Findings Of Fact GENERAL In November 1983, Pasco filed an application with DHRS to build and operate a freestanding psychiatric and substance abuse facility in Pasco County. Pasco is a Florida corporation and is a wholly owned subsidiary of Florida Health Facilities, Inc., which is a wholly owned subsidiary of United Medical Corporation (UMC). DHRS' initial notice of intent to deny Pasco's application was issued on April 13, 1984. On May 3, 1984, Pasco timely filed its petition for formal administrative hearing. (DOAH Case No. 84-1933). Thereafter, DHRS reconsidered its initial decision, and on November 20, 1984, DHRS and Pasco entered into a Stipulation, and DHRS issued CON No. 3053 to Pasco in February 1985. (DOAH Case No. 84-1933 was subsequently, dismissed as the result of this reconsideration.) Following publication of DHRS' decision to issue the CON, petitions for formal hearing were filed by Horizon and Hernando, UPC, CHNPR, and Harborside Hospital, Inc., and petitions to intervene were filed by Community Care, Morton Plant and PIA Medfield, Inc., d/b/a Medfield Center. The petitions were consolidated and resulted in the cases at bar--DOAH Consolidated Case Nos. 85-0780, 85-1513 and 85-2346. Harborside Hospital, Inc., Petitioner in Case No. 85-2392, and PIA Medfield, Inc., d/b/a Medfield Center, Intervenor in Case No. 85-0780, subsequently voluntarily dismissed their petitions and are not parties to this proceeding. Horizon is a freestanding psychiatric facility located at 11300 U.S. 19 South, Clearwater, in Pinellas County, in District V. Hernando is an approved, as of September 1984, but as yet unopened 50-bed freestanding psychiatric facility to be located at the intersection of S.R. 50 and Clay Street in Brooksville, Hernando County. Hernando County is in District III. Hernando's bed complement will consist of 35 short-term psychiatric beds, 15 short-term substance abuse beds and a 10-bed crisis stabilization unit. UPC is an approved but yet unopened 114-bed psychiatric teaching facility to be located on the campus of the University of South Florida in Hillsborough County, in District VI. Its bed complement does not include licensed substance abuse beds. CHNPR is a 414-bed acute care hospital located in Pasco County, Florida, in District V. As part of its bed complement, the hospital operates a 46-bed psychiatric unit. Its complement does not include licensed substance abuse beds. Morton Plant is a 745-bed acute care hospital located in Pinellas County, District V. As part of its bed complement, the hospital operates a 42-bed psychiatric unit. Its bed complement does not include licensed substance abuse beds. Community Care is an approved but as yet unopened 88-bed psychiatric facility to be located in Citrus County in District Its bed complement includes 51 short-term psychiatric beds and 37 long-term substance abuse beds. Its bed complement does not include licensed short-term substance abuse beds. Pasco originally proposed to construct and develop an 80-bed short-term psychiatric and substance abuse facility, composed of 60 general adult beds, 10 adolescent beds and 10 substance abuse beds (Exhibit 4). As a result of negotiations with DHRS, Pasco revised its proposal to a 72-bed facility composed of 35 general adult beds, 20 adolescent beds and 17 substance abuse beds (Exhibit 4, paragraph 1; Exhibit 11). As a condition to DHRS' agreement to grant the Certificate of Need, Pasco has agreed to provide at least 10 percent of its patient days to residents of Pasco County eligible under the provisions of the Baker Act or who are indigent, and to locate its facility no less than five miles east of the intersection of U.S. Highway 19 and County Road 587 (Exhibit 4, paragraphs 3, 4). The revised project cost, excluding working capital, totals $6,328,981.00 (Exhibit 6). BED NEEDS Applications for certificates of need must be consistent with criteria contained in Section 381.494(6)(c) as well as applicable rules of the agency. Subsection 1 of Section 381.494(6)(c) requires DHRS determine the proposal is consistent with: The need for the health care facilities and services and hospices being proposed in relation to the applicable district plan and State Health Plan adopted pursuant to Title XV of the Public Health Service Act except in emergency circumstances which pose a threat to the public health. The State Health Plan adopted addresses need through the year 1987, which is not the target year applicable to this case. The Plan indicates the need for short-term psychiatric and substance abuse beds should be determined based on the need methodologies found in Chapter 10-5.11(25) and 10-5.11(27) (Exhibit 27, page 6). DHRS' rules establish specific criteria to be used in evaluating and acting on CON applications for psychiatric and substance abuse services and facilities. Chapter 10-5.11(25) and 3-5.11(27), Florida Administrative Code. Psychiatric Bed Need In District V Rule 5-11.25, Florida Administrative Code, allocates .35 beds per 1,000 population in each district for psychiatric beds. Of those, not less than .15 per 1,000 population may be allocated within acute care general hospital settings and no more than .20 per 1,000 population may be located in freestanding psychiatric facilities. The differentiations recognize Medicaid reimburses facilities for psychiatric services provided in the acute hospital setting, but not in the freestanding setting, assuring at least some financial access to services for Medicaid patients and allows the agency, from a policy standpoint, to weigh the cost and benefits of building new facilities on one hand against adding additional beds at existing facilities (Exhibit 26, page 3). The Office of Comprehensive Health Planning, under the signature of the Deputy Assistant Secretary of Health Planning and Development, has published the agency's Short-Term Psychiatric Bed Counts and Projected Bed Needs for 1990. On a district wide basis, the agency's document indicates a total gross need for 401 beds. There exist 372 licensed beds and no CON approved but unlicensed beds in District V. Morton Plant received preliminary approval for 22 beds but its application was subsequently denied by Final Order. See, Morton F. Plant Hospital Assn., Inc. v. DHRS, DOAH Case No. 83-1275, Final Order Oct. 8, 1985. Therefore, there currently exists a net projected need for 29 short-term psychiatric beds in District V for 1990. Final approval of the application here would result in a district surplus of 26 beds, an increase in beds of less than 7 percent over the projected 1990 numerical need. This 26-bed surplus would replace the 29-bed need after the 55 beds granted to Pasco are considered (Exhibit 27, pages 15-16). The projected numerical surplus for psychiatric beds in District V is due to an excess of 114 beds located in South Pinellas County. However, access problems to Pasco residents may, in fact, be one of the reasons for this excess (Exhibit 10, page 3). Rule 10-5.11(25) projects the need at the district level, leaving the specific allocation to the agency and to the Local Health Council by identifying particular areas within the district that may need additional beds through use of the Local Health Plan (Exhibit 26, page 3). The Local Health Council's 1985 plan projects needed beds to the target year 1990 and projects need by subdividing District V on a geographic basis of East and West Pasco and North and South Pinellas Counties (Exhibit 8, page 110, Tables 8 and 11; Exhibit 10, page 2). The Plan establishes subdistricts identical to those subdistricts which have been designated for acute care beds (Exhibit 8, page 110, Tables 8 and 11; Exhibit 10, page 2; Exhibit 27, page 8). The subdistrict concept evidences a rational division of the District's population and healthcare communities (Exhibit 10, page 2; Exhibit 27, page 8). In view of the poor transportation situation in Pasco County as well as traffic congestion along U.S. Highway 19, especially during the tourist period, an access problem exists for patients and their families seeking psychiatric and substance abuse inpatient services (Exhibit 10, page 2). In 1990, Pasco County's population will reach 286,488. This total is broken down into East and West Pasco County, with population projected to be 88,811 and 197,677, respectively. Application of the numerical need methodology to the Pasco population indicates a projected need for 101 psychiatric beds in Pasco County, allocating 70 beds to West Pasco and 31 beds to East Pasco, to insure adequate services are provided to all residents of the County (Exhibit 26, page 3). Recognizing the existence of 46 psychiatric beds at Community in West Pasco, there remains a projected need for 24 psychiatric beds in West Pasco County. With no existing psychiatric beds being located in East Pasco County, between the two areas there is an estimated need for 55 psychiatric beds in the County as a whole, the precise number of short-term psychiatric inpatient beds sought for approval by Pasco (Exhibit 26, page 3). Applying the allocation portion of the rule for freestanding facilities to Pasco County residents, there is indicated a net need for beds in freestanding settings of 58 beds by the year 1990. The grant of 55 beds to the applicant in this case is, therefore, consistent with the provision of the rule (Exhibit 26, pages 3, 4). Rule 10-5.11(25)(d)7 recognizes that an applicant proposing to build a new but separate short-term psychiatric facility should have a minimum of 50 beds. There is no practical manner within which to approve a facility in East Pasco County at the present time, based solely on the East Pasco population, since the numerical need is only 31 (Exhibit 26, page 3). From a health planning standpoint, it is practical to build a facility in the middle of the County, as proposed here. The impact upon existing providers is lessened by its location while at the same time the facility has the ability to obtain patients from all portions of the County. A facility located farther east would not be financially feasible as a result of the low base population (Exhibit 26, page 3). According to Rule 10-5.11(25)(e)7, "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% of the service area's population." Conversely stated, not more than 10% of the Pasco service area population should be outside this time/travel standard. The Pasco proposed project meets the objectives of this criterion and improves geographic access to psychiatric care for Pasco County residents (Exhibit 28, page 3). Unlike a psychiatric unit in a general acute care medical hospital, it is not possible for the psychiatric beds proposed here to be used for acute medical purposes. The concept of a focused, single-purpose facility is also in keeping with the goal of the District Mental Health Board Plan which indicates the need to develop centralized inpatient services in Pasco County. Rule 10-5.11(25) (e)1 (Exhibit 28, page 5). The Local Health Plan notes that it would be cost effective to apply a 75 percent average occupancy threshold for psychiatric and substance abuse services within the service area when considering additional inpatient facilities or services of this type. It also indicates that facts such as patient origin and accessibility should be considered within the need for beds. The plan notes that individuals from Pasco County have had to seek Baker Act services outside of the County and even the District. Thus, access to inpatient care for the indigent psychiatric patient is recognized to be a problem in Pasco County (Exhibit 8; Exhibit 27, pages 11-12; TR-84, lines 16-25; TR-85, lines 16-25; TR-93, lines 23-25; TR-94, line 1). According to the-plan, Baker Act and indigent residents of Pasco County must travel to facilities in District VI to obtain these services. Additionally, with respect to the need for beds, the Local Health Plan indicates that if the subdistrict analysis is accepted, then the need for psychiatric and substance abuse beds is greatest in Pasco County. The plan also notes that while past utilization of the psychiatric unit which exists in West Pasco County would seem to suggest low demand in the County, the low utilization stems in part from the restriction of access to private pay and involuntary patients (Exhibit 27, page 12). According to the plan, services are only being provided to private pay, voluntary patients; consequently, indigent patients are not being served. Baker Act patients who are involuntarily admitted have not been served (Exhibit 27, pages 12-13; TR-374, lines 2-25; TR-376, lines 21-25; TR-377, lines 1- 11). The applicant is proposing to allocate a combined total of at least 10 percent of its patient days to Baker Act and indigent patients, clearly assisting in meeting this need (Exhibit 27, pages 17-18). The Local Health Plan represents local statements and input addressing the needs within the community. The application meets and is consistent with the standards noted in the existing and approved Local Health Plan for District V (Exhibit 10, page 3), a specific requirement of Rule 10-5. 11(25 (e) 1. The applicant initially projected an occupancy rate of 71 percent of the second year and approximately 83 percent of the third year of operation satisfying the criterion contained in Rule 10-5.11.(25)(d), Florida Administrative Code. Subsection (d)(5) recommends that a project would normally not be approved unless the average annual occupancy rate for all existing short- term inpatient psychiatric beds in the district is at or exceeds 75 percent for the preceding 12-month period. DHRS has interpreted this to be the average annual occupancy rate for all facilities for the short-term psychiatric beds within the service district, because the rule refers to the annual occupancy rate for existing beds in the service district, rather than to facilities (Exhibit 27, page 16). During the 12-month period July 1, 1984 through June 30, 1985 the existing short-term psychiatric facilities in District V reported an average of 75 percent occupancy level (Exhibit 27, page 17). Rule 10-5.11(25), Florida Administrative Code, indicates that a favorable determination may be made even when criteria other than those specified in the numeric need methodology, as provided further in Subsection (e) of Chapter 10- 5.11(25), are not met. This would also be true when applying the other criteria utilized in Section 381.494(6)(c) (Exhibit 27, page 13). Considering all these factors and the benefits that the proposed project would bring, there is a projected need for the 55 proposed short-term psychiatric beds shown under Rule 10- 5.11(25) (Exhibit 27, pages 22-23). Substance Abuse Bed Need In District V Rule 10-5.11(27) establishes a bed-to-population ratio of .06 beds per 1,000 population for the projected year in question (Exhibit 26, page 4). The need methodology, as applied to District V for 1990, shows a total need for 69 short-term substance abuse beds in District V. There are presently 74 licensed short-term substance abuse beds in District V and no additional CON approval. This results in a surplus of five beds in the district, without including the 17 beds approved for Pasco Psychiatric Center. (Exhibit 10, page 3, Exhibit 27, pages 23- 24). The Local Health Council has projected a need through 1990 for 17 substance abuse beds, using the State's formula contained in Rule 10-5.11(25) and 10.5.11(27) and applying the formula on a subdistrict basis (Exhibit A, page 118, table 11; Exhibit 10, page 2). Subsection (h)(l) contains a suggested standard of 80 percent occupancy rate in the District for the past 12 months. During the period from July 1, 1984 through June 30, 1985 reporting substance abuse bed facilities reported an average occupancy level of 88 percent. DHRS has determined there exist 22 short-term substance abuse beds at Horizon Hospital. However, Horizon does not report its utilization of those beds separately, but includes them within its reported short-term psychiatric beds (Exhibit 27, page 25). Much in the same manner as the short-term psychiatric rule, Rule 10-5.11(27)(h)3 refers to the Local Health Plan and consistency with local need determinations. According to the plan, there is a projected need in the two Pasco subdistricts for 17 short-term substance abuse beds by application of the numerical methodology .06 beds per 1,000 population to Pasco County. There are no short-term substance abuse beds available or approved in the Pasco County subdistricts (Exhibit 27, pages 11, 25-26). Rule 10-5.11(27)(h)4 establishes a minimum unit size of 10 designated beds. Additional calculation reveals that the numerical need for 17 beds is broken down into 12 beds in the . West Pasco area and five in East Pasco. Because of the minimum size requirement, there is no reasonable way for a unit to be built solely based on the East county portion of the numerical need. Consequently, a proper health planning alternative is to approve the 17-bed unit, which will be centrally located to serve both portions of the County (Exhibit 26, page 4). A Certificate of Need may be approved where need is determined through criteria other than the numeric need methodology. For example, criteria in Section 381.494(6)(c) and in subparagraph (f) of Rule (27) may indicate that need is demonstrated for the project beyond the numerical formula (Exhibit 27, page 23). Upon analysis of all the factors contained within the rule, the applicant meets the need for the Pasco subdistricts. AREAS OF CONSIDERATION IN ADDITION TO BED NEEDS A. Availability, Utilization, Geographic Accessibility And Economic Accessibility The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization and adequacy of like and existing health care services and hospices in the service district of the applicant. Section 381.494 (6) (c) 2 A number of hospital facilities serve District V's residents in need of psychiatric and substance abuse health care services (Exhibit 10, page 16 and 17, tables 9 and 10). Of these, Anclote Manor's patients have an average length of stay of more than two years. Anclote is licensed as a long-term care facility (Ibid., Exhibit 28, page 3) St. Anthony's Hospital, Mease Hospital and Suncoast Hospital have not contested the agency's initial decision to grant this application, leaving only Morton Plant and Horizon in Pinellas County and CHNPR in Pasco County as District V parties objecting to the application. CHNPR's patients are predominantly geriatric (Exhibit 28, page 3). During 1984 the utilization of psychiatric beds at Morton Plant was 137 percent. Hospitals in North Pinellas County show an average 100 percent utilization of their psychiatric beds for the period (Exhibit 35, pages 10 and 11). However, for the same period, utilization of CHNPR's psychiatric unit was 50 percent. Ibid. During the last available 12-month period of information (July 1, 1984 through June 30, 1985), the existing short-term psychiatric facilities in District V reported an average occupancy level of 75 percent (Exhibit 27, pages 16-17). Based upon utilization of less than 75 or 80 percent, there may exist underutilized beds for psychiatric services at Horizon Hospital (TR-798, lines 19-20). However, this conclusion is based upon the assumption that Horizon is licensed for 200 psychiatric beds (TR-798, lines 21-23). DHRS however, considers that Horizon is licensed (License 1809) for 178 psychiatric beds (TR-800, lines 10-15). Consequently, the number of licensed psychiatric beds affects the occupancy rates at Horizon. In order to determine access or demand within a community, factors besides utilization must be looked at (TR-887, lines 13-21). A number of other factors may and in this case do, in fact, affect occupancy rates (TR-887, lines 13-21). In addition to location, the existence of semi-private rooms, sex and age segregation policies adopted by various facilities, and corporate decisions artifically impede access and thus affect utilization and occupancy rates (TR-431, lines 9-13; TR-883, lines 12-24, 25; TR-884, lines 1-10). CHNPR's low occupancy rates are affected by the facility's location, lack of a commitment to indigents medically underserved patients, as well as its lack of segregation of psychiatric beds between adults and children (TR-392, lines 24- 25; TR-393, lines 1-9; TR-397, lines 13-19; TR-398, lines 4- 10).and 13; TR 883, lines 12-24, 25; TR-884, lines 4-10). Pasco residents have been forced to seek inpatient psychiatric and substance abuse services outside the County for years (Exhibit 21, page 1). The location of CHNPR in the western part of the county makes services inaccessible to residents of the eastern part of the county (TR-397, lines 1319; TR-398, lines 4-10). No facility exists in Pasco County that contains the proper housing for adolescents who need psychiatric services (Exhibit 21, page 2). Rainbow House, an adolescent residential care center in Dade City, can accommodate a very limited number of children and is not prepared to handle acutely ill children (TR-399, lines 5- 9). While CHNPR's psychiatric unit is designated for 46 beds, only 26 beds are available for psychiatric services. The dramatic changes in occupancy at Community Hospital of New Port Richey from 80 percent to 40 percent indicate the psychiatric beds are used for acute medical purposes (Exhibit 22, page 2). Without a public transportation system in Pasco County, travel time for Pasco residents and their families is a problem (TR-401, lines 14-25; TR-402, lines 1-23). A major portion of Pasco residents who have been provided inpatient services are provided those services by facilities located one hour away (Exhibit 22, page 2; Exhibit 23, pages 1-2; TR-397, lines 7-16). The access problem is more acute for the elderly, which comprise 32.7 percent of Pasco's population compared to 19.3 percent for all of Florida projected to 1990 (Exhibit 26, page 2). The distance to facilities serving Pasco County residents is sufficiently great as to make follow-up care very difficult, preventing family involvement, and making treatment inefficient (TR-325, lines 7-25; TR-408, lines 1-8; TR-436, lines 12-25). Based upon a July 1985 population of 240,204 approximately 13 percent of Pasco County residents are not within a 45-minute total travel time to a psychiatric facility in District V. This number is expected to increase to 19 percent of the County's population by 1990 (Exhibit 18, page 17, figures 10 and 11; page 14 and figure 13, page 15). United Medical Corporation (UMC), which owns Pasco, has a history of providing services to indigents and medically underserved (Exhibit 13, page 2) and in particular to residents of Pasco County. Ibid. This is based upon UMC's former ownership of Tampa Heights Hospital. At that time it was the facility that admitted Baker Act patients from Pasco County (Exhibit 10, page 3; Exhibit 13, page 2). CHNPR's recent corporate decision to take Baker Act patients is not persuasive as to the issue of access to indigents and medically under served (Exhibit 27, pages 19-20). The timing of the agreement with the Pasco and Hernando Human Development Councils during the pendency of these proceedings indicates, at a minimum, that the application here has already favorably affected access to these citizens. CHNPR's policy with respect to indigents, Medicaid and the medically underserved residents reduces the accessibility of these patients to its facility. See Turro v. DHRS and CHNPR v. DHRS, DOAH Case Nos. 83-005 and 83- 092, Recommended Order September 7, 1983, Final order October 25, 1983, 6 FALR 336, et seq. The proposed project will be accessible to residents in need of psychiatric and substance abuse services in District V. NEED FOR SPECIAL EQUIPMENT The need in the service district of the applicant for special equipment and services which are not reasonably and economically accessible in adjoining areas. Section 381.494 (6) (c) 6. Although an issue in this proceeding, no evidence was presented as to the applicability of this criterion or the applicant's consistency or inability to meet this criterion. It is thus specifically found that this criterion is not applicable. NEED FOR RESEARCH AND EDUCATIONAL FACILITIES The need for research and educational facilities including but not limited to institutional training programs and community training programs for health care practitioners and for doctors of osteopathy and medicine at the student internship and residency training level. Section 381.494(6)(c)7,. Although an issue in this proceeding, no evidence was presented as to the applicability of this criterion or the applicant's consistency or inability to meet this criterion. It is specifically found that this criterion is not applicable. AVAILABILITY OF RESOURCES The ability of the applicant to provide quality of care. Section 381.494(6) (c)3. The availability of resources including health manpower, management personnel and funds for capital and operating expenditures for project accomplishment and operation; the effects the project will have on clinical needs of health professional training programs in the service district; the extent to which the services will be accessible to schools for health professions in the service district for training purposes if such services are available in the limited number of facilities; the availability of alternative uses of such resources for the provision of other health services; and the extent to which the proposed services will be accessible to all residents of the service district. Section 381.494 ( 6) (c) 8. Management and Quality of Care UMC, the parent corporation, has at its disposal management personnel and will be able to obtain health manpower to accomplish the project (Exhibit 12, page 2; Exhibit 13, pages 1-2). UMC presently owns and operates three psychiatric hospitals (Exhibit 11, page 1). The facility will have at its disposal UMC's services in the areas of management and recruitment. UMC has successfully recruited physicians and other health care providers in the past (Exhibit 13, page 1) lines 1-5; TR-332, lines 19-21). The applicant will be able to adequately staff and, manage the facility and provide quality care to its patients in the service area. Funds for Capitol and Operating Expenditure UMC has obtained a commitment from Freedom Savings & Loan Association to finance the project (Exhibit 14, page 2) and will therefore be able to obtain the financing necessary to build and operate the facility. No evidence was presented to show the project will have a detrimental effect on clinical needs of health professional training programs in the district for training. Financial Feasibility The facility will be financed through a construction loan with a 5-year permanent financing package at a rate of prime plus one and one-half percent floating and a two percent fee (Exhibit 14, page 1). The projections contained in Exhibit 7 and Exhibit 5 as well as the underlying assumptions indicate the figures represent reasonable and accurate estimates of income and expenses that will be incurred in the event the Certificate of Need is issued (Exhibit 9, page 1; Exhibit 11, pages 2-3; Exhibit 12, pages 1-2; Exhibit 13, pages 1-2; Exhibit 15, page 2; Exhibit 17, pages 1-2; Exhibit 25, pages 6-9). Note: See also, Hoefle's testimony. CHNPR contends that the projected ALOS should be considered at CHNPR's level. However, the ALOS at CHNPR's psychiatric unit is directly affected by the influx of Baker Act patients and contractual limitations (TR-921, lines 19-25; TR- 922, lines 1-2; TR-452, lines 14-17; TR-453, lines 5-12). In the final analysis the financial feasibility of the proposal will depend to a large degree on whether physicians will admit patients to the facility. Doctors Vesley and Rudajev will support the facility when built and their projections as to the numbers of patients and ALOS are reasonable (TR-292, lines 17-18; TR-293, lines 4-7; TR-293, lines 12-15; TR-295, line 16; TR-317, lines 19-24; TR-324, lines 13-24; TR-325, lines 1-2; TR-336, lines 19-22; TR-332, lines 19-21). It is reasonable that other physicians in Pasco County will locate in the area surrounding the hospital and will support the facility once it is opened (TR- 413, lines 7-17; TR-792, lines 2-9). The needs and circumstances of those entities which provide a substantial portion of their services or resources or both to individuals not residing in the service district in which the entities are located or in adjacent service districts. Such entities may include medical and other health professions, schools, multi-disciplinary clinics and specialty services such as open-heart surgery, radiation therapy and renal transplantation. Section 381.494 (6) (c) 11. No evidence was presented indicating the applicability of this criterion or the applicant's ability or inability to meet this criterion. I find this criterion not applicable. AVAILABILITY OF HEALTH CARE ALTERNATIVES The availability and adequacy of other health care facilities and services and hospices in the service district of the applicant, such as outpatient care and ambulatory or home care services which may serve as alternatives for the health care facilities and services to be provided by the applicant. Section 381.494 (6) (c) 4. At the time of hearing, no alternatives to the application proposed were presented. Nor was other evidence presented to indicate alternatives to the proposed facility and services are, in fact, available at the time of this proceeding. Other than CHNPR no facilities located in Pasco County provides inpatient psychiatric services (TR-400, lines 21 25; TR- 4 01, lines 1-3). Probable economies and improvements in service that may be derived from operation of joint, cooperative or shared health care resources. Section 381.494 (6) (c) 5. The facility will share resources with other facilities owned or operated by UMC such as common training and joint purchasing (Exhibit 11, page 1); financial management (Exhibit 12); financing (Exhibit 14); and recruitment and marketing (Exhibit 13). These shared resources will provide economies and improve services presently available in District V. IMPACT UPON EXISTING FACILITIES AND COSTS AND COMPETITION The probable impact of the proposed project on the cost of providing health services proposed by the applicant upon consideration of factors including but not limited to the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assuance and cost effectiveness. Section 381.494 (6) (c) 12. Two hospitals in Pasco County in relatively close proximity to each other are owned by Hospital Corporation of America--Community Hospital of New Port Richey and Bayonet Point Medical Center--giving HCA 86 percent of all hospital beds in the West Pasco service area. The applicant's expert, Dr. Scott, compared statewide HCA hospital averages and daily pre-tax profits based on adjusted patient days with those at CHNPR and Bayonet Point, using 1982 actual hospital data reported to the Hospital Cost Containment Board. The data indicates a much higher than HCA average operating margin, total margin, daily gross revenues and daily pre-tax profits. In Pasco County, HCA shows profitability roughly double that of its statewide averages (Exhibit 25, pages 3-4). HCA has now acquired the nearby freestanding psychiatric hospital at the University of South Florida (Exhibit 25, pages 3-4; TR-854, lines 14-18). Without competition, HCA will not be required to compete in Pasco County for price or quality of care. Approval of the application should significantly reduce HCA's share of the Pasco-Hillsborough market in terms of beds and would positively affect competition and the delivery of health care services (Exhibit 25, page 5; Exhibit 27, pages 29-30). In 1985 CHNPR psychiatric unit's occupancy rate was 41 percent (Exhibit 41, page 4). Following execution of its Baker Act agreements, occupancy rose to 49.7 percent (TR-921, pages 5- 18). CHNPR is a large institution which grossed more than $1 million in pre-tax income based on 50 percent utilization (TR-998, lines 21-25). CHNPR projects that in 1987, 1988 and 1989 only 1 percent of its revenues will be derived from Medicaid patients and .9 percent will be derived from indigents (TR-915, lines 18- 25; TR-916, lines 1-5). Left without competition, HCA will continue to dominate the health care delivery system in Pasco County, a situation which should not be continued. (TR-620, lines 24-25; TR-621; TR- 622). Morton Plant's witness agreed there exists a need for additional psychiatric and substance abuse beds in Pinellas and Pasco Counties in District V (TR-829, lines 15-25; TR-833, lines 3-6). In 1984, approximately 4 percent of Morton Plant's psychiatric patients resided in Pasco County (TR-837, lines 14- 17). Morton Plant's psychiatric unit's occupancy rates have consistently exceeded 100 percent (TR-838, lines 3-6) and there is a waiting list at Morton Plant's adolescent unit (TR-843, lines 2-4). Morton Plant presented no evidence that issuing this CON to Pasco would substantially affect its psychiatric unit (TR- 826, line 25; TR-827, lines 1-25; TR-828, lines 1-9). UPC, now owned by HCA, is located outside District V. UPC, as a university hospital, is different from any other in Florida (TR-860, lines 17-24). It was UPC's mission as a research and teaching facility, and its regional concept of .referrals extending over 17 counties, that led to the grant of its application by DHRS (TR-860, line 25; TR-861, lines 1-21). UPC projected 30 percent of its patients would be referred from outside the area including Pasco County (TR-856, lines 6-11). This limitation was not considered by Dr. Fernandez in concluding that UPC would be adversely affected by the grant of the CON to Pasco. The effect upon UPC is further lessened when one considers the general availability of UPC's facility to the Pasco/District V community. In order to admit patients to the UPC facility, physicians must be members of the UPC faculty (TR- 857, lines 5-11). Eight of UPC's beds will be subject to admissions restricted to only two physicians (TR-857, line 25; TR-858, lines 1-25; TR-859, lines 1-20). Horizon and Hernando are owned by PIA. Horizon receives approximately 5 percent of its patients from Pasco County (TR-787, lines 23-25; TR-788, lines 1- 2). Approval of the Pasco facility may cause Horizon to lose 80 to 90 percent of its total 137 admissions from Pasco--109 to 123 admissions; however, this loss may occur with or without approval of this application (TR-792, lines 17-25; TR-793, lines 1-9). Horizon's expert's testimony regarding utilization was based upon Horizon being licensed for 200 psychiatric beds (TR- 798, lines 1-24); however, DHRS considers Horizon licensed for 178 (TR-798, lines 25; TR-799, lines 1-25; TR-800, lines 1-25; TR-801, lines 1-4). Hernando, located in District III, relied upon a need argument based solely on District III, not District V, in pursuing its CON application (TR-770, lines 18-25; TR-771, line 1). Hernando has previously defined its primary service area as only including Citrus and Hernando Counties, both in District III, and did not include Pasco County within its secondary service area, or for purposes of projecting its admission rates or feasibility (TR-771, lines 14-22; TR-772 lines 10-15; TR-775, lines 20-25; TR-776, lines 1-2; TR-777, lines 5- 16). Community Care has not determined a site for its facility in Citrus County (Exhibit 29, page 6, lines 9-11). Community Care opposes the application because its main concern is the reduction in market share that may be available to its facility (Exhibit 29, page 27, lines 2-6). In its CON application in 1983, Community Care relied only upon District III as its population base (Exhibit 29, page 8, lines 18-21; page 9, lines 19-25). Community Care relief upon the Local Health Plan in District III in establishing need (Exhibit 29, page 10, lines 1- 10) and relied solely upon Citrus and District III population growth as its patient base (Exhibit 29, page 10, lines 10-15). Community Care will not provide short-term substance abuse services (Exhibit 29, page 20, lines 12-18; page 25, lines 11-25). Approval of the Pasco facility will not increase the cost of health services in District V and will favorably affect present services, promoting more efficiency in the health delivery system. The effect of the approval, with its related conditions, will assure access to underserved residents who otherwise will continue at the mercy of the HCA facilities. 110. Approval will not substantially adversely affect providers within or outside District V. CAPITAL EXPENDITURE PROPOSALS The costs and methods of proposed con- struction, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction. Section 381.49 (6) (c)13. In cases of capital expenditure proposals for the provision of new health services to inpatients, the department shall also reference each of the following its findings of fact: That less costly, more efficient, or more appropriate alternatives to such inpatient services are not available and the development of such alternatives has been studied and found not practicable. That existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner. In the case of new construction, for example, modernization or sharing arrangements, have been considered and have been implemented to the maximum extent practicable. That patients will experience serious problems in obtaining inpatient care of the type proposed, in the absence of the proposed new service. Section 381.494 ( 6) (d) 1-4. The evidence indicates the costs and methods of the proposed construction are reasonable. The normal percentage of architectural and engineering fees are in the range of 5 percent to 7 percent of construction costs; in this case the architectural and engineering fees are approximately 6 percent. The construction costs of approximately $78 to $80 per square foot are reasonable for this type facility (Exhibit 15, page 2; Exhibit 17, pages 1-2). See also footnotes to paragraphs 86 and 87. Less costly, more efficient or more appropriate alternatives to the services proposed here are not available. No existing facility or applicant has filed an application seeking to provide services similar to those sought to be provided by this applicant for the target population year 1990. Existing inpatient facilities providing services similar to those proposed are being used in an appropriate and efficient manner. Utilization rates at existing district facilities when considered in light of accessibility including artificial barriers, indicate the facilities are being used in an appropriate and efficient manner. As noted earlier, alternatives to the project here at issue are not present. The lack of access, geographical, financial and artificial, to residents of Pasco County in need of psychiatric and substance abuse services, as well as the numerical need evidenced by application of the state-mandated need methodologies indicate that, absent the proposed service, patients will experience serious problems in obtaining psychiatric and substance abuse inpatient care.
The Issue The issue for determination is whether Petitioner's Medicaid provider number should be cancelled.
Findings Of Fact I.M.P.A.C.T. Institute, Inc. (Petitioner) provides primarily counseling services to residents of Broward County and the surrounding areas. The majority of the residents who receive Petitioner's services are low income, have language barriers and have little education. Petitioner provides a valuable and important service to the community that it serves. At all times material hereto, Petitioner was licensed by the Department of Health and Rehabilitative Services in accordance with Chapter 397, Florida Statutes. Petitioner was issued its regular license on December 29, 1994. At all times material hereto, Petitioner was enrolled as a community mental health provider in the Florida Medicaid program pursuant to Subsection 409.906(8), Florida Statutes. Petitioner has been enrolled in the Medicaid program for approximately three years. At all times material hereto, Petitioner has been issued a Medicaid provider number which has been continuously renewed. Petitioner is currently receiving Medicaid reimbursement for community mental health services pursuant to Subsection 409.906(8), Florida Statutes. On June 10, 1994, Petitioner executed a Medicaid Provider Agreement (Agreement). The Agreement provides in pertinent part: The provider and the Department [Depart- ment of Health and Rehabilitative Services] agree to abide by the Florida Administrative Code, Florida Statutes, policies, procedures, manuals of the Florida Medicaid Program and Federal laws and regulations. The agreement may be terminated upon thirty days written notice by either party. The Department may terminate this agreement in accordance with Chapter 120, F.S. Respondent has a handbook which describes, among other things, the community mental health services program and provider participation requirements. Effective December 1995, the handbook provides in pertinent part: Community mental health services are governed . . . through the authority of Chapter 409.906(8), Florida Statutes. * * * To be eligible to be enrolled in Medicaid, a provider must have a current contract pursuant to the provisions of Chapter 394, Florida Statutes, for the provision of community mental health services; and, if applicable, a regular (i.e., not provisional or interim) license as an alcohol prevention and treatment or drug abuse treatment and prevention program from the district Depart- ment of Health and Rehabilitative Services (HRS), Alcohol, Drug Abuse and Mental Health (ADM) program office. Petitioner does not have a contract with the Department of Health and Rehabilitative Services, Alcohol, Drug Abuse and Mental Health (ADM) program office. Petitioner has been attempting to obtain a contract with the Health and Rehabilitative Services ADM program office but has been unable to do so because the Health and Rehabilitative Services ADM office has had no money to fund such a contract. Respondent is cancelling Petitioner's Medicaid provider number because Petitioner does not have a contract with the Health and Rehabilitative Services ADM program office.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order terminating I.M.P.A.C.T. Institute, Inc.'s Medicaid provider contract and cancelling its Medicaid provider number. DONE AND ENTERED on this 8th day of October, 1996, in Tallahassee, Leon County, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 8th day of October, 1996. APPENDIX The following rulings are made on the parties' proposed findings of fact: Petitioner Partially accepted in finding of fact 1. Partially accepted in finding of fact 1. Partially accepted in finding of fact 4. Rejected as being argument, or a conclusion of law. Rejected as being argument, or a conclusion of law. Rejected as being argument, or a conclusion of law. Partially accepted in findings of fact 5, 8, and 9. Rejected as being subordinate, irrelevant, or unnecessary. Respondent Partially accepted in finding of fact 2. Partially accepted in finding of fact 3. Partially accepted in finding of fact 6. Partially accepted in finding of fact 5. Partially accepted in finding of fact 7. Partially accepted in finding of fact 8. NOTE: Where a proposed finding has been partially accepted, the remainder has been rejected as being subordinate, irrelevant, unnecessary, cumulative, not supported by the evidence, argument, or a conclusion of law. COPIES FURNISHED: Jason H. Clark, Esquire Post Office Box 17486 West Palm Beach, Florida 33416 Roger R. Maas, Esquire Agency for Health Care Administration 2727 Mahan Drive, Ft. Knox No. 3 Tallahassee, Florida 32308-5403 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308-5403
The Issue Whether or not Halifax' Second Amended Petition has alleged sufficient standing to initiate a Section 120.57(1) F.S. formal hearing, pursuant to Subsection 381.709(5)(b) F.S., in challenge of HRS' modification of ATC's CON.
Findings Of Fact ATC is an existing 50-bed specialty psychiatric hospital with 25 short- term psychiatric beds for children or adolescents, five beds for short-term substance abuse by children or adolescents, and 20 long-term psychiatric beds for children or adolescents. ATC has operated under CON 2331 since 1984. By correspondence dated March 7, 1990, HRS issued to ATC Amended CON 2331 authorizing ATC to convert 15 of its 20 long-term psychiatric beds for children and adolescents into long-term psychiatric beds for adults in a secure unit. Petitioner Halifax is an existing 545 bed acute care hospital with adult patients in its 50-bed secure psychiatric unit. Its existing hospital license 2700 is for a short-term psychiatric program which does not specify use of the beds for either adults or for children and adolescents. Halifax does not have a CON for a long-term psychiatric program. Halifax' Second Amended Petition alleges its standing in the following terms: . . . Halifax is a 545 bed acute care hospital, licensed pursuant to Chapter 395, Florida Statutes, and located within HRS District IV. Halifax provides psychiatric services to adult patients in its 50 bed psychiatric unit. Due to the nature of the patients served, Halifax operates it (sic) psychiatric services in a secured unit. Halifax's psychiatric unit has been in operation since December 7, 1951 and is an "established program" under Section 381.709(5)(b) Fla. Stat. * * * 5. Halifax is a substantially affected party, and its substantial interest is subject to a determination in this proceeding in that: Halifax is an existing provider of acute care hospital services, located in Volusia County, Florida, and within HRS District IV. Halifax has an established program which provides psychiatric services to adult patients within HRS District IV. If the issuance of Amended CON 2331 were upheld, ATC would offer the same adult psychiatric services presently offered at Halifax' established psychiatric program. Therefore, Halifax is entitled to initiate this proceeding pursuant to Section 381.709(5)(b) F.S. (1989). The issuance of Amended CON 2331 will result in an unnecessary duplication of the same adult psychiatric services provided by Halifax in HRS District IV. Such duplication of services will result in decreased utilization of Halifax' psychiatric program, increased costs to consumers of such psychiatric health care services, and the decreased financial viability of Halifax' established psychiatric program. Additionally, the Second Amended Petition asserts that ATC's requested amendment of CON 2331 would represent a substantial change in the inpatient institutional health services offered by ATC and, thus, is subject to CON review pursuant to Section 381.706(1)(h) F.S. (1989). Further, Halifax alleges that, if approved, the amendment to CON 2331 will authorize ATC to serve an entirely new patient population that it is not authorized to serve pursuant to the original CON.
Recommendation Upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health and Rehabilitative Services enter a Final Order dismissing Halifax' Second Amended Petition and affirming the agency action modifying ATC's CON 2331. DONE and ENTERED this 26th day of October, 1990, at Tallahassee, Florida. ELLA JANE P. DAVIS, 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 26th day of October, 1990. Copies furnished to: Harold C. Hubka, Esquire Black, Crotty, Sims, Hubka, Burnett, Bartlett and Samuels 501 North Grandview Avenue Post Office Box 5488 Daytona Beach, Florida 32118 Robert A. Weiss, Esquire Parker, Hudson, Rainer & Dobbs The Perkins House 118 North Gadsden Street Tallahassee, Florida 32301 Lesley Mendelson, Senior Attorney Department of Health and Rehabilitative Services 2727 Mahan Drive, Suite 103 Tallahassee, Florida 32308 Robert D. Newell, Jr., Esquire Newell & Stahl, P.A. 817 North Gadsden Street Tallahassee, Florida 32303-6313 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
The Issue Whether Petitioner, the Agency for Health Care Administration (AHCA or Agency), proved that Respondents, Life Care Centers of America, Inc., d/b/a Life Care Center of Port St. Lucie, and other Life Care facilities in Winter Haven, Ocala, Orlando, and Citrus County, were not in compliance with the Medicaid-patient-days condition stated on the face of the Certificates of Need (CON) for each facility for calendar year 2006, and, if not in compliance, whether the Agency may impose administrative fines in the amount sought in the first amended administrative complaints.
Findings Of Fact The Parties The Agency for Health Care Administration is the state agency responsible for licensing and regulating nursing home facilities such as Respondents under Chapter 400, Part II, Florida Statutes, and issuing CONs under Chapter 408, Florida Statutes. Respondents are community/skilled nursing home facilities that have CONs issued pursuant to Chapter 408, Florida Statutes. Each facility is located in the geographical area indicated by its name, e.g., Life Care Center of Port St. Lucie is located in Port St. Lucie, Florida, and in an AHCA health service planning district (District) and subdistrict. Life Care Center of Port St. Lucie, a 123-bed facility, is located in District 9, Subdistrict 5; Life Care Centers of America, Inc., d/b/a Life Care Center of Winter Haven, a 177-bed facility, is located in District 6, Subdistrict 5; Life Care Centers of America, Inc., d/b/a Life Care Center of Ocala, a 120-bed facility, is located in District 3, Subdistrict 4; Life Care Centers of America, Inc., d/b/a Life Care Center of Orlando, a 120-bed facility, is located in District 7, Subdistrict 2; and Life Care Centers of America, Inc., d/b/a Life Care Center of Citrus County, a 120-bed facility, is located in District 3, Subdistrict 5. § 408.032(5), Fla. Stat.; Fla. Admin. Code R. 59C-2.200. The CONs; Medicaid Conditions; Dual Eligibility The starting point of this story begins with the CONs that are effective for calendar year 2006 for each Respondent and the Medicaid-patient-days condition stated on each CON.2 The Agency conditioned the issuance of the CONs based upon statements of intent expressed by Respondents in the CON applications. § 408.040(1)(a), Fla. Stat. The primary purpose of requiring the CON Medicaid- patient-days condition is to ensure access for Medicaid-eligible or funded residents. T 499-500.3 When the CONs were issued, either through a transfer or as an initial CON, Respondents committed to provide a certain level of Medicaid patient days. The required Medicaid percentage of patient days for each Respondent is set forth in the table under Finding of Fact 36. Agency Exhibits 1 through 11 and 13 show how Life Care Centers of America, Inc., characterized the agreed to number/percentage of Medicaid patient days in various CON application documents; verbalization of same; and the manner in which its facilities would account on Schedule 7 or 10, e.g., of the CON application, for projected revenue by payor source, including, but not limited to, Medicaid. See Fla. Admin. Code R. 59C-1.008(1)(f) (adoption of Agency forms); T 161. (Payor and payer are used throughout this record and in context have the same meaning.) Agency Exhibit 4 contains excerpts from a 120-bed new freestanding nursing home in Marion County, Florida, submitted in 1995 on behalf of Life Care Centers of America, Inc. T 49. The conditions page states that the applicant agreed to provide "66% of patient days to Medicaid clients." The following page states in part: "Condition C2: A minimum percentage of proposed project for Medicaid eligible patients at stabilized occupancy." Under "Measurement and Conformance," it is stated: "Actual payor mix experience following project licensure and fill-up; annual reporting requirements." Id. at 3; T 49-50. (Another excerpt states: "Condition C2: Percentage of patient days for Medicaid beneficiaries." PE 13 at 4.) Schedule 10 provides projected operating revenue for year two ending December 31, 1996. Medicaid patient days are stated (26,981) as well as a percentage (66.0%) of patient days. Id. at 5. (In other excerpts, similar material appears in Schedule 7.) The Schedule 10 Notes and Assumptions pages devote a paragraph to Medicaid. Id. at 7. See T 165-67. None of the excerpts from Agency Exhibits 1 through 11 and 13 expressly refer to providing services to "dual eligible" patients. The schedules do not have a specific line item for entry of this information, although Schedule 7 has a category "Other Revenue," PE 1 at 4, which the Agency suggests could have been used to identify that revenue source. T 163. The Agency considers Agency Exhibits 1 through 11 and 13 as proof that Respondents understood and agreed to provide a minimum percentage of patient days to residents whose care was paid for by Medicaid, a payor source. Thus, according to the Agency, only patient days that are provided to patients when Medicaid is the sole source of reimbursement are counted when determining compliance with the Medicaid condition. (According to the Agency, the statement "'Medicaid patient days' is defined, for purposes of CON condition compliance, as the 'patient days reimbursed by Medicaid,'" see PE 41 at paragraph 15.b., and is derived from Respondents' Schedule 7 indicating what the Respondents "expect their payers to be, and that is in rule." T 931.) Agency Exhibits 21, 22, and 24 through 26 are the CONs at issue in this proceeding and, with some minor variations, state: A minimum of [ ] percent of the [ ] bed facility's total annual patient days shall be provided to Medicaid patients. Medicare is a program of health insurance and benefits authorized and administered under Title XX of the Social Security Act. Medicaid is a program of health insurance and benefits authorized and administered under Title XIX of the Social Security Act. "Nursing facilities may obtain reimbursement for services provided to recipients privately or through long term care insurance. There are also specific situations when Medicare will be the payer. Medicaid is always the payer of last resort." RE 46 at 2-2. A person who is eligible for care under Medicare is not necessarily Medicaid-eligible. The person must meet eligibility factors to qualify. However, a person may be qualified as Medicare and Medicaid-eligible. A Medicaid-eligible patient may stay at a nursing home one day or more. Not infrequently, such a patient is more or less permanent resident. Generally, if a nursing home patient achieves the status of a Medicaid patient on day one of the stay, the patient's status as a Medicaid patient continues throughout the stay at the nursing home, unless the patient loses that status either through an ineligibility determination or for some other reason. See T 393.4 Stated otherwise, Medicaid-eligible nursing home patients do not lose their status as Medicaid-eligible patients when the nursing home is reimbursed in whole or in part by Medicare. According to the Florida Medicaid Nursing Facility Services Coverage and Limitations Handbook (Handbook), published by the Agency, a "recipient" "is used to describe an individual who is eligible for Medicaid." RE 46 at ii. "If Medicare Part A covers the recipient, Medicare will reimburse the facility for the entire cost of the care provided for the first twenty (20) days the resident is in the facility following an acute care hospitalization. During the period of time between the twenty-first and one-hundredth days, the resident will incur a charge for coinsurance." RE 46 at 2-2. "Medicaid will cover the amount of the coinsurance if the recipient is eligible for Medicaid" under certain circumstances. Id. "When a recipient is Medicare and Medicaid-eligible and is in the Medicare coinsurance period (21 through 100 days of Medicare coverage), Medicaid pays the Medicare coinsurance amount for the recipient. The amount paid by Medicaid is the lesser of the Medicare rate or the Medicaid per diem rate minus the patient responsibility. Medicaid does not pay for a Medicare HMO recipient during the coinsurance period." RE 46 at 3-2. See also id. at "Qualified Medicare Beneficiary." If the Medicaid patient either enters the nursing home after a three-day or longer hospitalization stay or is a resident of the nursing home and then is hospitalized for this length of time, the resident's care will be reimbursed by Medicare (assuming he or she is enrolled in the program) for up to 20 days upon returning to the nursing home. Medicare may continue to reimburse, typically 80%, (subject to Medicaid's payment of any coinsurance, typically 20%) the nursing home for the patient's care thereafter up to a maximum of 80 additional days, depending on the patient's continuing qualification to receive services paid by Medicare. See generally T 549-54, 663-65, 835-36. In 2006, Medicare was the primary payer and Medicaid covered co-pays and deductibles only. Medicaid could have potentially paid for co-insurance or cross-over. Cross-over means if the patient has Medicare, then Medicaid would be potentially the secondary payer of the cross-over or co-insurance. Generally days 21 through 100 are the cross-over days. See generally T 387-93, 551, 663-65. Subsection 408.040(1)(b), Florida Statutes, states: (b) The agency may consider, in addition to the other criteria specified in s. 408.035, a statement of intent by the applicant that a specified percentage of the annual patient days at the facility will be utilized by patients eligible for care under Title XIX of the Social Security Act. Any certificate of need issued to a nursing home in reliance upon an applicant's statements that a specified percentage of annual patient days will be utilized by residents eligible for care under Title XIX of the Social Security Act must include a statement that such certification is a condition of issuance of the certificate of need. The certificate- of-need program shall notify the Medicaid program office and the Department of Elderly Affairs when it imposes conditions as authorized in this paragraph in an area in which a community diversion pilot project is implemented. (emphasis added). Subsection 408.040(1)(d), Florida Statutes, states: (d) If a nursing home is located in a county in which a long-term care community diversion pilot project has been implemented under s. 403.705 or in a county in which an integrated, fixed-payment delivery system [program] for Medicaid recipients who are 60 years of age or older [or dually eligible for Medicare and Medicaid] has been implemented under s. 409.912(5), the nursing home may request a reduction in the percentage of annual patient days used by residents who are eligible for care under Title XIX of the Social Security Act, which is a condition of the nursing home's certificate of need. The agency shall automatically grant the nursing home's request if the reduction is not more than 15 percent of the nursing home's annual Medicaid-patient-days condition. A nursing home may submit only one request every 2 years for an automatic reduction. A requesting nursing home must notify the agency in writing at least 60 days in advance of its intent to reduce its annual Medicaid-patient-days condition by not more than 15 percent. The agency must acknowledge the request in writing and must change its records to reflect the revised certificate-of-need condition. This paragraph expires June 30, 2011. (emphasis added). The language in brackets was inserted in 2007. "[P]rogram" was inserted for "system" and the remaining language in brackets was new. Ch. 2007-82, § 2 at 1051, Laws of Fla. The amendments to Subsection 408.040(1)(d) were made at the same time that amendments were made to Section 408.912, adding, in part, "program" and deleting "system," and adding "or dually eligible for Medicare and Medicaid" to Subsection 408.912(5). Id., § 1 at 1048. The Agency interprets "utilized by patients eligible for care under Title XIX of the Social Security Act" to mean residents whose care is paid for solely by Medicaid. If the nursing home is reimbursed in whole or in part by Medicare for services to a resident Medicaid patient, e.g., during the one to 100-day period referred to above, the Agency does not count any days of treatment as a Medicaid patient day for the purpose of satisfying the Medicaid-patient-days condition. Conversely, Respondents count all residents who are eligible for Medicaid, regardless of who pays for the resident's care.5 The Agency conditions the approval of a CON based on the applicant's commitment to provide services to the medically indigent, here Medicaid patients. There is no indication that the patients referred to as "dual eligible" by Respondents were not, in fact, Medicaid patients during calendar year 2006, notwithstanding the nature of the facilities reimbursement. Respondents supplied the Agency with data counting traditional Medicaid days, hospice Medicaid days, and the days for "dual eligible" residents, separately stated. The Agency does not take issue with Respondents' reported number of "dual eligible," Medicaid-eligible patient days, only that they should not be counted toward meeting the CON condition. Based upon the persuasive evidence, it is determined that the Agency's interpretation to exclude the reported "dual eligible" Medicaid patient days from consideration for meeting the CON condition is not reasonable. The Annual Compliance Reports; Reporting of Patient Data to the Agency Respondents are required to provide annual compliance reports to the Agency that contain required information, including but not limited to "[i]f applicable, the reason or reasons, with supporting data, why the [CON] holder was unable to meet the conditions set forth on the face of the [CON]." Fla. Admin. Code R. 59C-1.013(4)(a)7. All nursing homes report occupancy data to the local health councils (LHC), with some data reported to the Agency. See PE 14. The LHCs supply the Agency with data concerning the total occupancy of each facility in patient days as well as the number of days reimbursed by Medicaid. Id. This data is compiled into the Florida Nursing Home Utilization by District and Subdistrict Guide (NH Guide). PE 14 (calendar year 2006). If data received from the LHC indicates that a facility is not in compliance with the CON Medicaid-patient-days condition, the Agency will send a letter to the facility requesting additional information. The Agency sent each Respondent a letter requesting additional information for calendar year 2006. See, e.g., RE 1. Consistent with this reporting requirement, on February 25, 2008, counsel filed a formal report for each Respondent. Four of the Respondents, except Life Care Center of Ocala, submitted a detailed booklet setting forth the reason why it was unable to meet the CON Medicaid-patient-days condition. In each formal report except one (Ocala), Respondents' counsel concluded that each facility appeared to strictly not meet the CON Medicaid-patient-days condition, but additional documentation and discussion was provided to the Agency to support a finding by the Agency that the facility was in substantial compliance with these conditions. (With respect to Life Care Center of Ocala, it was suggested that this facility was in full compliance with the Medicaid-patient-days condition.) Except as otherwise stated herein,6 the parties agree (see, e.g., T 155, PHS at 20) with the following data: A B B A C B + C A Life Care Total Patient Days Medicaid Patient Days % "Dual Eligible" % CON Minimum Cond. Port St. Lucie 42,162 16,978 40.27% 1,429 43.66% 47.00% Winter Haven 60,817 29,580 48.64% 5,914 58.36% 60.60% Ocala 40,888 10,725 26.23% 5,387 39.41% 33.00% Orlando 40,468 9,093 22.47% 2,781 29.34% 31.19% Citrus Cty 40,846 14,559 35.64% 3,064 43.14% 45.64% Without consideration of "dual eligible" patient days, five facilities are allegedly non-compliant as follows: Port St. Lucie -- 6.73 %; Winter Haven -- 11.96%; Ocala -- 6.77%; Orlando -- 8.72%; and Citrus County -- 10.00%. RE 41; JPHS at 5-6; Agency's Pre-Hearing Statement at 7. If "dual eligible" patient days are considered, four out of five facilities remain allegedly non-compliant, but to a lesser degree: Port St. Lucie -- 3.34%; Winter Haven -- 2.24%; Orlando -- 1.85%; and Citrus County -- 2.50%. Ocala is compliant by 6.41%. See RE 3, 41; T 817; Agency's Pre-Hearing Statement at 8. The Administrative Complaints This proceeding initially involved consideration of six (now five) separate administrative complaints alleging that each Respondent did not comply with the Medicaid-patient-days condition set forth in each CON for calendar year 2006. Each administrative complaint is based on the information contained in and the Agency's analysis of the formal reports submitted on behalf of each Respondent.7 The Agency does not dispute the facts and figures set forth in the formal reports, although it disagrees with Respondents' contention of compliance with the Medicaid-patient- days condition and whether "dual-eligible" patients may be considered for compliance purposes. Each administrative complaint states, in part, that "[t]his is an action to impose administrative fines in the amount of . . . against Respondent, pursuant to Section 408.040, Florida Statutes, and Florida Administrative Code Rules 59C- 1.013 and 59C-1.021." The Agency has the statutory authority to impose fines up to $1,000 per day for noncompliance, taking into account as mitigation the degree of noncompliance.8 Prior to filing its first amended administrative complaints on October 28, 2009, when a CON holder was determined to be in noncompliance, the Agency made an individualized determination as to whether and how much to fine the CON holder. RE 44 at 3; T 115-16. The Agency created a chart that is completed as an analytical tool. Next, the Agency considered the individual situation of the CON holder, "including but not limited to" a number of factors, such as the "degree of noncompliance, absolutely and in comparison to others within the sub-district"; whether the "[f]acility is not at 85% occupancy"; whether the "[f]acility has not been operational for at least 18 months or first reached 85% occupancy during the reporting year"; whether the "[f]acility can demonstrate operational losses through financial statements and or audit"; whether the "[f]acility has a sister facility (facility owned by the same entity) in the same sub-district that either has no Medicaid condition or has met its Medicaid condition and has additional Medicaid Total Annual Patient-Days to donate to its sister facility"; "[p]rovision of patient care to Hospice Medicaid patients"; "[p]rovision of care to Charity/Indigent patients (days or cash)"; whether the "[f]acility is within 1% or less of its condition"; whether "[p]rovision of Medicaid for facility exceeds that of the sub-district"; and "[a]ny other factors that a CON holder may present that could impact against fines are considered." RE 44. These are a common list of factors that have been considered (not in isolation) by Agency management, if brought to their attention by the facility in assessing whether a fine should be imposed. RE 44; T 206-213, 215-216, 221, 279-80, 352- 56, 373, 483, 927-30, 947-49. See also Fla. Admin. Code R. 59C- 1.013(4)(a)7; Findings of Fact 73 through 83. "All things [were] considered prior to determining the fine, including [the Agency] gave [nursing homes] the 75 percent [for diversion programs] off." T 365. On a rare occasion, the Agency did not fine a noncompliant nursing home because the nursing home was closed during a portion of the year. T 267-68.9 With the filing of the third amended administrative complaints, none of these factors is considered in determining the fine. T 931, 949. The Agency proposed to fine each Respondent as follows: Port St. Lucie -- $13,085; Winter Haven -- $18,022; Ocala -- $18,724; Orlando -- $25,540; and Citrus County -- $19,992. The Agency explained how these fines were calculated, including the mitigation factors considered regarding the degree of noncompliance. RE 26; T 225-30. Respondents' Exhibit 26 consists of the forms (Excel spreadsheets) used by the Agency to determine noncompliance matters in calendar year 2006. The Agency started applying the Excel spreadsheets in approximately 2004 or 2005 in condition compliance cases. T 223, 250-51. For example, for Port St. Lucie, the maximum fine under the statutory framework is $365,000 ($1,000 per day times 365 days). The "applicable fine" was calculated to be $52,341, which is the maximum fine times the percent difference or $365,000 times 14.34%. Then the applicable fine was reduced by 75% to $13,085 ($52,341 times 25%), which is the fine sought in the administrative complaint. RE 26 at 5; see also T 252, 292-97. The 25% factor was applied in each case to reflect consideration of pilot diversion programs in each county where the Respondents are located. T 268, 295. Each Respondent was treated the same. See RE 26.10 Since approximately 2006 and 2007 and prior to the filing of the Agency's third amended administrative complaints in October of 2009, the Agency routinely applied the 25% diversion factor (a 75% deduction). T 294, 338-39. With the filing of the third amended administrative complaints, prior to calculating the fine, the Agency still considers the circumstances of each nursing home and the reasons why they were unable to meet the Medicaid-patient-days condition. "But in terms of the degree [the nursing home is] out of compliance, [the Agency is] using the statute based on the days that [the nursing home is] out of compliance and" the penalty is based on that calculation. T 366-68, 374. See also T 349-50, 357, 363-65. The Third Amended Petitions for Formal Administrative Hearing and the First Amended Administrative Complaints On October 2, 2009, Respondents filed a motion and revised motion to amend their second amended petitions and also filed their third amended petitions challenging the administrative complaints filed by the Agency. (The revised motion was granted over the Agency's objection.) Respondents dispute that they failed to meet the respective Medicaid-patient-days conditions; dispute that the Agency appropriately considered the degree of alleged noncompliance; dispute how the Agency determined the number of residents eligible pursuant to Title XIX of the Social Security Act and Section 408.040, Florida Statutes, claiming that "dual eligible" residents should be counted for purposes of compliance; and further claim that the Agency is improperly relying on six alleged statements as unadopted rules. See PE 41. On October 14, 2009, the Agency filed a motion requesting leave to amend its administrative complaints. (The motion was granted over Respondents' objection.) In its motion, the Agency voiced its disagreement with Respondents' challenge to the alleged statements as unadopted rules and stated: "While the Agency disagrees that the alleged statements are rules, the Agency has determined that in the present proceeding, it will explicitly not rely on the alleged statements, but will explicitly only rely on the Agency's statutory authority conferred by" Subsection 408.040(1)(e), Florida Statutes, and that "the Agency has amended the administrative complaints as to each respondent based on the admissions by each respondent and based upon the authority and language of" Subsection 408.040(1)(e). The Agency incorporated by reference the exhibits (including, but not limited to, the formal reports submitted by Respondents) attached to the original administrative complaints.11 On October 28, 2009, the Agency filed first amended administrative complaints against each Respondent. Most notably, the Agency deleted reference to Florida Administrative Code Rules 59C-1.013 and 59C-1.021, cited in the administrative complaints, and proceeded, consistent with the Agency motion requesting leave to amend, to rely solely on Subsection 408.040(1)(e), as authority to impose the fines requested. The proposed fines are based solely on the Agency's determination that each Respondent is not in compliance with the applicable Medicaid-patient-days condition and based on its view that the degree of noncompliance means the result of the mathematical calculation of the difference between the conditioned level of compliance and the reported level of compliance. No consideration was given to any other factors such as the prior proposed reduction in fines (in the original administrative complaints) in light of the pilot diversion programs (the 25% factor). Stated otherwise, the Agency applied the new proposed rule, see Finding of Fact 63, as the sole criterion for determining as mitigation the degree of noncompliance. T 219, 492. The Agency will no longer consider the mitigating factors considered by the Agency in the past. This led the Agency to proceed to rule development. T 494-95. The Agency explained how it calculated the amended fines. Agency Exhibits 27 and 28 and 30 through 32 are the calculation sheets used by the Agency to determine the fines for the first amended administrative complaints. T 151, 274-79. Based on each Respondents' formal report of compliance (without regard to "dual eligible" Medicaid patient days), except for "dual eligible" Medicaid patient days reported by a Respondent, the Agency considered all traditional Medicaid patient days, including Medicaid hospice days12 and charity days. T 152, 201-03. The Agency imposed a fine of $1,000 per day for each day in which Respondents were not in compliance. T 150-57, 272-79. The degree of noncompliance per month in calendar year 2006 was taken into consideration by calculating the percentage of noncompliance. For January 2006, Port St. Lucie was required to provide 1,688 Medicaid patient days (47% times 3,592) and actually provided 1,506 traditional Medicaid patient days, which was then divided by the required number of Medicaid patient days (1,506/1,688) to equal 89.22% of the 31 days in January that were met or 27.66 days or 3.34 unmet days. The resulting fine for January was $3,342 or $1,000 per day times 3.34. These calculations were performed for each month with the actual fine requested in the first amended administrative complaint at $52,024, T 152-153, PE 27, which is the fine for the number of days out of compliance. T 279, 494. (Mr. McLemore thought the Agency would not fine a nursing home out of compliance for two days. T 278.) The new formula is based on statutory-based days out of compliance, resulting in higher fines rather than taking 75% off the top reflected in the administrative complaints. T 274, 297. The Agency performed the same calculations for each Respondent. PE 27-28 and 30-32. T 156-57. The Agency has attempted to codify its decision to change the manner in which the fines are calculated in the first amended administrative complaints by publishing a Notice of Development of Rulemaking and proposing to amend Rule 56C- 1.021(3)(a), Certificate of Need Penalties, as follows: "Facilities failing to comply with any conditions . . . will be assessed a fine, not to exceed $1,000 per failure day. In assessing the penalty the agency shall take into account the degree of noncompliance. The degree of noncompliance means the result of the mathematical calculation of the difference between the conditioned level of compliance and the reported level of compliance." (emphasis in original). Aside from this notice, there is no evidence that the Agency has proceeded further to adopt the proposed rule. According to the Agency, it would be "completely impractical" to promulgate a rule listing all the conditions that would mitigate noncompliance. T 924-26, 940. The proposed fines were increased above the fines requested in the administrative complaints as follows: Port St. Lucie -- $13,085 to $52,024; Winter Haven -- $18,022 to $71,642; Ocala -- $18,724 to $74,830; Orlando -- $25,540 to $103,132; and Citrus County -- $19,992 to $79,409. The Amount of the Fine Using the Agency's Methodology It is determined that the fines should be calculated for each Respondent by including the stipulated number of "dual eligible" Medicaid patient days, arriving at a dollar figure and then subtracting 75%.13 The Agency used a methodology to calculate the fines in the original administrative complaints. That methodology is applied herein. See RE 26. Port St. Lucie The difference between the minimum CON condition percentage (47%) and the actual Medicaid percentage (43.66%) is 3.34%, which is then divided by 47% and yields 0.0710638 times $365,000, which yields $25,938. Twenty-five percent of $25,938 yields a total fine of $6,485 (25% fine for pilot diversion program or 75% fine reduction), without consideration of any other factors discussed below. Compare with RE 26 at 5. Winter Haven The difference between the minimum CON condition percentage (60.60%) and the actual Medicaid percentage (58.36%) is 2.24%, which is then divided by 60.60% and yields 0.0369636 times $365,000, which yields $13,492. Twenty-five percent of $13,492 yields a total fine of $3,373 (25% fine for pilot diversion program or 75% fine reduction), without consideration of any other factors discussed below. Compare with RE 26 at 11. Orlando The difference between the minimum CON condition percentage (31.19%) and the actual Medicaid percentage (29.34%) is 1.85%, which is then divided by 31.19% and yields 0.0593 times $365,000, which yields $21,645. Twenty-five percent of $21,645 yields a total fine of $5,411 (25% fine for pilot diversion program or 75% fine reduction), without consideration of any other factors discussed below. Compare with RE 26 at 9. Citrus County The difference between the minimum CON condition percentage (45.64%) and the actual Medicaid percentage (43.14%) is 2.50%, which is then divided by 45.64% and yields 0.0547765 times $365,000, which yields $19,993. Twenty-five percent of $19,993 yields a total fine of $4,998 (25% fine for pilot diversion program or 75% fine reduction), without consideration of any other factors discussed below. Compare with RE 26 at 3. Ocala No fines should be imposed on the Ocala facility as it exceeded the Medicaid condition for calendar year 2006. Consideration of Reasons Why Respondent Nursing Homes Were Unable to Meet CON Medicaid-Patient-Days Conditions and the Amount of the Fine Considering Other Factors Prior to filing its first amended administrative complaints and its Notice of Development of Rulemaking, the Agency considered several factors when deciding whether a nursing home complied or was unable to comply with a Medicaid condition, and whether a fine was appropriate under the circumstances for noncompliance. See generally Finding of Fact 44 for some of the compliance factors. Respondents offered testimony that they used their best efforts to meet the Medicaid-patient-days conditions, including the relative demand levels for Medicaid services in the areas served of Respondents, income levels of seniors, and other reasons. See generally T 547-48, 557, 826, 829, 852, and 876; RE 4-7. Respondents suggested that the existence of various State diversion and transition programs in the counties where they are located should also be considered in mitigation. See generally T 694-95. The nursing home diversion program operated in 26 counties in Florida in 2006, and Respondents are located in five of those counties. (Potential nursing home patients are diverted to other health care settings under this and other similar programs.) Generally, these diversion programs have been successful in diverting Medicaid-eligible residents from nursing homes. To some extent, these diversion programs have impacted Respondent nursing homes. T 534. Respondents also provided other factors in support of noncompliance with the Medicaid-patient-days conditions such as Medicaid utilization, which may be affected by the moratorium (with some exceptions) on new CONs for nursing homes, the existence of other community-based facilities, the effects of various diversion programs, the income level of various population centers where some of the Respondents are located, high Medicare admissions, declining Medicaid demand, and the relative age of Respondent facilities. Respondents also provided evidence of their marketing efforts. See PE 15-16, 18- 20; RE 4-7; T 535-36, 540-44, 556-57, 560-61, 570-71, 627-30, 638, 671-72, 711-23, 728-32, 846-47, 849, 858-60, 875-77. See also PE 39 at 3-4, regarding reported impacts of the moratorium. But see endnote 7. The Agency considered a nursing home's occupancy when it considered mitigation. T 266-67, 484-85.14 Respondents also suggest that the Agency has applied other factors either to forgo action against a nursing home facility by waiving a fine or by reducing a fine contrary to the Agency's treatment of Respondents. See, e g., Respondents' Proposed Recommended Order at 36-44. For example, in the past, the Agency has reduced or eliminated a calculated fine for a nursing home if it was less than one percent out of compliance. See RE 44 and 45; T 206. There have been instances when the Agency has not taken action against a nursing home that had missed the Medicaid condition by five percent or less. RE 24 at 19-28; RE 45 at 61-66. (Here, after calculating the fines using the Agency's pre-first amended administrative complaint methodology and including consideration of "dual eligible" patients, see Findings of Fact 68 through 72, none of the Respondents missed their Medicaid-patient-days conditions by more than four percent.) Conversely, the Agency provided evidence that each Respondent provided Medicaid patient days on a percentage basis below the average for other nursing homes in their respective subdistricts. However, the Agency has not used the comparison to impose a fine on a nursing home. T 259-65; see also RE 26 at 2, middle calculations. None of the Respondents is located in the same subdistrict with another Life Care facility which exceeds its Medicaid-patient-days condition. None of the Respondents (except Ocala that exceeded its Medicaid-patient- days condition) was within one percent of the Medicaid-patient- days conditions, even considering the "dual eligible" patient days. None of the Respondents reported experiencing an operational loss. (According to the Agency, these factors were not always applied in every noncompliance case. T 927-39.) The Agency also offered evidence that nursing home facilities within a five-mile radius of, e.g., the Respondent Ocala facility in Marion County, had a higher percentage of their days provided to Medicaid patients than the Ocala facility, T 910-11. See also T 908-15. The Agency also offered evidence that the percentage of Medicaid patient days/census provided by Respondents has reduced between 2000 and 2006. T 891-908. Based in part on the foregoing, Respondents suggest that no fines should be imposed, whereas the Agency suggests that fines should be imposed. No party has cited to any Medicaid condition fine case that was resolved after an evidentiary hearing and the entry of a recommended order and a final order. Rather, the examples of alleged inconsistent Agency action appear to have been resolved by settlements. It is difficult to apply the factors considered in this subsection of the Recommended Order in an objective fashion so as to determine, with any reliability and predictability, whether and to what extent Respondents should be further relieved of meeting the Medicaid-patient-days conditions.15 On a final note, the Agency abruptly (toward the end of the discovery portion of this proceeding) changed its policy regarding, in part, the method of determining the fines for noncompliance. The Agency did not adopt a rule codifying the change in policy despite opportunities to do so in the past and did not persuasively explain the reasons for departing from its policy, which pre-dated the filing of the first amended administrative complaints.
Recommendation Based upon the foregoing, it is recommended that the Agency enter a final order imposing the following fines: Port St. Lucie -- $6,485; Winter Haven -- $3,373; Orlando -- $5,411; and Citrus County -- $4,998. No fines should be imposed on the Ocala facility as it exceeded the Medicaid-patient-days condition. DONE AND ENTERED this 15th day of March, 2010, in Tallahassee, Leon County, Florida. S CHARLES A. STAMPELOS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of March, 2010.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Since 1976, Horizon Hospital or its predecessor has been licensed by HRS as a special psychiatric hospital with 200 beds. Its most current license, License No. 1316, authorizes Horizon to operate a special psychiatric hospital with 200 beds, and bears an expiration date of June 30, 1985. Horizon has never applied for a Certificate of Need for substance abuse beds. The 1983 session of the Legislature amended the hospital licensure law and the Certificate of Need law. Section 395.003(4), Florida Statutes, was amended, in pertinent part, to require that the number of beds for the rehabilitation or psychiatric service category for which HRS has adopted by rule a specialty bed need methodology must be specified on the face of the hospital license. Section 381.494(8)(g), Florida Statutes, was also amended to require that Certificates of Need include a statement of the number of beds approved for the rehabilitation or psychiatric service category for which HRS has adopted by rule a specialty bed need methodology. In April of 1983, HRS adopted Rules 10-5.11(25), (26) and (7), Florida Administrative Code, setting forth methodologies for determining the need for proposed new hospital beds for short-term psychiatric services, long-term psychiatric services and short- and long-term substance abuse services. The methodologies set forth in the rules for short-term psychiatric (Rule 10- 5.11(25)) and substance abuse (Rule 10-5.11(27) beds require, first, the application of a bed to population ratio to arrive at the total number of beds needed in a District, and then a subtraction of the number of existing and approved beds in that District to arrive at the number of additional beds needed at any particular time. Thus, in order to apply the methodologies and determine the actual number of beds needed in a District at any given time, the number of existing and approved beds in that District must be determined. HRS's Office of Comprehensive Health Planning therefore established an inventory of existing and approved short-term psychiatric and substance abuse beds for each of the HRS Districts. At the time of establishing its inventory, HRS hospital licenses did not distinguish between psychiatric and substance abuse beds in specialty hospitals. In order to determine the number of existing psychiatric and substance abuse beds in each District, HRS reviewed the Hospital Cost Containment Board (HCCB) reports filed on behalf of existing facilities, and also consulted a publication of the Florida Alcohol and Drug Abuse Association entitled "Alcohol and Drug Abuse Treatment-Prevention Programs in Florida, 1983 Directory." When a hospital was included in the Directory or when it reported on the HCCB form that the facility had a separately organized and staffed substance abuse program, HRS personnel called that facility to ascertain the number of beds devoted to such a program. No inquiry was made regarding the method of treating the substance abuse patient or the manner in which the substance abuse unit was staffed. The telephone conversation was then followed up with a confirmation letter. Utilizing these sources of information, as well as the definitions contained in Rules 10-5.11(25) and (27), Florida Administrative Code, HRS completed and published the results of its inventory process. The published inventory includes Horizon Hospital and categorizes its beds as 178 short term psychiatric and 22 substance abuse. The HCCB reports filed by Horizon for the years 1981, 1982 and 1983 indicate in the section entitled "Services Inventory" that Horizon's substance abuse unit bears a "Code" of "1." Code "1" is defined on the form as a "separately organized, staffed and equipped unit of hospital (discrete)." Code "2" on the HCCB form means "services maintained in hospital but not in separate unit (nondiscrete)." In its 1980 HCCB report, Horizon listed its "drug abuse care" and its "alcoholism care" as a Code "1." The 1983 Directory for "Alcohol and Drug Abuse Treatment -- Prevention Programs in Florida," published by the Florida Alcohol and Drug Abuse Association, lists Horizon Hospital as having an "alcohol and chemical abuse program," a "medical non-hospital detoxification program treatment center," "intensive/intermediate residential treatment;" and "drug abuse treatment" for all ages. The source of the information provided in this Directory was not established. Horizon Hospital has published and has distributed a pamphlet entitled "Alcohol and Chemical Abuse -- The Family Disease." This pamphlet describes the nature of alcoholism, how to recognize the symptoms, the family involvement and how Horizon can treat the total problem of alcoholism. The pamphlet describes the treatment team at Horizon to include a medical director, a psychiatrist, a nurse, nursing staff, allied therapist and a social worker. Horizon also has published and distributes a booklet advertising itself as "a private psychiatric hospital" with 200 beds, and as containing six programs -- one of which is the "addictive disease program." The program, noted as the "Horizon Hospital's Alcohol and Chemical Abuse Program of Treatment" is described as being unique in that "unlike most alcoholic rehabilitation centers, it is capable of treating the alcoholic who not only is in need of alcoholism counseling, but also has severe emotional conflicts that require psycho-therapy." Horizon Hospital does provide specialized programs for, what it describes as, subpopulations in psychiatry. These programs include an adult general psychiatric program, a crisis and intensive care program, an adolescent treatment program, an older adult treatment or geriatric program, a pain management program and an addictive disease program. Horizon emphasizes the psychiatric aspect in each program. Patients at Horizon are admitted only by psychiatrists and the bylaws of Horizon require that a psychiatrist visit a patient at least once every three days. The physical layout of Horizon's three-story facility is that two of the units, Unit 31 and Unit 32, are located on the third floor of the building. Unit 31 is known as the adolescent substance abuse unit and Unit 32 is known as the adult substance abuse unit. Each of the units at Horizon has its own staff. The Program Medical Director of Unit 32 is Dr. Vijaya Rivindran, a psychiatrist. Dr. Rivindran holds this position on a part-time basis, and is responsible for the administration of and program philosophy for patient care. As of the time of the hearing, Unit 32 had 26 beds, with a capacity for 30 beds, and Unit 31 had a capacity for 12 beds. The Program Coordinator and the Assistant Program Coordinator for Unit 32 are both psychologists. They control the day-to-day clinical activities of Unit 32 and are directly responsible for the staff supervision. The staff of Unit 32 includes mental health counselors, psychiatric nurses, a social worker and mental health technicians. Most, if not all, of the staff members of Unit 32 have special training in the area of substance abuse. The criterion for admission to Unit 32 is that the patient need psychiatric hospitalization and have some involvement with substance abuse. The average length of stay for a Unit 32 patient is 20 or 21 days. A sample of records from patients discharged from Unit 32 over a three-year period revealed that only 4.8 percent of the patients had a single diagnosis of substance abuse, and some 17 percent of the patients sampled had a primary diagnosis of substance abuse, with another secondary or tertiary diagnosis. The remainder of the patient records sampled illustrates that substance abuse was a secondary or tertiary diagnosis for the patients assigned to Unit 32. In arriving at its inventory of existing and/or approved substance abuse beds, HRS did not base its determinations upon the treatment modality provided patients. Instead, HRS counted beds as substance abuse beds only if they were located in a separately organized and staffed unit of at least ten beds, had specially trained staff and the patients had an average length of stay not exceeding 28 days.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the petition challenging that portion of the HRS inventory of short-term psychiatric and substance abuse beds relating to Horizon Hospital be DISMISSED. Respectfully submitted and entered this 27th day of March, 1985, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of March, 1985. COPIES FURNISHED: William B. Wiley McFarlain, Bobo, Sternstein, Wiley and Cassedy, P.A. P.O. Box 2174 Tallahassee, Florida 32316 Amy M. Jones Building 1 - Room 407 1323 Winewood Blvd. Tallahassee, Florida 32301 Alan C. Sundberg and Cynthia S. Tunnicliff Carlton, Fields, Ward, Emmanuel, and Cutler, P.A. P.O. Drawer 190 Tallahassee, Florida 32302 C. Gary Williams and Michael J. Glazer Ausley, McMullen, McGehee, Carothers and Proctor P.O. Box 391 Tallahassee, Florida 32302 David Pingree Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301
The Issue The issues presented for resolution in the two consolidated cases are whether Rule 10E-16.004(27), Florida Administrative Code, is an invalid exercise of delegated legislative authority, and whether Petitioner violated that rule on a specified occasion and is subject to fine or other penalty.
Findings Of Fact Petitioner, Associated Counselling and Education, Inc., doing business as Substance Abuse Family Education (SAFE), is a Florida corporation doing business in Orange County, Florida. SAFE provides substance abuse treatment to adolescents, mostly within the ages of twelve (12) to eighteen (18) years, with a few young adults who have turned nineteen while in treatment. The Department of Health and Rehabilitative Services (HRS) is the state agency with statutory authority to license and regulate certain treatment programs, including SAFE. At all times material to this proceeding HRS has licensed SAFE to provide substance abuse treatment services in a category titled "non-residential day and night treatment with a host home component." SAFE is not licensed as a secure facility or an addictions receiving facility. SAFE uses a program similar to the Alcoholic Anonymous twelve-step program as a tool for rehabilitating drug abusing juveniles. The program includes five phases through which the clients progress at varying rates. The "first phase" describes clients who are new to the program. As clients progress they enter into stages of increasing responsibility and freedom, until they are able to graduate and return to the everyday world. The program requires that the youths' parents or legal guardians admit them into treatment, even when children are referred by a court, by HRS or another source. The program requires rigorous participation by the parents and any siblings of the client. SAFE's contract for treatment includes a voluntary withdrawal provision which requires that the client request withdrawal through a "chain of command." The purpose of the deliberate, several-step process is to avoid withdrawal on an impulsive or transitory whim of the client. SAFE's rules, including the withdrawal provision, are explained at the beginning of treatment and are reviewed daily with the clients. Clients who are just starting in the program, "first phasers," spend their days at the program and are placed at night with host parents, generally parents with experience in the program through their own children's participation. Staff and host parents are trained in crisis intervention and aggression control techniques through an HRS-sanctioned training program. The techniques are progressive; they range from verbal intervention, to putting an arm around a client's shoulder, to physically forcing a client to the floor when the client has threatened to injure himself or others. SAFE contends that when a client attempts to leave treatment without going through the withdrawal process and without involving the parents or guardians in the process, the client is in serious danger of injuring himself or others immediately following departure from the program. SAFE uses physical intervention as a last resort to prevent clients from leaving the program without going through the "chain of command." At night, however, such intervention is used by host parents only to restrain dangerously aggressive behavior. SAFE instructs its host parents to not physically stop a child from leaving the host home. S. B. was a "first phaser" in SAFE's program in August 1993. During dinner one evening he had been staring or glaring at other clients and acting in a provoking and disruptive manner. After dinner, during an organized "rap" session, several clients were called on to confront S. B.'s behavior. He reacted by throwing a chair, across several rows of clients, at the client who was confronting him. Then he bolted, or attempted to bolt, from the room through the exit door. He was restrained by staff, was calmed, and he returned to his seat. Very shortly after he returned to his seat S. B. began staring or glaring at a client by the exit door. He jumped up and ran for the door. Again, he was physically restrained as he kicked, fought and yelled with anger. Staffperson Pamela Mardis was one of the persons who participated in the restraint of S. B. on August 27, 1993. She considered the client to be in harm's way if he were permitted to leave the program without the assurance of proper safeguard for his well-being and safety. The January 12, 1994 amended notice of violation provided by HRS to Loretta Parrish, SAFE's owner and executive director, states, in pertinent part: As an amended complaint, the following incidents have been found to be in violation of 10E-16, F.A.C., requirements and are therefore subject to administrative fines: * * * August 27, 1993, 5:20 p.m., (report written August 27, 1993, 6:45 p.m.) in which a client was restrained in an effort to keep the client from leaving treatment, your agency will be fined $100 for non-compliance with 10E-16.004(27)(a), F.A.C., requirements. (Petitioner's exhibit no. 6) HRS interprets its rule to prohibit restraint when the perceived danger to the client is in leaving and getting back on drugs. SAFE contends that to let one client leave voluntarily without going through the withdrawal procedures would mean that all of the clients, adolescents with poor decision- making skills, would walk out. There is a program in Palm Beach County, Florida, purportedly similar to SAFE, called Growing Together, Inc. On January 22, 1994, HRS and Growing Together, Inc., entered into a stipulated Final Declaratory Judgement in case no. CL93-9599-AO, in the Circuit Court of the Fifteenth Judicial Circuit, in and for Palm Beach County, Florida, which provided, in pertinent part: In the absence of a Court Order restricting the rights of a parent or legal guardian to control decisions affecting the health and welfare of a minor, Growing Together, Inc., may act upon the request of a parent or legal guardian in accepting a minor client for substance abuse treatment regardless of the minor's objections. In the absence of a Court Order limiting the authority of a parent or legal guardian to control decisions affecting the health and welfare of a minor, Growing Together, Inc., may reasonably restrict minor clients from terminating their participation in treatment contrary to the express direction of a parent or legal guardian. So long as the minor's rights to challenge the reasonableness of restrictions imposed at the express direction of a parent or legal guardian are protected -- that is, so long as the minor is informed of his or her rights and is provided a practical means by which to exercise those rights -- Growing Together, Inc., may continue to act in loco parenti in declining to release a minor from treatment where such release is against the will of a parent or legal guardian and no court order has been issued to direct otherwise. The State of Florida , Department of Health and Rehabilitative Services is hereby prohibited from taking any action contrary to the legal principles enunciated herein and is expressly prohibited from enforcing any interpretation of F.S. Section 397.601 which interpretation is contrary to the findings of this Judgement. (Petitioner's exhibit no. 7) CONCLUSIONS OF LAW The Division of Administrative Hearings has jurisdiction in this matter pursuant to Sections 120.56 and 120.57, Florida Statutes. The two cases consolidated above present two separate issues which must be addressed in separate orders, as one issue (the validity of Rule 10E- 16.004(27), Florida Administrative Code) is determined by the Hearing Officer, and the other issue (whether SAFE violated the rule) is determined by the agency upon a recommended order by the Hearing Officer. Notwithstanding the parties' earnest desire to obtain a resolution of the issue of when a program like SAFE can use physical restraint to prevent withdrawal, the Hearing Officer has no authority to issue a "declaratory statement." That function, addressed in Section 120.565, Florida Statutes, is reserved to the agency. Rule 10E-16.004(6)(a), [Florida Administrative Code], provides that "[t]he department shall impose a penalty of no more than $100 per day against a licensed program that commits a [significant violation pertaining to the health and safety of the clients.] ..." [emphasis added] Rule 10E-16.004(27)(a), Florida Administrative Code, provides: (27) Aggression Control Techniques. Programs which use verbal, psychological and physical intervention methods for managing client behavior shall be required to implement the procedures established under HRS Regulation Number 205-1 regarding the use of Aggression Control Techniques (ACT), or other techniques, as approved by the department. (a) Justification and Documentation of Use. In the event that physical intervention is used to restrict a client's movement, clinical justification shall be documented in the client record, and a complete, detailed report of the incident shall be maintained as part of the program's administrative records and reported to the department's district administrator. Physical intervention techniques shall be employed by trained adult staff to prevent a client from injuring himself or others, or to prevent serious disruption of the therapeutic environment. HRS contends that SAFE violated Rule 10E-16.004(27)(a), Florida Administrative Code, when the program restrained its minor client, S. B., from attempting to bolt without going through the "chain of command" described in SAFE's voluntary withdrawal procedures. HRS has the burden of proving the alleged violation. Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1st DCA 1977) HRS does not claim that the techniques used on S. B. were by other than trained adult staff or that the required reports were not made to the agency and properly maintained by the program. Rather, HRS claims that a program such as SAFE cannot detain a child against his or her will. The rule cited by HRS simply does not include that prohibition. It states in the affirmative two circumstances in which a program shall use appropriate physical intervention: to prevent injury to the client or others, or to prevent serious disruption of the therapeutic environment. SAVE contends that permitting a child to leave at will, without following established withdrawal procedures would cause a serious disruption of the therapeutic environment. SAFE presented some competent credible testimony by its director to support its contention. HRS presented no evidence on that subject. HRS, moreover, has failed to justify its policy determination and interpretation of the rule in this case. It argues, for example, that parents do have a right to admit their children to a secure facility and to obtain a court order or alternative involuntary assessment. SAFE is not classified as a secure facility. The procedures and statutes referenced in HRS' proposed recommended order, however, were not in effect at the time of the incident at issue. Chapter 397, Florida Statutes, was substantially revised in 1993 and the revisions became effective October 1, 1993, after the incident at issue. See, Chapter 93-39, Section 51, Laws of Florida. The arguments made by HRS were specifically rejected by the court in Department of Health and Rehabilitative Services v. Straight, Inc., 497 So.2d 692 (Fla. 1st DCA 1986), a case decided prior to the 1993 amendments and therefore more relevant to the instant case. The determination that HRS has failed to meet its burden of proof in this case does not resolve for the parties their more global issue of whether a non-secure program such as SAFE can detain a child involuntarily placed by his or her parents or guardian. That issue is not resolved in Straight, supra, decided under a different statute; or by HRS' rule Chapter 10E-16.004, Florida Administrative Code, in its current form. Nor, contrary to SAFE's assertions, is the issue resolved in the stipulated judgement entered in the Palm Beach case referenced in paragraph 14, above, affecting a program which is not described in any competent evidence in this record. The conclusion in this case is properly limited to the facts and circumstances presented, and to consideration of a rule and statute in existence at the time of the incident at issue. The conclusion is merely that HRS failed to meet its burden of proving that by detaining S. B. on August 27, 1993, SAFE violated Rule 10E-16.004(27)(a), Florida Administrative Code.
Recommendation Based on the foregoing, it is, hereby, RECOMMENDED: That the Department of Health and Rehabilitative Services enter its final order dismissing the January 12, 1994 amended complaint. DONE and ENTERED this 2nd day of April, 1996, in Tallahassee, Florida. MARY CLARK, 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 2nd day of April, 1996. COPIES FURNISHED: Paul D. Newnum, Esquire TURNBULL, ABNER, DANIELS and ROOKS 147 West Lyman Avenue, Suite 100 Winter Park, Florida 32790-0100 James A. Sawyer, Esquire Department of Health and Rehabilitative Services 400 West Robinson Street, Suite S-827 Orlando, Florida 32801 Richard Doran General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-1600 Sandy Coulter, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-1600
The Issue The issue for determination is whether either applicant's request for a CON for IRTP beds should be granted. LORTC's allegation that La Amistad plagiarized portions of another PIA facility's CON application was deemed at hearing to be irrelevant. Likewise, it was determined at hearing and in a post- hearing order entered on November 1, 1988, that the sale of La Amistad to UHS of Maitland, Inc. had no material bearing on the La Amistad application under review here. In the parties' prehearing statement filed on September 26, 1988, the following were agreed: Consideration of the applications at issue is governed by the statutory criteria contained in section 381.705, Florida Statutes and Rule 10- 5.011(1)(b)(1)-(4), Florida Administrative Code. These criteria are either satisfied or are inapplicable: Section 381.705(1)(g), (h), (only as to the following clauses: "the effects the project will have on clinical needs of health professional training programs in the service district; the extent to which the services will be accessible to schools for health professions in the service district for training purposes if such services are available in a limited number of facilities"), (j), Florida Statutes (1987) As to LORTC, the parties stipulated that the criteria in Section 381.705(1)(h) as to availability of funds for capital and operating expenditures is satisfied. This is not a stipulation that the application satisfies the financial feasibility criterion contained in Section 381.705(1)(i). Rule 10-5.011(1)(b)(4)(b) , Florida Administrative Code. Each applicant argues that its application, and not that of the other, should be approved. HRS and West Lake both argue that neither application should be approved.
Findings Of Fact La Amistad is a not-for-profit corporation providing a variety of mental health services to children, adolescents and young adults on campuses in Maitland and Winter Park, Florida since 1970. At the time of hearing La Amistad operated 27 licensed IRTP beds at its Maitland campus. At the time of hearing La Amistad had a contract to sell its residential treatment program, including the beds that are the subject of this proceeding, to Universal Health Services, Inc. The contract was entered into after this CON application was filed. LORTC is a wholly owned subsidiary of PIA, Psychiatric Hospitals, Inc. (PIA), which in turn is wholly owned by NME Hospitals, Inc. PIA owns or operates approximately three residential treatment centers (RTCs) and 58 psychiatric hospitals throughout the country, including Laurel Oaks Hospital in Orange County, Florida, an 80-bed licensed hospital providing short term psychiatric and substance abuse services to children and adolescents. HRS is the state agency charged with the responsibility of implementing and enforcing the CON program, pursuant to Section 381.701-381.715, Florida Statutes. The Intervenor, West Lake, is an 80-bed licensed psychiatric hospital in Longwood, Seminole County, Florida. West Lake has allocated 16 beds to its children's program and 24 beds to its adolescent programs. West Lake is licensed for both long and short-term psychiatric beds. THE APPLICATIONS La Amistad's application requests the conversion of 13 existing beds (currently licensed as child caring beds) to licensed IRTP beds, the demolition of several old buildings and the construction of a new building which will contain a total of 16 IRTP beds. The 13 additional beds would bring La Amistad's IRTP total to 40 beds. The total project cost of La Amistad's proposal is $500,000.00 or $38,462.00 per bed. La Amistad's Maitland facility is located in a residential area and is itself designed to be residential in nature, rather than institutional. The patients prepare their own food under the supervision of a dietician and other staff. They also do their own housekeeping. La Amistad is not a "locked unit". A maximum of 16 patients reside in each "house" on the La Amistad campus. The houses are staffed on a 24-hour a day basis. Like other similar facilities, La Amistad utilizes a multi-discipline team approach to treatment. That is, psychiatrists, nurses, social workers and other staff work together. The treatment team meets weekly to discuss the program and treatment of each patient. Family members may visit and stay at the campus on weekends. Families are encouraged to participate in the treatment process. La Amistad has a full-time school on campus with teachers provided by the Orange County School System. The average length of stay for patients is in excess of Il to 12 months. This is consistent with HRS' understanding that 9-14 months is an average length of stay for an intensive residential treatment program. LORTC's application is for CON approval of a 40-bed IRTP located on the grounds of its existing freestanding psychiatric hospital, Laurel Oaks. The facility is currently under construction and will be operated as a residential treatment center if its IRTP CON is denied. LORTC anticipates serving two out of three of the following groups: adolescents who need long-term care, older children (8 years to 13 years) who need long-term care, and chemically dependent adolescents. The projected average length of stay is 120 days, which stay is consistent with that of other PIA residential treatment centers in Florida. The LORTC facility will be "locked". Meals will be prepared at Laurel Oaks Hospital and will be transported in some, as yet undetermined, manner to the separate building. The geographical area in which LORTC will be located is not residential. The capital cost of the 40 bed facility is projected at $3,291,000.00. The funds, provided by the parent company, NME, will be expended, regardless of CON approval. LORTC also uses a multi-discipline team approach to treatment. Each patient's treatment program will consist of psychiatric support services, educational services and family services. Students will attend academic classes four hours a day at the facility. THE APPLICABLE DISTRICT PLAN AND STATE HEALTH PLAN The District Seven Health Plan does not address needs, policies, or priorities for IRTP facilities for children and adolescents. The State Health Plan addresses very generally the need for mental health and substance abuse services. Goal 1 seeks to: "Ensure the availability of mental health and substance abuse services to all Florida residents in the least restrictive setting." Goal 2 seeks to: Promote the development of a continuum of high quality, cost effective private sector mental health and substance abuse treatment and preventive services". Goal 3 seeks to: "Develop a complete range of essential public mental health services in each HRS district." (Laurel Oaks Exhibit #20). The applications neither violate nor materially advance these goals. In both instances the beds will exist for the provision of mental health services, with or without the certificate of need. La Amistad's proposal clearly presents a "less restrictive alternative" to the more institutional psychiatric hospital. Laurel Oaks is also an alternative, although more institutional than homelike in character. NEED, INCLUDING THE AVAILABILITY OF LIKE OR ALTERNATIVE SERVICES AND INCREASED ACCESSIBILITY IRTP beds are a statutorily defined class of specialty hospital beds: Intensive residential treatment programs for children and adolescents means a specialty hospital accredited by the Joint Commission on Accreditation of Hospitals which provides 24-hour care and which has the primary functions of diagnosis and treatment of patients under the age of 18 having psychiatric disorders in order to restore such patients to an optimal level of functioning. Section 395.002(8), Florida Statutes. Because an IRTP is a hospital, a certificate of need is required. This alone distinguishes an IRTP from a residential treatment program (RTP). In spite of its name, HRS considers an IRTP as a service that is less intensive than a long or short term psychiatric hospital. Generally, the RTP and IRTP have a longer average length of stay than a psychiatric hospital and provide a more homelike setting. No HRS rule further defines the IRTP, and as evidenced by the La Amistad and LORTC proposals, the projected average length of stays vary widely (120 days for LORTC, versus 12-14 months for La Amistad). Long term psychiatric hospitals have an average length of stay of over 90 days. West Lake has treated adolescents in its psychiatric beds as long as a year, although this has not occurred recently. HRS has no rule methodology for calculating the need for IRTP's. However, HRS considers there is a need for at least one reasonably-sized IRTP in each HRS service district. In HRS district VII there are currently two IRTPs: Devereaux, a 100-bed facility in Melbourne, Brevard County, Florida, licensed on February 26, 1988; and La Amistad, with 27 IRTP beds in Orange County, licensed in August, 1988. Although HRS clearly does not limit its approval to only one IRTP per district, it has a policy of waiting to see what the need and demand are before it authorizes an additional program with a CON. Its deviation from this policy regarding approval of the La Amistad beds was adequately explained as a settlement based on the acknowledgment of a prior administrative error. Utilization of the Devereaux beds was not a consideration in that unique case. HRS also uses as a reasonable non-rule policy the requirement that existing programs be 80 percent occupied before additional programs are authorized. This is modeled after the promulgated rule in effect for long-term psychiatric beds. At the time the applications were considered, La Amistad was not licensed and Devereaux had a less than 50 percent occupancy. Conflicting evidence was presented with regard to the accessibility of both La Amistad's 27 beds and Devereaux' 100 beds. Devereaux is approximately one to two hours from the three counties identified as LORTC's primary service area: Seminole, Osceola and Orange. LORTC argues that families who need to actively participate in the patients' treatment are discouraged by the travel distance. However, Laurel Oak Hospital currently refers patients to its sister facilities in Manatee and Palm Beach counties, which are more distant than Devereaux. No patient origin studies of Devereaux were done and LORTC's expert in health and planning conceded that it takes a while for people to become aware of a new facility and its services, and a new facility can stimulate patient migration. The credible weight of evidence is that a travel time of two hours or less would not significantly influence decisions to use the facility. La Amistad is noted for its treatment of schizophrenics. It sponsors seminars attracting participants from a wide geographical area. It does not, however, limit its beds to patients with that diagnosis. In the past approximately 48 percent of La Amistad's beds (its entire facility, not just the IRTP beds) have been utilized by schizophrenics. This does not alone evidence non-accessibility of its IRTP beds. The statutory definition of an IRTP, cited in paragraph 17, above, is broad enough to include the type of care provided in long-term psychiatric hospitals, such as West Lake. The programs described in the applications of both LORTC and La Amistad are similar to the programs currently operated at West Lake for children and adolescents. The multi-disciplinary team monitors the patient's progress with a goal toward reintegration into the community. The patients attend school and receive a wide variety of therapies, with varying intensity: individual and group counseling, activity and occupational therapy, family therapy, vocational planning, and the like. When the patient is admitted, an evaluation is done to determine an anticipated length of stay. Some require a shorter stay, with more intensive therapy; others are more appropriately treated for a longer period, with less intensity. West Lake's program is not full. There are myriad alternative programs for the treatment of children and adolescents in the tri-county area. Seagrave House, the Charlie Program and Boystown are residential programs for children and adolescents who may have received treatment in a hospital but who are not ready to return home and could progress further in a residential program. Mainstream, a partial hospitalization program, is also available to this age group. A partial hospitalization program provides structured daytime treatment with the same therapies offered in a hospital or full residential program, but the patients are able to return home at night. Other existing facilities and programs available in the service district include Parkside Lodge, the Care Unit, the Center for Drug-free Living, Glenbeigh Hospital and Rainbow. Laurel Oaks has referred patients to Rainbow, a residential treatment program for youths with substance abuse problems. La Amistad presented anecdotal testimony from its clinical and other staff regarding the numbers of patients they could refer to La Amistad if the application were approved. In no instance did these witnesses eliminate the other available programs as appropriate alternatives. Several other witnesses testified on behalf of LORTC regarding the need for additional long-term treatment programs for children and adolescents. It is clear, however, that these individuals from the Orange County Public Defender's office, the Orange County Public Schools and the Seminole County Mental Health Center were descrying the need for services for economically disadvantaged youths and those without insurance. Neither La Amistad nor LORTC propose to materially serve that population. Medicaid funds are not available to licensed speciality hospitals and both La Amistad and LORTC will serve patients referred and paid for by HRS, with or without an IRTP CON. The projected percentage of non-pay patient days in both applications is negligible. Any consideration of alternatives in this case must consider the alternatives of the applicants themselves. In both cases, the beds will be available with or without the CON, and the treatment programs are substantially the same with or without the CON. Denial of these applications will not decrease the potential supply of beds in District VII. Indeed, LORTC candidly argues that it is asking only that HRS assist in enhancing financing access to its beds, that CON approval and subsequent licensure will provide increased access to patients with insurance which will not reimburse non- hospital based care. LORTC, and to a lesser degree, La Amistad, insist that approval will positively impact access for privately insured patients. The weight of evidence does not support that basic contention in this case. PIA's non-hospital RTCs in Palm Beach and Manatee County claim to have a 60-70 percent commercial insurance pay or mix. LORTC projects only 67 percent commercially insured patients after its first year of operation. This does not represent an increase. According to its financial experts La Amistad is not projecting any increase in insurance reimbursement because of licensure as an IRTC. Two trends in insurance reimbursement practices were described at length in this proceeding. First, companies are willing to negotiate an "out-of- contract" reimbursement when a non-covered facility is able to show that its services are more appropriate and in the long term, more cost effective than the covered services for a particular patient. Second, insurance companies are carefully scrutinizing long term treatment reimbursement and are limiting coverage in expensive residential programs. Neither trend weighs in favor of approval of these applications. AVAILABILITY OF RESOURCES Nursing costs in health care institutions usually comprise more than 50 percent of the operating costs. It is the largest single budget item in a hospital or health care facility. Throughout the country and in District VII, there is a shortage of nurses and trained allied health personnel. Although Laurel Oaks Hospital is staffed, maintaining its staff of registered nurses is a day-to-day problem. West Lake also experiences difficulty in maintaining qualified staff. No doubt LORTC, with aggressive recruitment will initially attract the personnel it needs. Financial incentives will have to be provided and West Lake's problems will be exacerbated. The additional costs will be passed on to the consumer, thus perpetuating the upward inflation spiral of health care costs. FINANCIAL FEASIBILITY AND EFFECTS ON COMPETITION La Amistad states it intends to finance $450,000.00 of its $500,000.00 total project cost through bank loans, fund raising efforts and personal commitments from board members. Its pro forma, as corrected and updated at the hearing is reasonable, based upon the facility's actual experience in staffing and filling beds. However, the ability of the applicant itself to complete construction for the replacement beds is questionable in light of an admission at hearing by Walter Muller, M.D., the founder and Medical Director of La Amistad. Dr. Muller conceded that one of the reasons for the sale to Universal Health is to obtain adequate funds for the new building. (transcript pages 271-272). LORTC contends that no capital expenditure is relevant here as the facility is being constructed as a non-hospital RTC. For the transfer to IRTC status no additional expenses will be incurred. Regardless of the validity of that contention, the parties have stipulated that funds are available for capital and operating expenditures. LORTC's pro forma is reasonable based on the extensive experience of its parent company with similar facilities, the RTCs in Manatee County and Palm Beach County, and Laurel Oaks Hospital. That experience has not been tested in an area, where, as here, there are existing unfilled IRTPs. As provided in the discussion of need, above, LORTC cannot dismiss West Lake, Devereaux, La Amistad and other facilities offering similar programs. LORTC did not establish conclusively that it could maintain its projected utilization in the face of the potential draw of those other facilities. PIA has been highly successful in marketing its services in the past. If its success prevails and LORTC proves financially feasible, there is substantial evidence that it will be at the expense of West Lake, Devereaux, and the others. There is no evidence that LORTC or La Amistad evaluated the impact of their proposals on other service providers in the area. OTHER REVIEW CRITERIA, INCLUDING QUALIFY OF CARE Both applicants enjoy a reputation for providing good quality mental health services and there is no substantial evidence that this quality will deteriorate if the applications are approved. No competent evidence was presented regarding the failure of either applicant to meet the remaining relevant criteria.
Findings Of Fact Procedural History On August 15, 1983, the Manatee Mental Health Center, Inc., d/b/a Manatee Crisis Center applied to the Department of Health and Rehabilitative Services for a certificate of need number 2681 to operate 42 short term psychiatric hospital beds and 12 short term substance abuse hospital beds. The application was denied in free form action by SIRS on January 30, 1984, and on February 23, 1984, MMHC timely requested a formal administrative hearing. On April 16, 1984, Charter Medical-Southeast, Inc., d/b/a Charter Haven Hospital petitioned to intervene in this case. The petition was granted May 7, 1984. On October 17, 1985, Manatee Memorial Hospital petitioned to intervene. The petition was granted December 5, 1985. On March 28, 1986, Charter Medical- Southeast, Inc., d/b/a Charter Hospital of Tampa Bay petitioned to intervene, and the petition was granted by order dated April 11, 1986. On March 18, 1986, MMH moved to dismiss Charter Haven as a party. On April 2, 1986 and April 16, 1986, Charter Haven filed amended petitions to intervene. The amended petitions sought comparative review as well, and consolidation. On May 5, 1986, the final hearing in this case commenced. The first portion of the hearing was directed to the issue of Charter Haven's petition to intervene and to consolidate for purposes of comparative review. On May 7, 1986, the motions of MMHC and MMH to dismiss Charter Haven granted, and this was confirmed by findings of fact and conclusions of law entered in an order dated May 14, 1986. The final hearing was continued to July 7, 1986. All portions of the order of May 14, 1986, including the findings of fact and conclusions of law, are herein by reference, and a copy of that order is attached to this recommended order as Appendix B. Additionally, all testimony and evidence received since the commencement of the final hearing of May 5, 1986, are a part of the record in this case. Description of MMHC The Petitioner, MMHC, is a private not-for-profit corporation which contracts with HRS to provide community mental health services pursuant toChapter 394, Florida Statutes. As a community mental health facility, it also provides alcohol programs pursuant to Chapter 395, Florida Statutes, and drug abuse treatment programs pursuant to Chapter 396, Florida Statutes. I-2, 47, 51. As a community mental health center, MMHC is required to provide and does provide a wide variety of inpatient and outpatient services dealing with mental health and substance abuse. Among the services provided by MMHC are outpatient services; inpatient services; residential services; case management; suicide crisis counseling; outpatient programs for chronically mentally ill adults, elderly persons, and children and adolescents; programs for the moderately mentally ill and institutionally dysfunctional persons; outpatient chemical dependency services; employee assistance programs; crisis stabilization inpatient services; detoxification services; and 28-day substance abuse inpatient services. I-2, 43-44. MMHC is required by contract with SIRS, generally speaking, to provide all of these services if not by name, then by subject. I-2, 51. The primary service area of MMHC is Manatee County. I-2, 57. The primary source of funds to MMHC comes from the state, either as state money or federal money allocated by the state, but Manatee County provides some matching money. I-2, 52- 53. Additionally, MMHC receives some money from payment of charges by patients themselves. I-2, 53-55. As a community mental health center, MMHC has the responsibility to tailor its services to serve the middle and lower socioeconomic populations in Manatee County. I-2, 54-57. It is not usual for MMHC to serve patients from upper management or professional persons, or persons other than those in the middle and lower socioeconomic classes. I-2, 83. It is the mission of MMHC to insure that its services are financially accessible to everyone in the community. Id. MMHC is responsible to provide financially accessible services to the "medically underserved" which includes two groups: the "financially indigent" who meet federal poverty guidelines, and the "medically indigent" who do not meet federal poverty guidelines, but who do not have insurance or enough income to pay for health care. I-2, 56-57. The "medically indigent" also includes in concept those persons with insurance who cannot pay the co-payment or deductible. The financially indigent are eligible for 100 percent free care supported by Baker Act and Myers Act funds. MMHC has facilities at ten different sites in Manatee County. I-2, 44. The largest is Glen Oaks, which houses a 12-bed psychiatric crisis stabilization unit (CSU), a 12 bed substance abuse "28-day" unit, and a 12-bed alcohol detoxification unit. I-2, 44, 46. Glen Oaks also currently rents 18 beds that are unfunded and that have been classified as "minimum residential" to satisfy state requirements. I-2, 46, 11-2, 83. Glen Oaks is located just outside Bradenton on the east side, I-2, 50, and is relatively close to MMH. The 12 CSU beds are licensed under Chapter 394, Florida Statutes, and are funded under the Baker Act to provide psychiatric care for the financially indigent only. I-2, 55. The funding under the Baker Act is by the state, with matching county funds, rather than patient fees. I-2, 46. The 12-bed detoxification and 12-bed substance abuse units are operated by contract with HRS under Chapter 396, Florida Statutes, and receive Myers Act state funds matched with county funds. I-2, 51-2, 60. Both units also appear to receive a small amount of revenue from patient fees. I-2, 55. Substantially all of the persons who use the detoxification beds are financially indigent. Id. These 18 "minimum residential" beds were rented as a means to generate enough revenues to cover overhead expenses. I-2, 48. These beds are not considered by MMHC to be a part of the treatment program of Glen Oaks because no services are brought to these persons at the Glen Oaks facility. I-2, 48, 11-2, Persons who rent these beds for $400 to $800 per month are all clients of MMHC who are involved in outpatient programs, primarily the chemical dependency program. I-2, 47-48. The only services provided for the persons renting these beds are room and board. II-2, 63. Medications are controlled by the nursing staff only as a precaution with respect to patients in the other 36 inpatient beds. Id., II-2, 85. The classification of these 18 beds as "minimum residential" is to meet HRS regulations; HRS is aware of this classification and concurs in it. II-2, 83. The building at Glen Oaks was designed for acute inpatient beds, and the 18 minimal residential beds are not suitable for that design and intended purpose. II-2, 86. Under Chapter 394, Florida Statutes, MMHC is designated as a Baker Act public receiving facility for screening, evaluation, and treatment of psychiatric emergencies. I-2, 59. This program operates in a specially provided space at the Glen Oaks facility. I-2, 65. Law officers often bring in such emergency patients. I-2, 66. MMHC has five part-time physicians (four psychiatrists and one internist) working in various programs. I-2, 60-61. There is also one full- time psychiatrist who is the medical director. V-2, 4. These physicians provide psychiatric evaluations, admission and treatment in the inpatient program, chemotherapy in the outpatient programs, consultation to the clinical staff, training, and participate in quality assurance. I-2, 61. The medical director and two psychiatrists work in the inpatient program and the other two psychiatrists work in the outpatient programs. II-2, 13-14. Admissions to the 36 beds currently at Glen Oaks come from either the outpatient programs of MMHC or from emergency screening described above. I-2, 61-62. Thus, generally speaking, admissions to MMHC inpatient beds do not come from physicians in private practice. Hospitals, including MMH, receive admissions from physicians in private practice, from emergency room visits, and (in the case of MMH) from referrals from MMHC. I-2, 62-63, 58, 60. MMHC uses non-physician clinicians to recommend admissions initially. Admissions are then made by physicians after examination and evaluation. Id. Currently, the 36 inpatient beds at Glen Oaks are operated much the same as licensed hospital beds providing the same services in a licensed hospital, except that revenues at MMHC do not come from patient charges but from governmental funding, and MMHC does not have an organized medical staff of physicians who are in private practice. It uses, rather, employed physicians on contract. I-2, 46. Third party payors such as Medicare and commercial insurance companies will not pay for inpatient care at Glen Oaks because it is not licensed as a hospital. I-2, 58, VI-2, 18, 31- 33. Almost all patients who come into the MMHC system and need inpatient care, but have third-party payor coverage, are referred to MMH. I-2, 58. A few patients needing inpatient substance abuse treatment who have third-party payor coverage can be treated at MMHC, but most cannot. Id. By mistake some insured patients are admitted to the CSU for psychiatric care, but treatment is then provided without expectation of reimbursement. I-2, 58. Patients with insurance or other third-party coverage will elect to go where their insurance will pay the bill, VI-2, 40, assuming competence to make the choice. The ability of MMHC to provide indigent care is becoming more difficult due to inflation and current levels of governmental funding. I-2, 53- 54, 125. Expenses have been increasing at about nine to ten percent a year, but public funding has been increasing at about four to five percent a year. I-2, 125. The smaller percentage of increase each year of public funding has not kept pace with the increase in workload caused by increases in population. IX- 2, 47. Moreover, public funding has typically been targeted to particular priorities rather than to general and overall operations. I-2, 125, IX-2, 47. As a consequence, the capability of MMHC to provide care to the various categories of indigent persons in Manatee County has been impaired. VI-2, 31. MMHC has in recent years been able to operate with a small net surplus of revenues over expenses. II-2, 71. The goal of MMHC is to break even or to have a small surplus. II-2, 5. Glen Oaks is currently operating in the black, VII-2, 60, but this is achieved by use of some revenues from other programs which are not dedicated funds. II-2, 72, 74. Currently at Glen Oaks, MMHC has resources to provide only chemotherapy and milieu therapy for psychiatric crisis stabilization, and does not have resources to provide individual, group, activity, or recreation therapies. I-2, 78. Involvement of the family in therapy is now not possible due to lack of resources. I-2, 99. Chemotherapy is drug therapy. Milieu therapy is the provision of a supportive, non-threatening environment. I-2, 78. The Glen Oaks facility is a replacement funded by the state for an earlier facility called Glen Ridge, a facility which provided CSU, detoxification, and 28-day substance abuse services also. II-2, 77. The funding was about $1.9 million. CT/CH Ex. 3, p. 45. The building was completed in May 1985. I-2, 63. The total cost of construction of the new facility has been $2,275,152. 1-2, 120. The Glen Oaks facility is built on land owned by Manatee County and MMHC has a 99 year lease from Manatee County. I-2, 71. The lease is dated September 1982. MMHC Ex. 2, p. 87. With respect to the building, MMHC entered into a lease with SIRS on April 24, 1986, for a term of forty years, leasing all title and interest that SIRS may claim. MMHC Ex. 3. At the time the Florida Legislature appropriated the funds for the new Glen Oaks facility, MMHC had not contemplated construction of a licensed hospital. II-2, 77. It was the understanding of the Executive Director of MMHC that the funds were appropriated to provide a new building in which to provide the services provided at Glen Ridge. II-2, 77. 22. A "clinic" generally is a treatment facility of some sort. A "hospital" is a facility licensed under Chapter 395, Florida Statutes. II-2, It was the opinion of Mr. More that a clinic is not a hospital. At the time that Chapter 82-215, Laws of Florida (1982), was enacted, appropriating funds for the new facility at Glen Ridge, MMHC did not have a "hospital" at Glen Ridge. The new facility at Glen Oaks was designed by MMHC for acute care hospital use. II-2, 86. As discussed above, MMHC applied for a certificate of need with respect to this new facility in August 1983, but has not yet received a certificate of need to operate the new facility as a licensed hospital. The Proposed Project The application of MMHC for certificate of need 2861, as amended, is to establish at Glen Oaks a specialty hospital consisting of 17 short term psychiatric hospital beds and 10 short term substance abuse hospital beds, all of which would be licensed as hospital beds pursuant to Chapter 395, Florida Statutes. If the proposed certificate of need were to be issued, and the beds granted by that certificate of need were licensed under Chapter 395, Florida Statutes, MMHC proposes potential allocations of the beds. The following is a display of the current bed types, the bed types under the first option, and the bed types under the second option: Bed Type License Type Current Option A Option B CSU Chapter 394 12 15 14 Detox Chapter 396 12 10 10 Substance Abuse Chapter 396 12 2 0 Substance Abuse Chapter 395 0 10 10 Psychiatric Chapter 395 0 17 17 Minimum Residential 18 0 0 TOTALS: 54 54 51 I-2, 75-76. Under option A, the substance abuse beds would be physically separated form the psychiatric beds, but otherwise all of the beds licensed under Chapter 395, Florida Statutes, would be spread throughout the facility. I-2, 108. Under option B, a two-hour fire wall would be built to separate all licensed beds from beds not licensed under Chapter 395, Florida Statutes, and substance abuse beds would continue to be separated from psychiatric beds. The separation of substance abuse beds in a wing of the building was demonstrated to the Hearing Officer on a chalk board by Mr. More. The sketch is not in evidence. Apparently the HRS Office of Licensure and Certification (OLC) does not usually allow the mixing of licensed and "unlicensed" beds, and if it does not, then the Petitioner will proceed under option B. Thus, option B appears to be the most probable option. I-2, 107. If the certificate of need at issue in this case is granted, MMHC proposes to always place patients having third party payors in a bed licensed under Chapter 395 (a hospital-licensed bed) if available. Those patients who are financially indigent will be placed in the other licensed beds along with some medically indigent patients. II-2, 35. Some medically indigent patients would also be served in the hospital-licensed beds. II-2, 35, VI-2, 20-21. However, if a bed is available, no one will be denied services because of an inability to pay. II-2, 23, VI-2, 82. If the certificate of need is granted, MMHC will continue to serve Manatee County, and will continue to serve the same groups of patients in the "other licensed" psychiatric (CSU) and detoxification beds; the only change will be the addition of the hospital licensed beds, which will serve patients having third party payer resources, as well as some medically patients. I-2, 82-83. MMHC is currently serving most of financially indigent persons in Manatee County, and thus does not expect to serve any more such persons if the certificate of need is granted, but does expect to be able to provide financially indigent persons in Manatee County with better and more comprehensive services. II-2, 51. MMHC will not reduce its current role in providing Baker Act and Myers Act services at the Glen Oaks facility if the certificate of need is granted. Id., I-2, 80, 83. MMHC proposes to serve those patients having third-party payor resources who are currently being served within the MMHC system, or who may come to MMHC in the future in MMHC's role as a "public receiving facility" for emergencies. I-2, 79. Almost all of such patients now are referred to MMH, and thus MMHC proposes to serve these patients who are now being served MMH. See finding of fact 17 above. It is expected that MMHC will serve insured patients from the middle and lower socioeconomic classes. I-2, 83. These are projected to be having annual incomes of between $20,000 to $40,000 annually. II-2, 43. Over 90 percent of the families and households in Manatee County have incomes less than $35,000 annually, so the great majority of potential insured patients in Manatee County are compatible with the current socioeconomic caseload of MMHC. II-2, 43. Issuance of the proposed certificate of need to MMHC will enable MMHC to add the following services for its inpatient beds at Glen Oaks, services which currently are not provided: individual therapy, group therapy, activity therapy, an recreation therapy. II-2, 78. These services would thus be expanded for all patients, including the financially indigent and medically indigent. Enhancement of services will enable MMHC to attempt to treat more than just the acute psychiatric episode. V-2, 12. The family of the patient will be more involved, staff will have more time to try to identify the underlying cause of the psychiatric illness, where possible, and more time will be available to provide education for the patient to assist in his or her own self-care. Id. The proposal would also result in more continuous care provided by the same staff within the MMHC system for patients having third-party payor resources who currently must be referred to facilities outside of the MMHC system. I-2, 78-79. Continuity of care is an important goal of a mental health system. IX-2, 96. Having the ability to track patients, assure continuity of treatment, and assure that the patient is treated at the appropriate level of treatment is what is meant by continuity of care. Id. With a continuum of services in the chance that the patient will be neglected is lessened, the patient should be treated at the proper level without the inefficiency of having to be transferred to another system having no familiarity with the patient. IX- 2, 94-97, IV-2, 136. Community mental health centers were created in part to continuity of care to the community. IX-2, 95. Issuance of the proposed certificate of need to MMHC would improve and foster competition among short term and substance abuse providers in Manatee County in the future. Currently, there are only 25 short term psychiatric hospital beds in the counties, all at MMH, and there are no hospital licensed short term substance abuse beds. See finding of fact 41D. The charges at MMHC will be lower than charges for similar services in the area. See finding of fact 111. If the proposed certificate of need is issued, MMHC would no longer rent 18 beds in what it now calls a "minimum residential" category of beds. Minimum residential treatment beds, providing a form of halfway residential setting between inpatient care and the community, are a very important service for a community mental health center to provide. IX-2, 103-4. MMHC plans to develop some form of minimum residential beds in the future. II-2, 85. Development of this service would involve additional costs. The 18 minimum residential beds provide a valuable housing service to those persons now renting these beds, and in that way provide a valuable service to Manatee County as well. But the beds are not treatment beds, and are not part of any treatment program as such. See finding of fact 12. Persons now using the 18 beds would probably benefit from having a more structured environment, but they also probably could function adequately on their own renting housing in the community IV-2, 155-59. The evidence indicates that these persons will find housing in the community. II-2, 84. There is no persuasive evidence in the record that the 18 minimum residential beds are necessary or essential to the persons now renting them, or that it would be impossible for them to rent or find other accommodations in the community. MMHC seeks the certificate of need in this case primarily to allow it to treat patients having third party payor resources at Glen Oaks so as to generate additional revenues so that improved mental health services may be provided to the financially and medically indigent of Manatee County. With the exception of the improvements to services caused by expansion of therapies available, discussed above, there are no significant differences between the psychiatric or substance abuse treatment services that MMHC provides now to persons occupying the other licensed beds and the services that will be provided if a certificate of need is granted. VI-2, 127-28. Moreover, will not be any significant differences between the treatment services that will be provided in the hospital-licensed beds, should a certificate of need be granted, and the beds licensed under other Florida Statutes. II-2, 21, 35. The quality of care currently provided by MMHC is very good, and meets all criteria set out by HRS, but the quality of services provided by MMHC could be enhanced and improved if resources were available. II-2, 28-29, V-2, 19, 21. Patients who currently are discharged from inpatient care do not have need for more inpatient care. V-2, 21. Need For the Proposed Project The "planning horizon year" is the year in which need for short term psychiatric or substance abuse beds will be calculated pursuant to HRS rules, and is July 1988 in this case, which is five years from the date of the application. See findings of fact 41 and 42, order of May 14, 1986, Appendix B. Despite the delay in this case in coming to final hearing, a planning horizon year of 1988 is still appropriate since MMHC can begin operations rather quickly because no major construction is needed. III-2, 45-46. Following the methodology of rules 10-5.11(25)(d) and 10-5.11(27)(f), Florida Administrative Code, there is projected to be a surplus of 154 short term psychiatric hospital beds and a surplus of 68 short term substance abuse hospital beds in District VI in the horizon year, 1988. VIII-2, 49. The amended application of MMHC identifies a bed need specified in the 1983 District VI local health plan, which is MMHC Ex. 1, and does not seek to satisfy a bed need identified in any later state or local plan. See findings of fact 29 through 36, Appendix B. The Community Medical Facilities Component of the District VI Local Health Council plan was adopted on August 1, 1983. MMHC Ex. 1. In 1983, HRS District VI consisted of Hillsborough and Manatee Counties only. MMHC Ex. 1. The 1983 District VI Health Plan showed a net surplus of short term psychiatric hospital beds by 1988 of 133 and a net need of 57 short term substance abuse hospital beds by the same year. Id., p. 52-53. The Community Medical Facilities Component of the District VI Local Health Council plan designates Manatee County as a distinct planning and service area for assessing bed need for psychiatric and substance abuse services. MMHC Ex. 1, p. 53. The plan designates Manatee County as a distinct area according to the plan, most Manatee County residents are beyond 45 minutes travel time to facilities located in Tampa. Id. It also treats Manatee County as a distinct area because the county has only one existing provider of short term psychiatric beds, MMH, which had a greater than 100 percent occupancy rate in 1982. HRS officials charged with the responsibility to review and recommend approval or disapproval of applications for certificates of need have concluded that Manatee County is a proper service and planning area for calculation of need in this case. See findings of fact 20 and 22, order of May 14, 1986, Appendix B; II-1, 188-91. Short term psychiatric care is a part of a continuum of care that is aimed at deinstitutionalization. II-1, 143-44. Short term psychiatric patients have a greater need to be in touch with their local communities. Id. Having all mental health services available in the local community, rather than at greater distances away, fosters the goal of continuity of care. Manatee County is designated as a "mental health catchment area" by the National Institute of Mental Health. III-2, 55, 63-64. This designation is intended to identify needs and resources within the designated geographical area. Id. Manatee County is designated by the United States Bureau of Census as a-metropolitan statistical area. III-2, 55. Other applicants for certificates of need for short term psychiatric or substance abuse services have considered Manatee County to be the proper area for planning and determining need, notably the application of Charter Medical-Southeast, Inc., d/b/a Charter Haven Hospital for certificate of need 4294, which contains an analysis of need from Fagin Advisory Services, Inc., dated December 22, 1985, pages 3-20. MMHC Ex. 6. It is therefore reasonable to consider Manatee County as a separate service and health planning area for assessment of need for short term psychiatric and substance abuse hospital beds. HRS has not by rule adopted Manatee County as a subdistrict for determining need for short term psychiatric or substance abuse services. It has done so in this case as a matter of incipient policy and that policy has been found in this case to be reasonable. See finding of fact 38. The 1983 Local Health Council plan, using the methodology contained in the state rules applied only to Manatee County, found a gross need in Manatee County by 1988 for 65 short term inpatient psychiatric hospital beds, and 11 short term inpatient substance abuse beds. MMHC Ex. 1, p. 53. The net need is 40 short term psychiatric hospital beds and 11 short term substance abuse hospital beds. III-2, 68. The conclusion that there is a net need for short term psychiatric and substance abuse beds contained in the preceding paragraph is corroborated and supported by the following additional findings: The historical use rate for short term psychiatric beds in District VI has been 88.4 patient days per 1,000 population, and the use rate for short term substance abuse beds in District IV has been 26.5 patient days per 1,000 population. III-2, 78-80. A district rate is more reliable since it tends to average out under-utilization that may be caused by lack of beds in a particular county. Id. Applying these use rates to 1988 populations, there would be a need for 31 to 35 short term psychiatric beds and 17 short term substance abuse beds in Manatee County by 1988. Id. Manatee County currently has only .14 short term psychiatric beds per 1,000, while District VI has 47 beds per 1,000. III-2, 79. Accepting the rate of .35 beds per 1,000 as a norm, that rate having been promulgated as a need rate in rule 10-5.11(25), Florida Administrative Code, then there is a shortage of these beds in Manatee County. Manatee County has only 25 short term psychiatric hospital beds currently and those are located at MMH. Manatee County has no hospital licensed short term substance abuse beds. III-2, 69, 150. The occupancy rate for the 25 short term psychiatric beds at MMH has been consistently very high since 1980: 82.9 percent in 1980, 87.0 percent in 1981, 102.0 percent in 1982, 112.0 percent in 1984, 88.0 percent in 1985, and 97.0 percent in the first four months of 1986. III-2, 66, 70, CH/CT Ex. 8, p. 154, MMHC Ex. 1, p. 30. It is preferable that MMH operate under 75 percent occupancy. XI-2, 124. Charter Tampa's parent corporation, Charter Medical-Southeast, Inc., presented in an application for a certificate of need an analysis showing a net bed need of 63 short term psychiatric beds for Manatee County in 1990. MMHC Ex. 6, p. 17-20. The method used was essentially the same as proposed by the Petitioner, except that 1990 populations were used, and was presented by the same consulting expert who testified for Charter Tampa during the hearing. Id. MMH has applied for a net increase of 17 short term psychiatric hospital beds and 11 substance abuse beds in a comprehensive application for certificate of need in a later batch in which Charter-Medical Southeast, Inc., has two pending applications. CH/CT Ex. 1, p. 2. The services proposed by the Petitioner are thus consistent with, and would partially satisfy, the need for short term psychiatric and substance abuse inpatient hospital beds as set forth in the 1983 local plan. The 1983 state health plan is not in evidence. As will be discussed in the conclusions of law, the 1985 versions of these plans are not legally relevant to Petitioner's application in view of recent case law. Alternatives The short term psychiatric beds at MMH have been running at a very high occupancy rate for the last five years. A significant number of psychiatric patients having insurance or other third party payors are currently referred for treatment to MMH by MMHC. I-2, 58, 60. If the certificate of need sought in this case were to be granted, MMHC would retain most of these patients for treatment, and would no longer refer them to MMH. See findings of fact 27 and 17 above. However, the local health plan identifies 40 short term psychiatric beds need by 1988, and MMHC proposes to serve only 17 beds of that need, or less than 50 percent. The total need is 65 beds, and 23 beds, or 35 percent of the gross need, would be unmet by the Petitioner or anyone else. This unmet need would be available to MMH as well as to other providers, such as Charter Tampa, and constitutes a very substantial additional source of patients. It must be concluded, therefore, that although MMH will lose patients now referred by MMHC, in the long term MMH will not suffer significant reduced occupancy. Given the level of need shown, and the higher occupancy rates shown at MMH, it must further be concluded that MMH does not provide an adequate alternative in the service area to satisfy all need for short term psychiatric inpatient hospital beds. MMH does not provide any certificate of need approved hospital licensed short term substance abuse beds, and thus there are no alternatives in the service area for this service proposed by the Petitioner. The 12 CSU beds at MMHC are not an adequate alternative to the 17 short term inpatient hospital psychiatric beds sought by MMHC in this case. If they were, the occupancy levels at MMH would be substantially lower. Moreover, the 12 CSU beds are not adequate to treat patients having third party reimbursement sources. See finding of fact 17. Finally, assuming hypothetically that CSU beds should be deemed to be an adequate equivalent of hospital licensed beds, the current 12 CSU beds at MMHC only would fulfill a portion of the net need in Manatee County for 40 inpatient hospital psychiatric beds. A net residual need of 28 beds would still exist to be served by the 17 short term beds proposed by MMHC. Quality of Staff and Care The parties stipulated that there was no issue in this case concerning the quality of staff that would be used if this certificate of need were granted. I-2, 14. Moreover, the number of full time equivalent positions (FTE's) proposed is not contested either. I-2, 15. The quality of care now provided by MMHC is good, and good quality of care would be provided if the certificate of need were granted. See finding of fact 33. Indigent Services Currently, the Glen Oaks facility operates 12 CSU (psychiatric) beds, 12 detoxification beds, and 12 substance abuse beds. It also rents 18 beds which it terms "minimal residential." See findings of fact 9 through 12. If the certificate of need in this case were granted, it would continue to operate essentially the same number of beds in each category with the exception of the minimal residential beds. See finding of fact 24. The only major change to existing services would be replacement of the 18 "minimum residential" beds with 17 hospital licensed short term psychiatric inpatients beds. The 18 rented beds are not associated with inpatient programs, and are not similar to the 17 short term psychiatric hospital beds. MMHC intends to continue to serve indigent patients and to expand these services as population grows. III-2, 89. Currently, MMHC uses a sliding or discounted fee system, charging patients according to ability to pay. I-2, 54-55. If the certificate of need is granted, MMHC will collect essentially the same total minimal level of revenues from these same indigent patients. II-2, 36-37, VI-2, 19-22. Although there will be no sliding fee schedule, the result will be the same: such indigents will receive care paying the same minimal total amount. VI-2, 77, II-2, 36-38. Thus, if the certificate of need at issue in this case were granted, MMHC would not eliminate any of its current inpatient psychiatric (crisis stabilization), detoxification, or substance abuse services for indigents. These inpatient services would still be available to the same extent at minimal or no cost to such persons, except that additional and enhanced therapies and services will be made available to indigents. See finding of fact 26. Geographical Accessibility Glen Oaks will be geographically accessible to all residents of Manatee County, though it will not provide any geographic accessibility advantage different from nearby MMH. Both MMHC and MMH are well located to be near a large portion of the population of Manatee County. Short Term Financial Feasibility There are adequate resources to complete the project proposed by the Petitioner. The building was funded by the Legislature and is essentially complete. Funds exist for any necessary modifications and for all equipment. I-2, 111, 116- 117. It was stipulated that adequate and qualified staffing has been proposed and will be obtained to operate the new beds as proposed at Glen Oaks. I-2, 14-15. The project proposed by MMHC is financially feasible in the short term. Long term Financial Feasibility Long term financial feasibility involves a number of sharply disputed issues of fact. Paragraphs 51 through 112 will address these issues. Deborah J. Krueger was accepted as an expert in health care facility financial feasibility and health care financial analysis. V-2, 56. Karen Wolchuck-Sher was accepted as an expert in health planning. III-2, 48. It was Ms. Wolchuck-Sher's expert opinion that there is a need for 17 short term inpatient hospital psychiatric beds and 10 short term inpatient hospital substance abuse beds in Manatee County as proposed by the Petitioner. III-2, It was Ms. Krueger's expert opinion that the proposed project would be financially feasible in the long term. VI-2, 6. Ms. Wolchuck-Sher testified primarily concerning need. Ms. Krueger testified primarily concerning financial feasibility. The projection of expected patient days for the 17 short term psychiatric beds and 10 short term substance abuse beds was prepared by Ms. Wolchuck-Sher and used by Ms. Krueger in her financial feasibility analysis. VI-2, 69. However, to produce a projection of payor mix, Ms. Krueger had to analyze the same data relied upon by Ms. Wolchuck-Sher to determine projected patient days. VI-2, 70. Projected Patient Days Based entirely upon patients estimated to already be within the MMHC system, but who are typically referred elsewhere because they have insurance or other third party payor resources, MMHC projects that on the first day of operation of the proposed 27 hospital licensed beds, occupancy will be 64 percent or an average daily census of 17 patients. III-2, 128-29, 154. It is further projected that this occupancy level will average 70 percent in the first year of operation, ending August 31, 1988. III-2, 129, The 17 patients estimated to be available on an average daily basis from the beginning were identified as patients that currently are seen and treated in MMHC programs and who could be referred for treatment to the hospital licensed beds if the certificate of need were granted. III-2, 131. These would include people with insurance and Medicare, but not Medicaid, or those who have a physical illness requiring hospitalization. Id. The 17 patients estimated above was based upon a study conducted by staff of MMHC, which was reviewed by both Ms. Wolchuck-Sher and Ms. Krueger. See finding of fact 52. III-2, 128-29, 132. The study included discharge records of patients from July 1985 to February 1986. The discharge records were reviewed to determine whether the patient had been referred for treatment to a hospital licensed bed elsewhere. A cross check of MMH records was performed to determine if MMH actually treated the referred patient. Ms. Wolchuck-Sher did not personally count the numbers, but she personally reviewed the census sheets prepared by MMHC staff, studied the methods used to tabulate the numbers, and concluded that the methods used were reasonable. III-2, 132-36, 146. Based upon the study, an initial average daily census of 17 was projected. III-2, 136. The 17 patients on an average daily census was projected by tabulating admissions, multiplying admissions by projected average lengths of stay by program, and converting this to a monthly rate. III-2, 137, 146-47. The average length of stay was based on actual current experience at MMHC, projected increase in average length of stay when MMHC at Glen Oaks adds new forms of treatment programs, and comparisons to current average lengths of stay at the 25 short term psychiatric beds at MMH. III-2, 139. By program, the following numbers of patients and projected average lengths of stay were identified in the study relied upon by Ms. Wolchuck-Sher and Ms. Krueger: about 7 patients per month from the geriatric residential treatment services (GRTS) program with an average length of stay of 20 days, IV- 2, 115, VI-2, 65, XII-2, 29-30; about 6 patients per month from the crisis stabilization unit (CSU) with an average length of stay of 10 days, IV-2, 72, XII-2, 29-30; about 2 patients per month from the employee assistance program (EAP) with an average length of stay of 10 days, VI-2, 73, XII-2, 29 30; about 2 patients per month from outpatient programs, with an average length of stay of 10 days, although outpatient programs, excluding GRTS, show on the census sheets about 7 admissions a month, VI-2, 73-74, XII-2, 32; and an average daily census of 9 patients in the 10 substance abuse beds, with an average length of stay of days, III-2, 155, 158, 159, 161. Currently, the 12 substance abuse beds have an average 75 percent occupancy, which is an average daily census of 9 patients. III-2, 161. MMHC simply projects that these patients will fill the 10 hospital licensed beds if the certificate of need is granted. III-2, 155, 159. Mathematically, the patients identified in finding of fact 57 results in the following: Average daily Program that Average Patient census (Patient is the source Monthly length days for days divided by of the referral Admissions of stay each month 30 days in mo.) GRTS 7 20 140 4.67 CSU 6 10 60 2.00 EAP 2 10 20 0.60 Outpatient 2 10 20 0.67 Subtotal: 8.01 Substance abuse 9.00 TOTAL: 17.01 From the foregoing, the average length of stay of patients from all programs except substance abuse programs would be 14.1 days. (240 patient days divided by 17 admissions.) This is consistent with testimony that the average length of stay for "psychiatric patients overall" would be 14 days, but that CSU patients would have an average length of stay of 10 days. III-2, 154. Ms. Wolchuck-Sher's testimony on this point is not clear, but the foregoing analysis is the only one that makes sense on this record. Apparently Ms. Wolchuck-Sher did not consider the substance abuse beds when she testified as to projected average length of stay since the substance abuse beds were, in her opinion, projected to have a 21 day average length of stay, and were simply to continue the same daily census of 9 patients. III-2, 158, 161. The reason for the "overall" 14 day average length of stay is that although many of the patients referred to the short term psychiatric beds will have an average length of stay of 10 days, those who are elderly and originate from the geriatric residential treatment service program will have an average length of stay of 20 days. The numbers of potential admissions identified in paragraph 57 above are reasonable. These numbers come from actual experience of MMHC, and the methods of collecting were found to be reasonable by an expert in health planning. The numbers of potential admissions come from patients already within the MMHC system and do not depend upon referrals from private physicians. III- 2, 92-93. Thus, even if one were to assume that patients of private physicians, and such physicians themselves, would prefer not to use short term hospital services at MMHC due to its role as provider for indigents, this does not alter the projected number of admissions. MMHC currently serves about 5,000 persons annually in its many programs. I-2, 89. It also serves as a public receiving facility for emergency psychiatric cases. Id. Thus, it is reasonable to expect that the existing MMHC mental health system will in fact be a source of the referrals estimated in paragraph 57 and 58 above. III-2, 82-83. Moreover, the estimated numbers of admissions are conservative in several respects. First, the outpatient programs were relied upon as a source of only 2 admissions per month, although the estimate could have run as high as 7 admissions per month. See paragraph 57. Also, the estimate does not consider potential admissions from private physicians, but the opportunity for such admissions will exist because MMHC will operate an open medical staff, and any qualified community physician may join. II-2, 7, 87-88. Undoubtedly some additional referrals would be made to MMHC because MMH is operating now at capacity and the numeric need estimates shows a need for 40 short term psychiatric beds by 1988. At an average daily census of 17, with 9 of this in substance abuse beds, MMHC is projecting that it will only attract a small portion of that need: enough to fill 8 of the 40 beds, leaving an unmet demand for 32 beds. It is not unreasonable for MMHC to project initially that it will 20 percent of the unmet need of Manatee County. The projected average length of stay of 20 days for patients in the geriatric residential treatment program is reasonable. It may be inferred that healing for the elderly may be slower, and that therefore the length of stay will be longer than for other short term psychiatric patients. IX-2, 88-89. The projected average length of stay for admissions to the 17 hospital licensed psychiatric beds from the CSU, EAP, and other outpatient programs of 10 days is reasonable. Manatee Memorial Hospital currently experiences an average length of stay in its 25 short term psychiatric beds of about 10 days, and there is no reason to believe that the same type bed at MMHC will not function the same. III-I, 148. Although the CSU at Glen Oaks currently has an average length of stay of 6.5 days, III-2, 147, this is based upon the current limited services which consists only of chemotherapy and milieu therapy (which is only a supportive, non-threatening atmosphere). I-2, 78. If the certificate of need is granted, MMHC will be able to provide more individualized therapies such as activity therapy, recreation therapy, group therapy, and individual therapy. I- 2, 78. It is reasonable to infer that provision of more staff, as will be discussed ahead, aimed at providing more individual attention, will result in longer inpatient stays, III-2, 147-148, at least until the average length of stay is similar to that currently at Manatee Memorial Hospital. The projection that there will be 9 patients on average occupying 9 of the 10 substance abuse beds each day is reasonable based upon current actual occupancy in the same beds at Glen Oaks. See finding of fact 57. This projection does not depend upon an average length of stay since the average daily census is known. However, it would appear that to the extent that Ms. Wolchuck-Sher assumed that the average length of stay in the substance abuse beds would be 21 days, III-2, 158, it appears this was too conservative. The current average length of stay in the substance abuse beds is actually 28 days. II-2, 12, V-2, 21. From findings of fact 54 through 62, it is concluded that the estimate that the proposed 17 short term psychiatric beds and 10 short term substance abuse beds will initially open with about a combined average daily census of 17 patients, or an occupancy rate of 64 percent, is reasonable and supported by the evidence. The projection that the 27 new beds would have an 80 percent occupancy rate in the second year effectively means that the 10 substance abuse beds will continue to be occupied by an average daily census of 9 patients, and that the occupancy of the 17 psychiatric beds would increase to an average daily census of 12.6 patients. (80 percent of 27 beds is a 21.6 average daily census. If 9 of these beds were occupied by substance abuse patients, the remainder of the 12.6 would be occupied by psychiatric patients.) At 64 percent occupancy, the substance abuse beds would have a daily average of 9 patients and the psychiatric beds would have a daily average of 8 patients. See finding of fact 58 above. Thus, the 80 percent occupancy projection is simply a projection that the average daily census in the 17 psychiatric beds will grow from 8 (47 percent occupancy) to 12.6 (74 percent) occupancy in two years. This is an entirely reasonable projection. In effect, it predicts that in two years, MMHC will service 12.6 beds of the 40 net short term psychiatric beds needed in Manatee County by that date. Given the fact that this leaves a shortfall of 17.4 short term psychiatric beds in Manatee County, there ought to be sufficient demand to achieve this projection. It is not unreasonable to project that at the end of two years, MMHC will capture only 31.5 percent of the projected net need for short term psychiatric beds in Manatee County. In summary, the expert opinion of Ms. Wolchuck-Sher that an 80 percent occupancy rate is a reasonable projection for the second year of operation is quite credible and is accepted. Moreover, there is no evidence in the record to believe that the 80 percent occupancy rate will not continue through the third year. Once established, the need projections (based upon a population which, on this record, cannot be concluded to be expected to diminish in 1989 or 1990) remain at least constant, and thus it is reasonable to infer that MMHC will retain and serve enough patients in the third year of operation to sustain a continued 80 percent occupancy rate The number of patient days projected in the second year for purposes of long term financial feasibility, 7905 patient days (see table 7, page 48, MMHC EX. 2) is based entirely upon the projection of 80 percent occupancy in the second year. III-2, 156. It is simply 27 beds times 80 percent times 366 (the number of days in leap year 1988). Id. Since the projection of 80 percent occupancy is reasonable, the projection of 7905 patient days in the second year is also reasonable. The reasonable nature of the projection of 7905 patient days in the second year of operation is further corroborated by the projection of patient days in the application of Charter Medical-Southeast, Inc., d/b/a Charter Haven Hospital for certificate of need 4294. MMHC Ex. 6. That application included a "bed need study" by Fagin Advisory Services, Inc., dated December 22, 1985. In that study, a net need of 63 short term inpatient hospital psychiatric beds was estimated in Manatee bounty by 1990. MMHC Ex. 6, p. 19. Further, the applicant estimated that in the 12 months from May 1987 to April 1988, its project would serve 9122 short term psychiatric hospital patient days. Id. at p. 31. This should be compared with the short term patient days contained in the estimate of 7905 patient days by MMHC, which includes short term substance abuse patient days as well. The annual short term substance abuse patient days were derived from an estimate of 9 beds occupied at all times, which would result in 9 times 366, or 3294 patient days devoted to short term substance abuse. See paragraph Thus, the MMHC projection of short term psychiatric patient days in this case is only 4611 in 1988, a number quite smaller than 9125 days estimated by Charter Medical-Southeast. Dr. Fagin, who testified for Charter Tampa, testified that he would not be surprised if there were 7905 patient days of demand in Manatee County. XI-2, 128-29. Patients having third party payor resources will to some substantial degree choose not to be served by a community mental health center like MMHC because MMHC serves a large number of indigent patients. IX-2. 102. Similarly, it is reasonable to expect that a number of private physicians in the community will continue to use MMH for inpatient mental health care, and will not be referring paying patients to MMHC. XI-2, 72-73. Nonetheless, the reasonableness of the projection of 7905 patient days is not significantly undermined by the expected reluctance and refusal of a substantial number of third party payor patients to use MMHC. There are several reasons for this conclusion in the record. First, as discussed above, the projection of 7905 patient days is not based upon referrals from private practice physicians; it is based primarily upon referrals of patients already within the MMHC system who, for one reason or another, have affirmatively chosen that system. Second, if MMHC upgrades its services by the addition of more therapies as planned, its inpatient hospital beds will be more attractive to patients. Moreover, it has a new physical facility, and thus the building itself should not be a deterrent to patients. Other mental health centers having hospital licensed inpatient short term psychiatric and substance abuse services have been able to attract a substantial number of patients having Medicare or other third party payor resources. The Brevard Mental Health Center operates a hospital with 48 hospital licensed beds, 20 of which are short term substance abuse beds and 24 of which are short term psychiatric beds. IX-2, 37-38. The Brevard Mental Health Center is a community mental health center responsible to provide community mental health services regardless of ability to pay. IX-2, 37-38. The services are generally the same type as provided by MMHC. IX-2, 37, 64-66. Approximately 41 of the 48 beds are normally occupied, and of these, about one half are normally occupied by patients having third party reimbursement or payor sources. IX-2, 44. These were more specifically distributed as follows: 15 percent of the psychiatric beds (15 percent of 28 or 4.2) were Medicare, 18 percent of the psychiatric beds (18 percent of 28 or 5) were insurance, and 80 percent of the substance abuse beds (80 percent of 20, or 16) were insurance IX- 2, 52. 53. Thus, a total of about 25 of the 48 beds were occupied by patients having third party reimbursement resources. For the past five and one-half years, the Brevard Mental Health Center has been able to achieve its budgeted goal of placing in hospital licensed beds patients having third party payor resources. IX-2, 45. There are about six other community mental health centers in Florida having hospital licensed short term psychiatric beds. VIII-2, 63. In 1984, the four community mental health centers then having hospital licensed beds were able to attract Medicare and other charged based patients. XII-2, 61. In addition to the success of other community mental health centers, Charter Tampa's own expert was of the opinion that Charter Tampa would lose from one-third to two-thirds of its current annual number of patients (14) from Manatee County if MMHC obtains a certificate of need as proposed in this case. See finding of fact 115. Obviously, then, Charter Tampa's expert was of the opinion that Manatee County patients would choose to be served by MMHC if that alternative were available to them, and would not be deterred by the fact that MMHC serves indigents. While the conclusion that Charter Tampa will lose patients has been rejected due to the large quantity of unmet need in Manatee County, Dr. Fagin's assumption that MMHC would be an attractive alternative to Charter Tampa is supported by other evidence in the record. Finally, the projections of 64 percent occupancy in the first year, and 80 percent occupancy in the second year, as discussed above, assume that MMHC will capture only a modest number of the total number of patients in 1988 in Manatee County needing short term psychiatric health care: 20 percent in the first year and 31.5 percent in the second year. See findings of fact 57, 58 and While some patients and their families may in fact be reluctant to use the services of a community mental health center, the projections of MMHC are well within any reasonable range of predicted loss of patients due to stigma associated with services to economically disadvantaged persons. Short term psychiatric patients in Manatee County have to go somewhere reasonably close by, and MMC is full. This fact alone will overcome some of the reluctance of patients or others to use MMHC. About one to two percent of all psychiatric and substance abuse patients also have a medical problem, and these patients would continue to be referred to MMH despite the existence of a mental health problem as well. V-2, 13-14. The evidence, however, is not sufficiently clear to categorically conclude that one or two percent of the persons needing inpatient psychiatric hospital care or inpatient hospital substance abuse care will also have a medical problem. The record cited above is from the testimony of Dr. Ravindrin, who thought that the percentage of "dually diagnosed" patients to be "very small," and that "it may be one or two percent of the people who might need actual medical intervention plus active Dsvchiatric treatment at that moment." Id. From this it is uncertain to what extent the percentage applies to those patients needing inpatient care, as opposed to other forms of "active psychiatric-treatment." The evidence does compel the conclusion that some small percentage of patients needing to be served in a hospital inpatient short term bed may also have need of medical treatment. However, this fact does not appear to be relevant since the projections of patient admissions were derived from studies that estimated the numbers of patients who in fact would be admitted to hospital licensed beds at Glen Oaks if a certificate of need were granted. See finding of fact 57. There is no evidence that any of these patients are expected to have a dual diagnosis, and given the nature of the purpose of the study, it would be expected that dually diagnosed patients would not have been counted. The foregoing findings of fact 34-69 concern only the 27 hospital licensed psychiatric and substance abuse beds. Under option A, see finding of fact 24, MMHC will continue to operate 15 crisis stabilization unit beds, 10 detoxification beds, and 2 substance abuse beds, and will continue to have these beds licensed pursuant to either chapter 394 or 396, Florida Statutes, as "other licensed" beds, but not hospital licensed. Under option B, which is more probable, MMHC will continue to operate 14 CSU beds and 10 detoxification beds, again as "other licensed" beds. The long term financial feasibility projections estimated that these "other licensed" beds would continue to serve the same indigent patients as currently served in the 12 CSU beds and 12 detoxification beds operated by MMHC. VI-2, 81-82. In future years, the financial feasibility projection simply assumes that the number of patient days in these "other licensed" beds will grow in proportion to the increase in population in Manatee County. Id.; III-2, 88-90. The occupancy rate generated by these estimates was 65 percent in the "other licensed" beds for both years since the population increase was quite small. III-2, 89. These projections are reasonable. Id. Projected Staffing Table 11, page 51, of the updated application for certificate of need, MMHC Ex. 2, contains the proposed staffing for the new hospital licensed beds. VI-2, 23. The parties have stipulated that the numbers of full time equivalents (FTE's) shown on Table II are adequate for the programs proposed by MMHC and the parties further stipulated that there is no dispute in the case concerning the ability of MMHC to hire and retain qualified persons to fill these positions. I-2, 12-15. MMHC currently operates with 37.7 FTE's. It proposes to add 35.2 full time equivalents if the certificate of need is granted for a total of 73.2 FTE's. Table 11, MMHC Ex. 2. Currently, MMHC operates with 0.8 FTE's for medical staff. It proposes to add 1.8 FTE's to make this 2.4 FTE's for the medical staff. If the certificate of need is granted, Dr. Ravindrin would fill one full time equivalent, and the remaining 1.4 FTE's would be provided by other physicians who currently have a relationship with MMHC. Table 11, MMHC Ex. 2; 11-2, 14-15. MMHC currently has only 4.0 FTE's for treatment staff, but proposes to add 6.0 FTE's if the certificate of need is granted. Table II, MMHC Ex. 2. These new staff positions will provide the enhanced psychiatric treatment therapies described in finding of fact 28. I-2, 99. MMHC currently has 21.1 FTE's of nursing staff, and would add 13.9 nursing FTE's if the certificate of need were granted. Table 11, MMHC Ex. 2. This would provide 0.65 nursing FTE'd per bed (35/54) compared to the existing ration of 0.59 (21.1/36). Id. II-2, 52. The administrative staff is proposed to increase from the current 2.0 FTE's to 4.0 FTE's, and this will enable MMHC at Glen Oaks to handle the reporting requirements and other administrative work associated with the facility. 1-2, 99; Table 11, MMHC Ex. 2. The current level for support staff (kitchen, janitorial, and so forth) is 9.8 FTE's and would be increased to 21.0 FTE's. Table 11, MMHC Ex. 2; II-2, 17, 53. The current level of consultant staff (pharmacy and dietary) is 0.3 FTE's and this would increase to a total of 0.6 FTE's if the certificate of need were granted; Table 11, MMHC Ex. 2 is in error on this point. I-97. Projected Revenues Long term financial feasibility is determined by comparing projected revenues with projected costs. MMHC Ex. 2, Appendix A. Projected revenues are determined by projected patient days (utilization forecasts) and a projected average charge per patient day. VI-2, 12-13. MMHC projected an average gross charge per patient day based upon the kind of operating margin MMHC wanted to have, the expected payor mix, and consideration of the charges of other facilities. VI-2, 13. The charges of all of the community mental health centers and all of the free standing psychiatric facilities in Florida as reported in the 1984 Hospital Cost Containment Board Report, and the charges of Charter Tampa and MMHC for 1986 were reviewed by MMHC's expert in determining the proposed average charge for the hospital licensed beds. VI-2, 14. The average daily charge proposed by MMHC is $295 per day in the first year of operation and $313 per day in the second year of operation. VI-2 37-38. If the certificate of need is granted, MMHC will hire a consultant to assist it in preparing a schedule of specific fees by service so as to achieve the average cost per day projected to be both competitive and to cover expenses. I-2, 126; VI-2, 53. The technique of projecting an average charge per patient day is commonly used by experts to forecast revenues and to establish actual charges, and is also commonly used in certificate of need proceedings, and is reasonable. VI-2, 53, 41; VIII-2, 9-14. Analysis of projected revenues must proceed by considering first the 27 inpatient hospital beds that are the subject of this application for certificate of need, the hospital licensed beds, and then considering the remaining beds to as "unlicensed" beds in the forecast statement of revenue and expense, Appendix A, MMHC Ex. 2. In the second year of operation, which is the most relevant for consideration of financial feasibility, the projected 7905 patient days will generate $2,474,265 in gross revenue at an average daily charge of $313. Table 7, p. 48, MMHC Ex. 2; VI-2, 12-14, 38-39. The mix of patients in the 27 hospital licensed beds in the second year is estimated to be 29.6 percent Medicare, 48.2 percent insurance, and 22.2 percent private pay. Table 7, p. 48, MMHC Ex. 2. The estimate of 29.6 percent Medicare is based upon the current 27 percent of admissions that currently are GRTS patients plus the increasing trend in Medicare utilization. VI-2, 66-67. From the study that identified the types of patients who were within the existing MMHC system and were candidates for referral to the hospital licensed beds it was estimated that about 30 percent of the total number of such persons were patients having insurance; it was further projected that once the enhanced therapies are added to MMHC, this percentage would increase to 48.2 percent. VI-2, 71-75. The remainder of the payor mix would be private pay patients, or 22.2 percent of the patient days. Table 7, p. 48, MMHC Ex. 2; VII-2. 72. The estimated mix of patient days for the 27 hospital licensed beds is reasonable. V1-2, 40. It is projected that in the second year of operation, MMHC will have $1,106,891 total deductions from the gross revenues of $2,474,265, leaving net revenues of $1,367,374. Appendix A, MMHC Ex. 2. There are three deductions projected: Medicare, bad debts, and indigent care. Id. Since no Medicaid patients can be treated in free standing psychiatric beds, there is no Medicaid deduction. A total of $343,906 is projected as a Medicare deduction. Appendix A, MMHC Ex. 2. The Medicare program reimburses for the lesser of charges or reasonable costs in a free standing inpatient psychiatric facility. VI-2, 16; XII-2, 49. The calculation of the Medicare deduction was based upon the assumption that Medicare would reimburse 100 percent of the average cost per patient day. The average cost per patient day was roughly $166 for the second year of operation, which is the total operating expenses divided by the total number of patient days. XII-2, 47-48. Thus the Medicare deduction is basically the gross average daily charge, $313, less the average daily cost, $166, which is $147, times the estimated number of Medicare patient days, 2,342. VI-2, 15- 16. It is reasonable to base the estimated total Medicare reimbursement upon the average cost per patient day. This technique does not necessarily assume that Medicare will not disallow some costs in actual practice. XI1-2, Rather, the estimate is based upon a set of estimated costs, which produce the average daily cost, which in and of themselves do not contain any costs which are typically disallowed by Medicare officials. XII-2, 49. Moreover, the average cost per day is not reported Medicare. XII-2, 80. The report is based, rather, upon cost center accounting. Id. Medicare patients may incur costs that are different from other patients. XII-2, 65. There is some degree of flexibility in cost accounting, and some facilities are able to obtain a medicare reimbursement greater than the average cost per day for the entire facility. XII-2, 49-50, 64, 85. Charter Tampa presented expert opinion that MMHC will receive 90 percent of its projected cost from Medicare. XII-2, 52. A loss of 10 percent of costs would result in a loss of about $39,000 in net revenue. XII-2, 56. It is unclear from Charter Tampa's expert's opinion, however, whether the 90 percent figure was 90 percent of what a free standing hospital would submit to Medicare, or 90 percent of average daily costs for the entire facility. If his opinion were the former, it may not be inconsistent with the opinion expressed by the expert for MMHC. MMHC's expert testified that although some costs submitted to Medicare may be disallowed, other costs may be approved, and the total approved cost still may be greater or the same as the average daily cost for the facility (and all patients) as a whole. See the preceding paragraph. The second estimated deduction from gross revenues associated with the 27 hospital licensed beds is a deduction of $268,038 for bad debt for the second year of operation. Appendix A, MMHC Ex. 2. The bad debt estimate concerns the insured patients, other than Medicare, and some private pay patients. The estimate of bad debt is based generally upon the assumption that a small portion of private paying patients will not pay part or all of what is billed, and a more substantial portion attributed to a failure of the patient to pay the co- payment or deductible after insurance has paid its portion of the bill. VI- 2, 19, 78. The bad debt estimate is about 10.8 percent of total gross revenues for the 27 hospital licensed beds in the second year of operation. VI-2, 78, 19. The 10.8 percent is about 20 percent of the revenues generated by the 48.2 percent of patients who have insurance. Table 7, MMHC Ex. 2; VI-2, 80. The assumption was not that all insured patients would fail to pay their 20 percent share, VI-2, 79, but rather that some private pay patients would fail to pay some portion of their charge, combined with a failure of insured patients generally, but not always, to pay their co-payments or deductible. VI-2, 79-80. There is credible expert opinion in the record supported by the analysis in the preceding paragraph that the estimate of bad debt is reasonable. VI-2, 80. That expert opinion is further corroborated by Charter Tampa Ex. 12, which is the Report of the Hospital Cost Containment Board for 1984. That report assigns to short term psychiatric hospitals the code "4C." The following hospitals thus are listed by the Hospital Cost Containment Board as short term psychiatric hospitals, and report for 1984 the following bad debt percentage of patient charges: Bad Debt Percentage 4C Hospital of Patient Charges Brevard MCH 21.5 Ft. Lauderdale Hospital 2.7 Hollywood Pavilion 11.5 Charlotte Medical Center 5.1 Highland Park Medical Center 2.2 P. L. Dodge Memorial Hospital 5.9 St. John's River Hospital 2.4 Fla. Alcoholism Treatment Center --- Northside Community Mental Health Center 6.8 Tampa Heights Hospital 6.5 Lake/Sumter CMHC --- Charter Glade Hospital 3.2 Lake Hospital of the Palm Beaches 3.1 45th Street CMHC 12.3 Camelot Care Center, Inc. 2.5 Horizon Hospital 10.5 Medfield Center 3.8 Indian River CMHC 10.0 Sarasota Palms Hospital 1.7 West Lake 4.1 It is concluded, therefore, that the estimate of bad debt in the second year of operation is reasonable. The final deduction estimated from gross revenue for the 27 hospital licensed beds is a deduction of $494,947 for indigent care. Appendix A, MMHC Ex. 2. The basis for this deduction is an expectation that MMHC will be able to collect only 10 percent of the $549,941 to be billed to private pay patients. Table 7, MMHC Ex. 2; VI-2, 77, 20-21, 22. MMHC plans to bill these private pay patients, II-2, 36, and the bill will not be on a sliding scale. VII-2, 40. Nonetheless MMHC considers most of such billings to be charity or indigent care and will not expect to collect 90 percent of such billings. II-2, 37. Since the gross revenues to be billed to private pay patients is based in the second year of operation upon an average charge per day of $313, the 10 percent collection estimate is an estimate that about $30 per day per patient will be collected. Currently in the other licensed CSU and detoxification beds MMHC is only able to collect at most about 20.5 percent of overall gross revenues. VI- 2, 76. The record does not contain precise evidence as to current fees in the other licensed beds, but it may be concluded that such current fees are very roughly $100 per day for the CSU, substance abuse, and detoxification beds. VII-2, 36, II-2, 12. Thus, it is inferred that currently MMHC collects very roughly $20 per patient day in these beds. If MMHC were able to collect only $20 per day from the 1757 patient days identified in Table 7, MMHC Ex. 2, as being the second year patient days attributable to private pay patients, it would collect approximately $17,000 less net revenue than is now shown in Appendix A, MMHC Ex. 2. It is difficult to tell, on this record, whether it is more likely that MMHC will continue to collect about $20 per patient day from these patients, or whether the enhanced services will attract a few more private pay patients who will pay proportionately more of their bills, thus making the $30 per patient day estimate more reasonable. To complete the estimate of revenues, it was estimated that the "other licensed" beds, crisis stabilization, detoxification, (and substance abuse, if option A is implemented) will generate $1,889,770 in gross revenues in the first year of operation, and $2,010,399 in gross revenues in the second year of operation. Appendix A, MMHC Ex. 2; V1-2, 12-13, 21-22, 82-83. The net revenues for the other licensed beds are based upon current use rates for current Manatee County population applied to the estimated future Manatee County populations in the first and second years of operation. VI-2, 81-82. The assumption is that the current indigent patients served in these other licensed beds will continue to be served and keep pace at the same rate as the population of Manatee County grows. Id. To reach net revenues for these beds, the current Baker Act and Myers Act funding for these beds was analyzed and used as the expected basis for revenues. These expected revenues were inflated forward at 5 percent a year. Id. Additionally, a few patients were estimated to continue to be served in these beds who did not qualify for Baker Act funding, and it was estimated that only 10 percent of the gross revenues would be collected from these patients. VI-2, 82-83. See also VI-2, 21-22. As a result of these deductions from gross revenues for indigent care, it is estimated that the other licensed beds will generate $1,052,636 in net revenues in the first year of operation, and $1,105,789 in net revenues in the second year of operation. Appendix A, MMHC Ex. 2. These estimates are reasonable. Projected Expenses The forecast statement of revenue and expenses contains estimates of expenses in several categories: salaries and wages, benefits, non-salary expenses, depreciation, and general and administrative expenses. MMHC Ex. 2. The projected annual salaries are found on Table 11, MMHC Ex. 2. These projected annual salaries are based upon and reflect current salaries, and are inflated by 6 percent for each year beyond the current year. VI-2, 91-94, 110, VII-2, 118-119, IX-2, 21-22, 27-28; MMHC Ex. 4. An inflation rate of 6 percent annually is reasonable. VII-2, 119. The salary levels, based upon current experience and retention, plus state classification plan salaries for positions which do not yet exist, and compared to mental health centers in the state by an expert, are reasonable. IX-2, 27-28, VI-2 95-110. It was stipulated that adequate and qualified staff will be obtained. Finding of fact 47. Salary expense is allocated on Appendix A, MMHC Ex. 2, between the hospital licensed beds and the other licensed beds based upon the ratio of total patient days projected for each group of beds. VI-2, 23-24. The total salary expense projected for the second year of operation is $1,229,871. The expense for benefits associated with salaries is reasonable. It is based upon current MMHC experience and is 24 percent of total salaries. VI- 2, 24. The benefit expense is $295,169 in the second year of operation. Appendix A, MMHC Ex. 2. Non-salary expense are projected to be $457,512 in the second year of operation. Appendix A, MMHC Ex. 2. This expense is projected to be 30 percent of the projected expense for salaries and benefits. VI-2, 25, 112. A ratio of 30 percent has been the actual experience of MMHC for the eight months from July 1985 through February 1986. VI-2, 117. Glen Oaks is currently providing three of the four services that it will provide if the certificate of need is granted: crisis stabilization beds, detoxification beds, and substance abuse beds. VI-2, 127-28. The non-salary expense for the new beds (which primarily will be the 17 hospital licensed psychiatric beds since substance abuse is already being provided) should be quite similar to the non-salary expenses currently being incurred for the crisis stabilization beds. VI-2, 115. The primary new expense with the addition of the new beds will be salary expenses. VI-2, 119. The addition of the new beds will result in the addition of more treatment therapies which are staff intensive, but does not generate non-salary expense to any unusual degree. VI-2, 122, 140. At the same time, the current non-salary expense contains certain substantial fixed expenses, such as utility costs, which will not increase with the increase of more staff, and in that sense the use of a 30 percent figure is conservative. VI-2, 118-119, III. Thus, the estimate that non-salary expenses will be 30 percent of the expenses for salaries and benefits is reasonable. VI-2, 127-128; XII-2, 42-43. The next projected expense is a depreciation expense of $89,280 for the first and second years of operation. This expense is based upon a 30 year straight line depreciation of the "total project costs" shown on page 57 MMHC Ex. 2. VI-2, 26 There is no evidence to suggest that this expense estimate is unreasonable. Since the building was funded not by borrowing and by revenues from charges but from a Legislative appropriation, is not altogether clear that MMHC would have to reserve $89,000 annually to replace the facility at the end of 30 years. Thus, addition of this expense is conservative. VI-2, 26. Finally, in the second year of operation it is estimated that general and administrative expenses will be $314,953. Appendix A, MMHC Ex. 2; VI-2, 27. These are expenses related to support functions provided by management. Id. The estimate is based upon current budget plus increase in staff projected in the project. Id. There is no evidence to suggest that this estimate is unreasonable, and thus it is found to be reasonable. Dr. Howard Fagin testified as an expert for Charter Tampa concerning ratios derived from data contained in reports to the Hospital Cost Containment Board. The data relied upon by Dr. Fagin was the actual financial experience of 16 free standing psychiatric facilities in Florida for 1984, which was the latest compilation of such data. XI-2, 41, 94. The Hospital Cost Containment Board category for "salary and wages" did not include "benefits." These were included under the "other" category. XI-2, 39. Thus, Dr. Fagin calculated a ratio of all expenses other than "salary and wages" divided by "salary and wages" for each of the 16 free standing psychiatric facilities. XI-2, 41. That average percentage was 132 percent. He made the same calculation for only the licensed beds portion of the estimated salaries and other expenses in Appendix A, MMHC Ex. 2, for the second year of operation and found that to be 94 percent. XI-2, 40. (Had he computed the ratio for the total for both licensed and so- called "unlicensed" beds, it would have been the same 94 percent.) Ms. Deborah Krueger testified as an expert for MMHC. Ms. Krueger testified that there were 18 free standing psychiatric hospitals in Florida in 1984, but that 4 of these were community mental health centers. XII-2, 45. Ms. Krueger then did the same calculation as was performed by Dr. Fagin, as discussed in finding of fact 104, but limited to the 4 community mental health centers. The average was 81.3 percent. Brevard was 96.5 percent; Palm Beach 45th Street was 78.4 percent; Hillsborough was 87.9 percent; and Lake Sumter Community Mental Health Center was 78.4 percent. XII-2, 46. Ms. Krueger also did the same calculation for the remaining 14 free standing psychiatric facilities that were not community mental health facilities and that ratio was 132 percent. The ratio used by Dr. Fagin and Ms. Krueger is one that increases as the "other expenses" category becomes greater in relationship to salaries and wages. Thus, the lower the ratio, the smaller the "other expenses" in comparison to salaries and wages. Comparisons such as those performed by Dr. Fagin and Ms. Krueger are useful as secondary modes of analysis, but are not as useful or reasonable as the actual recent experience of Glen Oaks facility itself. XII-2, 39, 43; VI-2, 143-144. Without more detailed information concerning the actual cost behavior and cost structure of the other existing facilities, it is difficult to draw conclusions from the comparisons offered above in finding of fact 104 and 105. However, of the two comparisons, the one done by Ms. Krueger is more relevant. It appears that the 132 percent ratio obtained by Dr. Fagin was either of all free standing facilities or of only the free standing psychiatric facilities that were not community mental health centers. Dr. Fagin did not state whether the 16 facilities chosen included community mental health centers. XI-2, 41. It is probable from the testimony of Ms. Krueger that Dr. Fagin's 16 facilities did not include community mental health centers, and thus his testimony, summarized in finding of fact 104, is irrelevant. Dr. Fagin's testimony is less reliable than Ms. Krueger's for the further reason-that it may be inferred that the cost structures and cost behaviors of the four community mental health centers in Ms. Krueger's analysis would be much more comparable to the facility proposed by MMHC than the aggregate of facilities contained in Dr. Fagin's analysis. Ms. Krueger's testimony, summarized in finding of fact 105, is secondary and corroborative evidence that the projected expenses (other than salaries and wages) of MMHC for the second year of operation of the total project, as well as for the hospital licensed beds, is reasonable and conservative. This is especially true with respect to the comparison to the Brevard Community Mental Health facility, which had a ratio of other expenses to salaries of 96.5 percent, almost the same as that projected for MMHC. The Brevard facility operates inpatient programs in much the same setting and manner as proposed by MMHC. IX-2, 37-38, 43-45, 48, 64. See finding of fact 68. MMHC intends to contract with David Feldman and Peat, Marwick Co. Mr. Feldman will assist with reporting such things as Medicare matters, reports to the Hospital Cost Containment Board, and the like. I-2, 81. Mr. Feldman and Peat, Marwick Co. also would work on establishing charges for services. I-2, Peat, Marwick Co. also would be assisting in pricing, budgeting, and reporting. II-2, 50. Mr. Feldman's services might cost about $720 or less since he might donate some time. II-2, 11. The costs of Peat, Marwick Co. are not known. II-2, 50. Neither cost has specifically been made a part of the estimates of expenses in the first or second year of operation. Long Term Financial Feasibility Conclusions Although contrary findings of fact have been made in the preceding paragraphs concerning the issues which follow, it is useful to look at the effect of the possibility that estimating errors are contained in Appendix A, MMHC Ex. 2. If Dr. Fagin were correct that MMHC would obtain only 90 percent of costs for Medicare reimbursement, this would result in a loss of $39,000 in revenue. Finding of fact 88-90. If Ms. Krueger were wrong, and Appendix A in fact contained rounding errors, this would mean an increase in salary expenses of $6,369. If indigents in fact will pay less than 10 percent for services in the hospital licensed beds, this would result in a loss of $17,000 in revenue. Finding of fact 95. If 2 percent of all estimated patient days would be lost to a facility like MMH because of dual medical/psychiatric diagnosis, this would result in a loss of 158.1 patient days out of 7,905 in the second year of operation, or a loss of revenue of $49,485 at $313 average per patient day. And if accounting firm expenses are left out of the estimate of future expenses, perhaps this may be $5,000 annually. Adding these figures (since a loss of revenue or a gain in expenses is the same thing as far as net income is concerned), net income in the second year of operation would be less by $116,854, which would result in a net operating loss in the second year of operation of $30,476. To recoup this loss and break even, MMHC would need only to raises its average charge per patient day by $3.93. This is calculated by dividing the net operating loss, $30,476, by the number of patient days, which would be 7905 less 2 percent, or 7746.9 patient days. Even making the assumptions in finding of fact 109, MMHC might still have net revenue at the end of the second year of operation if the depreciation expense, finding of fact 102, is not needed. But assuming that the $89,000 depreciation expenses is needed, and making the hypothetical assumptions of finding of fact 109, MMHC would still break even if it simply increased its average daily charge per patient from $313 to $317. The projected average charges of MMHC of $295 and $313 per patient day are lower than charges for similar services available to patients in the service area of MMHC. VI-2, 147. In 1986, Charter Hospital of Tampa Bay's 1986 budget filed with the Hospital Cost Containment Board reported gross revenue per adjusted patient day of $433. VI-2, 43. In 1984, the average gross revenue per patient day for MMH's short term psychiatric beds was $304. VI-2, 42. A reasonable inflation rate for that statistic would be 5 percent annually. VI-2, Thus, it may be inferred that the average gross revenue per patient day at MMH for its 25 short term psychiatric beds will probably increase to about $370 by 1988, if not more. (The same figure at Charter Tampa increased 17 percent in only two years, 1984 to 1986. VI-2, 43.) Thus MMHC could raise its per patient average daily charge by $4 in 1988 and easily remain competitive. MMHC annually has the fiscal goal of breaking even, with perhaps some small surplus. See finding of fact 19. Thus, long term financial feasibility must be considered with that goal in mind. Upon consideration of findings of fact 34 through 111, the project proposed by MMHC is financially feasible in the long term. Long term financial feasibility exists whether MMHC chooses option A or option B. VI-2, 10. The hospital license beds, as well as the entire facility at Glen Oaks, should realize some net income both the first and second years of operation and thus at least operate without net loss. Standing of Intervenors Charter Hospital of Tampa Bay is a wholly owned subsidiary of Charter Medical-Southeast, Inc. X-2, 34. It was purchased in April 1985. X-2, 54. Charter Tampa has 146 hospital licensed short term psychiatric beds, and no hospital licensed substance abuse beds. X-2, 24, 62. Geriatric patients are treated in the adult unit of Charter Tampa. XI-2, 117. Charter Tampa is located in Hillsborough County, Tampa, Florida. X-2, 24. Charter Tampa considers Hillsborough County to be its primary service area. X-2, 55. In the ten months preceding July 1986, Charter Tampa's administrator estimated that Charter Tampa had served approximately ten patients from Manatee County. X-2, 29. Records of Charter Tampa reviewed by Charter Tampa's expert indicated that in a six month period Charter Tampa had served seven patients who were Manatee County residents. XI-2, 76. Charter Tampa's expert thus offered the opinion that 14 such patients were being served now by Charter Tampa annually, and that from 5 to 10 of these patients would be lost to MMHC if this certificate of need were to be granted. XI-2, 76. The expert stated that this loss would be a financial loss, but was not asked to give an opinion as to the amount of the loss. Id. Charter Tampa's administrator stated that he thought the loss would be $150,000 annually. X-2, 32. The record does not contain an explanation as to the estimate of a $150,000 loss was projected. The ages, sex, or types of treatment received by the patients that made up the ten patients served in that last ten months were not known. X-2, 50, 64. The origin of the patient was estimated by the origin of the person who guaranteed payment, but it was estimated that this was the same person as the patient in 90 percent of the instances. X-2, 60-61. Charter Tampa has had one psychiatrist for the last four months on temporary staff privileges who has an office or residence in Manatee County. X- 2, 51-52. That physician is involved in establishing an outpatient clinic for Charter Tampa in Manatee County. X-2, 81. Charter Tampa's formal list of physicians having staff privileges at Charter Tampa has four categories of staff privileges: active, courtesy, consulting, and affiliate. As of May 1986, Charter Tampa's physician staff in these four categories almost exclusively had offices in Tampa. None of the physicians having staff privileges at Charter Tampa had an office in Manatee County. MMHC Ex. 5; X-2, 53. Charter Tampa did not know any physicians, including the physician involved in setting up the outpatient clinic, who is residing in Manatee County and would admit patients to Charter Tampa in the future. X-2, 55, 81. Charter Tampa's administrator did not have any certain knowledge as to the numbers of patients from Manatee County that might be treated by Charter Tampa in the future. X-2, 51. The administrator of Charter Tampa had not reviewed the application materials of MMHC and did not know anything about the history of MMHC or the services it had been providing to the date of the final hearing. X-2, 61-62. Charter Tampa supported the effort of Charter Haven to obtain comparative review of a would-be competing application for the same services in Manatee County. I- 1, 58. The estimated impact of a loss of $150,000 in gross revenues annually is clearly overstated by Charter Tampa. The record in this case shows that the normal length of stay for short term inpatient hospital psychiatric patients is between 10 to 14 days. See findings of fact 59, 61-62. Since Charter Tampa serves geriatric patients such as MMHC proposes to serve from its GRTS program, it is reasonable to infer that the average length of stay of the 5 to 10 patients served now from Manatee County by Charter Tampa is about 14 days. Finding of fact 59. It is also reasonable to infer that the probable average gross revenue per patient day at Charter Tampa for these 5 to 10 patients is about $477. (This is the budgeted 1986 figure inflated twice at 5 percent. Finding of fact 111.) Thus, the estimated loss of 5 to 10 patients is an estimated loss of 70 to 140 patient days annually, or a projected loss of only $33,390 to $66,780 in gross revenues annually. If this loss were true, this would probably constitute substantial interest. The outpatient clinic that Charter Tampa intends to open in Manatee County will not serve inpatients. Moreover, it will serve mostly patients who will personally pay for services X-2, 62. Thus, it would not be serving patients that MMHC now serves. In sum, the intended outpatient clinic would not compete with or be substantially affected by the operation of inpatient hospital beds by MMHC as proposed in its application. XII-2, 28. Based upon findings of fact 113 through 120, it is further found that Charter Hospital of Tampa Bay will not be substantially affected by the grant of the certificate of need at issue in this case. The most that Charter Tampa estimates that it might lose is about 140 patient days annually. See finding of fact 120. But Manatee County will still have an unmet need of 27.4 short term psychiatric beds by the second year of the operation of MMHC's proposed beds. See finding of fact 65. On an annual basis (365 days) this is 10,001 patient days that will not be served by MMHC. Even if this residual unmet need were only 4,700 to 6,200 patient days as was thought by MMHC's expert, III-2 86-87, there is still a very substantial residual unmet need in Manatee County to be served by Charter Tampa. It is not believable that Charter Tampa will lose a mere 140 patient days with so many days of unmet need. This is especially true since Charter failed to persuasively identify the Manatee County patients that it would lose, or to identify the reasons that such patients would be lost. See findings of fact 113 through 118. It was stipulated between MMHC, MMH, and HRS, but not Charter Tampa, that MMH has standing (a substantial interest) to contest the issuance of the proposed 17 short term hospital psychiatric beds to MMHC as an existing provider of the same services. It was further stipulated by the same parties that MMH has no short term or long term substance abuse beds. X-2, 82-85. Charter Tampa put on no evidence contrary to these stipulations, and therefore the stipulations are accepted as fact in this record. Appendix A which follows contains specific rulings upon all proposed findings of fact which have been rejected. In some cases Appendix A contains discussions and further findings of fact. Those findings of fact in Appendix A are adopted by reference as findings of fact in this recommended order.
Recommendation Upon consideration of the foregoing, it is recommended that the Department of Health and Rehabilitative Services issue its final order: Dismissing the petitions for intervention of Manatee Memorial Hospital and Charter Hospital of Tampa Bay to the extent that such petitions seek to contest the grant of a certificate of need to the Petitioner for short term substance abuse beds. Granting certificate of need number 2681 to Manatee Mental Health Center, Inc., d/b/a Manatee Crisis Center to operate 17 short term inpatient hospital psychiatric beds and 10 short term inpatient hospital substance abuse beds. DONE and ORDERED this 3rd day of December 1986 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 3rd day of December 1986. APPENDIX A TO RECOMMENDED ORDER IN DOAH CASE NUMBER 84-0988 The following are rulings by number upon all proposed findings of fact which have been rejected. Findings of fact proposed by Manatee Mental Health Center, Inc., d/b/a Manatee Crisis Center: 7. The record cited, 11-2, 85, does not support the conclusion that the 18 residential beds are not a part of the "necessary" continuum of care offered by MMHC. A finding of fact has been made that these beds are not a part of the treatment program of MMHC. 16. The implication in the last sentence that the project would provide "necessary licensed hospital services at very little cost" is rejected as not supported by the evidence. Without evidence on the point, the "position" of HRS is irrelevant. The second sentence is irrelevant since it refers to the 1985 local health plan. See the conclusions of law and discussion with respect to finding of fact 14 proposed by MMH. 21.i. This proposed finding of fact seeks a finding that the "optimal" occupancy rate is 75 percent. The record does not contain sufficient evidence to make that conclusion. The remainder of this proposed finding of fact has been adopted. 21.k. This proposed finding of fact is accounted for by the numeric rule, which is based upon population, and thus is cumulative. 24. The reference to the 1985 local plan is irrelevant. See proposed finding of fact 14 by MMH. 27-28. These proposed findings rely upon SIRS Ex. 1. HRS Ex. 1 relies upon an average length of stay of 14.3 days to 14.5 days. (This is mathematically obvious by dividing the projected number of patient days in each of the three projections by the number of admissions projected in each case.) While it is reasonable for MMHC to project an average length of stay of 14 days, this is so due to the fact that MMHC will have a substantial number of GRTS patients in its short term psychiatric beds. See findings of fact 57-59 and 61. The record does not contain, however, enough evidence to conclude that the average length of stay for all short term psychiatric patients in Manatee County will be 14 days. See VIII-2, 49-52. Indeed, the witness seems to have believed that the calculation in HRS Ex. 1 used an average length of stay of 9 days, but as discussed above, the math in HRS Ex. 1 is to the contrary. For this reason, and finding based upon HRS Ex. 1 is rejected. 29. Rejected because not in the record cited as proposed in this proposed finding of fact. I-1, 58. The last sentence with respect to projected occupancy levels of 85 percent on the average for the third year is rejected because not supported by the evidence. The witness did not so testify, and the exhibit cited does not provide average occupancy for the third year. This proposed finding is rejected since the average occupancy level of 85 percent for the third year is rejected in the preceding paragraph. 43. The conclusion that private physician referrals will be a bonus is rejected since the projection of 80 percent occupancy requires an increase in occupancy in the short term psychiatric beds from 8 to 12.6 beds from the first to second years. See finding of fact 65. The projection of an average daily census of 8 short term psychiatric patients was based solely upon patients currently within the MMHC system. See findings of fact 57 and 60. Thus, the increase of an average daily census to 12.6 in the second year must come in part from new patients referred by private physicians. This is not a bonus, but a necessary part of the projections of MMHC to reach 80 percent occupancy. Sentences three through five are rejected as cumulative and unnecessary. The fourth sentence is rejected as not relevant and inconclusive for lack of evidence of context. 58. This proposed finding of fact is irrelevant since these issues have been the subject of a stipulation removing them from dispute in this case. 59-64. These miscellaneous operational and managerial proposed findings of fact are not relevant. The Department of Health and Rehabilitative Services does not propose to deny the certificate of need with respect to these issues, and the simultaneously filed proposed findings of fact of the two Intervenors do not propose any facts concerning these issues. Thus, these issues are not in dispute in this case. The second sentence is cumulative and not relevant. This proposed finding of fact, as stated in the first sentence, is not disputed and thus not relevant. Findings have been made concerning the two options as this might affect the proposed number of beds sought. 81-82. It is true that MMHC currently has a sliding fee scale for determining how much certain impecunious patients will have to pay. It is also true that the updated application erroneously states that a sliding scale will be used if the certificate of need is granted. But expert witnesses relied upon the existing sliding fee scale only to project the portion of a hypothetical gross revenues which is currently being collected from patients receiving charity care. VII-2, 79. Thus, the error did not affect the reliability of testimony. No party has raised any of the foregoing as an issue. For these reasons, the matter is not relevant. 90. All sentences beyond the first sentence are mathematically correct, but are cumulative and unnecessary. 95. This proposed finding of fact is rejected because the 1983 local health plan does not contain the matter stated, the updated application is hearsay, and all plans other than plans in existence when the application was filed are not relevant. 97-98. To the extent not already adopted, these proposed findings of fact are rejected as cumulative and unnecessary. 101. Opponents of the application of MMHC in proposed findings of fact have not proposed that an entirely new free standing psychiatric hospital would be a preferable alternative to the application of MMHC. Dr. Fagin testified that bed need in "the community . . . is best served by a new freestanding facility." XI-2, 74. He then contradicted that testimony by testifying that "I said that two of the best alternatives are approval of this project or disapproval of this project and maintenance of the existing programs at the Manatee Mental Health Center." XI-2, 116. Thus, the first sentence of this proposed finding is rejected for lack of support in the record. Finally, if the issue had been raised, at least facially it is true that the MMHC proposal appears to be less costly because it already has a building and a new project would have to pay for a new building by increased fees. But there is a cost to Florida taxpayers through public funding of the MMHC building which should be considered as well. The record is insufficient for such comparative review. The last sentence is rejected since about 90 percent of the time the guarantor and the patient are the same person. The fourth sentence is rejected because based upon a deposition taken earlier in time, and the deposition itself is not in evidence. The third sentence is irrelevant. 111. The second sentence is irrelevant. The second sentence is not supported by the record. The record shows that the parent company receives or would receive revenues from all subsidiaries, whether existing or proposed. The last sentence is rejected because not relevant: no party has argued that Charter Tampa is an adequate alternative to the proposal of MMHC. The corporate motives of the parent corporation are not relevant to the issue of the standing of Charter Tampa. The issue of standing of Charter Tampa must be considered upon evidence it presented concerning its substantial interest, as well as evidence submitted by other parties. Thus, this proposed finding is not relevant. Not relevant since the corporate motives of the parent are essentially not relevant. Not relevant as stated with respect to proposed finding of fact 117 and not supported by the record. The last two sentences are not relevant. Findings of fact proposed by Manatee Hospitals and Health Systems, Inc., d/b/a Manatee Memorial Hospital: The proposed findings that social setting detoxification would be eliminated are rejected because contrary to the testimony cited. 11-2, 18-19. Findings with respect to the minimum residential beds are found in findings of fact 12 and 31. A finding that the current rented minimum residential beds are a part of the MMHC treatment program is rejected as contrary to the evidence as discussed in those findings. This proposed finding is a statement of law and a procedural statement. The proposed finding that the 1983 local health plan found no need for psychiatric and substance abuse beds for District VI is rejected. The plan found a need for substance abuse beds by 1988 (57 such beds) but no need for short terms psychiatric beds. MMHC Ex. 1, p. 53, 53-55. Any reference in this case to any local plan other than the 1983 local health plan, MMHC Ex. I, is legally incorrect and irrelevant. The amended application of MMHC only refers to the 1983 local health plan. See findings of fact 29 and 30, order of May 14, 1986, Appendix B herein. SIRS can only review an application for certificate of need against the specific local health plan cited by the application. NME Hospitals, Inc., d/b/a Delray Community Hospital et al. v. Department of Health and Rehabilitative Services, 492 So.2d 379, 385- 386 (Fla. 1st DCA 1986). Thus, the proposed finding must be rejected as irrelevant. Rejected as argument of law. Rejected because this plan was not in existence when the applicant filed its application, the applicant has not upon this plan for its application, and therefore, as discussed with respect to proposed finding of fact 14, the proposed finding is legally irrelevant. It is also rejected because irrelevant to this application: the application is for short term inpatient hospital psychiatric and substance abuse services; the application does not result in the loss of existing ARTS or EGRT programs, nor does it result in the loss of a formal treatment program of residential beds. See proposed finding of fact II above. Rejected as legally irrelevant for the reasons cited with respect to proposed finding of fact 14. Rejected for the reasons stated with respect to proposed findings of fact 11, 14, 15, 16, and 17. Sentences 3, 4, and 5 are rejected for the reasons stated in response to proposed finding of fact 18. 21. The second sentence concerning average lengths of stay at MMH must be rejected because the Hearing Officer has been unable to find the proposed finding in the record cited. The 1985 local health plan, CH Ex. 8, provides that in 1984, MMH had an average length of stay for adults in psychiatric beds of 11.0 days and 8.0 days for children. P. 120. The plan also states that non- hospital licensed crisis stabilization units are used lieu of hospital beds for stays less than 7 days, but that licensed hospitals provide more intensive service and the average length of stay can average 14-16 days. It is probable that data in a post-application local or state health plan can be utilized by the parties at a formal administrative hearing, so long as such use does not conflict with rule or statute. If data were to be relied upon from the 1985 District VI Local Health Plan, the above data supports the findings in the recommended order (finding of fact 61) that the average length of stay projected for most patients in the 17 short term psychiatric beds will be 10 to 14 days once the more intensive individual therapies are added to the inpatient program at MMHC. The third sentence in this proposed finding of fact is rejected. The high occupancy rates at MMH only show that MMH is near lawful capacity; it does not show that need in Manatee County is being adequately served by MMH, and indeed, the inference is to the contrary. Finally, the drop to 88 percent must be considered in relation to the prior rates and the rise again in the first four months of 1986. It does not show a clear or reliable diminution of need. 23. Rejected by finding of fact 43. The first sentence is rejected. The existence of CSU beds at MMHC would not be argued by MMH to be an adequate alternative to its own application for expanded hospital licensed beds. Moreover, the proposed application does not diminish the current CSU program at MMHC. That program will continue. The proposed findings that charges will increase and that the sliding fee scale for those unable to pay will be eliminated have been rejected by finding of fact 46. The finding that the proposed project would not be financially feasible is rejected by finding of fact 112. Evidence was introduced that services would be improved through shared resources. Specifically, benefits would be achieved by providing continuous care for patients within the MMHC system and indigent patients in the other licensed beds at Glen Oaks would benefit from expanded therapies. See findings of fact 26, 28, 29, 30, and 33. Thus, this finding of fact is rejected. It is true that no evidence was introduced services existing in counties other than Manatee County were reasonably close and accessible for patients and families in Manatee County. Without such evidence, it cannot be concluded that "services are available in Hillsborough and Pinellas Counties" as proposed in this finding of fact. The proposed finding of fact is therefore rejected. The proposed finding is true and irrelevant. The fourth sentence is rejected as discussed with respect to proposed finding 27. See also findings of fact 2-26, 31, and 46. The eighth sentence is rejected since the applicant projects, reasonably, that its services to financially and medically indigent persons will continue in the non-hospital licensed beds and will increase as Manatee County population increases. The finding with respect to the sliding fee scale is rejected by finding of fact 46. The next sentence is rejected as discussed above in the first sentence of this paragraph. The last sentence is rejected by finding of fact 46. This second proposed finding is a narrative summary and is contained by separate issue in the findings of fact. The second sentence is rejected because MMHC records show that about 7 inpatient hospital admissions per month are made from MMHC outpatient programs, but it was estimated that only 2 of these per month would be retained by the MMHC hospital licensed beds. Finding of fact 57. The remainder of this proposed finding of fact is rejected for the reason stated in finding of fact 69. The fifth sentence is rejected because it is not the testimony of Ms. Wolchuck-Sher. It is only the hearsay statement from someone in a deposition characterized by Ms. Wolchuck-Sher without evidence of the context of the statement of the deponentor the reliability of Ms. Wolchuck-Sher's memory on the point. XII-2, 33. The remainder of this proposed finding of fact is rejected for the reasons discussed in finding of fact 68. The second sentence is rejected because the word calculated" in the question is unclear and the response is contrary to the record. Average lengths of stay were estimated based upon studies discussed in findings of fact 57 through 62. The third sentence is rejected because the testimony clearly indicates that the average lengths of stay were based upon a review of actual experience plus assumptions concerning an increase of average length of stay to about 10 days in the psychiatry beds to more closely approximate the average length of stay of MMH. See findings of fact 57 through 62. The sixth sentence is rejected for the reason discussed in findings of fact 57, 58, 59, and 62. The ninth and tenth sentences are rejected because there is no evidence to conclude that MMHC will not continue to serve an average daily census of 9 patients in its substance abuse beds. The remainder of the proposed finding of fact has been rejected in findings of fact 57 through 62. The first two sentences are rejected for the reasons stated in findings of fact 57 through 62. The third sentence is rejected because the financial projection of MHC estimate that the CSU beds will continue to operate as before, generating the same revenues. See finding of fact 96. This estimate implicitly assumes the same number of patients served and the same average length of stay of 6.5 days, not 10 days. VI-2, 81-82. The 10 day average length of stay only applies to the hospital licensed psychiatric patients, other than geriatric psychiatric patients. See findings of fact 57 through 62. The remainder of this proposed finding of fact is rejected because contrary to the underlying facts found in findings of fact 57 through 62 and 96. This proposed finding of fact has been rejected in findings of fact 88 through 90. The second sentence is rejected because the current collection rate is roughly 20.5 percent of gross revenues in the CSU and detoxification beds. VI- 2, 76. The estimate of 10 percent in the 27 hospital licensed beds was due to the fact that overall gross revenues for the hospital licensed beds would increase to about $300 per patient per day. Id. The remainder of the proposed finding of fact is partially adopted in findings of fact 109 through 112. The loss of $17,000 in gross revenues, considered by itself, would be within the projected net revenue for the second year of operation; the project still would end the year with positive net revenue. The fifth sentence in this proposed finding of fact is rejected. VI- 2, 112, 125. The sixth sentence is true but irrelevant. While it would be a better method to estimate non-salary costs by estimating each component thereof separately, the Petitioner need not present the best method. The method presented by the Petitioner, using actual historical data from MMHC, is reasonable. See finding of fact 100. MMH might have presented an estimate by each separate component, but it did not. All of the rest of this proposed finding of fact must be rejected. The reasons that Ms. Krueger gave for rejecting as unreliable non-salary to salary expense ratios in other MMHC programs were: that such programs were not the same as the inpatient programs contemplated in this application, VI-2, 126, and the programs operated at the Glen Ridge facility provide an inappropriate basis for comparison because the Glen Ridge facility in 1984 was a "dump" and not comparable to the new Glen Oaks facility, VI-2, 116. These are good reasons for not making these comparisons. Next, she did not testify that there "would be changes at Glen Oaks if it became licensed" as proposed by MMH. She testified that there would be future changes expected in "the mental health center." VI-2, 139. She then testified that a change in Glen Oaks should not be expected in the next few years, and therefore use of the most recent actual data from the current operation of the Glen Oaks facility was reasonable. VI-2, 139-140. Mr. More initially testified that the salaries on Table 11, MMHC Ex. 2, "reflect" the average salaries currently paid by MMHC. I-2, 97. On cross examination, Mr. More was asked "was it your testimony that those are your current salaries," and he replied "current average salaries, yes." 11-2, 15. In rebuttal, over objection that Mr. More was impeaching his own testimony, Mr. More testified that Table 11 contains current salaries blending with inflation. IX-2, 14-15. Mr. More was never asked on cross examination whether he was sure that Table 11 did not contain inflation factors. He was merely asked whether Table 11 figures "were" current salaries. They were. They were current salaries used as a base with an inflation factor. VI-2, 91-94. There is no confusion concerning whether Table 11 contains an inflation factor. Moreover, the rebuttal testimony of Mr. More was proper given the brevity and incompleteness of cross examination. The third sentence of this finding of fact is thus rejected. The remainder of the proposed finding of fact is also rejected. The proposed finding depends upon a finding that MMHC has had salary increases since February 1986 which have not been accounted for in Table 11, MMHC Ex. 2. The record does not support that proposed finding. First, the testimony of Ms. Radcliffe was insufficient to conclude that in fact there have been 3 percent raises in salaries since February 1986; she only said possible," and said "I have no knowledge of when any raises would come due." IX-2, 23. But more important, it appears that projected raises for fiscal year 1986 were contained in the figures of "current salaries" used. Ms. Radcliffe said that she used the figures that were in the budget revised in February, 1986, and that [w]hen 1 prepared the budgets, I used the current salaries as of when I prepared the budgets, and then 1 put in a small amount on the overall budget based on people getting raises at various times during the year." Id. In sum, the "current" salaries in fact contain all the budgeted-raises for fiscal year 1986. The first sentence is rejected because the estimate of expenses was based upon a percentage method (non-salary) and current statistics (general and administrative). No expenses items were "deleted" as such. The second and third sentences are not supported by enough record evidence to make it relevant. Mr. More testified that MMHC already was producing a "TV series" that was "coming up," and that MMHC would be "continuing this kind of effort once we become a licensed hospital." Thus, to some extent TV expenses must already be accounted for in current general and administrative expenses. The only other TV comment was in the next paragraph when Mr. More mentioned timing a "TV marketing effort in with the opening of the hospital." 1-2, 94. There is no-further evidence in the record concerning the cost of such TV marketing, whether such marketing would occur only at the opening or would be ongoing, and whether the cost is significant. The sixth and seventh sentences are rejected as not relevant. The depreciation expense is somewhat unusual in this case since MMHC does not own the building. See finding of fact 102. Moreover, even if the expense in this area should increase by $2500 per year, that is effectively only $0.31 per patient day out of 7905 patient days in the second year of operation. The issue is negligible. VI-2, 46. The eighth sentence is rejected because the rounding error is not in appendix A, MMHC Ex. 2; it is probably in Table 11, MMHC Ex. 2. VI-2, 87-88. The last sentence is rejected as not relevant. Dr. Ravindrin was evidently recruited by MMHC with current resources, coming to work in 1985. V-2, 6. Dr. Ravindrin further will be the only full time physician out of the 2.4 FTE's allocated for physicians in the new staffing pattern. Finding of fact 73. As discussed in the findings of fact, current "general and administrative" expenses were used as the basis for projecting future expenses Thus, should Dr. Ravindrin leave, it is reasonable to assume that the same level of budgeted general and administrative expenses will be sufficient to recruit a replacement. Finally, the remaining physicians will only be part-time, and thus should not involve moving expenses. Moreover, all of the physicians have been identified and thus there will not be any recruitment expenses in the first few years of operation. XII-2, 39. This proposed finding of fact is a summary of proposed findings of fact which have been rejected for the reasons stated above, and thus it also is rejected for the reasons stated above. This proposed finding is not relevant for the reasons stated in the proposed finding. The first six sentences are rejected by findings of fact 25, 26, 46, 93 and 96. The proposed finding in the eighth sentence that MMHC "may actually serve fewer indigents" is rejected as not credible. MMHC will continue to serve the same number of indigents in the other licensed beds as well as some other indigents in the hospital licensed beds. See the above findings of fact. The ninth sentence is rejected by findings of fact 18, 19, 20, 26, 28, 29, and 30. The last two sentences are rejected due to all the findings of fact listed in this paragraph. The second sentence is rejected because not true. MMHC currently does not serve patients served by MMH. See finding of fact 17. The third and fourth sentences are rejected by findings of fact 38 and 41 D. Findings of fact proposed by Charter-Medical Southeast, Inc., d/b/a Charter Hospital of Tampa Bay: 6. The fourth sentence is rejected because it is an argument of law. 9. The record does not contain sufficient evidence concerning the programs conducted at Glen Ridge to conclude that it was a "clinic" then. Moreover, the record does not contain a sufficiently clear definition of a "clinic" to make this proposed factual finding. Thus, the third sentence must be rejected. 11. The third through fifth sentences are rejected because evidence to support these proposed findings of fact is not found at the place in the record cited. 15, 16, and 17. To the extent these proposed findings reference health plans adopted after the application was filed, and not cited by the application as amended, the proposed findings are irrelevant. See discussion with respect to the proposed findings of fact 14-19 of MMH. The first three sentences are rejected because the 18 minimum residential beds currently rented by MMHC are not part of a MMHC treatment program. See findings of fact 12 and 31. The next two sentences are rejected as irrelevant for this reason, and also because the referenced plans are 1985 plans. The last two sentences are rejected because the cost to patients will continue to be based upon ability to pay; the cost will not increase for those patients financially unable to pay. See finding of fact 46. In the first sentence, the phrase "as a component of those programs" is rejected because contrary to the evidence. See finding of fact 12 and 31. The remainder of this proposed finding of fact has been essentially rejected due to the findings of fact 12 and 31. The majority of this finding of fact has not been adopted since it is a statement of law. The categorical statements contained in the last two sentences of this proposed finding of fact must be rejected. Although MMHC is currently providing good care, MMHC has experienced funding stresses and the quality and continued viability of all of its services would be enhanced by obtaining an additional funding source. See finding of fact 18. If the certificate of need were granted, indigent patients in the CSU would have the opportunity to receive expanded therapies not now available to them, see finding of fact 20, although presumably available to patients having third party payor sources at MMH (which has a longer average length of stay, see finding of fact 61). The second one-half of this proposed finding of fact proposes a finding that the proposed average length of stay for psychiatric beds will be unreasonable. This proposed finding has been rejected in findings of fact 57 and 58. The first sentence is rejected as irrelevant. An applicant for a certificate of need not be in "dire financial straits" to be entitled to seek expansion of its services. In fact, an unhealthy financial condition might mitigate against the award of a certificate of need. For the same reason, the last sentence is also rejected as irrelevant. Most of this proposed finding of fact has been rejected for the reasons stated with respect to MMH proposed finding of fact 40. The eighth sentence is rejected because there is no citation to the record and because the testimony of Ms. Krueger was to the effect that it was not proper to calculate ratios for outpatient programs or Glen Ridge programs at MMHC and because the audited financial statements at pages 36-42 of MMHC Ex. 2 required extensive accounting adjustment to result in a comparable comparison. The ninth sentence (which concerns the comparisons made by Dr. Fagin to 1984 Hospital Cost Containment Board actual data) is rejected for the reasons stated in findings of fact 104 through 107. The tenth sentence is rejected because the testimony of Mr. Hackett cited is actually evidence that estimated expenses of MMHC are reasonable. Mr. Hackett testified that the "salary expense" at Charter Hospital of Tampa Bay recently was 44 percent of the total operating budget. X-2, 26. This left 56 percent for all other expenses, not for "non-salary" expenses in the sense that that is used in Appendix A, MMHC Ex. 2. In the second year of operation, MMHC projects that its "salaries and wages" expense will be $1,229,871, and that its total operating expense will be $2,386,785. Thus, MMHC projects that its "salary expense" will be 51 percent of its total operating expenses. Assuming Mr. Hackett meant "operating expenses" when he responded to the question about "operating budget," it is apparent that the MMHC estimate is reasonably the same as that currently experienced by Charter Tampa. (If "operating budget" meant net revenues, the percentage is 50 percent.) Thus, MMHC projects that its expense other than salaries and wages will be about 50 percent of all expenses, and Charter Tampa currently operates with other expenses at 56 percent of all other expenses. Charter Tampa is not a community mental health center. There is clear evidence in the record that the ratio of expenses other than salaries to salaries is much lower for community mental health centers than to free standing psychiatric facilities. See finding of fact 104 to 107. Thus, the fact that MMHC estimates that expenses other than salaries will be 50 percent of the total expenses, compared to the 56 percent ratio of Charter Tampa, is entirely consistent with that evidence. If anything, MMHC has estimated expenses other than salaries too high, and much closer to a facility like Charter Tampa. This proposed finding of fact is essentially the same as proposed finding of fact 36 by MMH and is rejected for the reasons stated with respect to that proposed finding. The following additional comments are noted. The average length of stay was not assumed to increase in the CSU: it implicitly remained the same since estimated revenues remained the same. The average length of stay overall for the 17 hospital licensed psychiatric beds was 14 days, but this was a mix of 10 day average lengths of stay for some patients, and 20 day average lengths of stay for elderly patients. The average length of stay at MMH is established at about 10 days by testimony. VI-2, 72. See also discussion related to MMH proposed finding of fact 21. The assumed average length of stay in the hospital licensed substance abuse beds was never tied to patient days or fiscal projections; instead, MMHC simply estimated a continued average daily census of 9 patients, which is current experience and is reasonable. Improved treatment logically will lengthen the average length of stay since the improved treatment involves greater individual attention, education, and exploration of causes of the acute psychiatric episode. While improved treatment might shorten the length of stay for a long term patient, it surely will lengthen the average length of stay for a patient who has only been an inpatient for a few days to stabilize an acute crisis. Rejected because the underlying proposed finding of fact 32 concerning average length of stay has been rejected. Rejected for the reasons stated in rejection of MMH proposed finding of fact 39. Rejected for the reasons stated in findings of fact 68 and 69 and as discussed in rejection of MMH proposed findings of fact 34 and 35. The portion of the proposed finding concerning dually diagnosed patients also has been determined to be irrelevant in findings of fact 109 through 112. Rejected for the reasons discussed in rejection of MMH proposed finding of fact 41, and irrelevant for the reasons stated in findings of fact 109-112. Rejected by findings of fact 88 through 90. Rejected for the reasons discussed in response to proposed finding of fact 42 of MNH. Rejected by finding of fact 112. To the extent that the second sentence proposes a finding of fact that Charter Tampa "directly serves" Hernando and Pasco Counties, it is rejected for lack of a citation to the record. Service of these counties is also irrelevant. The last sentence has been rejected by findings of fact 113 through 121, and particularly 119 and 120. The first portion of the first sentence is rejected by findings of fact 18, 19, 26, 28, 29, and 30. The last two sentences are rejected by findings of fact 26, 28, 29, 30, 33, 46, 70, 93, and 96. This proposed finding of fact is rejected by findings of fact 26, 46, 70, 93, and 96. The first four sentences are rejected because not supported by record evidence. None of the questions asked concerning deposition responses significantly pertained to the witness's ultimate credibility, and her responses upon cross examination were believable. The fifth and sixth sentences are rejected because the error noted, III-2, 164, is relatively insignificant. The seventh sentence, which pertains to the lack of precise charges for services, has been rejected in finding of fact 84. The eighth and ninth sentences are rejected because there is no evidence to explain the relevance of the question asked by counsel. If the definition of "residential treatment beds" pursuant to the state health plan were important in this case, presumably an expert would have testified to the issue. An assumption cannot be made that the definition of "residential treatment beds" in the state health plan is relevant in this case without some evidence or explanation for the relevance. Moreover, the context of the question was with respect to the loss of the 18 "minimum residential beds" which in fact were not "treatment" beds. See findings of fact 12 and 31. Thus, the question had little relevance to the witness. The tenth sentence is true, but does not, in context, significantly detract from the credibility of the witness. The final sentence is rejected for the reasons stated in this paragraph. This proposed finding is rejected in findings of fact 113 through 121. This proposed finding is an argument of law, not fact, and thus is rejected as a finding of fact. This is a summary conclusion of fact that has been rejected throughout the findings of fact. This proposed finding of fact is rejected for the reasons stated with respect to MMH proposed finding of fact 27. This proposed finding of fact is rejected for the reasons stated with respect to MMH proposed finding of fact 27 and findings of fact 40, 41, and 43. Findings of fact proposed by the Department of Health and Rehabilitative Services: This proposed finding of fact is not supported by the record cited, and is irrelevant since the applicant has not sought approval of 39 short term psychiatric beds. The methodology upon which this proposed finding of fact is based is not contained in State rule 10-5.11(25), Florida Administrative Code, and is not a methodology contained in the relevant 1983 local health plan, MMHC Ex 1. If it is incipient policy applied to this case, HRS failed to clearly explicate the basis for the policy. Indeed, the record concerning the policy is quite unclear. VIII-2, 50-53. In particular, no explanation was given for using utilization rates, or the validity of the utilization rates. It appears that this proposed finding of seeks a finding of fact that the status quo utilization at the only provider of short term psychiatric care, and thus the only source of utilization data in Manatee County at present should be projected to 1988 populations. The utilization rates appear to be derived from use rates for 1984! 1985, and 1986 populations. Which one is right? Why does this health planning method predict more net need in 1984 based upon fewer people living in Manatee County, and less net need in 1986, based upon more people living in Manatee County? HRS Ex. 1. Moreover, how can the needs of the mentally ill in Manatee County be predicted from use data derived by Manatee Memorial Hospital (the county's only resource) which for the relevant years has been running at full capacity? How can the unmet need be measured by such a method? The record does not answer these questions. It contains no explanation for the Source of the utilization rates except that it came from "the local health council." VIII-2, 50. Thus, this proposed finding of fact must be rejected for lack of explication in the record. Because this proposed finding of fact appears to rely on proposed finding of fact 7, it too must be rejected. A net need for the 17 beds does exist independently of proposed finding of fact 7. 11. To the extent that this proposed finding implies that currently the 18 minimum residential beds are mental health treatment beds, that proposed finding has been rejected by finding of fact 12. COPIES FURNISHED: Michael J. Cherniga, Esquire Fred W. Baggett, Esquire Roberts, Baggett, LaFace & Richard 110 East College Avenue Tallahassee, Florida 32301 Chris H. Bentley, Esquire Fuller & Johnson, P.A. Ill North Calhoun Street Post Office Box 1739 Tallahassee, Florida 32302 William E. Hoffman, Jr., Esquire James A. Dyer, Esquire King & Spalding 2500 Trust Company Tower 25 Park Place Atlanta, Georgia 30303 Theodore E. Mack, Esquire State of Florida, Department of Health and Rehabilitative Services Room 407 - Building One 1-323 Winewood Boulevard Tallahassee, Florida 32301 Jay Adams, Esquire 215 E. Virginia St., Suite 200 Tallahassee, Florida 32301 John P. Harllee, III, Esquire Harllee, Porges, Bailey & Durkin, P.A. 1205 Manatee Avenue Post Office Box 9320 Bradenton, Florida 33506 Wallace Pope, Jr., Esquire Johnson, Blakely, Pope, Bokor & Ruppel, P. A. P. O. Box 1368 Clearwater, Florida 33517 William Page, Jr. Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
The Issue Whether Petitioner, Palm Beach-Martin County Medical Center, Inc.'s ("PBMC"), application for a certificate of need ("CON") to build a 60-bed inpatient rehabilitation hospital in Palm Beach County, Florida, should be approved, or denied (as proposed by Respondent, Department of Health and Rehabilitative Services ("HRS") in preliminary action.). By petition filed with HRS on August 1, 1984, PBMC invoked Section 120.57(1) remedies to contest DHRS' preliminary denial of its application for a CON authorizing establishment of an inpatient rehabilitation hospital at its medical campus in Jupiter, Florida, by converting 60 existing skilled nursing beds to comprehensive medical rehabilitation inpatient beds. On August 14, 1984, HRS forwarded this case to the Division of Administrative Hearings for assignment of a hearing officer to conduct the requested proceedings. Petitions to intervene for the purpose of contesting issuance of a CON to PBMC were subsequently filed by NME Hospitals, Inc. d/b/a Delray Rehabilitative Institute, Rehab Hospital Services Corporation, and University Rehabilitation Services, Inc. (collectively referred to a "NME"). Intervention was granted and final hearing was set for May 1-3, 1985. On PBMC's subsequent unopposed motion for continuance, hearing was reset for July 8-10, 1985; then, on Intervenor's unopposed motion, continued and reset for October 21-23, 1985. At final hearing on October 21-23, 1985, PBMC presented (in support of its application) the testimony of Dino Cagni, Frank Griffith, Richard Chidsey, M. D., Thomas Schultz, and Woodrin Grossman. Elizabeth Dudek testified on behalf of HRS. NME presented (in opposition to PBMC's application) the testimony of Mark Rottenberg, M. D., Jerry Ingran, Tom R. Futch, and Dan Sullivan. PBMC exhibit Nos. 1 thorugh 20, HRS exhibit nos. 1, 2A, and 2B, and NME exhibit nos. 1 thorugh 9 were received in evidence. The parties stipulated that the CON application at issue is governed by statutory criteria contained in Section 381.494(6)(c) and (d), Florida Statutes, except for Section 381.494(6)(c) and (13), which they agreed were either inapplicable or were satisfied by the PBMC application. They agreed that rule criteria in DHRS Rule 10-5.11(1)-(9), (11), (12), and (24), Florida Administrative Code, also applied. The transcript of hearing was filed on December 2, 1985. PBMC and NME filed post-hearing memoranda and proposed findings of fact and conclusions of law (including responses) by January 20, 1985--within the time agreed on at hearing. (Explicit rulings on their proposed findings are contained in the attached Appendix.) HRS filed no proposed findings or memorandum of law. Based on the evidence adduced at hearing, the following facts are determined.
Findings Of Fact Background PBMC, a nonprofit corporation organized in the early seventies to serve the health care needs of residents of northern Palm Beach County and southern Martin County, owns and operates a community not-for-profit hospital known as Jupiter Hospital. Jupiter Hospital is a 156-bed acute care hospital. It is the northernmost hospital in Palm Beach County and provides health care services to the residents of northern Palm Beach and southern Martin Counties. PBMC also owns and operates a nonprofit 120-bed nursing home known as the Jupiter Convalescence Pavilion, located in the same complex as Jupiter Hospital. PBMC is governed by an eight-member Board of Directors. Jupiter Hospital is governed by a Board consisting of 22 members: 11 are physicians and 11 are lay persons from the community. PBMC also has a management contract with HCA Management Company. Pursuant to this contract, HCA Management Company provides an administrator and a finance director. All other employees are employed by PBMC. Overall policy decisions regarding the operation of Jupiter Hospital and Jupiter Convalescence Pavilion are made by the PBMC Board. The Jupiter Convalescence Pavilion, however, has a separate Board of Directors which has never voted on the CON application at issue here. On or about March 15, 1984, PBMC submitted an application for a CON to establish a 60-bed comprehensive inpatient rehabilitation facility on the PBMC campus in Jupiter. The application called for the conversion of 60 nursing home beds in the Jupiter Convalescence Pavilion to rehabilitation ("rehab") beds, and renovations and improvements to the first floor of the two-story nursing home to accommodate the new rehab facility and the services it would offer. (PBMC Exhibit Nos. 1 and 2) On or about July 2, 1984, HRS (preliminarily) denied PBMC's application. (HRS Exhibit No. 1) PBMC filed a timely petition for a hearing under Section 120.57, Florida Statutes, to challenge HRS' decision. On September 12 and October 9, 1984, NME Hospital, Inc. d/b/a Delray Rehabilitation Institute, Rehab Hospital Services Corp., and University Rehabilitation Services, Inc., moved to intervene in this proceeding. On October 2, 1984, and January 21, 1985, these motions were granted. NME Hospitals, Inc. d/b/a Delray Rehabilitative Institute is a 60-bed for-profit comprehensive inpatient rehab hospital under construction in Delray Beach, south Palm Beach County, on the campus of Delray Medical Center. The name of the hospital was changed recently to Seacrest Hospital. Rehab Hospital Services Corp. will have operational responsibility for Seacrest Hospital-- scheduled to open in the spring of 1986. Rehab Hospital Services Corp. is a for-profit corporation that operates comprehensive rehab facilities. It also owns and will operate Treasure Coast Hospital, a 40-bed freestanding comprehensive rehabilitation hospital under construction in Vero Beach, Indian River County, Florida. This hospital, like Seacrest, is scheduled to open in the spring of 1986. NME Hospitals, Inc. d/b/a Delray Rehabilitative Institute and Rehab Hospital Services Corp., are wholly-owned subsidiaries of National Medical Enterprises. National Medical Enterprises is one of the largest for-profit chains of acute care hospitals, psychiatric hospitals, long-term facilities, and rehabilitation hospitals in the world. National Medical Enterprises acquired Rehab Hospital Services Corp. in February, 1985. PBMC proposes to convert the first floor of its two story nursing home into a comprehensive inpatient rehab facility. On the first floor, there are two wings (with 30 beds in each) that will be converted. In addition, approximately 10,000 square feet of new construction will be necessary to house some of the rehab services. (PBMC Exhibit No. 2) The second story of the building will remain in service as a 60-bed nursing home. At hearing, PBMC proposed, in the alternative, to convert only 30 of the nursing home beds to inpatient rehab beds. This alternative calls for conversion of only one wing of 30 beds on the first floor of the nursing home. New construction required to accommodate the proposed rehab services would remain the same. (PBMC Exhibit No. 2) The 30-bed proposal has been approved by a majority of the members of the PBMC Board, although the nursing home's Board has not voted on it. REHAB BED NEED IN DISTRICT IX PBMC is located in Palm Beach County, which is in HRS District IX. District IX also includes the counties of Martin, St. Lucie, Okeechobee, and Indian River. (NME Exhibit No. 9) Although at the time of hearing, there were no existing, licensed inpatient rehab beds in District IX, there are 100 CON-approved beds. (PBMC Exhibit No. 10; NME Exhibit No. 9) The total CON-approved beds consist of the 60-bed Seacrest Hospital and the 40-bed Treasure Coast Hospital, both of which are owned by NME, but under the operational control of Rehab Hospital Services Corp., a corporate subsidiary. HRS measures the need for inpatient rehab beds using Rule 10-5.11(24), Florida Administrative Code. The need determination of Rule 10-5.11(24) has two components. The first part, set out at subsection (c)1., consists of a mathematical formula with which HRS initially calculates the numerical need for rehab beds. The second part of the rule enumerates the following factors that should also be considered in measuring the need for additional rehab beds: historic, current and projected incidence and prevalence of disabling conditions and chronic illness in the population in the service district by age and sex group; trends in utilization by various categories of third party payors; existing and projected inpatients in need of rehab services; and the availability of specialized staff. (Rule 10 5.11(24)(c)2., Fla. Admin. Code) Numerical Need Numerical bed-need is calculated using the mathematical formula set forth in Rule 10-5.11(24). (NME Exhibit No. 9) If applied to District IX for the year 1990, a numerical need for 83 beds is shown. HRS already has, however, already approved 100 beds in District IX. Thus, under this formula, all parties agree there is an excess of 17 rehab through 1990. (NME Exhibit No. 9) Other Indicia of Need But the fact that the mathematical formula shows no need for additional rehab beds does not require denial of an application. Need may be shown using the other factors listed in the rule, irrespective of whether the formula shows numerical need. For the purpose of demonstrating need under these additional indicia of the HRS rule, PBMC presented a methodology and need analysis developed by Richard Chidsey, M. D. (a psychiatrist on the staff of PBMC), and applied by Thomas Schultz, as health care planner. Dr. Chidsey selected various categories of diagnostically related groupings ("DRGs") which he considered to be categories of acute care patients who would be candidates for treatment in an inpatient rehabilitation hospital. Then, based on his experience, he designated a percentage in each DRG category to represent those patients who he felt would need such rehab hospitalization. Dr. Chidsey and Mr. Schultz then identified six area hospitals in Palm Beach and Martin Counties which they considered to be within the catchment area for PBMC's proposed rehab beds. Mr. Schultz then obtained 1984 DRG discharge data (in the categories designated by Dr. Chidsey) from each of the six hospitals. Using this information, Mr. Schult projected that those six hospitals would generate 919 referrals to the rehab beds at PBMC. Based on these projected referrals, Dr. Chidsey and Mr. Schultz concluded that the beds proposed by PBMC were needed and would attain the requisite levels of occupancy mandated by HRS rehab rule. For several reasons, this methodological is rejected as lacking in credibility. Dr. Chidsey, a staff psychologist at PBMC, has not had an inpatient rehab practice since the mid 1970s. His practice in Palm Beach County does not involve inpatient rehab services and only a small portion of his practice involves patients needing rehabilitation for major disabilities. In opposition to the DRG analysis made by Dr. Chidsey and Mr. Schultz, NME presented the testimony of Mark Rottenberg, M.D., and Dan Sullivan, an expert in health care planning and finance. Dr. Rottenberg is a pyschiatrist who lives in Detroit, Michigan, and maintains an active inpatient rehab practice. Dr. Rottenberg was critical of the DRG categories and referral percentages chosen by Dr. Chidsey, and testified that Dr. Chidsey's analysis significantly overstates the number of patients needing inpatient rehabilitation in many of the categories chosen. Dr. Chidsey's methodology is one which is not generally used or accepted by health care planners, and has not been subject to verification. This methodology, admittedly an institution specific methodology for looking at bed need and utilization, if applied to District IX as a whole, would predict the need for approximately 800 inpatient rehab beds or ten times the number predicted by the HRS rule. This is a gross overstatement of need, one which even PBMC does not defend. The weight to be given Dr. Chidsey's opinion on the need for the proposed hospital is also affected by his obvious personal stake in the outcome. If approved, the proposed rehab hospital would, in all likelihood, be under his direction and control. He has worked to establish such a rehab hospital for many year, yet he opposed earlier applications for rehab beds in Palm Beach County because they would have competed with outpatient units with which he worked. Dr. Rottenberg testified in a more detached manner and his recent inpatient rehab experience is more extensive than Dr. Chidsey's. His criticism of Dr. Chidsey's analysis is persuasive and Dr. Chidsey's methodology, as applied by Mr. Schultz, is rejected as lacing in credibility. The lack of need for additional rehab beds in District IX reflected by the mathematical formula is corroborated by the fact that Dr. Chidsey refers only a very small number of his patients to existing and available inpatient beds in Broward or Dade County. These counties are close enough so that if the need for beds is as pressing as PBMC suggests it is reasonable to expect that Dr. Chidsey would be referring more patients for inpatient rehab care. Another factor supporting a finding that the proposed rehab inpatient beds are not needed is the absence of any existing utilization data relating to the 100 approved (but not yet operational) beds in District IX. Since the district is already overbedded (according to the numerical formula), prudent health care planning would suggest that the two proposed facilities be allowed to open and their actual utilization determined before further rehab beds are added. PBMC correctly points out that, as a group, elderly people have a greater need for inpatient rehab services than younger people, and that Palm Beach County has a higher percentage of elderly people than the state as a whole. But the elderly nature of the population is a factor which has already been taken into account in the acute care discharge portion of the rehab methodology. The availability of ample outpatient rehab facilities has a tendency to reduce the average length of stay of patients at inpatient rehab facilities. There are numerous outpatient rehab facilities available in Palm Beach County. There is a comprehensive outpatient rehabilitation facility ("CORF") in West Palm Beach and another CORF has recently been approved at Palm Beach Gardens Medical Center, a short distance from PBMC. Also, most of the acute care hospitals and home health care agencies in the area provide outpatient rehab services. Both Seacrest and Treasure Coast Hospitals will offer outpatient rehab services. The existence of these services can reduce the length of stay of patients in a rehab hospital, thereby reducing the number of beds needed to serve the area. It has not been proven, however, that the availability of these outpatient facilities would reduce the average length of stay ("ALOS") at inpatient rehab facilities in Palm Beach County below the 28-day ALOS standard HRS now uses in its bed-need methodology. There has been an increasing trend toward recognition of rehab services by third-party payors, although recognition by private pay insurers (such as Blue Cross, Aetna and Prudential) is still fairly limited. The advent of the Medicare prospective payment system and DRGs, has also increased the demand for rehab services. Prior to implementation of the DRG system, Medicare reimbursed hospitals on a cost basis; patients could remain in hospitals long enough to receive needed rehab services and hospitals would be reimbursed for services. In contrast, the DRG system pays hospitals a fixed amount per admission based on diagnosis--this encourages hospitals to discharge patients earlier, sometimes before needed rehab services are provided. One effect of these financial incentives has been to increase the demand for inpatient rehab beds. The extent and likely duration of that increased demand has not, however, been shown. PBMC asserts that less weight should be accorded the calculation of bed-need by the numerical formula contained in Rule 10-5.11(24), because it fails to reflect these recent changes in health care delivery. As proof of the rule's asserted understatement of need for rehab beds, PBMC applied the formula to actual utilization in Broward County, District X, which has three rehab facilities. When the rule's 85 percent occupancy standard is applied, there is a need shown for 127 rehab beds in 1990--46 more than the 891 shown by the numerical formula. But the formula's apparent understatement of need in District X does not translate to understatement of need in District IX. This is because factors which affect rehab bed utilization in the two districts are not the same. While the two districts are contiguous, and the size and characteristics of their population are similar, the location of the populations and the concentrations of physicians (both of which can affect demand for rehab persons) are different. Accessibility Rule 10-5.11(24) also requires that at least 90 percent of the target population of a proposed facility reside within two hours driving time. Ninety percent of PBMC's target population is located within 30 minutes driving time of the proposed facility. Both Seacrest and Treasure Coast Hospitals will, however, provide available and accessible alternatives to the proposed PBMC facility. The average automobile travel time on the major north/south highways between Seacrest and Treasurer Coast Hospitals is approximately two hours. Since the proposed PBMC facility would be located between these two hospitals, and the main population concentration of District IX is located along the coast, the two hospitals should be within two hours travel time (under average traffic conditions) for most of the residents of the District. AVAILABILITY, QUALITY OF CARE, AND EFFICIENCY OF LIKE AND EXISTING HEALTH CARE SERVICES As reflected by the rule methodology and other developments in delivery of health care, there is a clear demand for inpatient rehab services in District IX. Although there are no existing inpatient rehab facilities in the District, it is likely that Seacrest and Treasure Coast Hospitals--at the southern and northern ends of the district--will adequately satisfy that demand until at least 1990. Seacrest Hospital is approximately 50 minutes driving time south of the proposed PBMC facility, while Treasure Coast Hospital is approximately 1.3 hours driving time north of the facility. When completed, both hospitals will offer services similar to and at least as intensive as those proposed by PBMC. Because of the travel times and distances involved, PBMC maintains that Seacrest Hospital (to the south) and Treasure Coast Hospital (to the north) will not be reasonably accessible to the patients in its proposed service area. Regular involvement of a patient's family in rehab therapy is an important factor and many rehab patients are elderly. A round trip to either of these NME facilities from the PBMC service area is estimated to take at least 1.5 hours-- 45 minutes each way. Because family involvement in a patient's therapy requires three to five visits a week, PBMC asserts that a one-way driving time of more than one-half hour is unreasonably burdensome to family members. With less family participation, the quality of care declines. PBMC's contention that one- way travel times from one half hour to 45 minutes are unreasonable is, however, rejected as not substantiated by the weight of the evidence. Dr. Rottenberg's testimony to the contrary is accepted as persuasive. Moreover, HRS Rule 10- 5.11(24)(c)3.c, contains an accessibility standard for rehab inpatient services. By requiring applicants to demonstrate that at least 90 percent of the target population resides within two-hours driving time of the proposed facility, the rule implies that driving time of up to two hours are acceptable and not unreasonably burdensome. HRS' interpretation--that this rule encompasses a two- hour driving time accessibility standard--is a reasonable one. Although it is possible that one-way travel times of from one-half hour to 45 minutes may affect the frequency of visits by family members and he patient's primary care physician, the extent which any reduced visitation rate may affect the quality of care provided is open to conjecture and has not been meaningfully established. PBMC proposes an average charge of $335 per day during the first year of operation of its rehab hospital, and $358 per day the second year. While these charges are significantly lower than the $465 per day charge proposed for both Seacrest and Treasure Coast Hospital, PBMC has seriously underestimated the number of registered nurses (with specialized rehab training) it would be required to employ. A 60-day hospital offering intensive and quality rehab services normally requires between 25 and 30 registered nurse FTEs; yet PBMC projects only four for its entire facility. If PBMC was required to hire additional registered nurses, its projected charges per day would increase significantly but--due to the cost savings derived from converting an existing structure--it is reasonably expected that the charges would still be less than, or comparable to, those of Seacrest and Treasure Coast Hospital. In summary, while there are no existing rehab inpatient facilities in District IX reasonably available to serve the patients in PBMC's proposed service area, there soon will be. Seacrest and Treasure Coast Hospitals, opening in the spring of 1986, will offer quality rehab services at least as intensive as those proposed by PBMC; their charges will be comparable to or somewhat more than those proposed by PBMC. QUALITY OF CARE The proposed PBMC rehab hospital will meet the standards published by the Commission on Accreditation of Rehabilitation Facilities ("CARF") and deliver quality medical care to its patients. PBMC is committed to this objective and will hire the staff and purchase any equipment necessary to achieve it. The medical program will be run by a qualified psychiatrist. Physicians with staff privileges will be allowed to admit patients to the facility, but a psychiatrist will be assigned to co-manage each patient. There are two features of PBMC's proposal which, while adequate, are less than optimum. One--the understatement of the number of registered nurses needed to provide quality services has already been mentioned. This problem would, in all likelihood, be remedied by the hiring of additional staff. The other shortcoming is PBMC's plan to serve two of the patients' daily meals in their bedrooms, rather than in a central dining area. It is important that patients with disabilities be able to practice their social skills and interact with others in preparation for their return to the community. Dining together in a congregate setting facilitates this kind positive socialization experience. Since PBMC patients would dine together only once a day, their exposure to this socialization experience would be limited. AVAILABILITY AND ADEQUACY OF OTHER HEALTH CARE FACILITIES AND SERVICES As already mentioned, there are numerous home health agencies, nursing homes, and acute care hospitals which offer outpatient rehab services in District IX. Although these services are not a substitute for comprehensive inpatient rehab services (which offer more intense services to patients with more severe disabilities or ambulatory difficulties), the existence of such outpatient services may allow patients to be discharged earlier than otherwise and lessen demand for inpatient beds. Although there are no existing comprehensive rehab inpatient facilities in District IX which provide an alternative to the PBMC proposal, these soon will be in the form of Seacrest and Treasure Coast Hospitals. ECONOMIC AND SHARED SERVICES PBMC intends to enter into referral agreements with acute care hospitals, nursing homes, and home health agencies in the service area of its proposed rehab hospital. The proposed hospital will benefit from being located close to Jupiter Hospital. Rehab inpatient services can complement the other medical services offered on the PBMC campus. The location of the rehab facility on the first floor of the nursing home will ease the transfer of patients to the nursing home on the second floor. The proposed rehab hospital would purchase ancillary services from, and share engineering and support services with, Jupiter Hospital. This would obviate the need to duplicate equipment and services already available in Jupiter Hospital and will allow for more efficient use of existing equipment and services. The rehab facility would also share services with the nursing home, such as dietary, maintenance, purchasing, housekeeping, and laundry. The existing outpatient rehab services at Jupiter Hospital would be relocated in the new rehab hospital. Integration of the inpatient and outpatient services will improve the efficiency and quality of rehab services. By sharing services with Jupiter Hospital and the connecting nursing home, the proposed rehab facility would achieve economies of scale and improve the overall quality of service. NEED FOR RESEARCH AND EDUCATION FACILITIES Currently, there are no existing acute care of rehab facilities in District IX that have training programs for physicians interested in rehab medicine. If granted a CON, PBMC will attempt to establish a training program in affiliation with the University of Miami Medical School and the Veterans Administration Hospital in Miami. PBMC also proposes to establish a residency program in rehab medicine at its new facility, in cooperation with medical schools at the University of Miami and Temple University. Such a residency program would provide further opportunities for training health care practitioners. AVAILABILITY OF RESOURCES AND ACCESSIBILITY TO PATIENTS PBMC has sufficient funds to undertake and complete the project. At the time of hearing, PBMC had 10 million dollars in reserves which could be used to construct and operate the proposed rehab hospital, and cover any shortfall. The projected construction costs for this facility are only 1.2 million dollars. The PBMC Board is committed to this project, although the separate Board of the nursing home has not voted on it. It is reasonably anticipated that there would be enough qualified physicians and personnel available to staff and operate the proposed facility. Dr. Chidsey, a board certified psychiatrist with 20 years of experience in rehab medicine, is the architect of the proposed program and will be one of the principal admitting physicians. Other qualified psychiatrists have expressed an interest in the proposed facility and would be recruited if PBMC's application is approved. PBMC expects to hire new employees to staff the proposed rehab hospital. It plans to hire a total of 68.4 FTEs for the facility's first year of operation, which includes six registered nurses, 22.6 nurse's aides, 3.4 occupational therapists, and 7.1 physical therapists. (PBMC Exhibit No. 13) As already mentioned, the projection of six registered nurses appears to be an understatement of expected actual needs. PBMC should be able to recruit enough qualified nurses, nurse's aids, and technicians to administer its proposed program. Jupiter Hospital has been offering rehab services to inpatients and outpatients, so PBMC has experience in hiring rehab personnel. It has received applications for employment from rehab nurses in the last few months. Should a problem arise, PBMC can use the recruiting resources of Hospital Corporation of America, which operates and/or manages over 400 hospitals. A number of acute care hospitals in the area have been forced to lay off personnel as patient utilization and census have dropped, resulting in an increase in the number of available qualified health care personnel. In addition, PBMC has trained personnel at its disposal who have been providing rehab services to patients in Jupiter Hospital and in Jupiter Convalescence Pavilion. Also, PBMC has numerous volunteer workers who could be trained to assist in administering the rehab program. PBMC's location near several major traffic arteries make it more accessible to its target population. The same population, however, has reasonable access to Seacrest and Treasure Coast Hospitals. At Jupiter Hospital, PBMC treats all patients regardless of their ability to pay. It is against PBMC policy to deny medical care based on inability to pay, and there is no evidence that it has ever done so. PBMC's nursing home has a Medicaid contract, and twenty per cent of its patients are Medicaid patients. Jupiter Hospital does not have a Medicaid contract, but has treated Medicaid patients regularly and simply "written off" the costs of care. Because the volume of Medicaid patients has steadily increased, Jupiter Hospital has now applied for a Medicaid contract and is awaiting approval. Presently about one percent of its patient population is Medicaid patients. It also has a contract with Palm Beach County to provide ambulatory surgery to indigents. Approximately fifty per cent of the admissions at Jupiter Hospital in 1985 were Medicare patients. (NME Exhibit No. 13) PBMC's proposed rehab facility would also accept Medicare, Medicaid, and indigent patients. A patient mix of ten percent Medicaid, sixty percent Medicare, two percent indigent, and four percent bad debt is projected. Approval of PBMC's proposal would enhance access to comprehensive rehab services for medically underserved groups, as well as other residents in the catchment area, although it has not been shown that such services will not be reasonably available at Seacrest and Treasure Coast Hospitals. FINANCIAL FEASIBILITY Since PBMC has not shown need for its proposed rehab hospital or demonstrated that it will meet occupancy levels needed to become self- sustaining, it cannot be concluded that the hospital is financially feasible in the short-term (without a continuing subsidy) or the long-term. The pro formas provide little assurance of the hospital's financial feasibility. They simply assume occupancy levels of seventy per cent in the first year and eight five percent in the second year--then test financial feasibility against those levels. The underlying assumptions were not shown to be reasonable or based on reliable or verifiable data. The pro forma projections are also deficient because they reflect an understatement of the number of registered nurses needed to staff the facility, thereby underestimating salary and benefit expenses by as much as $600,000. (This is the approximate cost of increasing the number of registered nurse FTE's from 4 to 25.) The pro formas assume a combined level of seventy per cent Medicare and Medicaid utilization. In order to qualify for Medicare reimbursement--on which the proposed hospital would financially depend--there must be 24-hour coverage by registered nurses with specialized rehab training or experience. It is unlikely that the staffing levels reflected in the pro formas would be adequate to meet the Medicare standard, thus placing a major financial assumption of the project in question. IMPACT ON COSTS OF HEALTH CARE AND COMPETITION PBMC projects an average daily charge significantly lower than NME's projected charges of its two facilities in District IX (Seacrest and Treasure Coast Hospitals), and the actual charge of its existing facility in Sunrise, Florida. However, PBMC's projected charges depend on it achieving occupancy rates which have not been substantiated by the evidence. Consequently, projected cost savings for patients in District IX are speculative and uncertain. At the present time, both of the approved inpatient rehab facilities (Seacrest and Treasure Coast Hospitals) in District IX are owned by NME. In addition, NME owns and operates a 108-bed rehab hospital in Sunrise, Broward County, Florida, which is approximately 45 minutes driving time south of the Seacrest Hospital site. NME also owns and will operate a new 60 bed rehab hospital in Melbourne, Florida. Melbourne is in Brevard County, immediately to the north of Indian River County. The Melbourne facility is about 45 minutes driving time north from the Treasure Coast Hospital site. Approval of PBMC's application will increase competition among providers of inpatient rehab services to residents of District IX. Increased competition may contribute to a lowering of health care costs for District IX. It is also likely that PBMC would draw a significant number of admissions and patient days which would otherwise accrue to Seacrest and Treasure Coast Hospitals, thereby causing them substantial financial injury. The approval of PBMC's application would also enhance the bargaining position of HMOs and PPOs, which negotiate with health care providers for discounts or lower costs. In the absence of the proposed PBMC hospital, NME--as the only provider of inpatient rehab services in District IX--would have less incentive to negotiate with HMOs and PPOs, or reduce its charges. ALTERNATIVES Both parties admit that instead of converting the 60 nursing home beds into comprehensive rehab beds, PBMC could convert acute care beds at the adjacent 156-bed Jupiter Hospital. Since 1982, the nursing home has experienced an occupancy level exceeding ninety percent. In contrast, the hospital has experienced a sharp decline in utilization. The average patient census in 1983 was 70.5 percent; by 1985, it had dropped to 50.3 percent. In terms of serving the needy, 20-30 percent of the nursing home residents are Medicaid patients, compared to only one percent of the hospital's patients. Citing these figures, NME contends that conversion of "needed" beds in the nursing home to rehab beds- -when "un-needed" hospital beds abound next door is an inappropriate choice by PBMC. PBMC responds that there is an excess of nursing homes in District IX; that a new 120-bed nursing home is opening up nearby; and that the configuration and layout of the nursing home made the conversion and construction of additional areas for rehab therapy relatively inexpensive. These assertions were not refuted by NME. Moreover, the record does not contain a cost comparison between the two alternative sources of rehab beds. NME has failed, therefore, to prove that PBMC's decision to convert nursing homes rather than hospital beds was inappropriate. ALTERNATIVES TO NEW CONSTRUCTION PBMC's proposal calls for a limited amount of new construction. To a significant extent, the new rehab facility will utilize existing space on the first floor of the nursing home. The nursing home was constructed in accordance with standards and specifications suitable for an inpatient rehab facility. The additional areas that need to be constructed are relatively minor and of minimal cost. By converting space in the nursing home, rather than building an entirely new facility, PBMC has adopted an appropriate and cost-effective alternative to constructing an entirely new facility, assuming that the rehab hospital is needed in the first place. STATE AND LOCAL HEALTH PLANS PBMC's application exceeds the 3.9/1000 ratio of rehab beds to projected acute care admissions set forth in the State Health Plan. If PBMC's application was approved, there would be an excess of 7 rehab beds in District IX in 1990. In addition, the District IX Local Health Plan states that "comprehensive medical rehabilitation services should be available to all residents of the district." When Seacrest and Treasure Coast Hospitals open in the spring of 1986, this requirement will be satisfied. 30-BED PROPOSAL As an alternative to its 60-bed application, PBMC proposes to convert only 30 of its nursing home beds. The same findings as to need, geographic and financial accessibility, availability and adequacy of alternatives, quality of care, economies and shared services, need for educational facilities, availability of resources, short-term financial feasibility, impact on health care costs, alternatives to new construction, and consistency with the State and Local Health Plans, apply to this alternative proposal. HRS Rule 10-5.11(24)(c)3.a., expressly requires new and separate rehabilitation facilities, such as proposed by PBMC, to have at least 40 beds. PBMCs 30-bed proposal does not satisfy this requirement.
Recommendation Accordingly, based on the foregoing, it is RECOMMENDED: That PBMC's application for a CON be DENIED. DONE AND ORDERED this 19th day of February, 1986, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of February, 1986. APPENDIX TO RECOMMENDED ORDER, CASE NO. 84-2917 RULINGS ON PBMC'S PROPOSED FINDINGS OF FACT Approved. Approved, with clarification that nursing home Board has not voted on the application at issue. 3-15. Approved in substance. Approved, but these cases are distinguished from the instant case. Rejected as irrelevant since the quality of evidence presented at the de novo hearing is at issue, not the propriety of preliminary agency action. 18-22. Rejected as not supported by the greater weight of the evidence. The Chidsey-Schultz analysis was not shown to be reasonable or reliable, and overstated actual need. 23. Approved, but an adequate supply of rehab beds will be made reasonably available to residents of District IX within the next couple of months. 24.-25. Rejected for the reasons stated in 18-22, infra. Approved except for conclusion, not proven, that the numerical formula understates need for rehab beds. Approved, except the elderly nature of the population is a factor in the acute care discharge portion of the methodology and quality outpatient programs can reduce demand for rehab inpatient beds. Substantially approved, except statements about ALOS other than 28 days are conjectual. Approved. Approved, but modified to reflect that inpatient rehab coverage is still limited. Rejected as unsupported by the evidence. The comparison of District IX to District X is inappropriate. Rejected as unsupported by the evidence. The methodology takes age into account. Rejected as unsupported by the evidence. See, para. 16-32, infra. Approved. Approved, but these cases are distinguishable. Approved, but modified to reflect that Seacrest and Treasure Coast Hospitals will adequately satisfy this need through 1990. 37.-40. Approved. 41.-43. Covered in finding nos. 29-31. Approved, but PBMC's projected charges are uncertain due to understatement of number of registered nurses needed and failure to demonstrate need for the facility. Rejected as unsupported by the weight of the evidence. 46.-47. Approved, except the number of registered nurses needed is understated. Approved. Approved, except the availability of outpatient rehab service tends to decrease need for inpatient services. Rejected as speculative. Rejected as unsupported by the greater weight of the evidence. Approved, except for the second sentence, which was not proven. 53.-61. Approved in substance. Rejected as unsupported by the greater weight of the evidence. Approved. Approved, except the number of needed registered nurses is overstated. 65.-71. Approved in substance. 72. Approved, but short run financial feasibility (without a continuing subsidy by PBMC) is in doubt because need has not been shown. 73.-75. Rejected as unsupported by the greater weight of the evidence. Neither need nor short and long term financial feasibility has been shown. 76. Approved, except for the last sentence which is rejected as not supported by the greater weight of the evidence. 77.-80. Substantially approved, but the charges are uncertain due to understatement of nursing need and failure to demonstrate need for the proposed facility. Financial feasibility is in doubt. Approved, but the extent to which it would still underprice the charges of Seacrest and Treasure Coast Hospitals is uncertain. Substantially approved, with caveat that inadequate nursing staff would place Medicare funding in jeopardy. Rejected as nursing staff costs are understated. 84.-85. Rejected, since without a showing of need, the financial feasibility is in doubt. Approved. Covered in finding no. 56. Approved. Covered in finding no. 57. Covered in finding no. 58. Covered in finding no. 57. Rejected as the extent to which costs may be lowered, and the likelihood, were not shown. Approved. Covered in finding nos. 59-60. Approved. Approved. First sentence, approved; second sentence rejected as speculative. Approved. Covered in finding no. 62. 100-102. Approved. First sentence, approved; second sentence, rejected as not proven by the greater weight of the evidence. First sentence, approval; second sentence, rejected as not proven. Rejected, as approval would not be consistent with the State Health Plan. Approved. Rejected as not proven since nursing needs were understated and need for the rehab beds was not demonstrated. Approved, except that the 30-bed facility would not satisfy the requirement of Rule 10-5.11(24)(c)3.a. RULINGS ON NME'S PROPOSED FINDINGS OF FACT 1-2. Approved. Approved, with clarification that the numerical formula shows excess beds in 1990. Approved, except for statement in the second sentence alluding to NME's ostensible "recognition" that Treasure Coast Hospital would be marginally successful at 60 beds, which is not proven. Approved. Approved, except for the fist sentence, which is argumentative. 7.-8. Approved. 9. Approved, except for the reference in the second sentence to what HRS consistently "recognized" in the past. Non-rule policy, no matter how often applied in the past, must be proved, anew, at each Section 120.57(1) proceeding. The generic impropriety of institution specific health care planning was not demonstrated in the instant case. 10.-11. Approved. 12. Approved, except for last sentence, which is not supported by the greater weight of the evidence. 13-16. Approved. Approved, except for the first sentence, which is not supported by the greater weight of the evidence. Approved, except for the first sentence, which is not supported by a preponderance of the evidence. Approved. 20.-21. Rejected, as unsupported by a preponderance of the evidence. Approved and clarified to reflect that PBMC has not demonstrated that the proposed hospital will be financially feasible. Approved. Approved. Rejected as unsupported by a preponderance of the evidence. Approved. Approved, except it has not been shown that the services of Treasure Coast and Seacrest Hospitals will be more comprehensicve than those proposed by PBMC, or that the approval of the PBMC Hospital will adversely affect the ability of Treasure Coast and Seacrest to attract and maintain staff. COPIES FURNISHED: J. Marbury Rainer, Esquire Jack C. Basham, Jr., Esquire 133 Carnegie Way 1200 Carnegie Building Atlanta, Georgia 30303 Harden King, Esquire 1323 Winewood Boulevard Tallahassee, Florida 32301 Michael J. Glazer, Esquire P. O. Box 391 Tallahassee, Florida 323029
