this proceeding were filed on January 19, 1990 (substance abuse), and on January 26, 1990 (inpatient psychiatric services) in the Florida Administrative Weekly. The Parties HRS administers the CON program pursuant to Section 381.701, et seq., F.S. (1989). The CON program regulates entry into the Florida health care market by providers through review and approval of certain capital expenditures, services and beds. The petitioner, Florida League of Hospitals, Inc. is a nonprofit corporation which is organized and maintained for the benefit of investor-owned hospitals which comprise its membership. The remaining petitioners and intervenors are current providers of hospital inpatient psychiatric services, long and short term, and of inpatient substance abuse services, long and short term. The petitioners and intervenors are all substantially affected by the proposed rules and have stipulated to the standing of all parties in this proceeding. Abolishing Distinctions Between Long-Term & Short-Term Psychiatric Beds "Short term hospital inpatient psychiatric services" is defined in existing rule 10-5.011(1)(o)1, FAC, as follows: Short term hospital inpatient psychiatric services means a category of services which provides a 24-hour a day therapeutic milieu for persons suffering from mental health problems which are so severe and acute that they need intensive, full-time care. Acute psychiatric inpatient care is defined as a service not exceeding three months and averaging length of stay of 30 days or less for adults and a stay of 60 days or less for children and adolescents under 18 years. "Long term psychiatric services" is defined in existing rule 10- 5.011(1)(p)1., FAC as a category of services which provides hospital based inpatient services averaging a length of stay of 90 days. Neither rule addresses services to adults with an average length of stay (ALOS) of 30-90 days, or services to children and adolescents with a 60-90 day ALOS. Because of this, and the "averaging" process, long term hospitals legitimately serve "short term" patients and short term hospitals may serve "long term" patients. One party has calculated than a long term facility could legally provide short term services for 80% of its patients, and long term services for only 20% of its patients and still have an ALOS of 90 days. Under the existing rules a facility must file a CON application to convert from long term to short term beds, or vice versa, and is subject to sanctions for failure to comply with the designation on its CON. The proposed changes would repeal rule 10-5.011(1) (p), FAC regarding long term services, and would amend rule 10- 5.011(1) (o), FAC to delete the definition of short term services, thereby permitting facilities to serve patients without regard to length of stay. The proposed changes are supported by several factors upon which a reasonable person could rely. Substantial changes have occurred in the last decade in clinical practices and in third party reimbursement to reduce the ALOS for hospital inpatient psychiatric care. Prior to the 1960s, there was no distinction between long and short term care, as all hospital based care was long term with an emphasis on psychoanalytic therapy. Beginning in the 1960s, the concept of community mental health programs evolved with an emphasis on deinstitutionalization of patients in large public "asylums" and with a goal of treatment in the least restrictive environment. In more recent years the trend has spread to the private sector. Improvements in the availability and use of psychiatric drugs, the use of outpatient care or partial hospitalization, and improved follow up care have led to a dramatic decrease in ALOS. Long term care is costly, and whether third party payors have been a driving force, or are merely responding to the trends described above, long term inpatient reimbursement is virtually nonexistent. During the 19805, most insurance companies imposed a 30-day limit on psychiatric inpatient care or imposed monetary limits which would have effectively paid for less than a 90-day term. CHAMPUS, the program providing insurance to military dependents, was providing long term coverage in 1982, but by 1986 its coverage was rarely available for more than 30-60 days, and today, under CHAMPUS' case management system, 30 days is a "luxurious amount". Other large third-party payors such as Blue Cross/Blue Shield have similar limits or aggressively use case management (the close scrutiny of need on a case by case basis) to limit reimbursement for inpatient care. Of the two or three long term facilities in existence at the time that HRS' rules were originally adopted, only one, Anclote Manor still reported an ALOS of over 90 days by 1989, dropping from an ALOS of 477.9 days in 1986 to 145.4 days in 1989. At the same time its occupancy rate dropped below 50%. There is an interesting dialogue among experts as to whether there still exists a clinical distinction between long term and short term inpatient psychiatric care. Studies at the Florida Mental Health Institute found no difference in rate of rehospitalization over a 12 month period between patients who were in a nine week program and patients from Florida State Hospital with a 500 day length of stay. Some mental health practitioners are looking now at treating the chronic psychiatric patient with repeated short term hospital stays and less intensive care between episodes, rather than a single long term inpatient stay. Other practitioners maintain that a long term psychiatric problem is behavioral in nature and requires a total life readjustment and longer length of stay. Whichever practice may be preferable, the facts remain that fewer and fewer mental patients are being treated with long term hospitalization. The proposed rules would not foreclose any facility from providing long term care, if it finds the need. To the extent that a clinical distinction exists between short and long term care, the existing rules do not address that distinction, except from a wholly arbitrary length of stay perspective. The existing rules no longer serve valid health care objectives. Existing providers with short term CONs are concerned that the allowing long term facilities to convert will further glut an underutilized market and will result in an increase in vacant beds and a rise in the cost of health services, contrary to the intent of the CON program. Intensive residential treatment facilities (IRTFs), which will be folded into the need methodology for children and adolescent beds, have no current restrictions on length of stay and may already compete with impunity with the short term providers. Moreover, long term facilities are also providing substantial short term care as a result of the trends discussed above. HRS has not consistently enforced the length of stay restrictions of long term providers' CONs. Whether those CONs were improvidently granted is beside the point. The capital costs have already been incurred; the beds are available; and the beds are being used, in part, for short term services. Abolishing the distinction is a rational approach to current conditions. And in determining that all existing providers would be placed in the same position regarding length of stay, HRS avoids the regulatory nightmare of trying to enforce limitations on existing providers and approving new beds without limitations. Creating a Distinction Between Adult and Children/Adolescent Beds Rule 10-5.011(1)(o)3.c. creates a CON distinction between general psychiatric services for adults, and those services for children and adolescents. Rule 10-5.011(1)(o)4., as proposed, would create separate need criteria for hospital inpatient general psychiatric services for adults and for children/adolescents. Adolescents are defined in Rule 10- 5.011(1)(o)2.a., as persons age 14 through 17 years. Persons over 17 years are adults, and under 14 years are children. There are valid clinical reasons to distinguish between programs fob the separate age groups. Although there is some overlap, differing therapies are appropriate with different ages. The types of services offered to adults are not the same as those which are offered to children. Children, for example, often receive academic educational services while being hospitalized. Adults receive career or vocational counseling and marriage counseling. The required separation by age categories would remove some flexibility from providers. However, this is offset by the Department's valid need to track for planning purposes inpatient services to children and adolescents separately from those provided to adults. Based on anecdotal evidence, HRS' Office of Alcohol, Drug Abuse and Mental Health Program Office is concerned about the possible overutilization of hospital inpatient services for children and adolescents and the potential that when insurance reimbursement expires they are discharged without clinical bases. Taking Inventory Under the proposed rule, in order to separately regulate adult and children/adolescent beds, HRS will fix an inventory of uses as of the time that the rule takes effect. For facilities with CONs which already allocate beds between the two groups, the proposed rule will have no effect. For facilities without a designation, as long as adults and children/adolescents are kept in separate programs, the allocation can now be mixed and changed at will. The rule amendment will freeze that use in place. HRS has conducted a preliminary survey to determine the existing uses of psychiatric, substance abuse and residential treatment program beds. The survey of approximately 120 facilities is complete, but is not intended to limit those facilities unless their CON already provides a limit. A final inventory will be taken after the proposed rules become effective. The inventory will be published, and providers will be given an opportunity to contest its findings. The ultimate outcome will be amended CONs and licenses which reflect each facility's mix of adult and children/adolescent beds. The process is a fair and reasonable means of commencing separate regulation of services to these age groups. The Definitions Proposed rules 10-5.011(1)(o)2.1., 2.p., and 2.t.) define "hospital inpatient general psychiatric services", "psychiatric disorder" and "substance abuse", respectively. Each of these provisions defines the terms by reference to classifications contained in the Diagnostic and Statistical Manual of Mental Diseases (DSM-III-R Manual) and equivalent classifications contained- in the International Classification of Diseases (ICD-9 Codes). The rule as originally proposed included the phrase "or its subsequent revisions", after incorporating the manuals by reference. In testimony, and in the parties second agreement (Hearing Office exhibit 3) the phrase is deleted. However, it still appears in proposed rule 10-5.011(1) (o)2.1., perhaps inadvertently. The DSM-III-R is a generally recognized manual for the classification of mental disorders and is widely used by clinicians and medical records professionals to categorize the conditions of patients. The ICD-9 codes are broader than just mental disorders, but they have a section on mental disorders with numbers that are identical to those in the DSM-III-R. Although the manuals are complex and subject to interpretation, clinicians are accustomed to their use and they provide a reasonable guide as to the services which may be provided in an inpatient substance abuse program, as distinguished from an inpatient psychiatric program. Advertising Limited Proposed rule 10-5.011(1)(o)3.d. (as amended in the parties second agreement, Hearing Officer exhibit #3), provides: D. Advertising of services. The number of beds for adult or for children and adolescent hospital inpatient general psychiatric services shall be indicated on the face of the hospital's license. Beds in intensive residential treatment programs for children and adolescents which are licensed as specialty hospital beds will be indicated as intensive residential treatment program beds on the face of the hospital's license. Only hospitals with separately-licensed hospital inpatient general psychiatric services, including facilities with intensive residential treatment programs for children and adolescents which are licensed as specialty hospitals, can advertise to the public the availability of hospital inpatient general psychiatric services. A hospital with separately licensed hospital inpatient general psychiatric services that does not have a certificate of need for hospital inpatient substance abuse services may advertise that they [sic] provide services for patients with a principal psychiatric diagnosis excluding substance abuse and a secondary substance abuse disorder. The Department does not currently have CON, licensure, or other rules which limit the ability of a health care provider to advertise its services, and has never used advertising as a factor in conducting CON review for any proposed services. HRS included provisions regarding advertising in its proposed rules because it had evidence that existing facilities have used misleading advertisements. The evidence came from other providers, rather than consumers. However, it is the consumer whom the agency feels may be confused by advertising which implies that services are available when such services cannot be legally provided under the facility's license. The advertising provision is prospective in nature, seeking to prevent licensed providers from advertising services for which they are not licensed. The provisions do not relate to CON review, and the staff is unclear as to how the rule would be implemented. Licensing and CON review are two separate functions within the agency. Although the term is not defined in the proposed rule, advertising broadly includes word of mouth referrals and public presentations by professionals in the community, as well as traditional media and written advertisements. Properly utilized, advertising helps consumers exercise choice and gain access to needed services. Improper advertising is subject to the regulation of federal and state agencies other than the department. New Need Methodology, with Preferences Proposed Rule 10-5.011(1)(o)4., deletes the existing population ratio methodology and creates a need formula based upon use rate, for adult and children/adolescent inpatient psychiatric services. Certain preferences are also described. 34. Rule 10-5.011(1) (o)4.e.(III) provides: In order to insure access to hospital inpatient general psychiatric services for Medicaid-eligible and charity care adults, forty percent of the gross bed need allocated to each district for hospital inpatient general psychiatric services for adults should be allocated to general hospitals. The same provision for children and adolescent services is found in rule 10-5.011(1)(o)4.h.(III). Medicaid reimbursement is not available for inpatient services in a specialty hospital. 35. Rule 10-5.011(1)(o)4.i. provides: Preferences Among Competing Applicants for Hospital Inpatient General Psychiatric Services. In weighing and balancing statutory and rule review criteria, preference will be given to applicants who: Provide Medicaid and charity care days as a percentage of its total patient days equal to or greater than the average percentage of Medicaid and charity care patient days of total patient days provided by other hospitals in the district, as determined for the most recent calendar year prior to the year of the application for which data are available from the Health Care Cost Containment Board. Propose to serve the most seriously mentally ill patients (e.g. suicidal patients; patients with acute schizophrenia; patients with severe depression) to the extent that these patients can benefit from a hospital-based organized inpatient treatment program. Propose to service Medicaid-eligible persons. Propose to service individuals without regard to their ability to pay. Provide a continuum of psychiatric services for children and adolescents, including services following discharge. The preferences are similar to those in CON rules relating to other types of health services and are intended to implement, in part, the legislative mandate that the agency consider an applicant's ". . . past and proposed provision of health care services to medicaid patients and the medically indigent." Section 381.705(1) (n), F.S. Under Medicaid reimbursement general hospitals are paid a set per diem based on a variety of services provided to all Medicaid patients, regardless of actual cost of the individual service. As psychiatric services are generally less costly than other services on a per diem basis, hospitals may recoup a greater percentage of their costs in serving Medicaid psychiatric patients. This and the fact that public hospitals receive some governmental subsidies do not obviate the need for incentives in the CON program. Not all of the charity care provided by these hospitals is funded and a large amount is written off. Although Petitioners argue that the preferences are not needed, or are too generous, none provide competent evidence that the facilities who do not enjoy the preferences are unduly prejudiced. The 40% allocation of bed need to general hospitals is a guideline, not a maximum, as applied by the agency, and presumes that there are general hospitals competing in any batch in question. It is not intended to frustrate a separate section of the rule which allows a hospital with at least an 85% occupancy rate to expand regardless of need shown in the formula and the occupancy rate district-wide. See 10- 5.011(1) (o)4.d. and g. "Evaluation of Treatment Outcomes" The proposed rules contain three provisions relating to a hospital's evaluation of its patients' treatment outcomes. Rule 10-5.011(1) (o)3.i, includes among "required services", ". . . an overall program evaluation of the treatment outcomes for discharged patients to determine program effectiveness." Rule 10-5.011(1)(o)8.j., requires in the application, A description of the methods to be used to evaluate the outcome of the treatments provided and to determine the effectiveness of the program, including any summary evaluation outcome results for hospital inpatient psychiatric services provided at other facilities owned or operated by the applicant in Florida and other states. The data shall exclude patient specific information. Rule 10-5.011(1)(o)9.e., imposes a similar additional requirement in applications from providers seeking more beds: A summary description of any treatment outcome evaluation of the hospital inpatient general psychiatric services provided at the facility for which additional beds are requested, for children, adolescents or adults as applicable to the facility for the 12-month period ending six months prior to the beginning date of the quarter of the publication of the fixed bed need pool. The purpose of these requirements, according to HRS, is to insure that hospitals will know whether its patients are better off when they leave than when they were admitted to the program. Most hospitals have such knowledge. The terms, "outcome determination", "summary evaluation outcome results", "summary description of treatment outcome evaluation" and "overall program evaluation of treatment outcomes", are nowhere defined in the proposed rules, and the department intends to leave to each applicant or provider the methodology for determining whether its patients are "better off" for having been in its program. Hospitals do not routinely evaluate their patients after discharge and such follow up would be difficult and costly. Most hospitals do, however, establish a treatment plan upon admission, continue to review and revise that plan as needed throughout treatment, and determine the patients' readiness for discharge based on the goals successfully attained. This is the process described by Florida Hospital's Center of Psychiatry Administrative Director. The rules require no more than a description similar to that provided by Florida Hospital. The rules set no standards and do not dictate that follow- up of discharged patients be accomplished, even though post discharge evaluation may be of value and is generally accepted as the best tool for measuring treatment effectiveness. The measurement of treatment outcome is an inexact process and relies on a series of subjective standards which need to be described. HRS does not intend to set those standards and, other than have its applicants demonstrate that a process is in place, the agency has no idea how the required information will impact its CON review. Without definitions and standards, the agency will have no way of comparing one applicant's information with another's. Without specificity and more guidance the rules fail to apprise the applicant of what is required and will provide no meaningful information to the agency in its CON review function. Miscellaneous Provisions The Non-Physician Director. The proposed definition of "Hospital Inpatient General Psychiatric Services" in Rule 10-5.011(1) (o)2.1. includes services provided under the direction of a psychiatrist or clinical psychologist In drafting this definition, agency staff relied on advice from experts at their workshops and on advice from the agency's own Alcohol, Drug Abuse and Mental Health Program Office, to the effect that professionals, other than physicians, are qualified to direct the units. Interpretation and Application. It is not the intention of HRS that its rules be interpreted to override good medical practice or the sound judgement of treating physicians. Thus, the rules would not prohibit stabilization of a patient who is presented to the emergency room of a hospital without a CON for substance abuse or psychiatric services. Stabilized Alzheimers patients may be housed in nursing homes. Nor do the rules prohibit or subject to sanctions the occasional admission of a psychiatric or substance abuse patient to a non-substance abuse or psychiatric bed so long as this occurs infrequently in a hospital without psychiatric or substance abuse programs. "Scatter" beds are not eliminated. Those beds would continue to be licensed as acute-care beds, as they would not be considered part of an organized program, with staff and protocols, to provide psychiatric or substance abuse services. Proposed rule 10-5.011(1)(o)4.h.(v) provides that applicants for IRTPs for children and adolescents seeking licensing as a specialty hospital must provide documentation that the district's licensed non-hospital IRTPs do not meet the need for the proposed service. The department is not seeking specific utilization data in this regard, as such is not available. General information on the availability of alternatives to inpatient hospital services is obtainable from local health councils and mental health professionals in the community. Quarterly Reports. Proposed rule 10-5.011(1)(o)10. requires: Facilities providing licensed hospital inpatient general psychiatric services shall report to the department or its designee, within 45 days after the end of each calendar quarter, the number of hospital inpatient general psychiatric services admissions and patient days by age and primary diagnosis ICD-9 code. The Health Care Cost Containment Board (HCCCB) is already collecting similar quarterly data from providers. The reporting system is being updated and improved but in the meantime HRS is experiencing problems with the type and accuracy of the data it receives from HCCCB. One problem is that HCCCB collects its data with regard to all discharges in a psychiatric or substance abuse diagnostic category, whereas HRS is interested only in data from a psychiatric or substance abuse program. Until the system improves, HRS needs the information it seeks from the providers in order to plan and apply the need methodology. The agency intends to designate local health councils to collect the data and has already worked with them to set up a system. If reports provided to the HCCCB comply with the proposed requirement, HRS has no problem in receiving a duplicate of those reports. The Economic Impact Statement Pursuant to Section 120.54(2), F.S., HRS prepared an economic impact statement for the proposed rule. It was authored by Elfie Stamm, a Health Services and Facilities Consultant Supervisor with HRS. Ms. Stamm has a Masters degree in psychology and has completed course work for a Ph.D. in psychology. She has been employed by HRS for 13 years, including the last ten years in the Office of Comprehensive Health Planning. She is responsible for developing CON rules, portions of the state health plan, and special health care studies. It was impossible for Ms. Stamm to determine how the rule could impact the public at large. The economic impact statement addresses generally the effect of abolishing the distinction between long and short term services and acknowledges that the rule will increase competition among short term service providers. The impact statement also addresses a positive impact on current long term providers.
Findings Of Fact Cirilo Alvarez, at all times pertinent to the allegations in the complaint, operated an adult congregate living facility in Lake City, Columbia County, Florida, Briar's Haven Adult Care Center, under license number 03-12- 0128-BPS, issued by the Florida Department of Health and Rehabilitative Services. In late July or early August, 1982, Respondent, who is a psychiatric nurse specialist and who works full time at North Florida State Mental Hospital (Hospital) at Macclenny, Florida, took Woodrow Harrison, an elderly patient at that institution, into his home, Briar's Haven Adult Care Center, on pass status from the Hospital for periodic short visits. Ultimately, on July 30, 1982, Harrison was released from Macclenny and began living full time at Respondent's facility. On August 3, 1982, Sharon Stucky, a registered nurse case manager for the North Florida Mental Health Center (Center) in Lake City, Florida, did an intake interview with Harrison, who had just been released from the Hospital and who was living at Respondent's facility. Mr. Harrison was brought into the Center by Respondent's wife. Records from the Hospital pertaining to Harrison, which came to the Center, reflected that he suffered from a seizure disorder and a diabetic condition. His medication consisted of 300 mg. of Dilantin daily and 30 mg. of phenobarbital daily, and he was to receive a daily insulin injection. At the time of his release from the Hospital, he was furnished with a thirty-day supply of these medications. On the afternoon of August 13, 1982, Mr. Alvarez went into the Center with Mr. Harrison and asked to see Ms. Stucky. Respondent indicated that Mr. Harrison was having many physical problems. Earlier in the day, he had taken Harrison back to Macclenny to have him readmitted for seizures, incontinence, etc., even though he was taking his medications, but officials at the Hospital refused to admit him. Mr. Alvarez wanted him admitted to some facility in Lake City. Stucky, indicating she would have to talk with Harrison before taking any action, did so and felt she could see no change in his condition since her first interview of him on August 3, and she decided she could not justify having him recommitted to the mental hospital. Since Stucky wanted to find out if the seizures were the result of a physical problem, and she could not do a physical herself, she requested that Respondent take Harrison to a doctor for an examination. The Respondent again demanded that Harrison be admitted and, when Ms. Stucky refused, stated he would take Harrison to the hospital and leave him. Ms. Stucky talked with her supervisor to see if there was any way that Harrison could be readmitted to Macclenny, and it was determined there was not. When the information was related to Mr. Alvarez, he departed with Mr. Harrison. Respondent then took Harrison to the emergency room at Lake City's Lake Shore Hospital. After a chart was prepared on Harrison, Alvarez departed, leaving Harrison there without his medications. When Alvarez first took Harrison in, he was told there would be an hour wait before Harrison could be seen. Alvarez asked if Harrison could sit there and wait, and the person on duty said, "Yes." Once that was arranged, Respondent left without Harrison. According to a report of the doctor on duty, Harrison was confused and incapable of giving a complaint or history. As a result, evaluation of him was difficult, and his well-being was compromised. Respondent subsequently made no effort to get Harrison's drugs to him by delivering them to Ms. Stuckv, nor did he inquire where Harrison was. Respondent's actions in dropping Mr. Harrison off at the Lake Shore Hospital unsupervised, and only calling to check on his status somewhat later, constitute an intentional abandonment which could have seriously affected Harrison's health, safety, and welfare. Somewhat later the same day, Respondent called Lake Shore Hospital to find out what Harrison's status was, but Harrison had already been placed in another adult care facility by Ms. Stucky when the hospital called her and told her of Harrison's situation. Respondent did not make any other calls. Ms. Stucky visited Harrison daily at this new facility and administered his insulin shot. He appeared to be doing well there and wanted to remain, but on August 17, 1982, he was readmitted to Macclenny, where he currently resides. Harrison is incapable of taking care of himself. He has a poor memory and is somewhat retarded and childlike, according to Stucky. He has no concept of time and could not administer his medicines to himself. He could not understand the need to take his medicine or remember to take it if he could. Since Mr. Harrison was dropped off at Lake Shore without either his medicines or a change of clothing, Stucky made several telephone calls to the Respondent to retrieve them. Mr. Alvarez was always out when she called, and Stucky talked with several different females who answered the phone and with whom she left messages requesting him to call her back. Alvarez did not return any of the calls, but he states he never received them. This is rossible since, he says, neither his mother nor his wife, two of the people at home who may have received the original calls from Stucky, speaks much English. Respondent provided Mr. Harrison with all the clothes he had except those he was wearing when he came from Macclenny. Upon the advice of individuals at Macclenny who he could not remember to identify, Respondent applied for Social Security benefits to support Harrison while he was at Respondent's facility. Because Harrison had no family, Respondent sought the counsel of the legal aid office in Lake City to see if he could be appointed Harrison's legal guardian and was told he could not. In late January or early February, 1983, Respondent received one Social Security check in the amount of $1,900 made out to Harrison and Mrs. Alvarez. This check was not cashed because Harrison was no longer with the Respondent, but was returned to the Social Security Office. Harrison's medicines that were in Respondent's possession when Harrison was taken to the hospital were discarded. Respondent worked with Harrison at Macclenny for about a year before taking him to his own facility. During that time to his knowledge, Harrison never had any seizures. Respondent gave him his medications at Macclenny and knew he needed drugs. When he took Harrison to his facility, he took Harrison's drugs as well.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Secretary of the Department of Health and Rehabilitative Services enter a final order revoking the Adult Congregate Living Facility License of Cirilo Alvarez, doing business as Briar's Haven Adult Care Center. RECOMMENDED this 1st day of April, 1983 in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of April, 1983. COPIES FURNISHED: James A. Sawyer, Jr., Esquire District III Legal Counsel Department of Health and Rehabilitative Services 2002 NW 13th Street, 4th Floor Gainesville, Florida 32601 Mr. Cirilo Alvarez Post Office Box 2392 Lake City, Florida 32055 Mr. David H. Pingree Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
Findings Of Fact THE PARTIES Health Management Associates, Inc. (HMA), is a publicly owned hospital corporation with corporate offices located in Naples, Florida. It owns and/or operates 17 hospitals in the United States, including 2 owned facilities in the State of Florida, and one which it operates for the State under contract. Psychiatric service is limited in scope. Charter Medical Corporation, operating 66 hospitals, owns and operates Charter Glade Hospital, a 104-bed specialty psychiatric hospital located in Ft. Myers, Lee County, Florida. The facility is located approximately 2 miles west of I-75 and approximately 22 miles north of the site identified by HMA for its facility. As an existing facility in the service area, it has intervened herein to protest any award of a Certificate of Need to a competing facility, here, HMA proposed hospital. THE FACILITIES Of Charter Glades' 104 beds, 80 are licensed as short-term psychiatric beds, of which 56 are utilized for adults and 24 for adolescents. The remaining 24 beds are licensed as short-term substance abuse beds. It draws approximately 91 percent of its patients from Lee County, where it is located, and the remaining 9 percent from Collier County, contiguous to the south. It also operates an outpatient program in Naples, Florida, further south in Collier County, and utilizes substantial marketing and advertising programs within Collier County to inform and attract patients from that area. HMA proposes to establish a 50-bed, freestanding, psychiatric hospital in Collier County, 30 beds of which will be on a unit dedicated to adult patients and 20 beds dedicated to adolescents. The facility is designed to be built on an 8 to 10 acre tract of land and due to efforts by HMA's vice president for psychiatric operations, Mr. Beatty, who has personally surveyed the northern Collier County area, at least one adequate tract of property, already appropriately zoned, with access to adequate roads and utilities, has been identified. The project was designed by Architect Bruce Hartwigson, a professional with over 20 years experience in the design of health care facilities. Construction is projected to take approximately 8 months from the beginning of construction, with the facility being ready for operations within one month after completion of construction. As designed, the facility will provide a state of the art atmosphere for the psychiatric patients. Design provides for a residential appearance with allowance for quiet space, counseling offices, and recreational and therapeutic areas in addition to patient rooms. The adult and adolescent units will be physically separated and those areas scheduled for use by both categories of patient, such as dining and recreation areas, will not be utilized by both at the same time. The building, consisting of approximately 47,670 square feet, will also include, in addition to those facilities described above, necessary support facilities including doctors' and nurses' offices, administrative and business offices, storage, educational and physical activities areas, a swimming pool, and various therapy and treatment/examination rooms, as well as a chapel, beauty and barber shops, and support activities. The design proposed provides good visibility from the nurses' station to the entire unit served by that facility. All outside doors and those between units will be secured. Outdoor courtyards will be enclosed by fences or walls, and security/seclusion rooms have been designed to promote patient safety. The design proposed by HMA, complies with all codes and regulations of state and local agencies, and the size and layout proposed is reasonable. NEED HRS District 8 includes Charlotte, Collier, DeSoto, Glades, Hendry, Lee and Sarasota counties. HMA's proposed facility will serve, primarily, Collier county. Collier county is located, along with Lee county, in the southernmost of two separate marketing regions within District 8. Currently, almost all psychiatric inpatient services provided in both Lee and Collier counties are provided by Charter Glade Hospital in Lee county, and in the limited psychiatric service at Naples Community Hospital in Collier county. These two facilities are the only facilities licensed to provide hospital inpatient psychiatric services in their respective counties and the services are substantially different. Whereas Charter Glade Hospital is a freestanding psychiatric facility, Naples Community Hospital is a general, acute care hospital with a hospital-based psychiatric unit. In the Naples Community Hospital psychiatric facility, the average length of stay is 7.8 days. Naples Community Hospital is currently licensed to operate a 32-bed short-term psychiatric unit, and an 11-bed substance abuse unit. Consistent with the terms of a Certificate of Need issued to Naples Community Hospital for the establishment of a satellite facility, the hospital has agreed to de-license 9 of the 32 short-term psychiatric beds and the 11 short-term substance abuse beds. At the time of the hearing, the psychiatric unit at Naples Community Hospital had 20 beds staffed. The unit is used by area psychiatrists primarily for providing crisis intervention and the treating of immediate symptoms. Crisis stabilization/intervention is a psychiatric service which in normal circumstances results in an average length of stay of between 10 and 12 days. It differs substantially from longer term care, available in a psychiatric hospital. Under the shorter term programs, the disturbed and disoriented patient does not have sufficient opportunity to benefit from the programs available in a more comprehensive long term program. In short, Naples Community Hospital's program is oriented primarily to short term treatment, and this would not be contradicted or duplicated by the proposed service to be offered by HMA in its facility. Additional psychiatric care is provided by the David Lawrence Center located in Naples, which is Collier county's comprehensive community mental health center. At this facility, psychiatric care ranges from outpatient care through group and family therapy, to inpatient crisis stabilization and residential treatment programs for substance abuse or mental health problems. As a part of its inpatient program, David Lawrence operates a 12-bed crisis stabilization unit and a 12-bed short-term residential treatment program, with the former operating at an average occupancy of 66 percent and the latter at an average occupancy of 70 percent. The average length of stay at David Lawrence Center is generally between 5 and 7 days, at which time the patient is generally released and medicated for outpatient care with the opportunity then existing to obtain appropriate therapeutic care from other sources. As a publicly funded facility, David Lawrence refers most paying patients to either Naples Community Hospital or Charter Glade. Little difficulty has been experienced in placing inpatient referrals with the exception of younger children. There is also a community health center operating 30 crisis stabilization and short-term residential treatment service beds located in Lee County. Since this facility's mandate includes providing provision of services for all of the southwest portion of District 8, some patients come from Collier county as well as Lee county. This facility also operates an adult residential treatment service, which has been funded to add an additional 80 to 100 beds in the foreseeable future. Other relevant resources, either actual or potential, include an adult residential treatment service funded to begin operation in Charlotte county, which will give access to geriatric psychiatric patients residing in Collier county, and the Naples Research and Counseling Center (The Willows), located in Collier county, whose program is primarily oriented to the treatment of bulimia and other food disorders. This facility, under the terms of its license, is primarily oriented to serving patients outside District 8, but may devote up to 3 percent of its total patient days to District 8 patients. Though it does serve as a resource, its impact on the need for psychiatric services in the southernmost portion of District 8 is minimal. Other outpatient psychiatric services available to Collier county residents include the activities of the six practicing psychiatrists located within the county, who provide outpatient services in conjunction with non- medical professionals. There is also psychologists and psychiatric social workers practicing within the county. In February, 1987, DHRS published projections for the January, 1992 Planning Horizon which revealed the net need for 61 short-term psychiatric beds in District 8. It was noted at the time that the short-term psychiatric bed need projection had not yet been adjusted for occupancy rates according to the terms of Rule 10-5.011(1)(o), Florida Administrative Code. The Agency thereafter promulgated Rule 10-5.008(2), which established the "fixed pool" concept for Certificate of Need Review. HMA submitted its application based on the 61-bed projection. Upon review of the applications, during which time the Agency calculated a net need numerically for 55 additional short-term psychiatric beds, DHRS denied HMA's application on September 9, 1987, even though a 55-bed need was established. Under the provisions of Rule 10-5.011(o)(4)(e), Florida Administrative Code, the Department determined the numeric need to be inapplicable, because the average annual occupancy rates for all existing adult short-term inpatient psychiatric beds in District 8 did not exceed 75 percent for the preceding 12 month period. By the same token, the same rate for adolescents and children did not exceed 70 percent for the same time period. DHRS's observation regarding occupancy rate thresholds was accepted by HMA's health planner. The difference between the 61-bed need published by DHRS initially and the 55-bed projection is an award of 6 short-term psychiatric beds to Venice Hospital. During the course of the hearing, and after HMA had presented its case in chief, the Department revised its numeric need calculation to reflect a 44- bed net need for January, 1992. This change was attributed to the mistaken assumption that 20 beds at Naples Community Hospital would be de-licensed. In reality, only 9 beds will actually be de-licensed. Under the terms of the Rule, gross need is calculated upon a standard of 35 beds per 1,000 population, and this figure must be reduced by the number of licensed and approved beds within the District. The proper count, therefore, should be a total of 295 beds including 23 at Naples Community Hospital instead of 12. HMA objected to the introduction of evidence relating to the change in numeric bed need on the basis that it had already presented its case in chief, and had not been advised of the change in advance. The basis for the original denial of HMA's application by the Department included as a important part thereof the fact that the occupancy standards outlined in the Department's Rules had not been met regardless of the bed need established by use of the methodology. This is as much a factor with a numeric need of 44, as it was with a numeric need of 55. The evidence did not establish that the occupancy rates had increased so as to meet the Department's standards. It is nonetheless appropriate for the Department to correct, at the hearing, an obvious miscalculation which goes to the very heart of the numeric need methodology. If accurate information is not included in the calculations under the methodology, then the methodology result is totally unreliable. Consequently, it is found that the appropriate bed need for the January, 1992 Planning Horizon is 44 beds. Turning to the question of occupancy levels, statistics compiled for District 8 for the years 1984 through 1987, reflect that district wide, the average occupancy for 1984 was 54.7 percent; for 1985, 69.22 percent; for 1986, 59.29 percent; and for 1987 through October, 59.12 percent. Though the health plan does not call for sub-district districting, if one looks at the two major facilities located in the Lee and Collier counties, that is Naples Community Hospital and Charter Glade Hospital, the average for those two is 51.35 percent, with Charter Glade at 33.2 percent. For 1985, the two had an average occupancy of 55.75 percent; for 1986, an average of 49.92 percent, and for 1987, an average of 50.81 percent. Therefore, no matter how it is looked at, either on a district wide basis or considering only the two counties, the average occupancy is well below the 75 percent standard for adults or 70 percent for adolescents. Under the provisions of the DHRS Rule, when numeric need has not been established, no new beds will "normally be approved." It has long been settled that this means that if other circumstances exist which indicate the need, outside of the numeric calculation, for additional beds, DHRS may consider and award them. The occupancy rates catalogued above would be one possible example of abnormal circumstances, if they had exceeded the Rule standards. Another is the access standard, contained in Rule 10-5.011(o)4g, which provides that short- term, inpatient hospital psychiatric services should be available within a maximum travel time of 45 minutes, under average travel conditions, for at least 90 percent of the service area population. As was stated above, service area means the entire District 8. It was clearly established at final hearing that more than 90 percent of the District 8 population is within a 45 minute travel time of short-term, inpatient hospital psychiatric services with only 6.3 percent falling outside that parameter. In fact, the local health plan indicates that 90 percent of the district population falls within 30 minutes travel time. Other real factors which may be considered are the shortage of psychiatrists in the area, in both counties, and a definite shortage of psychiatrically trained nurses in both counties. It has been shown, however, that physicians, like nature, abhor a vacuum. If facilities are available, medically trained personnel will generally gravitate to the area of availability, and it is consequently found that these two factors are not controlling. OTHER FACTORS The issue of the financial feasibility of the project is always pertinent. HMA proposes to develop this project, utilizing 20 percent equity contribution, and 80 percent debt financing. HMA has access to a $75,000,000.00 line of credit and financing drawn on that line would be at prime rate. It is estimated that costs and fees associated with financing will total approximately $57,000.00. The method of funding and the proposed interest expense and fees are considered reasonable. The applicant proposes to charge an all-inclusive rate of $398.00 per patient day in the first year and $415.00 per patient day in the second year. These are not contested and are considered reasonable. During the first year, total deductions of $508,000.00 include contractual allowances of $400,000.00, plus a bad debt allowance of approximately $100,000.00. Intervenor contends that HMA's bad debt factor of 4 percent is unrealistic, and Charter Glade's experience of 5 percent would be more reasonable. An adjustment of that nature would total $41,600.00, which is not particularly significant when compared against the overall project estimated yearly income. The second year's proposed revenue deductions of $716,500.00 are also contested by the Intervenor on the basis of what it considers unrealistic projections, but again, there is insufficient evidence to indicate HMA's projections are unreasonable. Intervenor has contested many of the line items on HMA's pro forma statement. Whereas HMA projects a 4 to 5 percent per year inflation rate for salaries and benefits, Intervenor suggests that an inflation rate of 6 percent would be more appropriate. Supplies and expenses figures should be increased according to Intervenor, who also contends that HMA's projected depreciation and other expense is understated, as were the projected pre- opening expenses. If all adjustments suggested by the Intervenor were to be made, HMA's facility would lose $588,000.00 in its second year of operation, in the event HMA's projected second year occupancy of 55 percent were to be realized. Intervenor contests this, contending that because of lack of bed need and lack of demand, it is doubtful HMA will achieve the projected occupancy and its position is well taken. The growth rate in the two county area is projected to be a sum equivalent to 19.6 percent of the 1980 population. Applying this same figure to the average daily census for the two existing facilities reveals an additional 12.4 patients per day available to HMA, if one assumes Naples Community Hospital and Charter Glade would continue to serve the existing population base. The 12.4 patient census would constitute a 25 percent occupancy rate, as opposed to 55 percent. In light of the currently existing occupancy rates, it is found that HMA's projected 55 percent occupancy rate at year two is overly generous and would likely not be achieved in light of the various factors discussed previously. While the criticisms and suggested adjustments by the Intervenor as to expense and salary items are considered unconvincing, there is some question, in light of proposed occupancy rates, whether Petitioner can operate the facility feasibly within two years. There is, however, little doubt that HMA would construct a quality facility and operate it in such a manner as to meet, if not exceed, all state standards. Its prior record would tend to establish that. Proposed staffing ratios are reasonable and consistent with industry standards, and the programs incorporated within the proposal are appropriate and reasonable. HMA has access to adequate capital resources to fund the construction and operate it for the first several years. There is some question, however, as to whether adequate, qualified staff can be recruited in sufficient numbers. HMA proposes to serve indigent patients in numbers sufficiently high to meet its proportionate share of indigent mental health problems within the service area. There was some evidence, through the deposition of Dr. Mack, which tends to indicate that from time to time, psychiatrists practicing in Collier county have difficulty from a logistical standpoints securing inpatient placement for their psychiatric patients at Charter Glade, and there can be little doubt that the distribution of psychiatric beds in District 8 is unbalanced, with far more beds in the northern portion of the district than in the south. Whether this justifies construction of a new psychiatric hospital in Collier county, however, is another matter. The evidence clearly indicates that the short- term beds at Naples Community Hospital are not fully utilized and the occupancy rates would tend to indicate that the demand within the two counties, as it currently exists and is proposed to exist within the framework of the Planning Horizon, is currently being met. Another legitimate factor to be considered is the adverse impact construction of a new facility, such as proposed by HMA, would have on the existing Charter Glade facility which, more than any other existing facility, provides the same service. Evidence of record indicates that Charter Glade gets 85 percent of its patients from Lee county, in which it is located, and 17 percent of that number comes from that area of Lee county, south of the Charter Glade facility. In addition, 9.3 percent of Charter Glade's patients come from Collier county. Adding the south Lee county patients to the north Collier county patients, accounts for approximately 23.75 percent of Charter Glade's total patients. (.17 X .85 .1445 + .093 .2375) If HMA's new facility were to draw 50 percent of that figure, approximately 12 percent of Charter Glade's total patient days would be lost. (.2375 X .50 .11875) In 1987, Charter Glade's charge per day was slightly in excess of $431.00, which resulted in a net profit of slightly over $105,000.00. Were Charter Glade to lose approximately 12 percent of its patient days, the net adverse effect to its revenue picture would be substantial.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is therefore: RECOMMENDED that Petitioner, Health Management Associates, Inc.'s application for Certificate of Need Number 5170 to establish a 50-bed, freestanding, short-term psychiatric hospital in Collier county be denied. Recommended in Tallahassee this 30th day of June, 1988. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of June, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-4741 The following constitutes my ruling on Proposed Findings of Fact submitted by the parties hereto, consistent with Section 120.59(2), Florida Statutes. For HMA: 1 - 2. Accepted and incorporated herein. 3. Irrelevant. 4 - 5. Accepted and incorporated herein. 6 - 14. Accepted and incorporated herein. 15 - 16. Accepted and incorporated herein. 17. First and third sentences accepted and incorporated herein. Second sentence is irrelevant. 18. First and second sentences accepted and incorporated herein. Third sentence is irrelevant. 19 - 22. Accepted and incorporated herein. Accepted and incorporated herein. Cumulative. 25 - 26. Accepted and incorporated herein. Not a finding but a restatement of evidence. Accepted. First sentence accepted and incorporated herein. Second sentence rejected as a restatement of evidence. 30 - 37. Accepted and incorporated herein. Rejected as a restatement of evidence. Accepted. Accepted. Accepted and incorporated herein. 42 - 43. Accepted. 44 - 46. Accepted and incorporated herein. 47 - 48. Accepted. 49. Rejected as contra to the weight of the evidence. 50. Irrelevant. 51 - 53. Accepted and incorporated herein. 54 - 58. Accepted and incorporated herein. 59 - 61. Accepted and incorporated herein. 62. Accepted and incorporated herein. 63 - 69. Accepted and incorporated herein. 70. Rejected as contra to the weight of the evidence. 71 - 81. Accepted and incorporated herein. 82. Rejected. 83. Irrelevant. 84. Accepted. 85 - 87. Rejected as an overstatement of the situation as it exists. By DHRS: 1 - 2. Accepted and incorporated herein. 3 - 6. Accepted and incorporated herein. 7 - 8. Accepted and incorporated herein. 9 - 10. Accepted. 11. Accepted and incorporated herein. 12 - 14. Accepted and incorporated herein. By Charter Glade Hospital: 1 - 4. Not Findings of Fact but Introduction. 5 - 8. Accepted and incorporated herein. 9. Accepted. 10 - 12. Accepted and incorporated herein. 13 - 15. Accepted and incorporated herein. 16 - 17. Accepted and incorporated herein. 18 - 20. Accepted and incorporated herein. 21 - 22. Accepted. Not a Finding of Fact but a comment on the evidence. Accepted. Not a Finding of Fact but a comment on the evidence. 26 - 27. Accepted. 28. Accepted and incorporated herein. 29 - 34. Accepted and incorporated herein. 35 - 36. Accepted and incorporated herein. Accepted and incorporated herein. Accepted. 39 - 40. Accepted and incorporated herein. First sentence accepted and incorporated herein. Remainder is irrelevant. Accepted. 43. Accepted and incorporated herein. 44 - 46. Accepted and incorporated herein. 47. Irrelevant. 48 - 51. Accepted and incorporated herein. 52. Accepted and incorporated herein. 53 - 55. Accepted and incorporated herein. 56 - 59. Accepted and incorporated herein. 60 - 65. Accepted and incorporated herein. Not a Finding of Fact. Accepted. 68 - 70. Not a Finding of Fact but a comment on the evidence. 71 - 72. Accepted and incorporated herein. Accepted. Not a Finding of Fact but a comment on the evidence. 75. Accepted. Accepted. Accepted. Accepted and incorporated herein. Not a Finding of Fact but a recitation of and comment on the evidence. Not a Finding of Fact but a restatement of and comment on the evidence. 81-83(o). Accepted in part by HMA and commented on in Recommended Order. 84 - 86. Not a Finding of Fact but a speculative projection. 87 - 89. Accepted and incorporated herein. 90. First sentence accepted - Second sentence rejected as a restatement of evidence designed to bolster first sentence. 91 - 94. Accepted and incorporated herein. COPIES FURNISHED: John F. Gilroy, III, Esquire Robert S. Cohen, Esquire Haben and Culpepper Post Office Box 10095 Tallahassee, Florida 32302 John Rodriguez, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 2727 Mahan Drive Tallahassee, Florida 32308 Michael Cherniga, Esquire Roberts, Baggett, Laface & Richards 101 East College Avenue Tallahassee, Florida 32301 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 R. S. Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
Findings Of Fact The Application West Florida Regional Medical Center is a 400-bed acute care hospital in Pensacola, Escambia County, Florida. The hospital is located in a subdistrict which has the greatest population aged 65 and over who are living in poverty. That group constitutes the population qualified for Medicare. Some 17 percent of Escambia County's population falls into the medicare category. Prior to October, 1987, HRS had determined that there was a fixed pool need in the Escambia County area for 120 nursing home or extended care beds. Several hospitals in the Escambia County area applied for the 120 nursing home beds. Those beds were granted to Advocare (60 beds) and Baptist Manor (60 beds). The award of the 120 beds to Baptist Manor and Advocare is not being challenged in this action. West Florida, likewise, filed an application for an award of nursing home beds in the same batch as Advocare and Baptist Manor. However, Petitioner's application sought to convert 8 acute care beds to nursing home or extended care beds. West Florida's claim to these beds was not based on the 120 bed need established under the fixed need pool formula. West Florida's application was based on the unavailability of appropriately designated bed space for patients who no longer required acute care, but who continued to require a high skill level of care and/or medicare patients. The whole purpose behind West Florida's CON application stems from the fact that the federal Medicare system will not reimburse a hospital beyond the amount established for acute care needs as long as that bed space is designated as acute care. However, if the patient no longer requires acute care the patient may be re-designated to a skilled care category which includes nursing home or extended care beds. If the patient is appropriately reclassified to a skilled care category, the hospital can receive additional reimbursement from Medicare above its acute care reimbursement as long as a designated ECF bed is available for the patient. Designation or re-designation of beds in a facility requires a Certificate of Need. Petitioner's application for the 8 beds was denied. When the application at issue in this proceeding was filed Petitioner's 13-bed ECF unit had been approved but not yet opened. At the time the State Agency Action Report was written, the unit had just opened. Therefore, historical data on the 13 bed unit was not available at the time the application was filed. Reasons given for denying West Florida's application was that there was low occupancy at Baptist Hospital's ECF unit, that Sacred Heart Hospital had 10 approved ECF beds and that there was no historical utilization of West Florida 13 beds. At the hearing the HRS witness, Elizabeth Dudek stated that it was assumed that Baptist Hospital and Sacred Heart Hospital beds were available for West Florida patients. In 1985 West Florida applied for a CON to establish a 21-bed ECF unit. HRS granted West Florida 13 of those 21 beds. The 8 beds being sought by West Florida in CON 5319 are the remaining beds which were not granted to West Florida in its 1985 CON application. In order to support its 1985 CON application the hospital conducted a survey of its patient records to determine an estimate of the number of patients and patient days which were non acute but still occupied acute care beds. The hospital utilized its regularly kept records of Medicare patients whose length of stay or charges exceeded the Medicare averages by at least two standard deviations for reimbursement and records of Medicare patients whose charges exceed Medicare reimbursement by at least $5,000. These excess days or charges are known as cost outliers and, if the charge exceeds the Medicare reimbursement by $5000 or more, the excess charge is additionally known as a contractual adjustment. The survey conducted by the hospital consisted of the above records for the calendar year 1986. The hospital assumed that if the charges or length of stay for patients were excessive, then there was a probability that the patient was difficult to place. The above inference is reasonable since, under the Medicare system, a hospital's records are regularly reviewed by the Professional Review Organization to determine if appropriate care is rendered. If a patient does not meet criteria for acute care, but remains in the hospital, the hospital is required to document efforts to place the patient in a nursing home. Sanctions are imposed if a hospital misuses resources by keeping patients who did not need acute care in acute care bed spaces even if the amount of reimbursement is not at issue. The hospital, therefore goes to extraordinary lengths to place patients in nursing home facilities outside the hospital. Additionally, the inference is reasonable since the review of hospital records did not capture all non-acute patient days. Only Medicare records were used. Medicare only constitutes about half of all of West Florida's admissions. Therefore, it is likely that the number of excess patient days or charges was underestimated in 1986 for the 1985 CON application. The review of the hospital's records was completed in March, 1987, and showed that 485 patients experienced an average of 10.8 excess non-acute days at the hospital for a total of 5,259 patient days. The hospital was not receiving reimbursement from Medicare for those excess days. West Florida maintained that the above numbers demonstrated a "not normal need" for 21 additional ECF beds at West Florida. However as indicated earlier, HRS agreed to certify only 13 of those beds. The 13 beds were certified in 1987. The 13-bed unit opened in February, 1988. Since West Florida had planned for 21 beds, all renovations necessary to obtain the 8-bed certification were accomplished when the 13- bed unit was certified in 1987. Therefore, no capital expenditures will be required for the additional 8 beds under review here. The space and beds are already available. The same study was submitted with the application for the additional eight beds at issue in these proceedings. In the present application it was assumed that the average length of stay in the extended care unit would be 14 days. However, since the 13 bed unit opened, the average length of stay experienced by the 13-bed unit has been approximately 15 days and corroborates the data found in the earlier records survey. Such corroboration would indicate that the study's data and assumptions are still valid in reference to the problem placements. However, the 15- day figure reflects only those patients who were appropriately placed in West Florida's ECF unit. The 15-day figure does not shed any light on those patients who have not been appropriately placed and remain in acute care beds. That light comes from two additional factors: The problems West Florida experiences in placing sub-acute, high skill, medicare patients; and the fact that West Florida continues to have a waiting list for its 13 bed unit. Problem Placements Problem placements particularly occur with Medicare patients who require a high skill level of care but who no longer require an acute level of care. The problem is created by the fact that Medicare does not reimburse medical facilities based on the costs of a particular patients level of care. Generally, the higher the level of care a patient requires the more costs a facility will incur on behalf of that patient. The higher costs in and of themselves limit some facilities in the services that facility can or is willing to offer from a profitability standpoint. Medicare exacerbates the problem since its reimbursement does not cover the cost of care. The profitability of a facility is even more affected by the number of high skill Medicare patients resident at the facility. Therefore, availability of particular services at a facility and patient mix of Medicare to other private payors becomes important considerations on whether other facilities will accept West Florida' s patients. As indicated earlier, the hospital goes to extraordinary lengths to place non- acute patients in area nursing homes, including providing nurses and covering costs at area nursing homes. Discharge planning is thorough at West Florida and begins when the patient is admitted. Only area nursing homes are used as referrals. West Florida's has attempted to place patients at Bluff's and Bay Breeze nursing homes operated by Advocare. Patients have regularly been refused admission to those facilities due to acuity level or patient mix. West Florida also has attempted to place patients at Baptist Manor and Baptist Specialty Care operated by Baptist Hospital. Patients have also been refused admission to those facilities due to acuity level and patient mix. 16 The beds originally rented to Sacred Heart Hospital have been relinquished by that hospital and apparently will not come on line. Moreover the evidence showed that these screening practices would continue into the future in regard to the 120 beds granted to Advocare and Baptist Manor. The president of Advocare testified that his new facility would accept some acute patients. However, his policies on screening would not change. Moreover, Advocare's CON proposes an 85 percent medicaid level which will not allow for reimbursement of much skilled care. The staffing ratio and charges proposed by Advocare are not at levels at which more severe sub-acute care can be provided. Baptist Manor likewise screens for acuity and does not provide treatment for extensive decubitus ulcers, or new tracheostomies, or IV feeding or therapy seven days a week. Its policies would not change with the possible exception of ventilated patients, but then, only if additional funding can be obtained. There is no requirement imposed by HRS that these applicants accept the sub-acute-patients which West Florida is unable to place. These efforts have continued subsequent to the 13-bed unit's opening. However, the evidence showed that certain types of patients could not be placed in area nursing homes. The difficulty was with those who need central lines (subclavian) for hyperalimentation; whirlpool therapy such as a Hubbard tank; physical therapy dither twice a day or seven days a week; respiratory or ventilator care; frequent suctioning for a recent tracheostomy; skeletal traction; or a Clinitron bed, either due to severe dicubiti or a recent skin graft. The 13-bed unit was used only when a patient could not be placed outside the hospital. The skill or care level in the unit at West Florida is considerably higher than that found at a nursing home. This is reflected in the staffing level and cost of operating the unit. Finally, both Advocare and Baptist Manor involve new construction and will take approximately two years to open. West Florida's special need is current and will carry into the future. The Waiting List Because of such placement problems, West Florida currently has a waiting list of approximately five patients, who are no longer acute care but who cannot be placed in a community nursing home. The 13-bed unit has operated at full occupancy for the last several months and is the placement of last resort. The evidence showed that the patients on the waiting list are actually subacute patients awaiting an ECF bed. The historical screening for acuity and patient mix along with the waiting list demonstrates that currently at least five patients currently have needs which are unmet by other facilities even though those facilities may have empty beds. West Florida has therefore demonstrated a special unmet need for five ECF beds. Moreover, the appropriate designation and placement of patients as to care level is considered by HRS to be a desirable goal when considering CON applications because the level of care provided in an ECF unit is less intense than the level of care required in an acute care unit. Thus, theoretically, better skill level placement results in more efficient bed use which results in greater cost savings to the hospital. In this case, Petitioner offers a multi-disciplinary approach to care in its ECF unit. The approach concentrates on rehabilitation and independence which is more appropriate for patients at a sub-acute level of care. For the patients on the awaiting proper placement on the waiting list quality of care would be improved by the expansion of the ECF unit by five beds. Finally, there are no capital costs associated with the conversion of these five beds and no increase in licensed bed capacity. There are approximately five patients on any given day who could be better served in an ECF unit, but who are forced to remain in an acute care unit because no space is available for them. This misallocation of resources will cost nothing to correct.
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 CON to Petitioner for five ECF beds. DONE and ORDERED this 30th day of March, 1989, in Tallahassee, Florida. DIANE CLEAVINGER Hearing Officer Division of Administrative Hearings 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of March, 1989. APPENDIX The facts contained in paragraph 1-29 of Petitioner's proposed Findings of Fact are adopted in substance, insofar as material. The facts contained in paragraph 1, 2, 3, 4, 5, 6, 8, 12, 15, 16, 20, 27, 28, 29, 31 and 33 of Respondent's Proposed Findings of Fact are subordinate. The first sentence of paragraph 7 of Respondent's Proposed Findings of Fact was not shown to be the evidence. Strict compliance with the local health plan was not shown to be an absolute requirement for CON certification. The remainder of paragraph 7 is subordinate. The facts contained in paragraph 9, 10, 11 and 30 of Respondent's Proposed Findings of Fact were not shown by the evidence. The first part of the first sentence of paragraph 13 of Respondent's Proposed Findings of Fact before the semicolon is adopted. The remainder of the sentence and paragraph is rejected. The first sentence of paragraph 14 of Respondent's Proposed Findings of Fact was not shown by the evidence. The remainder of the paragraph is subordinate. The facts contained in paragraph 17, 26 and 32 of Respondent's Proposed Findings of Fact are adopted in substance, insofar as material. The acts contained in paragraph 18 are rejected as supportive of the conclusion contained therein. The first (4) sentences of paragraph 19 are subordinate. The remainder of the paragraph was not shown by the evidence. The first (2) sentences of paragraph 21 are adopted. The remainder of the paragraph is rejected. The facts contained in paragraph 22 of Respondent's Proposed Findings of Fact are irrelevant. The first sentence of paragraph 23 is adopted. The remainder of paragraph 23 is subordinate. The first sentence of paragraph 24 is rejected. The second, third, and fourth sentences are subordinate. The remainder of the paragraph is rejected. The first sentence of paragraph 25 is subordinate. The remainder of the paragraph is rejected. COPIES FURNISHED: Lesley Mendelson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive Tallahassee, Florida 32308 Donna H. Stinson, Esquire MOYLE, FLANIGAN, KATZ, FITZGERALD & SHEEHAN, P.A. The Perkins House - Suite 100 118 North Gadsden Street Tallahassee, Florida 32301 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
