Findings Of Fact I The Parties Charter Medical of Orange County, Inc., (Charter) is a wholly-owned subsidiary of Charter Medical Corporation, founded in Macon, Georgia in 1969. The parent corporation operates approximately 92 hospitals throughout the country, including Florida. Most of its hospitals are psychiatric or substance abuse facilities. Orlando Regional Medical Center (ORMC) is a 1,119- bed, nonprofit medical system comprised of four divisions. In downtown Orlando it operates a 630-bed tertiary care hospital and a 255-bed Arnold Palmer Hospital for women and children. A Sand Lake campus is located 10 miles southwest of Orlando, off I-4, and includes medical/surgical beds and 32 licensed short-term psychiatric beds. ORMC's St. Cloud Campus in Osceola County, south of Orlando, includes 84 medical/surgical beds. The Department of Health and Rehabilitative Services (HRS) is the state agency responsible for implementing and enforcing the certificate of need program pursuant to Sections 381.701-.715, F.S. Psychiatric Institute of Orlando, Inc., d/b/a Laurel Oaks Hospital, (Laurel Oaks) is a subsidiary of P1A Psychiatric Hospitals, Inc., which is a subsidiary of National Medical Enterprises (NME). P1A owns approximately 50 psychiatric hospitals throughout the county, including (30-bed Laurel Oaks, in southwest Orange County, a short-term psychiatric and substance abuse facility for children and adolescents Health Management Associates, Inc., (HMA) is a health management company which owns or operates 16 hospitals in the southeastern United States, including four psychiatric hospitals in Florida. HMA's Crossroads University Behavioral Center is a 100-bed free-standing psychiatric hospital in northeast Orange County. Its 60 adult beds and 40 adolescent beds opened in January 1989 as a licensed long-term facility, but it has been operating continually as a short-term facility. The Applications Charter proposes to develop a new free-standing 60- bed psychiatric hospital (40 beds for adults, 10 beds for adolescents and 10 beds for children). It plans a wide range of treatment modalities utilizing a multi-disciplinary team approach, tailored to the age and needs of the patient. Although no specific site has been selected, several have been identified in southwest Orange County. Charter anticipates the total cost for the project will be $7,783,000. Charter's patients will be primarily commercially insured (71%), with 15% Medicare and 4% indigent. Charter has committed to serve this share of indigent for the first two years of operation. As a specialty hospital, Charter is not eligible to accept Medicaid patients. ORMC proposes to build a 60-bed free-standing facility on a 7.2 acre site within 40 acres it already owns at Sand Lake and adjacent to its existing Sand Lake Hospital, for a total project cost of $6,678,935. No new licensed beds are required as ORNC will transfer its 32 short term beds from the sixth floor of the Sand Lake Hospital and will convert 28 of its licensed medical/surgical beds from its downtown hospital. The 60 beds will consist of 30 adult and 30 adolescent short term beds. Since the existing 32 beds are primarily adult beds, ORMC's project will be adding adolescent beds to the inventory in District 7. Proximity to Sand Lake Hospital will facilitate shared services, including engineering, dietary and laundry. ORMC also expects the joint use of therapists at its psychiatric facility and its existing brain injury rehabilitation unit at Sand Lake. Because the facility will be added to ORMC's general hospital license, it can and will accept Medicaid patients. ORMC has committed to serve 20% Medicare, 8% Medicaid and 8% indigent patients. ORMC will likely seek an outside management firm to operate its psychiatric facility. The Review On August 23, 1988, HRS published a need for 140 short-term psychiatric beds in District 7. Its SAAR issued in January 1989, recommended approval of a total of 137 beds. When the SAAR was amended in March 1989, to include the Charter approval, the total surged to 197 approved beds. Even after First Hospital withdrew its application for 55 beds, the total approved exceeded the published need for the 1993 horizon year by two beds. Numeric Need The short-term psychiatric bed need rule is found at Rule 10- 5.011(1)(o) , F.A.C. "Short-term" is defined as an average length of stay of 30 days or less for adults, and 60 days or less for children and adolescents under 18 years. A favorable need determination will not normally be given to an applicant unless a bed need exists according to sub-paragraph (1)(o)4 of "the rule". Rule 10-5.011(1)(0)4, F.A.C. provides as follows: Bed allocations for acute care short term general psychiatric services shall be based on the following standards: A minimum of .15 beds per 1,000 population should be located in hospitals holding a general license to ensure access to needed services for persons with multiple health These beds shall be designated as short term inpatient hospital psychiatric beds. 20 short term inpatient hospital beds per 1,000 population may be located in specialty hospitals, or hospitals holding a general license. The distribution of these beds shall be based on local need, cost effectiveness, and quality of care considerations. The short term inpatient psychiatric bed need for a Department service district shall be projected 5 years into the future based on the most recent available January or July population estimate prior to the beginning to the respective batching cycle. The projected number of beds shall be based on a bed need ratio of .35 beds per 1,000 population. These beds are allocated in addition to the total number of general acute care hospital beds allocated to each Department District under Paragraph 10-5.011(1)(m). The net need for short term psychiatric beds shall be calculated by subtracting the number of licensed and approved beds from the number of projected beds. The population estimates are based on population projections by the Executive Office of the Governor. Occupancy Standards. New Facilities must be able to project an average 70% occupancy rate for adult psychiatric beds and 60% for children and adolescent beds in the second year of operation, and must be able to project an average 80% occupancy rate for adult beds and 70% for children and adolescent short term psychiatric inpatient hospital beds for the third year of operation. No additional short term inpatient hospital adult psychiatric beds shall normally be approved unless the average annual occupancy rate for all existing adult short term inpatient psychiatric beds in a service district is at or exceeds 75% for the preceding 12 month period. No additional beds for adolescents and children under 18 years of age shall normally be approved unless the average annual occupancy rate for all existing adolescent and children short term hospital inpatient psychiatric beds in the Department district is at or exceeds 70% for the preceding 12 month period. Hospitals seeking additional short term inpatient psychiatric beds must show evidence that the occupancy standard defined in paragraph six is met and that the number of designated short term psychiatric beds have had an occupancy rate of 75% or greater for the preceding year. Unit size. In order to assure specialized staff and services at a reasonable cost, short term inpatient psychiatric hospital based services should have at least 15 designated beds. Applicants proposing to build a new but separate psychiatric acute care facility and intending to apply for a specialty hospital license should have a minimum of 50 beds. The parties do not dispute that application of the formula yields a need for 140 beds, the total published in the applicable fixed need pool. Nor do the parties dispute that the occupancy standard was met, since HRS uses the lower standard of 70% as a threshold for determining whether need should be published. The parties agree that approval of both Charter's and ORMC's applications results in an excess of two beds over the published need. There is substantial dispute as to whether that excess is justified, and as to the composition of the beds as "speciality hospital" or "general hospital" beds. The only provision in agency rules or policy for exceeding bed need calculations is when "not normal" or "special" circumstances exist in the District. HRS' Policy Manual for the Certificate of Need program, dated October 1, 1988, provides in Section 9-6 B. (3): If a qualified applicant exist but the proposed project exceeds the beds or services identified in the fixed need pool, the department may award beds or services in excess of the pool when warranted by special circumstances as defined in rule 10- 5.011(1)(b), 1-4, F.A.C. and, specifically for nursing homes Rule 10-5.011(1)(K)2.j. F.A.C. (Laurel Oaks Exhibit #10, P. 9-2) The referenced sections of Rule 10-5.011(1)(b), F.A.C., relate to the enhancement of access--primarily economic access and access by underserved groups. Access is addressed in Part VII, below. No evidence was presented regarding special problems of access in District 7. Rather, HRS asserts that its excess approval was based on "rounding up" the numbers of beds, and on the favorable occupancy rates in the district. In its SAAR, HRS calculated the following occupancy rates by age cohort in the district: Adult 75.8% Child/Adolescent 74.8%; and in Orange County: Adult 57.4% Child/Adolescent 100. The adult rate is therefore slightly above the 75% minimum in the district, and substantially below the minimum in Orange County. The child/adolescent rate is above the 70% minimum in both the district and county. HRS appropriately does not utilize occupancy in beds other than licensed short term psychiatric bed in calculating its rates as it would be difficult to compute the number of available beds (medical/surgical, long term psychiatric, etc.). The rule specifies that a minimum of .15 beds per 1000 population "should" be allocated to hospital1s holding a general license and that .20 beds per 1000 population may be located in either speciality hospitals or hospitals holding a general license. Of the 140 beds needed in District 7, 75 may be located in a speciality hospital under this formula. 30 speciality beds were awarded to West Lake and are unchallenged. The Charter application for 60 speciality beds exceeds by 15, the 45 speciality beds left to be allocated. The State and Local Health Plans The State Health Plan is dated 1985-1987. Goal 1 is the only portion of the plan that is relevant in this review. It essentially reiterates the need methodology described above, regarding the .35 beds per 1000 population and the 70% and 75% annual occupancy thresholds. The applicable local health plan is the 1988 local health plan for District 7. This plan divides the district into "planning areas": Brevard, Osceola, Seminole and Orange -- the four counties within the district. Planning areas, unlike subdistricts, are more in the nature of guidelines and do not carry the same legal weight as subdistricts. Both applicants are committed to submit data to the local health councils, as provided in recommendation #2. Both applicants have committed to provide a fair share of care to the underserved, although ORMC's commitment is substantially greater and has a proven record to support it. Recommendation #5 provides that no new short-term psychiatric or substance abuse beds shall be approved until all existing beds in the planning area are operating at or above 75% occupancy for the most recent twelve months for which data is available from the local health council. This criteria is barely met when adult and children/adolescent occupancy is combined, and is not met by the occupancy rate for adult beds in Orange County. Financial Feasibility The pro formas of both applicants, which are no more than best guess estimates, are generally reasonable, based upon the experience of the applicants' existing programs. Charter's proposal makes no provision for management fees, although such fees are remitted to the parent company by its subsidiaries and are reported to the Health Care Cost Containment Board. Charter anticipates that it would not incur additional corporate overhead to support this facility if it is built. In recent years ORMC's psychiatric unit has lost money in its operation when overhead is factored into the cost. Its Program Director, Jeffrey Oppenheim, reasonably anticipates the new facility will make a profit, as it will serve a better mix of age cohorts and will offer a more desirable setting than its limited facility now located on the sixth floor of a medical/surgical hospital. The financial feasibility of both applications depends on the programs' ability to attract patients. That ability is not seriously questioned. Both applications have substantial experience in operating financially efficient health care programs. Quality of Care and Accessibility No evidence was presented to challenge either applicant's ability to provide quality care. Nor, however, was the quality of care of existing alternative programs at issue. Geographic access in District 7 is not a problem, and none suggests that the access standard in Rule 10-5.011(1)(o)5.g., F.A.C., is not met (travel time of 45 minutes or less for 90% of the service area population). Charter's inability to provide Medicaid services and its time-limited commitment to serve even 4% indigents amount to only minimal contribution to the economically underserved population. In the past, ORMC has been a receiving facility for Baker Act patients and it anticipates it will again when the psychiatric program has its new quarters. It is only one of two hospitals in Orange County eligible to provide Medicaid services and is the fifth highest provider of charity and Medicaid in the State of Florida, according to Medical Health Care Cost Containment Board data. Impact on Existing Facilities and Competition Positive competition among providers already exists in District 7. There are eleven existing short term psychiatric programs in the four-county area, including both speciality and general hospitals, and adult, children and adolescent programs. Only three obtained an occupancy rate of more than 75% for the fiscal period ending June 1988. The Availability of Health Manpower There is a shortage of nurses, qualified social workers and counsellors in District 7. HMA has experienced problems in recruiting staff at its Orlando facility. Competition for these staff has caused salaries to rise, and consequently the cost of providing services has risen. Turnover results when staff are attracted to new facilities, causing training problems and affecting quality of care. Charter has the corporate resources to conduct effective recruiting, but has no experience recruiting in the Orlando area. ORMC, a large diverse facility, with good opportunity for lateral and upward mobility, has experienced few problems staffing its programs. The Availability of Alternatives Eight of eleven District 7 short term psychiatric facilities have operated below 75% occupancy in the last two years. These under-utilized facilities are plainly alternatives for new projects proposing the same services. Neither applicant is proposing novel or innovative services in psychiatric care. That licensed long term psychiatric facilities such as HMA, are operating short term programs does not justify the approval of new short term beds, but rather suggests these programs could be converted, with little or no capital outlay, into short term programs. Conversion of under-utilized acute are beds to short term psychiatric beds is also an alternative in District 7. Acute care bed occupancy rates in each county of District 7 failed to reach 60% in the most recent 12-month period of available data. The criterion of Rule 10-5.011(1)(o)5.f., F.A.C. favors the conversion of under-utilized beds in other hospital services unless conversion costs are prohibitive. There has been a trend in the last several years away from inpatient care and toward less restrictive treatment modalities. Both applicants acknowledge this trend with their inclusion of partial hospitalization programs in their plans. ORMC has no reasonable alternative to building a new facility if it is to maintain its inpatient psychiatric program. There is an increasing demand for the medical surgical beds it currently occupies on the sixth floor of Sand Lake Hospital. There is no appropriate space in its downtown facilities. Balancing the Criteria Comparative Review and Summary As reflected above, not all of the relevant statutory and rule criteria have been met by these applicants. There remains, however, the planning horizon numerical need for additional short term psychiatric beds. While that need could likely be met with the utilization of beds that are not licensed for the provision of short term care, such a solution frustrates state licensing requirements. Three alternative dispositions exist: to deny both ORMC and Charter applications, leaving an unmet need in this cycle for 86 beds; to grant one application only; or to approve both and exceed the need by two beds. HRS argues that the two-bed difference is of little consequence and that the excessive number of specialty beds if Charter is approved is irrelevant, as no general hospital is currently competing for the beds. It is not possible to conjecture that appropriate general hospital applicants will participate in a near future cycle, but it is certain that if those beds are awarded in this cycle to a specialty hospital, they will not be available in a future cycle. Nothing requires that all beds identified in a fixed pool must be awarded in that cycle. The converse follows when, as here, other considerations weigh against approval of additional beds. Between the two applicants, ORMC more consistently meets the rule and statutory criteria. Although it still proposes a substantial capital outlay, (ORMC) relies on conversion of existing licensed beds and results in less impact on other existing programs. Its contribution to the underserved population is more substantial; it proposes more needed adolescent, rather than adult beds; and it does not violate the .15/.20 general hospital, specialty hospital bed balance. That balance needs to be maintained in this case to insure competition among Medicaid providers. In summary, the evidence supports approval of ORMC's application and denial of Charter's.
Recommendation Based on the foregoing, it is hereby, RECOMMENDED That a Final Order be entered denying CON number 5691 to Charter Medical of Orange County, Inc.; and granting CON #5697 to Orlando Regional Medical Center. DONE AND RECOMMENDED this 15th day of February, 1990, in Tallahassee, Leon County, 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 15th day of February, 1990. APPENDIX TO THE RECOMMENDED ORDER IN CASES NO. 89-1358,89-1366.89-1368,89-2039 & 89-2041 The following constitute rulings on the findings of fact proposed by each party: Charter Medical of Orange County, Inc. Adopted in substance in paragraph 1. Adopted in substance in paragraph 2. Adopted in paragraph 3. Adopted in paragraph 4. Adopted in paragraph 5. 6.-17. Adopted in statement of the issues. 18. Adopted in paragraphs 6 and 7. 19.-36. Rejected as unnecessary, except as summarized in paragraph 6. 37. Addressed in paragraph 30. 38.-5O. Rejected as unnecessary, except as summarized in paragraph 36. 51.-57. Rejected as unnecessary, except at summarized in paragraph 7. 58.-6I. Adopted in paragraph 16. 62.-69. Rejected as unnecessary and contrary to the methodology in the rule. 70. Adopted in substance in paragraph 16. 71.-77. Rejected as unnecessary. 78. Rejected as contrary to the evidence and law. "Not normal" does not include high occupancy rates in several facilities. 79.-8I. Adopted in summary in paragraph 21. 82.-83. Rejected as immaterial. The evidence in this case supports maintenance of the balance, notwithstanding past practice. 84. Adopted in paragraph 15. 85.-103. Rejected as unnecessary. 104. Rejected as contrary to the law and evidence. 105. & 106. Adopted in paragraph 22. 107.-109. Adopted in paragraph 23. 110. & 111. Rejected as unnecessary. 112. & 113. Adopted in paragraph 24. Rejected as unnecessary. Adopted in substance in paragraph 25. 116.-149. Rejected as unnecessary. 150. Adopted in substance in paragraphs 26 and 29. 151.-161. Rejected as unnecessary. 162.-164. Adopted in substance in paragraph 27. 165.-171. Rejected as unnecessary. 172. Rejected as contrary to the evidence. 173.-180. Rejected as immaterial and unnecessary. 181. Adopted in paragraph 5. 182.-190. Rejected as unnecessary. Adopted in substance in paragraph 43. Rejected as contrary to the evidence. 193.-198. Rejected as unnecessary. 199. Rejected as contrary to the evidence. 200.-206. Rejected as unnecessary. Rejected as contrary to the evidence. Rejected as unnecessary. Adopted in paragraph 8. 210.-213. Rejected as unnecessary. 214. Adopted by implication in paragraph 33. 215.-218. Rejected as unsupported by the weight of evidence. Rejected as unnecessary. & 221. Rejected as contrary to the weight of evidence. 222. Adopted in summary in paragraph :28. 223.-238. Rejected as unnecessary. Orlando Regional Medical Center Adopted in paragraph 2. Adopted in paragraph 9. 3.-7. Rejected as unnecessary. Adopted in paragraph 9. Rejected as unnecessary. Adopted in substance in paragraph 42. Rejected as unnecessary. Adopted in substance in paragraph 42. Adopted in summary in paragraph 12. Adopted in paragraph 1. Rejected as ummaterial. Adopted in paragraph 6. Adopted in paragraph 4. Adopted in paragraph 15. Addressed in the preliminary statement. Adopted in paragraph 14. Rejected as unnecessary. 22.-24. Adopted in summary in paragraph 16. Adopted in paragraph 15 and conclusion of law #7. Adopted in substance in paragraph 21. Adopted in paragraph 15. Rejected as unnecessary. 29 & 30. Adopted in paragraph 9. Adopted in paragraph 20. Adopted in paragraph 22. Rejected as unnecessary. Adopted in paragraph 23. Adopted in paragraph 23. 36 & 37. Adopted in paragraph 24. Adopted in paragraph 11 and 33. Adopted in paragraph 8. Adopted in paragraph 11. 41 & 42. Rejected as unnecessary. Adopted in summary in paragraph 25. Rejected as unnecessary. Rejected as cumulative and unnecessary. Rejected as unnecessary. Adopted in summary in paragraph 26. 48.-52. Rejected as unnecessary. Adopted in paragraph 10. Rejected as contrary to the weight of evidence (the finding as to no alternatives). The finding regarding Park Place is unnecessary. Rejected as cumulative and unnecessary. Adopted in paragraph 42. Rejected as cumulative and unnecessary. Adopted in paragraph 9. Adopted in paragraph 7. Adopted in paragraph 36. Rejected as cumulative and unnecessary. Adopted in paragraph 30. 63.-66. Rejected as unnecessary. 67. Adopted in paragraph 47. The Department of Health and Rehabilitative Services 1. & 2. Addressed in Preliminary Statement. Adopted in paragraphs 6. and 9. Adopted in paragraph 24. Adopted in paragraph 20. Adopted in paragraph 36. 7.-9. Rejected as contrary to the weight of evidence. Adopted in paragraph 30. Rejected as contrary to the weight of evidence. Rejected as unnecessary. Adopted in paragraph 26. Rejected as contrary to the evidence. Adopted in paragraph 33. Adopted in substance in paragraph 32. Adopted by implication in paragraphs 30 and 34. Rejected as contrary to the evidence. Adopted in summary in paragraph 13. Adopted in paragraph 15. Rejected as contrary to the weight of evidence. Rejected as contrary to the evidence. The policy is found in HRS' Policy Manual. Rejected as immaterial. Adopted in paragraph 21. Rejected as unnecessary. 26 & 27. Adopted by implication in 23. Rejected as unnecessary. Rejected as contrary to the evidence. Rejected as immaterial. Rejected as unnecessary. Rejected as contrary to the evidence. 33 & 34. Rejected as unnecessary. Adopted in summary in paragraph 46. Rejected as contrary to the evidence, and immaterial (as to the ratio). Rejected as contrary to the definition "not normal" and immaterial. 38 & 39. Rejected as argument. Adopted in paragraph 16. Adopted in paragraph 20. Rejected as unnecessary. 43 & 49. Rejected as argument. Laurel Oaks Hospital Adopted in paragraph 1. Adopted in paragraph 2. Adopted in paragraph 3. Adopted in paragraph 4. Adopted in paragraph 5. Rejected as unnecessary. Adopted in paragraph 13. & 9. Addressed in Preliminary Statement. 10. Adopted in paragraph 18. 11.-21. Rejected as unnecessary and immaterial. Adopted in paragraph 6. Adopted in paragraph 8. Adopted in paragraph 7. Adopted in paragraph 9. Adopted in paragraph 11. Adopted in paragraph 9. Adopted in paragraph 10. Adopted in paragraph 11. Adopted in paragraph 9. Adopted in paragraph 14. Rejected as unnecessary. Rejected as contrary to the evidence. The term is "should", not "shall". Adopted in paragraph 15. 36 Adopted in paragraph 13. 37.-40. Adopted in paragraph 16. 41 & 42. Adopted in paragraph 18. 43 & 44. Rejected as immaterial and unnecessary. 45.-47. Rejected as argument and unnecessary. 48 & 49. Adopted in paragraph 21. Rejected as unnecessary. Adopted in substance in paragraph 16. 52 - 54. Rejected as unnecessary. 55 & 56. Adopted in summary in paragraph 20. 57.-61. Rejected as unnecessary or argument. 62.-65. Adopted in summary in paragraphs 20 and 23. 66 & 67. Adopted in paragraph 22. 68. Adopted in paragraph 23. 69.-72. Rejected as unnecessary or cumulative. 73 & 74. Adopted in substance in paragraph 24. 75. Rejected as contrary to the evidence. 76.-78. Rejected as unnecessary. Rejected as contrary to the evidence. Adopted in paragraphs 30 and 31. Adopted in paragraph 37. 82.-85. Rejected as unnecessary. 86. Adopted in paragraph 30. 87 & 88. Rejected as unnecessary. Adopted in paragraph 34. Adopted in paragraph 41. Adopted in paragraphs 38 and 39. 92.-95 Rejected as immaterial and unnecessary. Adopted in substance in paragraph 39. Adopted in paragraph 35. Adopted in paragraph 30. Rejected as cumulative. Rejected as contrary to the evidence. 101-112. Rejected as unnecessary. Adopted in paragraph 27. Rejected as unnecessary. Adopted in paragraph 35. 116-121. Rejected as cumulative or unnecessary. Health Management Associates1 Inc:. (HMA) 1. & 2. Adopted in paragraph 6. Adopted in paragraph 1. Adopted in paragraph 6. 5.-6. Rejected as unnecessary. 7.-11. Adopted in paragraph 9. Adopted in paragraph 10. Adopted in paragraph 12. Rejected as unnecessary. Adopted in paragraph 16. Adopted in paragraphs 15 and 23. Adopted in paragraph 25. Adopted in paragraph 16. Adopted in paragraphs 16 and 18. 20 Adopted in paragraph 19. Adopted in paragraph 15. Adopted in paragraph 21. 23 & 24. Rejected as unnecessary. 25 & 26. Adopted in paragraph 5. 27.-51. Rejected as unnecessary. 52. Adopted in paragraph 35. 53.-55. Rejected as unnecessary. COPIES FURNISHED: Stephen A. Ecenia, Esquire Michael J. Cherniga, Esquire Roberts, Baggett, LaFace & Richard 101 East College Avenue Tallahassee, FL 32301 James M. Barclay, Esquire Cobb, Cole & Bell 315 South Calhoun Street Tallahassee, FL 32301 Steven R. Bechtel, Esquire Mateer, Harbert & Bates 225 East Robinson Street Orlando, FL 32802 Edgar Lee Elzie, Esquire MacFarlane, Ferguson, Allison & Kelly First Florida Bank Building, Suite 804 Tallahassee, FL 32401 C. Gary Williams, Esquire R. Stan Peeler, Esquire Ausley, McMullen, McGehee, Carothers & Proctor 227 South Calhoun Street Tallahassee, FL 32301 John Brennan, Jr., Esquire Bonner & O'Connell 900 17th street, Suite 1000 Washington, D.C. 20006 Robert S. Cohen, Esquire Haben & Culpepper 306 North Monroe Street Tallahassee, FL 32301 John Miller, General Counsel HRS 1323 Winewood Blvd. R. S. Power, Agency Clerk HRS 1323 Winewood Blvd. Tallahassee, FL 32399-0700
The Issue The issue presented is whether Respondent HealthSouth Corporation engaged in an unlawful employment practice as to Petitioner Mary A. King, and, if so, what relief should be granted to Petitioner, if any.
Findings Of Fact Petitioner Mary A. King is a black female born on April 5, 1952. Respondent HealthSouth Corporation operates HealthSouth Rehabilitation Hospital of Tallahassee, located in Tallahassee, Florida. Petitioner was initially employed by HealthSouth in 1995 as a nurse tech or certified nursing assistant (CNA) in the nursing department. In 1998 she suffered a back injury while performing her regular CNA duties. She received treatment for the injury and returned to work with lifting limitations placed on her by her doctor. The limitations were inconsistent with her duties as a CNA and are still in effect. In 1999 Petitioner requested a transfer to the position of patient transporter aide due to her lifting limitations and concerns over her back injury. Her transfer request was granted, and she began to work as a patient transporter in the physical therapy department. She was pleased with the transfer. As a patient transporter, Petitioner was responsible for transporting patients to and from the locations in the hospital where they received treatment. She was not directly involved in the administration of treatment to patients. Subsequently, Petitioner was transferred from the physical therapy department to the occupational therapy department. Her position and job duties remained the same; the only change was in the types of patients Petitioner transported. On September 1, 2004, new federal regulations went into effect. These regulations directly impacted all in-patient rehabilitation hospitals, limiting the types of patients that HealthSouth could accept. The new regulations had a severe impact on HealthSouth, causing a dramatic drop in the patient census. The 76-bed facility had an average daily census of 65, and occasionally up to 76, prior to the effective date, but only a patient census in the 30s and 40s after the effective date of the new regulations. With the dramatic drop in patient census, HealthSouth had to dramatically reduce costs. Lynn Streetman, Administrator of HealthSouth Rehabilitation Hospital of Tallahassee, looked at a variety of ways in which costs could be reduced, including re- structuring contracts with outside vendors, reducing orders of medical supplies, reducing or substituting pharmaceutical orders, discontinuing the use of P.R.N. or as-needed staff, and, ultimately, reducing the workforce at the hospital. Streetman began reducing the workforce through attrition. As positions at the hospital became vacant, they were not filled if they were not critical to the functioning of the hospital and if there would not be a negative impact on patient care. Although reducing the workforce through attrition helped, more workforce reductions were necessary to respond to the hospital's declining patient census. In order to determine what positions to eliminate, Streetman preliminarily reviewed all positions throughout the facility and developed a list of positions she thought could be eliminated with minimal impact on the hospital's operations. The criteria she used included whether the position was a clinical or non-clinical position, whether the position was essential to the operation of the hospital or merely a luxury position, whether the duties of the position could be effectively absorbed by other positions in the hospital, and what impact the elimination of the position would have on patient care. Streetman next met individually with members of the hospital's senior management team to discuss the positions in their respective departments that she had preliminarily identified as appropriate for elimination. She obtained input from the team members as to whether it would be appropriate to eliminate those positions and what impact their elimination would have on the functioning of their respective departments. After she met with the team members to discuss the reduction in force and consider their input, Streetman made the decision to eliminate 13 positions at the hospital in December 2004 and January 2005. Three positions were eliminated in December, and ten were eliminated in January. Streetman was the person responsible for making the final decision about which positions to eliminate. Of those employees affected by the reduction in force, 6 were black and 7 were white. Of those employees affected by the reduction in force, 6 were over 40 years of age, and 7 were under 40 years of age. Each employee whose position was eliminated as a part of the reduction in force was informed that he or she would be eligible to purchase insurance benefits through COBRA for up to 18 months after his or her employment with the hospital ended, each was paid for any accrued paid time off, and each eligible employee received severance benefits in accordance with an identical formula: one week of pay for every year of service up to a maximum of ten years. With the exception of a part-time employee who was not eligible, all employees affected by the reduction in force received benefits, paid time off payments, or severance payments in accordance with these policies. One of the positions selected for elimination was that of patient transporter. When Streetman was employed by HealthSouth, there had been three patient transporters. Two of the three positions had already been eliminated through attrition, and Petitioner was the only remaining patient transporter. Since Petitioner's position was eliminated, HealthSouth has not hired anyone as a patient transporter. Petitioner's position was selected for elimination because it was not essential to the operation of the hospital, was not responsible for any direct patient care, and was a luxury position for the facility. As verification that the elimination of Petitioner's position would not have a negative impact on the level of patient care at the hospital, Streetman considered that therapists at the hospital had already been assisting in the transportation of patients to and from treatment and that the previous reduction of two patient transporters through attrition did not negatively impact patient care at the hospital. Petitioner's job duties were absorbed into the daily work routine of therapists in the outpatient therapy department. Therapists simply transported their own patients rather than have Petitioner (and the other transporters who had previously been phased out through attrition) perform this function for them. Petitioner was informed of the decision to eliminate her position on November 30, 2004, by Donna Crawford, Director of Clinical Services, and Cindy Cox, Occupational Therapy Team Leader. Crawford informed Petitioner that Petitioner's position was being eliminated, that Petitioner would receive severance pay in accordance with her years of service, that Petitioner would be paid for all of her accrued paid time off, and that Petitioner was welcome to apply for any other open position at the hospital for which she was qualified. Crawford also told her that Petitioner was welcome to discuss any open positions with Jackie Chaires, Human Resources Director at the hospital. Petitioner was paid 360 hours of severance pay (nine weeks pay for nine years of service), was compensated for all accrued paid time off, and was sent a letter informing her of her right to purchase insurance under COBRA for up to 18 months after her employment with Respondent had ended. Petitioner also applied for and received unemployment benefits as a result of her job being eliminated. After Crawford advised her that her position had been eliminated, Petitioner went to talk with Jackie Chaires, a black female. Petitioner told Chaires that she did not understand why she had been laid off and asked about any available positions. During that conversation, in an attempt to console Petitioner according to Chaires' affidavit but as an act of discrimination according to Petitioner's testimony, Chaires suggested that Petitioner could also retire and let Petitioner's husband take care of her. At no time did Chaires suggest that Petitioner's husband's situation, his income, or Petitioner's age were factors in HealthSouth's decision to eliminate her position as part of its reduction in force. Moreover, Chaires was not involved in any way in the selection of Petitioner's position for elimination. At some point after being informed that their positions were eliminated, Petitioner, along with Kim Spencer, another employee affected by the reduction in workforce, inquired as to whether there were positions available in the nursing department. However, there were no positions available in that department, and both Petitioner and Spencer were informed that their requests could not be accommodated. Spencer is a white female. HealthSouth has a written policy prohibiting employees from giving letters of recommendation. At some point after being informed that her position was eliminated, Petitioner asked Cynthia Cox, her direct supervisor, for a letter of recommendation. Cox agreed to give her one even though she was uncertain as to the correct procedure, but after ascertaining from the human resources department that a recommendation would be against corporate policy, Cox told Petitioner she could not give her the letter and told Petitioner that it was against corporate policy. That policy is clearly stated in the hospital's employee handbook, which Petitioner had been given. At no time prior to her filing her charge of discrimination with the Florida Commission on Human Relations did Petitioner inform any of her supervisors that she felt she was being discriminated against in any way based on either her race or her age. Patsy Kitchens is a white female who is the same age as Petitioner. HealthSouth terminated her employment at the same time as it terminated Petitioner's employment as part of the same reduction in force.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that Petitioner failed in her burden of proof and dismissing the petition filed in this cause. DONE AND ENTERED this 24th day of March, 2006, in Tallahassee, Leon County, Florida. S LINDA M. RIGOT Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of March, 2006. COPIES FURNISHED: Cecil Howard, General Counsel Florida Commission on Human Relations 2009 Apalachee Parkway, Suite 100 Tallahassee, Florida 32301 Denise Crawford, Agency Clerk Florida Commission on Human Relations 2009 Apalachee Parkway, Suite 100 Tallahassee, Florida 32301 Mary King 1039 Idlewild Drive Tallahassee, Florida 32311 L. Traywick Duffie, Esquire Wesley E. Stockard, Esquire Hunton & Williams, LLP Suite 4100 600 Peachtree Street, Northeast Atlanta, Georgia 30308-2216
The Issue The issues are whether Respondent violated Sections 458.331(1)(m), 458.331(1)(q), 458.331(1)(s), and 458.331(1)(t), Florida Statutes, and if so, what penalty should be imposed.
Findings Of Fact Petitioner is the state agency charged with regulating the practice of medicine pursuant to Section 20.42, Florida Statutes, and Chapters 455 and 458, Florida Statutes. Respondent is licensed to practice medicine in the state of Florida. She holds license number ME 0028693. 3 Respondent, a native of Manila, Philippines, attended medical school and received her M.D. degree in 1965 from Manila Central University. She completed an internship and residency in OB-GYN in Manila before immigrating to the United States in 1968. Respondent became a citizen of the United States in 1972. She obtained her license to practice medicine in the state of Florida in 1973. Thereafter, Respondent completed a residency in general practice in Portsmouth, Virginia, and a residency in pathology in Norfolk, Virginia. She is not board certified. Prior to October 23, 1996, Respondent was engaged in a solo practice of general and family medicine. Except for this proceeding, Respondent has never been the subject of disciplinary action in connection with her medical license. She has never had a medical malpractice claim asserted against her. Fiorinal No. 3 or Fiorinal with codeine is a legend drug as defined by Section 465.003(7), Florida Statutes. Fiorinal No. 3 is also a Schedule III controlled substance which is listed in Section 893.03, Florida Statutes. In March of 1991, Respondent began treating Patient G.C. for symptoms related to menopause and anxiety. Respondent's record of G.C.'s initial visit indicates that G.C. is allergic to penicillin and codeine. G.C. made 46 visits to Respondent's office from March 12, 1991 through February 21, 1995. On 37 of these visits, Respondent's records note G.C.'s allergy to codeine. On September 19, 1991, G.C. complained that her knee and calf on her right leg were hurting. Respondent ordered a venogram and prescribed Lorcet Plus for G.C. On December 13, 1991, G.C. complained that she had a cough, sore throat, and congestion. Respondent prescribed Lorcet Plus for G.C. in addition to other medication. G.C. made 15 visits to Respondent's office from June of 1995 through September of 1996. Respondent's records of these visits do not note G.C.'s allergy to codeine. Respondent did not charge G.C. for six of these visits. G.C. complained of pain and swelling in her left elbow on October 31, 1995. Respondent treated G.C. for bursitis and gave her a prescription for Fiorinal No. 3. Respondent did not charge G.C. for this visit. G.C. complained of pain in her elbow again on December 19, 1995. Respondent treated G.C. for bursitis and prescribed Fiorinal No. 3. Respondent did not charge G.C. for this visit. Respondent's records indicate that she saw G.C. for the last time on September 20, 1996. The records do not indicate the purpose of the visit. There is a notation which states, "Last time I'll give this Rx to her," followed by three prescriptions including Fiorinal No. 3. Respondent testified that she prescribed Fiorinal for G.C. because she had previously taken Lorcet with no problems or reactions. Lorcet, like Fiorinal, contains codeine. Allergic reactions to codeine can range from mere rashes to life-threatening problems. Accordingly, prescribing Fiorinal No. 3 for G.C. was contraindicated. Respondent concedes that G.C.'s medical chart was deficient in several ways. It failed to contain an adequate medical history, failed to reflect proper physical examinations, failed to reflect adequate tests and lab studies, and failed to fully document conditions/symptoms to warrant treatment rendered, including medications prescribed. Respondent and G.C. developed a social relationship in 1995. Respondent and G.C. were taking trips together, going out to eat together, and seeing each other quite often in a social setting. G.C. told Respondent that some investors in Sicily wanted to buy Respondent's medical practice. Respondent and the foreign investors could not agree on the terms of sale. Respondent lent G.C. a large sum of money in cash. G.C. would not re-pay the loan or acknowledge the debt. The friendship between G.C. and Respondent began to deteriorate. In March of 1996, G.C. contacted Lynn Flanders, a narcotics investigator from the Escambia County Sheriff's Department. G.C. informed Ms. Flanders that Respondent had written a prescription for Fiorinal No. 3 in G.C's name with the intention of diverting the medicine for her own consumption. The prescription was dated January 15, 1996. Respondent's records do not indicate that G.C. made a visit to Respondent's office in January of 1996. G.C. planned to meet Respondent at a restaurant on March 19, 1996. Before the meeting, Investigator Flanders had the prescription filled at a local drug store. She equipped G.C. with an audio listening device. Ms. Flanders also searched G.C.'s car and person. Finding no drugs or money in G.C.'s possession, the investigator gave the bottle of Fiorinal capsules to G.C. and sent her to meet Respondent at the restaurant. Investigator Flanders seated herself in the restaurant so that she could observe Respondent and G.C. during the meal. Respondent never left the table. Ms. Flanders was unable to observe G.C. when the confidential informant went to the ladies' room. The investigator did not see G.C. hand the prescription bottle to Respondent. After Respondent and G.C. ate lunch, they left the restaurant. Investigator Flanders subsequently discovered that the audio tape was inaudible. Ms. Flanders told G.C. to call the sheriff's office if the doctor gave her another prescription and asked her to get it filled. As referenced above, Respondent gave G.C. a prescription for Fiorinal No. 3 on September 20, 1996. Although the prescription was in G.C's name, Respondent intended to consume the medicine herself. G.C. contacted Investigator Flanders again. She told Ms. Flanders about the prescription. The investigator took the prescription and had it filled at a local drug store. G.C. planned to meet Respondent at another restaurant on September 15, 1996. Before the meeting, Investigator Flanders equipped G.C. with an audio listening device, searched her car and person, gave her the bottle of Fiorinal No. 3 capsules, and sent her to meet Respondent. Investigator Shelby and his partner arrived at the restaurant before G.C. or the Respondent. Investigator Shelby positioned himself in the restaurant so that he could observe G.C. and Respondent. Investigators located outside of the restaurant monitored the listening device. They recorded the conversation between Respondent and G.C. Investigator Shelby saw G.C. take the bottle containing 30 Fiorinal No. 3 capsules from her shirt pocket and pass it under the table to Respondent. Respondent leaned forward, accepted the bottle under the table, and placed it in her purse. Respondent left the restaurant and entered her vehicle. She was then placed under arrest. The bottle of medicine, containing 30 capsules, was recovered from her purse. Respondent's testimony that she did not intend to divert the narcotic for her own consumption is not persuasive. Criminal charges against Respondent are being processed through the Pretrial Intervention Program for nonviolent first offenders. Charges against Respondent will be dismissed if she does not commit any offense for ten months after March 27, 1997, and provided that she satisfactorily completes the program. As part of the ten-month probation, Respondent agreed to voluntary urinalysis and compliance with the mandates of her recovery program through the Physician's Recovery Network (PRN). Respondent has a history of chronic daily headaches and hypertension. She has been taking Fiorinal No. 3 which contains codeine and aspirin since 1972. Respondent was diagnosed with a bleeding ulcer just before her arrest in September of 1996. Her treating physician prescribed Fioricet which contains codeine but no aspirin. Respondent accepted this prescription without telling her treating physician about her codeine dependency. Respondent divorced her husband for the second time in August of 1996. Around the time of her arrest, Respondent experienced a lot of stress as a result of her relationship with her ex-husband. PRN is Florida's impaired practitioner program. Pursuant to contract with Petitioner, PRN offers educational intervention, treatment referral, and rehabilitation monitoring services for health care workers in Florida. The PRN's director, Dr. Roger Arthur Goetz, became aware of Respondent's arrest on October 3, 1996. On his recommendation, Respondent voluntarily agreed to undergo an evaluation by the following three doctors in Pensacola, Florida: (a) Dr. Rick Beach, an addiction specialist; (b) Dr. Doug H. Fraser, a board certified psychiatrist; and (c) Dr. Thomas Meyers, a psychologist. Dr. Beach and Dr. Meyers agreed that Respondent was impaired due to a substance abuse problem. All three doctors agreed that Respondent suffered from a depressive disorder and other psychological problems. Dr. Beach, the addictionologist, determined that Respondent had a dysfunctional relationship with her ex-husband, an unhealthy relationship with G.C., and a probable dependence on opiates. Dr. Fraser, Respondent's psychiatrist, diagnosed Respondent with generalized anxiety disorder and dysthymia. Generalized anxiety disorder is a life-long disorder from which the patient experiences a chronic sense of nervousness, tension, and worry. A patient suffering from this condition will have some physical symptoms such as gastrointestinal problems, headaches, muscle tension, or difficulty sleeping. Dysthymia is also a chronic life-long disorder which causes patients to suffer from chronic minor depression more days than not. On October 23, 1996, Respondent entered into a Voluntary Agreement to Withdraw from Practice with Petitioner. This agreement states that Respondent shall cease practicing medicine until Petitioner issues a Final Order in this case. On November 4, 1996, Respondent entered Jackson Recovery Center in Jackson, Mississippi. This facility was an in-patient substance abuse treatment center. Respondent's treating physician, Dr. Lloyd Gordon, admitted her for treatment with the following diagnosis: (a) Axis I, opioid dependence and dysthymia with anxiety; and (b) Axis II, avoidant and dependent traits. Respondent subsequently entered a residential treatment program, the Caduceus Outpatient Addictions Center (COPAC), in Hattiesburg, Mississippi. COPAC specializes in the treatment of physicians and other health care workers who abuse controlled substances. Respondent remained in this residential program for almost three months. She was discharged from COPAC on February 21, 1997. Respondent signed an Advocacy Contract with PRN the day that she was discharged from COPAC. The contract established a five-year monitoring period during which Respondent agreed to abide by certain terms and conditions, including but not limited to, the following: (a) to participate in a random urine drug and/or blood screen program; (b) to abstain from the use of controlled substances; (c) to attend group self-help meetings such as AA or NA; (d) to attend continuing care group therapy; and (e) to attend a twelve-step program for recovering professionals. In March of 1997, Respondent went to her office to see patients. She wrote prescriptions for some of these patients. She was under the impression that she could return to her practice because she had been therapeutically cleared to practice by COPAC. PRN learned that Respondent was practicing medicine in violation of her agreement to voluntarily withdraw from practice. PRN advised Respondent that she could not go into her office to see patients or write prescriptions until Petitioner gave her that right. Respondent immediately ceased her practice. Upon her discharge from COPAC, Respondent continued to see her psychiatrist, Dr. Fraser. In May of 1997, Respondent told Dr. Fraser that she was experiencing forgetfulness and panic attacks. She complained of having difficulty making decisions and sleeping. Respondent was feeling depressed and having suicidal thoughts. Dr. Fraser increased her antidepressant medication and referred her to a local counseling center. Respondent went to visit her family in California from May 25, 1997 through June 6, 1997. She did not tell Dr. Fraser that she was going out of town. However, she did tell one of the therapists from Dr. Fraser's office about the trip. Respondent saw Dr. Fraser again on June 18, 1997, when she returned to Pensacola. He made a tentative diagnosis of bipolar disorder and began appropriate treatment. Respondent was feeling better when she saw Dr. Fraser on June 25, 1997. Respondent moved to California to live with her sister on July 6, 1997. This move was necessary because Respondent had lost her home as well as her practice. While she was in California, Respondent saw a psychiatrist, Dr. Flanagan. She also attended AA meetings in California. Respondent returned to Pensacola a week before the hearing. She saw Dr. Fraser on August 21, 1997. Dr. Fraser was not aware that Respondent had been living in California and receiving treatment from Dr. Flanagan. During her visit with Dr. Fraser, Respondent admitted that she had a craving for codeine when she was tense. However, she denied use of any prescription drugs except those being currently ordered by her doctors. Respondent reported on-going mood swings even though Dr. Flanagan had increased her Depakote. She verbalized fantasies involving violent behavior toward G.C. Respondent revealed that she was experiencing grandiose delusions. She admitted that she was not ready to return to medical practice. Dr. Fraser concurs. Respondent needs intensive individual psychotherapy for at least six months on a weekly basis. At the time of the hearing, Respondent had not begun such therapy. The record indicates that Respondent was a caring and compassionate physician. Respondent's elderly patients testified that Respondent treated them with extraordinary concern when other doctors refused. Respondent's colleagues in nursing home settings attested to her skill and proficiency in the care of the elderly. None of these patients or associates were aware of Respondent's drug dependence or psychological problems before her arrest. Respondent is "in recovery" for her drug dependence. However, she is not mentally, emotionally, or psychologically ready to practice medicine with reasonable skill and safety for her patients.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that Petitioner enter a Final Order indefinitely suspending Respondent's license to practice medicine until she is able to demonstrate the ability to practice with reasonable skill and safety followed by five years of probation with appropriate terms, conditions, and restrictions, and imposing an administrative fine in the amount of $4,000. DONE AND ENTERED this 22nd day of October, 1997, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of October, 1997. COPIES FURNISHED: John E. Terrel, Esquire Agency for Health Care Administration Post Office Box 14229 Tallahassee, Florida 32317-4229 James M. Wilson, Esquire Wilson, Harrell and Smith, P.A. 307 South Palafox Street Pensacola, Florida 32501 Marm Harris, Executive Director Department of Health 1940 North Monroe Street Tallahassee, Florida 32399-0792 Angela T. Hall, Agency Clerk Department of Health 1317 Winewood Boulevard, Building 6 Tallahassee, Florida 32399-0700
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 CPC is an international health care company specializing in psychiatric care. It operates 25 hospitals in the United States and three in Great Britain. Its proposed Orlando hospital would be its fourth Florida facility. CPC has not yet selected a site for the proposed facility, but anticipates a South Orange County or Osceola County location. Site factors such as cost, services and zoning are obviously not determined and the estimated project cost of $6,776,125 is subject to substantial change. It has prepared basic architectural plans, however, which were shown to provide adequate space and necessary health care features for its proposal. The CPC facility would be "freestanding" and not a part of any larger medical complex. It would provide a range of psychiatric and substance abuse services for adolescent and adult patients, emergency evaluation, family therapy and follow-up care. CPC policy provides that up to 5 percent of gross annual revenue may be allocated for indigent care. Thus, some indigent patients could be treated. However, no specific commitment in this regard was made. CPC has adequate funds to finance this project "in-house" and anticipates no difficulty in obtaining necessary medical staffing. In view of this company's resources and experience, its ability to fund this project and adequately staff it are reasonably certain. OGH is a nonprofit 171-bed osteopathic acute care facility located in Orange County, seven miles east of downtown Orlando. It has been operated as a nonprofit facility since 1945, and has existed at its present location since 1960. In 1981, HRS issued a Certificate of Need authorizing OGH to add 70 medical-surgical beds to its facility by constructing four new floors to an existing building, including a top (sixth) floor which is now proposed for the OGH substance abuse program. The additional cost of construction is estimated to be $500,000. OGH proposes to apply osteopathic principles to its substance abuse program. Of the approximately 60 doctors of osteopathy in Orange County, most are admitted to the staff of OGH and not to the allopathic facilities in Orange County, which require that doctors of osteopathy have postgraduate training in an allopathic residency program. The proposed OGH facility would thus be the only one available to these physicians and would provide an opportunity for osteopathic practice and training in substance abuse. This would also be the only program of this type available to substance abuse patients who seek osteopathic treatment in Orange County. There are patient care advantages to locating a substance abuse program within an acute care hospital such as OGH, since patients who require substance abuse treatment frequently require other services provided by a general hospital. The program proposed by OGH would have such auxiliary hospital services readily available where the CPC program would not. OGH has made tentative arrangements for the additional health care and management personnel required by its proposal. OGH will provide some indigent care and anticipates that it will continue to experience a "bad debt" rate of about 9 per cent, which includes indigent care costs. Intervenor, Florida Hospital (FH), consists of three major campuses in the Orlando metropolitan area, (Orlando, Orange County; Altamonte Springs, Seminole County; and Apopka, Orange County). FH is a not-for-profit tertiary care hospital owned by the Seventh Day Adventist Church. It has been in operation for approximately 75 years and currently has 943 beds. As of the date of the hearing, FH had 99 beds in its facility dedicated to psychiatric and substance abuse services with 2 in Altamonte Springs, 51 in the main Orlando campus building and 24 in a building adjacent to the Orlando campus main hospital building. FH has been providing psychiatric and substance abuse services for approximately 25 years, but does not currently have any beds designated specifically for substance abuse patients. At the time of the hearing, FH had under construction and scheduled to be completed in October, 1984, a 56-bed, freestanding psychiatric facility which is to be located approximately 600 feet from the main Orlando campus building, consisting of 24 adult general psychiatric beds, 16 substance abuse beds and 16 adolescent psychiatric beds. During FH's current fiscal year, which began January 1, 1981, there has been a decrease in patient days in the hospital in general and a decline in occupancy in the psychiatric treatment program. At the time of the hearing, the occupancy level for the pregram was approximately 60 percent and had been less than 75 per cent during the calendar years 1982, 1983 and 1981 (through August), with a projection of 62 percent for all of 1984. The opening of the facility by Intervenor, West Lake Hospital (WLH) in May, 1984, has had the effect of reducing the number of patient days and percentage of occupancy at FH. Intervenor, WLH, is located in Longwood, Seminole County, Florida, (HRS District VII) and provides psychiatric and substance abuse treatment. Forty-eight percent of its patients come from Orange County and it estimates that as many as 60 percent of those patients would go to another facility in Orange County, were one available. Since its opening in May, 1984, the WLH facility has had an occupancy level of less than 75 per cent for its 80-bed facility. Both intervenors oppose grant of the CPC application, but neither opposes grant of the OGH application. HRS Rules 10-5.11(25)(d) and 27(f), Florida Administrative Code (FAC), set forth the methodology to be used in computing bed need for short term psychiatric and substance abuse treatment. Beds are allocated within each health planning district on the basis of a five year projection. The proposed facilities would be located in HRS Health Planning District VII. Thus, projections, allocations and computations are based on health planning data applicable to this district. Although CPC seeks to create a sub-district consisting of Orange and Osceola Counties for evaluation of its application, there is no basis in these rules or in existing health plans for this proposed subdivision. The projected bed need for District VII (1989) is as follows: A. Short term psychiatric Existing and approved beds 368 Tentatively approved beds 60 1/ Total existing and approved 428 Total need 454 2/ Net need 26 B. Short term substance abuse Existing and approved beds 40 Tentatively approved beds 26 3/ Total existing and approved 66 Total need 78 4/ Net need 12 The above referenced rules, while providing for a minimum number of psychiatric beds in general hospitals, require no corresponding minimum number of beds in freestanding specialty hospitals, nor do they establish any preference for freestanding hospital beds. Should a freestanding facility be viewed as desirable, the new psychiatric treatment center at Florida Hospital is essentially freestanding, and would meet any such need. Further, the inventory of short term psychiatric beds indicates that the limited existing need is within the category of general hospital beds, rather than the specialty hospital category. HRS Rule 10-5.11(25)(d)5, F.A.C. provides that no additional short term psychiatric beds shall normally be approved unless the average annual occupancy rate for all existing psychiatric beds in the district exceeds 75 percent (for adult services) or 70 percent (for adolescent and children's services) for the preceding twelve months. Virtually all of the psychiatric beds in District VII have been for adult services. For calendar year 1983, the occupancy rate for short term psychiatric beds in District VII was approximately 73.5 percent. For the 12-month period from July, 1983 through June, 1984 the occupancy rate had declined to 71.7 percent. Thus, the occupancy standard for short term psychiatric beds was not met. Similarly, Rule 10-5.11(27)(h)1, F.A.C. provides that no additional inpatient substance beds will normally be approved unless the average occupancy rates for all existing hospital based substance abuse inpatient beds is at or exceeds 80 percent for the preceding twelve months. Since the occupancy rate for substance abuse beds during the 12-month period of July, 1983 through June, 1984 was in the low sixties, this standard was not met.
Recommendation Based on the foregoing, it is RECOMMENDED that the Department of Health and Rehabilitative Services enter a Final Order granting the application of Orlando General Hospital to establish a 26-bed substance abuse treatment program and denying the application of Community Psychiatric Centers to construct a 105-bed short term psychiatric and substance abuse facility in District VII. DONE and ENTERED this 20th day of December, 1984 in Tallahassee, Florida. R. T. CARPENTER Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of December, 1984.
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
