The Issue The issue is whether Respondent is guilty of being unable to practice as a physician assistant with reasonable skill and safety due to illness or use of alcohol or drugs, in violation of Section 458.331(1)(s); inappropriately prescribing medicine to family members by using the name of his supervising physician, in violation of Section 458.331(1)(q); and engaging in fraud in the practice of medicine by obtaining controlled substances through fraudulent means, in violation of Section 458.331(1)(k). If so, an additional issue is what penalty should be imposed.
Findings Of Fact At all material times, Respondent has been licensed as a physician assistant, holding license number PA 0002975. When applying for his license, Respondent supplied the Board of Medicine with certain information that resulted in a referral of Respondent to the Physician’s Recovery Network (PRN) for a psychiatric evaluation. The initial evaluation was completed on May 5, 1995. The evaluating psychiatrist determined that Respondent suffered from opiate dependency, probably as a result of some injuries that he had suffered years earlier. The psychiatrist concluded that Respondent could undergo outpatient treatment in an intensive program where he would be seen 3-5 times weekly. At the end of May, on the advice of the evaluating psychiatrist, Respondent entered a six-week intensive outpatient treatment in a chemical dependency program at Charter Glade Hospital. He also commenced attending meetings of Alcoholics Anonymous and Narcotics Anonymous and undergoing random drug screens. For the summer of 1995, Respondent had drug-free urine and seemed to be doing well. The evaluating psychiatrist informed the PRN that Respondent could safely return to practice, and the Board of Medicine certified Respondent to practice as a physician assistant. By early summer, 1996, the evaluating psychiatrist, who had continued seeing Respondent, began to suspect that something was not quite right with him. Respondent had begun acting hypomanically, developing, for example, a get-rich-quick scheme that was not well-founded in reality. During the summer of 1996, Respondent began using the name of his supervising physician to call in prescriptions for Vicodin, Trimox, and Ultram in the name of Respondent’s wife. These were fraudulent acts to gain possession of these narcotics for use by Respondent. Respondent’s physician employer terminated Respondent’s employment in June 1996 following bizarre behavior on Respondent’s part in professional settings involving patients and prospective patients. Respondent resisted all efforts by his evaluating psychiatrist to undergo reevaluation and retreatment, if necessary. Instead, Respondent became highly suspicious and unstable. On October 4, 1996, Petitioner entered an order of emergency suspension of Respondent’s license.
Recommendation It is RECOMMENDED that the Board of Medicine enter a final order revoking Respondent’s certificate as a physician assistant. ENTERED in Tallahassee, Florida, on June 4, 1997. ROBERT E. MEALE 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 on June 4, 1997. COPIES FURNISHED: Joseph S. Garwood Senior Attorney Agency for Health Care Administration Post Office Box 14229 Tallahassee, Florida 32317-4229 Daniel Kulick 4641 Southwest Santa Barbara Place Cape Coral, Florida 33914 Dr. Marm Harris, Executive Director Board of Medicine 1940 North Monroe Street Tallahassee, Florida 32399-0792 Jerome Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308-5403
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
Findings Of Fact At all times material hereto, Respondent has been licensed by the State of Florida to practice medicine and surgery, having been issued license number NE 14637. Respondent was born in Cuba and is a Catholic. He specializes in gynecology and obstetrics and, until March 1983, had hospital privileges at Mercy Hospital in Miami, Florida. Respondent is married and has seven children, most of whom are adults. He is supporting all of them, including grandchildren, and at the time of the formal hearing in this cause there were 12 people living in Respondent's home whom he was supporting. Respondent has not had a vacation since 1970. In approximately the late summer of 1982, Dr. Jose Carballo was walking from his office at the Mercy Hospital complex to the hospital when he encountered Respondent. Respondent grabbed Carballo's arm and appeared extremely agitated. Respondent advised Carballo that the administration at Mercy Hospital was anti-Catholic or anti-Christian, since several of the stained glass windows in the chapel in the hospital had been covered with plywood. Respondent further advised Carballo that Respondent had asked the priest in the chapel why that had been done, and the priest had advised Respondent the windows on that side of the chapel had been covered as a precaution and would remain covered until the end of the hurricane season. The windows on the side of the chapel opposite the direction of potential hurricane winds had not been covered. Although the priest had given that explanation to Respondent, Respondent still insisted that the real reason was a conspiracy on the part of the hospital administration to prevent Catholics from looking at the windows. Since Carballo had known Respondent for a number of years, he noted on that occasion that Respondent acted and appeared to be a different person. At the time, Carballo believed that Respondent was on the verge of a breakdown. During late 1982 and early 1983, both the chief of obstetrics at Mercy Hospital and the chief of the department of anesthesiology at Mercy Hospital noted a number of occasions when Respondent appeared to be engaged in bizarre behavior. They observed incidents of violent behavior and heard much talk of Communists, Zionists, and conspiracy on different occasions when they encountered Respondent. Respondent was seen in the hospital on occasions when he appeared to be very heavily medicated, and observations were made of the changes in Respondent's demeanor, in his coordination, and in his speech. Respondent appeared depressed and introverted, and even his manner of walking had slowed. Respondent's violent behavior was triggered by small incidents, and he would accuse someone of being a Communist simply if that person wore a red tie. On one occasion, Respondent accused one of the labor room nurses of poisoning his cup of tea. By late 1982, both the chief of obstetrics and the chief of the department of anesthesiology had formed the opinion that Respondent was unable to practice medicine with reasonable skill and safety. In January 1983, Respondent performed an emergency cesarean section at Mercy Hospital. During the course of that delivery, he cut the baby's ear and the area of the baby's head behind his ear. Dr. Roger Walker saw Respondent when he entered the operating room and saw him again when he left the operating room. Respondent appeared depressed, introverted, and slowed. On March 18, 1983, Respondent's hospital privileges at Mercy Hospital were suspended. During late 1982 and early 1983, Respondent realized that he was depressed and started treatment with Dr. Carlos Diaz Silvia. Diaz-Silvia believed at the time that Respondent might present a danger to himself and to others and placed him on anti psychotic drugs. Subsequent to Mercy Hospital's suspension of Respondent's staff privileges, the Department of Professional Regulation ordered Respondent to undergo a three-day evaluation at South Miami Hospital's addiction treatment program under Dr. Delores Morgan. As a result of the mental and physical examinations conducted during that three-day evaluation, it was determined that Respondent had no chemical dependency on alcohol or drugs but rather that Respondent was suffering from a major depression episode. It was further determined that the medication given to Respondent by Dr. Diaz-Silvia had been one of the major causes of the determination by the administration at Mercy Hospital that Respondent was incompetent to practice medicine. Instead, Respondent was placed on Elavil, an antidepressant drug which affects the mood centers of the brain and removes depression and allows a person to function. It was also determined that Respondent must, in addition to taking the Elavil, remove the stressors which had caused his depression by reducing his medical practice, by requiring some of his grown children and their families to begin supporting themselves so Respondent would not have to work continuously with no vacations in order to support all of the adult members of his family, and by Respondent undergoing regular therapy with a psychiatrist who could help Respondent resolve some of his problems and monitor Respondent's need for an antidepressant drug. Respondent was released from South Miami Hospital's program to the care of psychiatrist Paul Daruna. Respondent started treatment with Daruna on a weekly basis on June 1, 1983. During the next 11 sessions, Respondent showed marked improvement with the Elavil prescribed for him: his sleep pattern improved, and his mood visibly improved. It was determined that Respondent had become able to make rational decisions and presented no danger to himself or to others. By October 13, 1983, Respondent's prognosis was excellent, and Daruna believed that Respondent would be able to practice medicine with reasonable skill and safety so long as he continued his treatment regimen, including both therapy and the antidepressant drug, and so long as Respondent took whatever steps were necessary to remove the stressors in his life caused by his heavy practice and the burdensome demands of his family. Daruna has not seen Respondent since October 13, 1983, and Respondent has not been under the care of any other psychiatrist. Dr. Delores Morgan saw Respondent on February 8, 1984, two days before the formal hearing in this cause. Respondent was still taking his Elavil but was not treating with a psychiatrist. Respondent had voluntarily reduced his office practice and had relocated his office so that he was now practicing with a general practitioner, Dr. Harry Rosado, who was voluntarily monitoring Respondent's practice. Although Respondent's privileges were still under suspension at Mercy Hospital, Respondent was practicing at Baptist Hospital and had performed approximately 54 deliveries during 1983 while practicing only three days a week. Dr. Morgan noted Respondent's marked improvement and Respondent's continued cooperation. However, she determined that Respondent was still in need of psychiatric follow-up so long as he was on medication in order that he could be monitored for change. She further believed that Respondent's practice of medicine should remain restricted to the level it is at this time until his treating psychiatrist had determined that it was appropriate for him to again engage in the full-time practice of medicine. She further recommended that monitoring of Respondent's practice continue, and believed most strongly that it was still imperative that Respondent's family, comprised primarily of grown children, start to assume some responsibility for their own lives and not continue to place the total burden on their father. Although Respondent admitted at the formal hearing that he agrees with Dr. Morgan's assessment of his prognosis and that he has voluntarily restricted his practice and is voluntarily taking his medication, Respondent still does not believe that he was impaired during the approximate six-month period in question, does not believe he was "slowed down" during that time period, and does not believe that he was irrational or paranoid concerning the stained glass window episode. Accordingly, although Respondent has voluntarily imposed on himself some of the restrictions recommended in order that he continue to function well, it appears that Respondent still does not fully appreciate the extent to which his mental state had deteriorated during the time before he was involved in any treatment regimen. During late 1982 and early 1983, Respondent was mentally incompetent due to a severe depressive state and inappropriate treatment which made him more incompetent to the extent that he was unable to practice medicine with reasonable skill and safety to patients.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding Respondent guilty of the allegations contained in the Administrative Complaint filed against him and placing Respondent's license to practice medicine on probation under such terms and conditions as may be considered necessary by the Board of Medical Examiners, including continued psychiatric care and reporting to the Board of the status of the health of Respondent, with restrictions upon his medical practice as may be recommended in the future by his treating physicians in light of his mental and physical status. DONE and RECOMMENDED this 22nd day of May, 1984, in Tallahassee, Leon County, Florida. LINDA M. RIGOT, 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 22nd day of May, 1984. COPIES FURNISHED: Joseph W. Lawrence, II, Esquire Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Luis Fernandez, Esquire 2600 SW Third Avenue, Suite 203 Miami, Florida 33129 Frederick Roche, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Dorothy Faircloth, Executive Director Board of Medical Examiners 130 North Monroe Street Tallahassee, Florida 32301
Findings Of Fact The parties further stipulated at the hearing that the billing for which Shands seeks payment does not include charges for services rendered during the months Linda Sue Austin was being treated as an out-patient at Shands. All other facts, as stipulated to by the parties and as set forth above, are hereby adopted.
Findings Of Fact Based on the stipulations 3/ and admissions of the parties, the exhibits received in evidence, and the testimony of the witnesses at hearing, I make the following findings of fact: FIRST HOSPITAL's address is the World Trade Center, Suite 870, Norfolk, Virginia 23510. CHARTER GLADE HOSPITAL is a freestanding psychiatric hospital located in Fort Myers, Lee County, Florida. CHARTER GLADE has (80) licensed psychiatric beds, and twenty-four (24) licensed substance-abuse beds. The service area served by CHARTER GLADE includes Collier, Lee, and Charlotte Counties. The address of HRS is 1317 Winewood Boulevard, Tallahassee, Florida 32301. HRS is responsible for the administration of the "Health Facilities and Health Services Planning Act," Section 381.493, et seq., Florida Statutes (the Act), and has implemented its provisions through the adoption of rules set forth in Chapter 10, Florida Administrative Code. FIRST HOSPITAL applied to HRS for a certificate of need (CON) for the establishment of a freestanding specialty hospital in Naples, Florida. Pursuant to the Act, a CON is required before FIRST HOSPITAL can establish its specialty hospital. FIRST HOSPITAL's application was denied by HRS. FIRST HOSPITAL appealed the denial of its application to the Division of Administrative Hearings, DOAH Case No. 84-1835. CHARTER GLADE has intervened in DOAH Case No. 84-1835. In this proceeding, Petitioner has challenged the validity of Rule 10- 5.11(25) and (26), Florida Administrative Code, asserting that the rule is arbitrary and capricious and, therefore, invalid. By virtue of the fact that CHARTER GLADE is an existing facility located in the same service area in which Petitioner proposes to construct and operate its facility, and further by virtue of its participation in DOAH Case No. 84-1835, at least in part, on the basis of the provisions of Rule 10 15.11(25) and (26), Florida Administrative Code, CHARTER GLADE is substantially affected by the issues presented for determination in this cause and should be allowed to participate as a party. The Act contemplates rule adoption by HRS of specialty bed-need methodologies for psychiatric services. See, e.g., Subsection 381.494(8)(g), Florida Statutes (1983). Toward this end, HRS has adopted Rules 10-5.11(25) and (26), Florida Administrative Code. Rule 10-5.11(25), cited as the basis for denying FIRST HOSPITAL's CON application, addresses need for short-term psychiatric beds; Rule 10-5.11(26) purports to address need for long-term psychiatric beds. FIRST HOSPITAL's substantial interest in establishing its proposed specialty hospital has been determined by both of these rules. In particular, Rule 10-5.11(25), Florida Administrative Code, was applied by HRS in the denial of FIRST HOSPITAL's CON application. In addition, FIRST HOSPITAL alleges that Rules 10-5.11(25) and (26) combined fail to assess the need for intermediate inpatient specialty psychiatric services, one of the types of psychiatric services proposed by FIRST HOSPITAL. FIRST HOSPITAL's CON application proposes intermediate inpatient specialty psychiatric services. Rules 10-5.11(25) and (26), Florida Administrative Code, were adopted in early 1983. The adoption process began in the summer of 1982 when HRS assigned to one of its employees, Elfie Stamm, the task of developing a bed-need rule for psychiatric services. Ms. Stamm, at that time, was a planner in the Office of Comprehensive Health Planning of HRS. Ms. Stamm has been a planner with HRS for several years and had been responsible for the development of the State Health Plan and for the development of various rules used in the CON process. She had also been employed in the Mental Health Program Office of HRS, where her responsibilities included the development of a state plan with regard to alcoholism and mental health. She was also responsible for monitoring statewide mental health programs. Upon being assigned the task of developing the subject rules, Ms. Stamm made a thorough review of all information available to HRS with regard to the number of existing psychiatric beds and programs throughout Florida. She also evaluated all available local health plans and spoke with various individuals who had been involved in health planning, particularly those with interest in mental health planning. Ms. Stamm surveyed the available literature on health planning emphasizing mental health planning and bed-need methodologies for psychiatric beds. Ms. Stamm wrote the initial draft of Rule 10-5.11(25) based upon her collection and evaluation of data regarding existing and approved psychiatric beds in Florida and her review of literature, both Florida specific and national. A primary feature of the drafts, as well as of the adopted version, of Rule 10-5.11(25) is a fixed bed-to-population ratio of .35/1000, meaning that normally there should be no more than .35 short-term psychiatric beds for each 1,000 persons. Ms. Stamm was instructed to develop rules to assess the need for inpatient psychiatric services. As finally adopted, short-term care is defined in Rule 10-5.11(25) as care not exceeding three months and averaging a length of stay of 30 days or less for adults and 60 days or less for children and adolescents, and long-term care is defined in Rule 10-5.11(26) as care averaging a length of stay of 90 days. Neither rule defines the term "intermediate care." The documents contained in HRS Composite Exhibit IX and reviewed by Ms. Stamm are a representative sample of the literature available in the field and the level of knowledge among health planners as of the date of the promulgation of the subject rules. The documents are a reasonable cross-section of the literature available in the area of psychiatric bed-need assessment. In terms of the literature that was available at the time of the rule adoption in the area of psychiatric bed-need assessment, there is nothing missing from these documents which would have been important to a health planner in developing a psychiatric bed-need methodology. There is discussion in those documents of all the basic methodologies for determining psychiatric bed need. After reviewing all of the available materials, the HRS established a range of from .35 to .37 beds per 1,000 population and from that point made a policy decision to establish a figure of .35 to use in the bed-need formula. In promulgating the subject rules HRS invited and received comment from a broad cross-section of the public, with particular emphasis on those persons and organizations with special knowledge and interest in the provision of mental health services and the determination of psychiatric bed need. HRS conducted a workshop to which it invited a broad cross-section of individuals and organizations with particular knowledge about psychiatric bed need, including representatives of the Florida Hospital Association, Florida Psychiatric Association, Florida Council for Community Mental Health, Florida State Association of District Mental Health Boards, Florida League of Hospitals, Florida Association of Voluntary Hospitals, and the Florida Alcohol and Drug Abuse Association. The comments and results of the workshop were considered by Ms. Stamm and HRS in the promulgation of the subject rules. In response to several requests, HRS conducted a public hearing in accordance with Section 120.54(3), Florida Statutes, to receive comments from interested persons on the subject rules. More than fifteen (15) people representing various hospitals and organizations concerned with psychiatric services entered appearances and made comments at the public hearing. In addition to the oral comment presented at the public hearing, various persons and organizations submitted numerous written comments expressing their opinion with regard to the proposed rules. The comments, both oral and written, were all considered by Ms. Stamm and HRS prior to the promulgation of the subject rules. The process engaged in by HRS, primarily through Ms. Stamm, in the development of the subject rules was extensive and reasonably calculated to invite substantive public comment and to procure the knowledge on the part of HRS necessary to write workable and rational rules concerning psychiatric bed need. The knowledge acquired by HRS through this process with regard to the assessment of psychiatric bed-need methodologies was reasonably sufficient to allow it to knowledgeably draft and promulgate the subject rules. Consideration of this substantive public comment led to several changes in the subject rules as originally drafted. As originally promulgated, Rules 10-5.11(25) and (26) were challenged pursuant to Section 120.54, Florida Statutes, in various petitions filed with the Division of Administrative Hearings. In settling these proposed rule challenges, HRS modified the rules to provide for even greater flexibility in their application. HRS Composite Exhibits I through XII constitute all written matters considered or produced by HRS in the rule adoption process with regard to the subject rules. All of those documents and papers have been maintained in the records of HRS since the promulgation of the subject rules. The statutory criteria for reviewing CON applications are set out in Sections 381.494(6)(c) and (d), Florida Statutes. Rule 10-5.11, Florida Administrative Code, sets forth the rule criteria against which CON applications are evaluated. Subsections (1) through (12) and (25) of Rule 10-5.11 are the rule criteria against which applications for CONs for short-term hospital inpatient psychiatric services are to be evaluated. Subsections (1) through and (26) of Rule 10-5.11 are rule criteria against which applications for CONs for long-term psychiatric services are to be evaluated. Rule 10-5.11(25) sets forth certain criteria specifically for the evaluation of CON applications for short term hospital inpatient psychiatric services. Short-term services are in part defined as services averaging a length of stay of thirty (30) days or less for adults and a stay of sixty (60) days or less for children and adolescents under eighteen (18) years. Rule 10- 5.11(25) in its adopted form provides in relevant part as follows: Short Term Hospital Inpatient Psychiatric Services. Short term hospital inpatient psychiatric services means a category of services which provides a 24-hour a day therapeutic milieu for persons suffering from mental health problems which are so severe and acute that they need intensive, full-time care. Acute psychiatric inpatient care is defined as a service not exceeding three months and averaging a length of stay of 30 days or less for adults and a stay of 60 days or less for children and adolescents under 18 years. Short term hospital inpatient psychiatric services may be provided in specifically designated beds in a hospital holding a general license, or in a facility holding a specialty hospital license. Applications for proposed short term hospital inpatient psychiatric services will be reviewed according to relevant statutory and rule criteria. A favorable need determination for proposed general acute care psychiatric inpatient services will not normally be given to an applicant unless a bed need exists according to paragraph (25)(d) of this rule. A favorable Certificate of Need determination may be made when the criteria, other than as specified in (25)(d), as provided for in Section 381.494(6)(c), Florida Statutes, and paragraph (25)(e) of this rule, demonstrate need. 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 problems. 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 five years into the future shall be calculated by subtracting the number of existing and approved beds from the number of beds calculated for year x based on a bed need ratio of .35 beds per 1,000 population projected for year and based on latest mid-range projections published by the Bureau of Economic and Business Research at the University of Florida. These beds are allocated in addition to the total number of general and acute care hospital beds allocated to each Department District established in Rule 10-5.11(23). Occupancy Standards. New facilities must be able to project an average 70 percent occupancy rate for adult psychiatric beds and 60 percent for children and adolescent beds in the second year of operation, and must be able to project an average 80 percent occupancy rate for adult beds and 70 percent 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 percent for the preceding 12 month period. No additional beds for adolescents and children under 18 years of age shall normally be approved unless the average annual occupancy rate for all existing adolescent and children short term hospital inpatient psychiatric beds in the Department district is at or exceeds 70 percent for the preceding 12 2 month period. Hospitals seeking additional short term inpatient psychiatric beds must show evidence that the occupancy standard defined in paragraph six is met and that the number of designated short term psychiatric beds have had an occupancy rate of 75 percent or greater for the preceding year. 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. Other standards and criteria to be considered in determining approval of a Certificate of Need application for short term hospital inpatient psychiatric beds are as follows: . . . . 7. Access standard. Short term inpatient hospital psychiatric services should be available within a maximum travel time of 45 minutes under average travel conditions for at least 90 percent of the service area's population. There are three basic types of methodologies generally accepted in the field of health planning as valid for determining the need for psychiatric hospital beds. The first type is a need-based methodology which evaluates the need for services. The second is a demand or utilization-based method, which utilizes current or projected utilization statistics for a particular service. The third is a fixed-ratio method which involves the use of a ratio, or rate, of service to population to determine projected need for that service in the future. All three of these methodologies are generally accepted and utilized by health planners throughout the United States. Each has its advantages and disadvantages, but all are valid. The fixed ratio methodology is that which HRS has employed in Rule 10 5.11(25). The ratio of .35 beds per thousand population is a reasonable ratio with a rational basis in fact. It is not arbitrary and capricious as a measure of short-term psychiatric bed need. The National Institute of Mental Health developed draft guidelines in the late 197Os suggesting a range of .15 beds to .40 beds per thousand population as an appropriate fixed-bed ratio program for psychiatric short-term acute-care programs. At least four other states presently or in the past have utilized a fixed bed-need ratio in planning for health care needs. They are Massachusetts, Indiana, Michigan and Georgia. Some of those states used fixed-bed ratios less than .35 per thousand. Ms. Stamm, in developing this rule methodology for HRS, considered and balanced the different approaches relating to the establishment of need. One of her concerns on behalf of HRS, in developing the methodology was to strike a proper balance between need and demand since not everyone who needs psychiatric care will choose to seek that care or can afford to seek that care. In 1982, during the time of the rule adoption process, the ratio of existing short-term psychiatric beds per thousand population in Florida was .29 per thousand. Ms. Stamm selected .35 per thousand, in part, to allow for growth in the number of psychiatric beds for reasons other than just population growth. The current rate of existing licensed short-term psychiatric beds in Florida in 1985 is .28 beds per thousand. However, the ratio for currently existing short-term psychiatric beds, plus CON approved beds not yet licensed in 1985, is .39 beds per thousand. The fact that the existing and approved inventory of psychiatric beds is greater than the .35 ratio specified in the rule demonstrates that HRS has applied Rule 10-5.11(25) in a flexible manner as envisioned by the "not normally" language in the rule. A theoretically ideal way to determine psychiatric bed need would be for HRS to go into each community and conduct epidemiological surveys to identify the people who actually need mental health care. While such a survey, properly conducted, might produce momentarily reliable date, it is not a realistic method for statewide planning purposes because of several problems attendant to such a methodology. Such a survey would be very expensive and very time-consuming and is not practical for use on a statewide basis in a state the size of Florida. Because of the time-consuming nature of such a methodology, if applied on a statewide basis, some of the data would be stale before all of the data was gathered. Further, the rapidly changing population in Florida would require that such a survey be continually updated. The allocation of short-term beds between general and specialty hospitals set forth in subsections (d)1 and 2 of Rule 10-5.11(25) has a rational basis in fact and is not arbitrary. There are many patients who simultaneously need medical as well as psychiatric care. To have those patients located in a specialty hospital, away from a general hospital, would be inappropriate. There are also patients who have acute episodes of psychiatric illness and who need to be treated very rapidly. Because there are many more general hospitals than there are freestanding psychiatric specialty hospitals, it is appropriate to ensure that psychiatric beds are available to general hospitals to fill the particular episodic acute needs. Further, there are many patients in Florida who can afford health care only through Medicaid. Because Medicaid does not provide funding of mental health inpatient services in psychiatric specialty hospitals, it is appropriate to include in the methodology an incentive for the location of some psychiatric beds in general hospitals where psychiatric services can be funded by Medicaid. The specific allocation of the .35 per thousand bed need ratio set forth in Rule 10-5.11(25)(d)(1) and (2) is that .15 beds per thousand "should" be associated with general hospitals and .20 beds per thousand "may" be associated with specialty hospitals. This allocation was designed to be flexible so that, in any given circumstance, an allocation other than the .15 and .20 guideline could be applied. The occupancy rate standards set forth in Rule 10 5.11(25) specify that normally, additional beds should not be approved unless the average occupancy of all existing beds in a service district exceeds 75 percent for adults and 70 percent for children and adolescents. The occupancy rate standards set forth in Rule 10- 5.11(25) were not arrived at in an arbitrary fashion and are reasonable in themselves. The occupancy rates are designed to ensure that a reasonable number of beds in each facility are filled. Hospitals with a substantial number of empty beds are not cost effective. Therefore, it is reasonable to project occupancy rates in the range of those projected in the subject rule. Indeed, the occupancy rates in the rule are liberal in terms of minimum occupancy levels, compared with those in the past and those recommended by others in the industry. With regard to the travel access standard in the rule, the Task Force for Institutional Care recommended a 60 minute travel standard for 90 percent of the population in the district. The 45 minute standard is reasonable. The rule does not exclude from within the travel standard area other facilities providing the same service. At the time of the final hearing, there were sixty five (65) existing hospital facilities in Florida which had psychiatric bed services. Of those sixty-five (65) facilities, sixty-one (61), or 93 percent, had more than fifteen (15) psychiatric beds, and fifty-five (55), or 84 percent, had more than twenty (20) psychiatric beds. In the exceptional event that the average occupancy rate for a particular district did not accurately reflect the availability of beds, the language of Rule 10-5.11(25)(d)5, which says that no additional beds shall "normally" be approved unless the occupancy rates are met is sufficiently flexible to account for the exceptionality. The methodology set forth in Rule 10-5.11(25) is designed to identify and express a need for short-term psychiatric inpatient beds for the overall population of Florida. The rule was intended to be sufficiently flexible that, when balanced with the other criteria set forth in Rule 10-5.11(1) through (12), it would allow substantive input from the district and community levels with regard to the need for beds by subpopulation groups such as child, adolescent, adult, and geriatric. The "national guidelines" referred to by Ms. Stamm were proposed hut never adopted. They recommended fixed bed ratios between .15/1000 and .40/1000. The guidelines were based on a 1978 survey by the National Institute of Mental Health (NIMH), which indicated that .15/1000 was the 25th percentile and .40/1000 was the 75th percentile of 1978 existing short-term psychiatric beds nationwide. The NIMH report stated that selection of an appropriate ratio for a particular state depended on the development of the state's mental health system and recognized that special consideration was necessary for traditionally underserved groups such as children, adolescents, and geriatrics. In the context of inpatient psychiatric care, there has been a trend over the last twenty years, and more particularly over the last five years, toward the development of specialty treatment programs, separately planned for children, adolescents, adults, and geriatrics. In recent years in Florida there has also been a trend toward the provision of alternatives to inpatient psychiatric services in facilities such as residential care. In 1982, Ms. Stamm considered evidence that children, adolescents, and geriatrics were not being adequately served by Florida's mental health facilities. Nevertheless, she did not plan for these subgroups in the rule because in her judgment decisions about allocation of services to subpopulation groups were best made at the district level by the local health councils.
The Issue Whether Petitioner is entitled under Florida’s workers’ compensation laws to payment for professional services to an injured worker for the billings identified by the three notices of disallowance at issue in this consolidated proceeding.
Findings Of Fact The claimant, a male, was born July 21, 1961. On February 17, 1995, the claimant sustained a severe traumatic brain injury (TBI) and other injuries during the course of his employment with the City of Hollywood, Florida. At all times relevant to these proceedings, the claimant has been receiving benefits pursuant to the Florida workers’ compensation laws. At all times relevant to this proceeding, the carrier has been the workers’ compensation carrier for the employer. At all times relevant to this proceeding, the claimant has lived in a home purchased for him by the carrier. The claimant has a life estate in the home and the carrier has the remainder interest. The claimant lives in the home with his mother and has 24-hour attendant services paid for by the carrier. The carrier has purchased a van for the claimant, which his attendant uses to transport the claimant to therapy and other appointments. The claimant has a history of mental illness dating to his teenage years, when he was diagnosed with schizophrenia. As a result of his injury and his illness, the claimant acts out periodically and becomes physically resistive to those trying to care for him. At all times relevant to this proceeding, Petitioner has been a provider of rehabilitation services to various patients, including those with TBI. Dr. Marie DiCowden, a psychologist, is the founder and director of Petitioner. Dr. DiCowden described Petitioner as being a health care community that provides an integrated administration for a long continuum of care post acute rehabilitation through community reintegration using health promotion, prevention, and integrated primary care. Petitioner is accredited by two national accrediting organizations referred to by the acronyms CARF (Commission on Accreditation of Rehabilitation Facilities) and CORF (Commission on Outpatient Rehabilitation Facilities). Petitioner is also certified by the Florida Division of Vocational Rehabilitation (formerly housed in the Department of Labor and now housed in the Department of Education), the Florida Division of Workers’ Compensation, and by the Florida Brain and Spinal Cord Injury Program.4 As a result of his accident, the claimant was in a coma for several weeks. He was hospitalized (first in an acute care facility and subsequently in two different rehabilitation hospitals) until December 28, 1995, when he was placed in Whitehall Nursing Home. Whitehall was not an appropriate placement for the claimant because of his behavior and his need for rehabilitation services. On March 27, 1996, Yvonne Beckman, a rehabilitation nurse consultant employed by the carrier, referred the claimant to Petitioner for an evaluation. Shortly before that referral, the claimant had been evaluated by two neuropsychologists (Dr. Jorge A. Herra and Dr. Lee. H. Bukstel), who had opined that the claimant would benefit from rehabilitation services. Ms. Beckman asked Dr. DiCowden to recommend a neurologist who practiced in South Florida. In response, Dr. DiCowden gave Ms. Beckman the names of three neurologists, one of whom was Dr. Paul Wand. Ms. Beckman authorized Dr. Wand to provide services to the claimant. Dr. Wand prescribed continued rehabilitation services for the claimant at Petitioner’s facility. The services at issue in this proceeding were provided by Petitioner pursuant to prescriptions from Dr. Wand.5 Prior to accepting the claimant, Dr. DiCowden informed a representative of the carrier that Petitioner would accept the claimant as a patient in its brain injury program and estimated the annual costs to be $200,000.00. The claimant began receiving rehabilitation services from Petitioner five days a week beginning August 1, 1996. The claimant received from Petitioner’s staff physical therapy, occupational therapy, cognitive retraining, speech training, language training, psychological services, art therapy, music therapy, and yoga therapy. The claimant continued to receive those rehabilitation services from Petitioner (five days a week) from August 1996 to the date of the hearing (and presumably to date). The authorization for the provision of rehabilitation services to the claimant was periodically reviewed by the carrier. In November 1998, the carrier had the claimant examined by Dr. Richard Bailyn (a neurologist) and by Dr. Kevin Lapinski (a neuropsychologist). Those doctors opined that the claimant was not benefiting from cognitive retraining, occupational therapy, speech therapy, or language therapy at Petitioner’s facility. They further opined that the claimant required an activity program to satisfy his recreational and stimulation needs, but that such a program did not require Petitioner’s facility since the claimant’s aide could be trained to provide those services. Dr. Bailyn was of the opinion that as of November 1998 the various therapies provided by Petitioner’s facility to the claimant were not reasonable and were not medically necessary. Section 440.13(6), Florida Statutes, requires a carrier to review bills by providers of medical services as follows: (6) UTILIZATION REVIEW.--Carriers shall review all bills, invoices, and other claims for payment submitted by health care providers in order to identify overutilization and billing errors, including compliance with practice parameters and protocols of treatment established in accordance with this chapter, and may hire peer review consultants or conduct independent medical evaluations. Such consultants, including peer review organizations, are immune from liability in the execution of their functions under this subsection to the extent provided in s. 766.101. If a carrier finds that overutilization of medical services or a billing error has occurred, or there is a violation of the practice parameters and protocols of treatment established in accordance with this chapter, it must disallow or adjust payment for such services or error without order of a judge of compensation claims or the agency, if the carrier, in making its determination, has complied with this section and rules adopted by the agency. As required by Section 440.13(6), Florida Statutes, the carrier conducted a utilization review of the services provided by Petitioner to the claimant beginning in late 1999. The carrier retained Dr. Thomas G. Hoffman to review the claimant’s medical records and to express opinions pertaining to the services provided to him by Petitioner. On April 10, 2000, Dr. Hoffman submitted a report that included several conclusions, including those that follow. The claimant has severe, residual deficits as a result of his accident. He requires 24-hour attendant care. There is no reasonable expectation for further improvement. The therapy he was receiving at that time (and still receives) was not reasonable or medically necessary. The therapy was excessive in frequency and duration. Dr. Hoffman’s deposition testimony was consistent with his written report. The carrier retained Dr. Victor B. Robert to review the claimant’s medical records and to express opinions pertaining to the services provided to him by Petitioner. On June 19, 2000, Dr. Robert submitted a report that included several conclusions, including those that follow. The treatment rendered by Petitioner was excessive in frequency and duration. The claimant reached an improvement plateau in early 1997 and therapy was thereafter needed only for maintenance reasons. Dr. Robert’s testimony was consistent with his written report. The carrier retained International Assessment Systems, Inc. (IAS), a professional association of various medical practitioners, to conduct an independent neurological, neuropsychological, and psychological examination of the claimant. On September 22, 2000, IAS submitted a report (Intervenors’ Exhibit 8) based on the examinations of claimant and the review of his medical records by Dr. Kenneth C. Fischer, Dr. Alan J. Raphael, and Dr. Charles J. Golden. The report included several observations and conclusions, including those that follow. The testimony of Drs. Fischer, Raphael, and Golden was consistent with the written report they prepared for IAS. Pages 12-13 of the IAS report contain the following: [The claimant] was oriented to person, but not to place or time. He did not know the current day, date, month, or year. His sensorium was significantly impaired. His mood was volatile, ranging from normal to agitated. His affect was similarly labile, at times he was placid, laughing, and able to converse at a basic level, however he was also quite violent. Attention and concentration were significantly impaired. His receptive, expressive and fluency language capabilities were similarly impaired, although, as noted, he was capable of basic/functional [sic] communication. There were no direct indications of hallucinatory or delusional phenomena, however, based on his behavior, it is likely that some hallucinatory or delusional phenomena were present. His reality testing and insight were significantly impaired. During his repeated fits of anger, he often uttered suicidal and homicidal threats, however there was no evidence of actual intent or plan. He showed no ability to monitor his own safety. Page 15 of the IAS report contains the following: From a neuropsychological and psychological perspective, there were gross impairments noted in his cognitive abilities and emotional functioning. . . . He has been afforded considerable time to maximize his cognitive recovery at this point. It is clear that he has plateaued with regard to cognitive improvement. He will not benefit from continued rehabilitation efforts, although he will require continued stimulation to avoid further cognitive decline. His mood and labile affect may also be benefited by continued stimulation in terms of recreational activities to provide appropriate quality of life.6 Page 17 of the IAS report contains the following under the heading “Neurologic Impression”: . . . I [Dr. Fischer] would recommend that he be placed in a supervised residential setting which will give better protection for him and his caregivers than his present home setting. As the patient is four and a half years status post-injury, specific rehabilitative and therapeutic endeavors will have no benefit and are unwarranted. This would relate to hyperbaric oxygen and cognitive rehabilitation was well as any form of physical, occupational, or speech therapies. Page 19 of the IAS report contains the following: [The claimant] was certainly aided by initial removal from the nursing home and receiving cognitive and physical therapies at Biscayne. However, he has long since reached a plateau in his improvement and no further improvement can be expected at this time. Maximum medical improvement should have been reached within 18 to 24 months post-injury. Any treatment after that time would be palliative or maintenance-oriented (sic). Therefore, the treatment prescribed by Dr. Wand became unreasonable and medically unnecessary several years ago. Page 20 of the IAS report reflects the opinion that while the treatments at Petitioner’s facility were excessive in all respects, the claimant does require maintenance rehabilitation services. It is opined that cognitive retraining is no longer appropriate, but that cognitive tasks and games are appropriate in a recreational setting. By letter dated October 27, 2000, the carrier, through its counsel, advised Petitioner that based on its Utilization Review investigation, it had concluded that as to the identified dates of service “. . . there has been overutilization and/or misutilization since the treatment has been excessive and not medically necessary.” This Letter of Disallowance was the first of a series of letters sent by counsel for the carrier to Petitioner, and frames the issues for all of the disallowances at issue in this proceeding. Thereafter, Petitioner timely disputed the carrier’s basis for disallowing its services to the claimant and petitioned the Respondent to resolve the dispute. The total amount disallowed and at issue in this consolidated proceeding is $615,587.00. Respondent employed four Expert Medical Advisors (EMAs) to perform peer review and assist it in resolving the dispute involving the rehabilitation services provided the claimant by Petitioner. Respondent employed Dr. Fernando G. Miranda, Dr. Jorge Villalba, Dr. Gerard P. Garcia, and Dr. David McCraney to serve as EMAs.7 Each of these doctors prepared a report following his review and each sat for deposition. Dr. Miranda’s report, dated September 17, 2001, is attached to his deposition (Intervenors’ Exhibit 17). The report included several conclusions, including those that follow. The referral for intensive multi-disciplinary treatment at Petitioner’s facility is no longer medically necessary. The services provided by Petitioner are excessive in frequency and duration and he will not further improve with speech therapy, cognitive retraining, occupational therapy, or individual psychotherapy. Maintenance physical therapy is recommended. Dr. Miranda testified in his deposition that the recommended physical therapy could be performed by the claimant’s attendant. Dr. Miranda’s deposition testimony was consistent with his written report. Dr. Villalba’s report dated October 15, 2001, is attached to his deposition (Intervenors’ Exhibit 19). The report included several conclusions, including those that follow. The claimant reached maximum medical improvement between February 1996 and October 1997. Dr. Villalba described the services provided by Petitioner to claimant “clearly not medically necessary” after October 1997. He also opined that the claimant will require maintenance physical therapy, occupational therapy, and speech and language therapy on a continuing basis. Dr. Villalba’s deposition testimony was consistent with his written report. Dr. Garcia’s undated report was prepared during the second week of October, 2001, and is attached to his deposition (Intervenors’ Exhibit 16). The report included several conclusions, including those that follow. The claimant should be on a maintenance program and Petitioner’s treatment was excessive. The claimant is unlikely to make further neuropsychological improvement, but he should be treated by a psychiatrist for his schizophrenia. Dr. Garcia’s deposition testimony was consistent with his written report. Dr. McCraney’s report dated November 18, 2001, is attached to his deposition (Intervenors’ Exhibit 18). The report included several conclusions, including those that follow. While the care provided Petitioner appears to be excellent, the claimant is far beyond the point where Petitioner’s therapies would be reasonable or medically necessary. Dr. McCraney’s deposition testimony was consistent with his written report. Dr. DiCowden testified at length about the various services her facility provides the claimant and the records her staff generates as a result of those services. Dr. DiCowden testified that her staff is well-trained in assessing the functional status of rehabilitation patients using nationally recognized assessment methodologies. FIN-FAM, acronyms for “Functional Independence Measures” and “Functional Assessment Measures” is one assessment measure used by Petitioner’s staff. The FIN-FAM measure purports to quantify a patient’s progress or lack thereof and can be used by staff as a tool in developing treatment strategies. Dr. DiCowden presented a chart of the FIN-FAM scores for the claimant for the periods at issue in this proceeding. The chart, prepared for this litigation, reflects steady functional improvement of the claimant. Dr. DiCowden further testified that Petitioner’s staff uses a scale of cognitive functioning developed by a rehabilitation facility known as Rancho Los Amigos Hospital, which measures a patient’s response to stimuli on a scale of Ranch Level I (no response) to Ranch Level VII (appropriate response). She asserts that the measurement of the claimant’s status using the Rancho methodology reflect that the claimant has improved over the years. In support of its position that the claimant steadily progressed while undergoing therapy at its facility, Petitioner presented the testimony of Drs. Antonio Puente, Vernando Batas, and Richard Kishner who observed the claimant at Petitioner’s facility on June 23, 2003, September 13, 2003, and February 24, 2004, respectively. Each of these witnesses had the subjective impression that the claimant was benefiting from therapy at Petitioner’s facility. Petitioner asserts that the FIN-FAM scores, the Rancho Levels, and the testimony of its experts establish that the claimant is benefiting from therapy. That assertion is rejected as being contrary to the greater weight of the credible evidence. The FIN-FAM scoring and the Rancho scale depend on the subjective impressions of the various therapists who treat the claimant at Petitioner’s facility and the record reflects that the scoring was done on an irregular basis.8 Dr. DiCowden adamantly disagreed with the contention that the rehabilitation services provided by her facility is not reasonable or medically necessary. All evidence presented by Petitioner, including Dr. DiCowden’s testimony, has been carefully considered by the undersigned in resolving the conflicts in the evidence. At best, Petitioner established that the claimant made some unquantified amount of progress in the highly structured therapeutic setting at Petitioner’s facility. Intervenors’ experts clearly established that any progress made by the claimant in therapy did not transcend that therapeutic setting to the real world. Petitioner failed to establish by a preponderance of the evidence that the rehabilitation services it provided the claimant were appropriate and medically necessary. To the contrary, the greater weight of the credible evidence established that at all times relevant to this proceeding the rehabilitation services provided by Petitioner to the claimant have been excessive and that those excessive services have been neither reasonable nor medically necessary.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration issue a final order that sustains the disallowances at issue in this consolidated proceeding. DONE AND ENTERED this 15th day of June, 2004, in Tallahassee, Leon County, Florida. S CLAUDE B. ARRINGTON 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 15th day of June, 2004.
The Issue The issue in this case is whether Respondent violated Section 464.018(1)(h), Florida Statutes (1997) (hereinafter, "Florida Statues"), and Florida Administrative Code Rules 59S- 8.005(1)(e)1 and 2, by diverting morphine during his care and treatment of two patients and failing to keep accurate nurse's notes. (All references to rules are to rules promulgated in the Florida Administrative Code in effect on the date of this Recommended Order).
Findings Of Fact Petitioner is the state agency responsible for regulating the practice of nursing. Respondent is licensed as a nurse pursuant to license number RN 2185632. Respondent admitted under oath at the hearing that he committed the acts alleged in the Administrative Complaint. Respondent did not overdose any patient, endanger, or neglect any patient. Respondent diverted morphine during his care and treatment of patients J.G. and R.B. at West Volusia Memorial Hospital on March 24 and 26, 1997. Respondent was addicted to morphine and diverted morphine from the two patients for self- administration. Respondent is guilty of negligent administration of morphine. Respondent self-administrated morphine that was not medically necessary. Respondent failed to keep accurate nurse's notes for patient J.G. Respondent inaccurately recorded the amount of morphine administered to patients J.G. and R.B. Respondent has voluntarily sought aggressive care and treatment for his drug addiction. Respondent is in three rehabilitation programs in Georgia. Respondent is in an intervention program for nurses ("IPN") approved by the State of Georgia pursuant to a prosecution conducted by the appropriate state agency in Georgia. He is also in a nurses anonymous program and a follow-up hospital program. Respondent is also under the regular care of a psychiatrist.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Board enter a Final Order finding Respondent guilty of violating Section 464.018(1)(h) and Rules 59S-8.005(1)(e)1 and 2, suspending Respondent's license for two years from the date of this Recommended Order, and placing Respondent on probation for two years from the end of the suspension period. The terms of probation shall include a requirement that Respondent successfully complete the IPN program in Georgia and hospital follow-up program. DONE AND ENTERED this 18th day of June, 1998, in Tallahassee, Leon County, Florida. DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 18th day of June, 1998. COPIES FURNISHED: Marilyn Bloss, Executive Director Department of Health Board of Nursing 4080 Woodcock Drive, Suite 202 Jacksonville, Florida 32207 Angela T. Hall, Agency Clerk Department of Health 1317 Winewood Boulevard Building 6, Room 136 Tallahassee, Florida 32399-0700 Joseph S. Garwood, Esquire Agency for Health Care Administration 1580 Waldo Palmer Lane Post Office Box 14229 Tallahassee, Florida 32308-4229 Joseph Webb, pro se 2169 Turner Church Road McDonough, Georgia 30252
Findings Of Fact On April 1, 1986, a letter of intent was filed on behalf of Anthony J. Estevez to apply for a CON in the March 16, 1986, batching cycle for a 120-bed long-term psychiatric hospital in Dade County, Florida, HRS Service District XI. A long-term psychiatric hospital is defined in Rule 10-5.011(p), Florida Administrative Code, as a "category of services which provides hospital based inpatient services averaging a length of stay of 90 days." Subsequently, DHRS notified Mr. Estevez that his letter of intent was effective March 17, 1986; the application was to be filed by April 15, 1986; the application was to be completed by June 29, 1986; and the date for final department action was August 28, 1986. On April 15, 1986, Mr. Estevez filed his CON application with DHRS (designated action #4854). Anthony J. Estevez' name appeared along with Health Care Advisors Corporation on the line of the application which requested "legal name of project sponsor." Mr. Francis A. Gomez, Mr. Estevez' authorized representative, had the responsibility for the preparation and submission of the application. Mr. Estevez signed the CON application as the project sponsor. HCAC Psychiatric Hospital of Dade County was meant to be the name of the proposed facility. HCAC is an acronym for Health Care Advisors Corporation, Inc. HCAC was incorporated as of April 14, 1987, but the name had been reserved prior to that time. HCAC was initially intended to be a health care management corporation owned by Mr. Estevez. However, it is now anticipated that Flowers Management Corporation (Flowers) will manage the project under the HCAC corporate umbrella. Mr. Estevez owns 100 percent of the stock of HCAC and is also its sole director and sole shareholder. Mr. Estevez considered HCAC and himself to be one and the same for the purpose of the CON application. HCAC initially proposed to construct in Dade County, Florida, a freestanding 120-bed long-term psychiatric hospital. HCAC proposed to divide those beds into three groups: (1) 75 beds for adults; (2) 30 beds for geriatrics; and (3) 15 beds for adolescents. On May 15, 1986, DHRS requested additional information from HCAC regarding its CON application. On June 19, 1986, and June 23, 1986, HCAC in two separate filings provided DHRS with responses to its request for additional information which DHRS believed was omitted from the original application. The application was deemed complete effective June 29, 1986. On August 20, 1986, Francis Gomez, Paul McCall, a health care consultant employed by HCAC at that time, and HCAC's attorney, met with Islara Soto of DHRS regarding the CON application. At this meeting, HCAC advised DHRS of its intent to orient the facility programmatically to meet the needs of the Hispanic population of Dade and Monroe Counties. By letter dated August 29, 1986, DHRS notified Mr. Francis Gomez of its decision to deny CON application 4584. HCAC requested a formal administrative hearing to contest the denial. At the formal hearing, HCAC indicated a desire to abandon its proposal to provide 15 beds dedicated to serve adolescent patients and sought to introduce evidence relating to a down-sized 105-bed long-term psychiatric hospital serving only adult and geriatric patients. Charter renewed its prehearing motion to exclude any evidence concerning a 105-bed facility. (Approximately three or four weeks prior to the administrative hearing, HCAC had decided to go forward with a proposal for the 105-bed facility.) The undersigned ruled that HCAC would be allowed to present evidence concerning a down-sized 105-bed facility to the extent that such evidence related to a separate and identifiable portion of the original application. HCAC's Proposal The proposed building site for the facility, although not finally selected, is intended to be within the Northwest Dade Center cachement area which is in the northwest corner of Dade County. The ownership of the proposed facility will be by Mr. Estevez and/or his family or wife. The proposed area to be serviced by the facility is Dade and Monroe Counties (HRS Service District XI). HCAC proposes to offer at its facility a psychiatric inpatient unit, patient support services, diagnostic/treatment services, ambulatory care, administrative services, environmental/maintenance, educational and training services, and materials management. The HCAC facility will be managed by Flowers Management Corporation (Flowers), of which Mr. Estevez is a majority shareholder. Flowers was created approximately three and a half years ago for the purpose of providing management in the psychiatric field. Humana Hospital, a hospital chain, has selected Flowers to manage four of its facilities and is also considering Flowers for an additional two facilities. Those facilities are currently providing short-term psychiatric and substance abuse services. Nelson Rodney will be responsible for the design and implementation of the treatment programs in the HCAC facility. Rodney is employed as Regional Vice President of Flowers and is responsible for the management of the Florida hospitals affiliated with Flowers, including a chemical dependency unit at Humana-Biscayne Hospital and a psychiatric unit at Humana West Palm Beach Hospital. The HCAC facility is intended to provide specialty long-term psychiatric services for chronically mentally disturbed individuals requiring a 90-day or greater average length of stay. Many of the patients would be a danger to themselves and others and will require a very restrictive setting -- a locked facility. The programs proposed to be offered involve a range of inpatient diagnostic services, including an intensive diagnostic work-up done prior to admission for all patients. Each patient will have an individualized treatment plan updated every two weeks. The treatment program will include specialized therapy, such as art, music, milieu therapy and special education. There would also be specialized inpatient and outpatient treatment programs for family members and significant others. Discharge planning from the day of admission to assure continuity of care would be another aspect of the program. The proposed HCAC facility would offer a community-like atmosphere. It would provide both open and locked units. Flower's therapeutic model encourages patient participation in daily activities and in the many decisions of what is occurring at the hospital. One component of the project will be an initial screening process by a multi-disciplinary team who will employ a predetermined set of admissions criteria to assist in appropriate levels of care determination. The multi- disciplinary team would consist of a psychiatrist, psychologist, sometimes a neurologist, social worker, a family social assessment person, the patient, and others. The team will attempt to identify and admit only those patients who will have an expected length of stay greater than 90 days. The HCAC facility would provide seminars and workshops to practitioners in the community as well as its own staff. In-service training will also be offered. HCAC proposes to be flexible in the design of its treatment programs and allow new treatments to be utilized. A variety of therapies will be available to provide individualized treatment plans in order to optimize the chance of successful outcome in the patient's treatment. Currently, Flowers affords an in-house program of evaluation. Peer review serves this function in order to assess quality of care rendered to patients in the facility. The HCAC facility proposes to have an Hispanic emphasis. More than 50 percent of the staff will be bilingual. Upper management will consist of individuals who have an acute understanding of Hispanic culture and treatment implications of that culture. The facility will be more flexible in family visitation than is done in many facilities which is an important aspect of the Hispanic culture. The facility as managed by Flowers would have the required "patient's bill of rights" and will also seek JACH accreditation, although these items were not discussed in the application. The HCAC facility would offer each patient an attending psychiatrist who will be part of the multi-disciplinary team that will determine the individualized plan for each patient. Sufficient health manpower including management resources are available to HCAC to operate the project. Additionally, the facility will provide internships, field placements and semester rotations. PROJECT AND CONSTRUCTION COSTS HCAC's CON application, admitted into evidence as Petitioner's Exhibit 4, contains 26 tables concerning various aspects of the 120-bed project as well as Exhibit III.D.1., an operating pro forma. In response to a request for omissions by DHRS, HCAC submitted, among other things, a revised Table 7, revised Table 8, and a revised operating pro forma for the 120-bed project. The items making up HCAC's omission responses were admitted into evidence as Petitioner's Exhibit 5. In conjunction with its desire to complete a 105-bed facility only, HCAC submitted various new tables and a new operating pro forma (forecasted income statement), which were admitted into evidence as Petitioner's Exhibit 6. Table 1 - Source of Funds The estimated total project cost of the 120-bed facility would be $6,469,500. The estimated project cost of the 105-bed facility would be $5,696,940. The financing of the project is contemplated to be done through NCNB bank which has expressed its willingness to finance the project. It is reasonable to assume that HCAC would and could obtain the necessary financing for the proposed facility. Table 2 - Total Debt Table 2 for both the 120-bed project and the 105-bed project shows that 100 percent of the project costs would be financed by debt at an interest rate of 13 percent. The 13 percent interest rate was projected in 1986 and is higher than current rates. It is reasonable to assume that 100 percent of the costs can be financed at 13 percent for either the 120-bed or 105-bed project. Table 3 - New Purchase Equipment HCAC initially projected that $750,000 would be needed to equip the proposed 120-bed facility. The projected expenditure for the 105-bed facility is $500,000. The projected costs of $750,000 and $500,000 for the equipment needed for the 120-bed and 105-bed facility, respectively, are unreasonably low. For example, of the $500,000 projected for equipment costs for the 105-bed project, $80,000 is for mini-vans, $15,000 is for the security system, $40,000 is for a computerized medical records system, and $40,000 for a computerized on-line nurse care program. This would leave $325,000 for all other necessary equipment. Pharmacy, laboratory services and x-ray equipment would be on contract. The remaining $325,000 would be insufficient to equip the kitchen (which would require $80,000), furnish patient rooms (approximately $150,000) and equip the remainder of the 105-bed facility which would reasonably require housekeeping equipment, exam room equipment, chart racks for the nurses station, seclusion room beds, office furniture and equipment, laundry equipment, lockers or shelving, refrigerators, ice makers, day room furniture and lounge furniture. A more reasonable projection for equipment costs would be in the neighborhood of $850,000 to $900,000. Table 7 - Utilization by Class of Pay Tables 7 and 8 of the original application which dealt with utilization by class of pay and effect on patient charges, were revised by HCAC in their responses to DHRS' Omissions Request. Table 7 reflects estimations of the net revenues which HCAC expects to capture from specific payor mixes, namely, contract/indigent, Medicare and insurance/private pay. There is no Medicaid reimbursement available for psychiatric care rendered in a freestanding psychiatric facility. The proposed payor mix for the 120-bed facility is, in patient days, as follows: Year 1 -- Contract/Indigent 8.64 percent (1989) Medicare 26.10 percent Insurance and Private Pay 65.26 percent Year 2 -- Contract/Indigent 8.48 percent (1990) Medicare 26.15 percent Insurance and Private Pay 65.37 percent The proposed payor mix for the 105-bed facility is, in patient days, as follows: Years 1 and 2 - Medicare 3.3 percent Insurance and Private Pay 90.7 percent Indigent 6.0 percent The change in payor mix was not attributed to down-sizing of the facility, but rather was the result of HCAC's additional research and understanding of what the payor mix would most likely be. The change in payor mix does not represent a substantial change to the original application taken as a whole. Francis Gomez, who prepared the Table 7 and was designated as an expert for HCAC in the area of health care facilities management and financial and marketing operations, conceded that HCAC's Table 7 for the 120-bed facility is not reasonable. The Table 7 for the 105-bed facility is also not reasonable. HCAC's contractual allowances are not reasonable. HCAC projects 3.3 percent for Medicare and nothing for HMOs or PPOs. It is unreasonable for HCAC's proposal to make no provision for HMO and PPO type arrangements in view of its projection of 90.7 percent insurance and private pay. Because the proposed patient mix for the 105-bed project is adults and geriatrics, 20 to 25 percent would be a more reasonable Medicare projection. HCAC's projected 90.7 percent insurance and private patient days is unreasonably high in view of the project's intended emphasis of serving the Hispanic population in HRS Service District XI. In 1980, 27.8 percent of the Hispanics in Dade County had incomes less than 150 percent of the poverty level. The 1987 United States Hispanic market study establishes that 20 percent of the Hispanic adults who are heads of households are either retired, students or unemployed. These groups of individuals would not reasonably fit into the insurance and private pay category in most cases. Thus, the 90.7 percent figure for insurance and private pay would have to be reduced significantly. Table 8 - Effects on Patient Charges HCAC's revised Table 8 for the 120-bed facility lists net revenues rather than gross charges for the specific services listed. In year one (1989), the table lists the following projected charges/rates: daily room charge - $214.61; average daily ancillary charge - $25.00; contract/indigent - $125.00; and Medicare - $229.61. In year two (1990), the table lists the following projected charges: daily room charge - $223.19; average daily ancillary charge - $26.00; contract/indigent - $130.00; and Medicare - $238.79. The Table 8 for the 105-bed facility reflects an all-inclusive gross charge of $300 per day in both years (1989 and 1990) for the daily room charge, Medicaid and Medicare. The $300 per day figure would include ancillary charges but not physician fees. The projected patient charges fall within the range of charges currently in effect at psychiatric hospitals in Dade and Monroe Counties and are reasonable for both the 120-bed facility and the 105-bed project. Table 10 - Projected Utilization The financial feasibility of any proposed hospital is largely tied to the ability of the hospital to generate an adequate level of utilization. Absent an adequate level of utilization, a facility will not generate sufficient revenues to meet expenses. Table 10 for both the 120-bed facility and the 105- bed facility sets forth the projected utilization of the proposed facility, by month and year, in patient days, for the first two years of anticipated operation. Table 10 for the 120-bed facility projects the facility will exceed 80 percent occupancy for two of the last three months of the second year and be at 80 percent occupancy at the end of that year. Eighty percent occupancy of 120 beds yields an average daily census of about 96 patients. Table 10 for the 105- bed facility projects that the facility will arrive at 92 percent occupancy at the end of the first year of operation and remain at 95 percent throughout the second year. Ninety-five percent occupancy of the 105-bed facility equals an average daily census of about 99 or 100 patients. The Table 10 "fill-up" rates for both the 120-bed and 105-bed facilities are unreasonable and not practical to be achieved. There is presently an emphasis on providing psychiatric care in less restrictive settings, a trend favoring reduced lengths of stay and a trend in third-party payors to provide reimbursement for a shorter number of days. In addition, nationwide statistics show that only 4 percent of the patients admitted to psychiatric facilities require treatment longer than 90 days. Table 11 - Manpower Requirements For the 120-bed facility, HCAC projected in the Table 11 a staffing ratio of one full-time equivalent (FTE) per occupied bed of 1.625 for the first year of operation and 1.43 for the second year. For the 105-bed facility, HCAC projected in the Table 11 1.91 FTE per occupied bed ratio for the first year and 1.45 for the second year. The actual average of FTEs available for both facilities would be 1.8 to 2.0. The application figures are lower than the actual average because students and other non-paid personnel were not included. Thus, when all programmatic FTEs are included, the number of FTEs per occupied bed is higher than what is listed in the Table 11 for either project. There is a relationship between the number and quality of staff personnel and a facility's ability to provide quality psychiatric care. The industry standard for FTEs is 1.8 to 2.0 FTEs per occupied bed. HCAC's proposed staffing for both the 120-bed and 105-bed projects are reasonable. For both proposed facilities, HCAC projects 110.5 FTEs for the first year with a total annual salary of $1,932,000 which equals an average salary of approximately $17,400 per FTE. HCAC's projected total annual salary expense is unreasonably low. Specifically, the salary for the occupational therapist is too low and the nursing salaries are too low because of shortages. Table 16 - Areas and Square Feet / Table 18 - Space Requirements HCAC proposes a total 59,603 square feet of gross area for the 120-bed facility and a total of 56,050 square feet of gross area for the 105-bed facility. The decrease in size for the 105-bed facility is attributed to a reduction of the ground floor, a reduction of the second floor by removing the adolescent portion and an increase of ancillary services on the second floor for the geriatric population. HCAC projects 168 feet of net living space in the patient's bedroom for both the 120-bed facility and the 105-bed facility. HCAC's proposal of total area and square feet requirements for both the 120-bed and 105-bed facility are reasonable for the delivery of quality psychiatric care within the proposed facilities. There would be adequate land space for parking at HCAC's facility to forego the necessity of constructing a parking garage. Table 19 - Nursing Unit Area Summary HCAC proposes a total of 34,479 square feet of gross area for the nursing unit in the 120-bed facility and the 105-bed facility. The square footage figures under Table 19 for both the 120-bed facility and 105-bed facility are reasonable. Table 25 - Estimated Project Costs Project Advisors Corporation (PAC), of which Mr. Estevez is the Chief Executive Officer, will be responsible for the design and construction of the proposed facility. PAC is a design and construction company which employs a registered architect, several licensed general contractors, an engineer, two graduate architects and a registered graduate architect. The registered architect and basically 90 percent of the staff have previously been involved in the design and construction of health related facilities. HCAC's projected total cost for the 120-bed facility is $6,469,500 and the projected total costs for the 105-bed facility is $5,696,940. HCAC projected construction costs per square foot of $57.55 for the 120-bed facility and $60.00 per square foot for the 105-bed facility. Although the average construction cost of psychiatric facilities today is around $75 to $95 per square foot, HCAC's projected costs are reasonable and reflect reasonable charges given the fact that PAC, the company which would construct the facility, is controlled by Mr. Estevez. The projected costs of land acquisition are also reasonable. HCAC's projected equipment costs are contained in both Table 25 and Table 2. As previously discussed, the projected equipment costs for both projects are unreasonably low. Table 26 - Project Completion Forecast HCAC projects that construction for both the 120-bed facility and 105- bed facility would be completed approximately one year after DHRS' approval of the construction documents. The project completion forecasts for both projects are reasonable. Exhibit III.D.1.- Operating Pro Forma/Forecasted Income Statement Revised Exhibit III.D.1 sets forth the operating pro forma for the first two years of operation of the 120-bed facility (1989 and 1990). HCAC's pro forma for its 120-bed facility is not reasonable. The supplies and other expenses depicted in the pro forma (year one at $55.60 per patient day and year two at $58.10 per patient day) are unreasonably low. A more reasonable estimate would be approximately $100 per patient day. The pro forma for the 120-bed facility does not include any estimate for the Hospital Cost Containment Board (HCCB) tax. Similar facilities in Florida pay an HCCB tax which is composed of one and a half percent of net revenue. Utilizing the more reasonable estimate of $100 per patient day for supplies and other expenses, and including the appropriate HCCB tax, the total supplies and other expenses would increase approximately $1,100,000 and the HCCB tax would be approximately $85,000 in year one. Instead of showing a profit of $395,012, HCAC would potentially lose approximately $785,000 in that year. In year two, the total supplies and other expenses would increase approximately $1,400,000 and the HCCB tax would be approximately $115,000 to $117,000. Thus, in year two, instead of showing a profit of $919,036, HCAC would potentially lose approximately $617, 000. HCAC's "forecasted income statement" for the 105-bed project is also not reasonable. Specifically, the contractual allowances, the allowance for bad debt, and the salaries, wages and fringe benefits are unreasonable. Contractuals include such things as Medicare, Medicaid, HMOs and PPOs, which all generate discounts which are considered contractual allowances. HCAC estimates its bad debt factor at 1.6 percent. A more reasonable projection would be 6 to 8 percent of gross revenue. CONSISTENCY WITH THE DISTRICT XI HEALTH PLAN AND STATE MENTAL HEALTH PLAN The District XI local health council has produced the 1986 District XI Health Plan. The district plan contains the relevant policies, priorities, criteria and standards for evaluation of an application such as HCAC's. HCAC's application is consistent with some of the applicable sections of the District XI Health Plan but inconsistent with the plan taken as a whole. Policy No. 1 of the District XI health plan states that the district should direct its efforts toward a licensed bed capacity of 5.5 non-federal beds per thousand population ratio by 1989. Presently there are 11,294 beds in District XI which represents a number in excess of 5.5 non-federal beds. HCAC's application is inconsistent with this policy. Policy No. 1, Priority No. 1, states that proposals for the construction of new beds in the district should be considered only when the overall average occupancy of licensed beds exceeds 80 percent. Priority No. 1 refers to certain types of beds, specifically, acute care general beds, short- term psychiatric beds and substance abuse beds. HCAC's application is not inconsistent with this priority because long-term psychiatric beds are not mentioned. Policy No. 1, Priority No. 2 favors the encouragement of projects that meet specific district service needs through the conversion of existing beds from currently underutilized services. Because HCAC is not the operator of an existing hospital and it is not possible for HCAC to convert any beds from other services, HCAC's application is inconsistent with Policy No. 1, Priority No. 2. Policy No. 1, Priority No. 3 would only be relevant in the case of an existing hospital but not in the case of a new hospital where no comparative hearing is involved. HCAC's application is not inconsistent with Policy No. 1, Priority No. 3. Policy No. 1, Priority No. 4 allows for priority consideration for the initiation of new services for projects which have had an average occupancy rate of 80 percent for the last two years and which have a documented history of providing services to Medicaid and/or other medically indigent patients. HCAC's application is not entitled to priority consideration under Policy No. 1, Priority No. 4. Policy No. 2 is a broad policy which provides that service alternatives should be available within the district to meet the needs of community residents, while at the same time maintaining an efficient level of utilization. This policy is necessarily tied to the demonstration of overall need for the facility. If HCAC can show need for the proposed facility, its proposal would be consistent with this policy. Policy No. 2, Priority No. 1(f) (Psychiatric Bed Services) provides for priority consideration to be given to specific institutions which have achieved an 80 percent occupancy rate for the preceding year. HCAC's application is not entitled to priority consideration under Policy No. 2, Priority No. 1(f). Policy No. 2, Policy No. 3(f) states that a CON applicant should propose to provide the scope of services consistent with the level of care proposed in the application in accordance with appropriate accrediting agency standards. In the case of psychiatric bed services the appropriate accrediting agency is the Joint Commission for Accreditation of Hospitals (JCAH). Although HCAC neglected to address its ability to comply with JCAH standards in its application, it has established its intent to seek JCAH accreditation. HCAC's proposal is consistent with Policy No. 2, Priority No. 3(f). Policy No. 2, Priority No. 4 gives a preference to those applicants that propose innovative mechanisms such as various complimenting outpatient and inpatient services which are directed toward an ultimate reduction in dependency upon hospital beds. HCAC does not meet this priority because it has not proposed any mechanisms to complement outpatient services with inpatient services directed toward an ultimate reduction in the dependency on hospital beds. Policy No. 2, Priority No. 5 gives a preference to applicants who have based their project on a valid marketing research effort and have placed it in the context of a long-range plan. HCAC does not meet this priority because there was no evidence that the project was based on a valid marketing research plan or placed in the context of a long-range plan. Policy No. 2f Priority No. 6 states that existing facilities as well as applicants for new services should demonstrate a willingness to enter into cooperative planning efforts directed at establishing a system whereby duplication of specialized services is avoided while quality of such services is enhanced. HCAC presented no documentation of transfer agreements with other hospitals and did not substantiate its willingness to enter into cooperative planning efforts with letters of intent, referral agreements or memoranda of understanding. Policy No. 3 provides that services in the community should be made available to all segments of the resident population regardless of the ability to pay. HCAC's proposal is consistent with this policy because a provision for services to indigent patients has been made. Policy No. 3, Priority No. 1 provides that priority should be given to applications proposing services and facilities designed to include Medicaid (Baker Act) patients to the greatest extent possible based on documented history or proposed services. Although Medicaid does not reimburse for freestanding psychiatric services, and Baker Act is only available to short-stay facilities specifically chosen to receive a Baker Act contract, HCAC has not designed its project to include those patients to the greatest extent possible. Thus, HCAC's application is not consistent with Policy No. 3, Priority No. 1. Goal I of the 1986 District XI Goals and Policies for Mental Health and Substance Abuse Services is applicable to HCAC's application. This goal favors mental health services in the least restrictive setting possible. Long- term institutional care may be the least restrictive setting possible in the continuum of mental health care for the treatment of certain more serious types of patients. The concept of "continuum of care" means the full breadth of services available within a community, from least restrictive to most restrictive, from least intensive to most intensive. There must be settings along the full continuum of psychiatric care for patients to receive the level of care they may need. HCAC's application is not inconsistent with Goal I. Issues Relating to CON Recommendations and Priority for Inpatient Psychiatric Services (District XI Health Plan 1986, page 26). In this section of the district health plan, the Planning Advisory Committee states its recommendations and preferences for services for the comprehensive treatment of the mentally ill. The Committee recognizes that long-term hospitalization is a viable form of treatment for some mentally ill patients. However, the Committee expresses a preference for short hospital stays and applicants that project treatment modalities with an average length of stay under 20 days. In addition, the Committee emphasizes a preference for services to be obtained through the conversion of medical/surgical beds, because the district has a large surplus of such beds. Overall, HCAC's project is not consistent with the recommendations and priorities of the Planning Advisory Committee. HCAC's proposal is inconsistent with the goals, objectives and recommendations of the State Health Plan taken as a whole. The State Health Plan contains an important and significant goal that no additional long-term hospital psychiatric beds should be added in the area until the existing and approved beds in the district have achieved an 80 percent occupancy level. The existing long-term hospital psychiatric beds in the district have an occupancy level at approximately 67 percent. AVAILABILITY AND ADEQUACY OF ALTERNATIVES There are available, accessible and appropriate facilities within the service district which can be utilized for the services proposed by HCAC that are presently underutilized. Currently, there are short-term psychiatric providers, a long-term provider, residential facilities, nursing homes and adult congregate living facilities that are available as alternatives in the service district, and in many cases are significantly underutilized. Although the services to be offered by the HCAC facility would be in excess of what is provided in an adult residential treatment facility, nursing home or adult congregate living facility, those facilities could serve as viable alternatives in appropriate cases. In 1986, there were 6,513 existing nursing home beds in District XI and an additional 1,928 approved for opening. There are 24 adult congregate living facilities in District XI with 50 beds or more. The total number of beds for ACLFs in 1986 was 2,620. In addition, Grant Center Hospital has 140 existing and 20 approved long-term psychiatric beds; its occupancy rate is low. THE ABILITY OF THE APPLICANT TO PROVIDE QUALITY OF CARE AND THE APPLICANT'S RECORD OF PROVIDING QUALITY OF CARE The "Flowers Model," made a part of the application, is a description of how, from a clinical perspective, the proposal will be managed. Although Flowers does not presently operate any long-term psychiatric facilities, the Flowers Model is appropriate for a long-term psychiatric care facility. From a clinical and programmatic perspective, the HCAC facility would provide good quality of care. PROBABLE ECONOMIES AND IMPROVEMENTS IN SERVICE WHICH MAY BE DERIVED FROM OPERATION OF JOINT, COOPERATIVE OR SHARED HEALTH CARE RESOURCES HCAC has not demonstrated that there will be any improvements in service which may be derived from operation of joint, cooperative or shared health care resources. The Northwest Dade County proposed location of the HCAC facility would place the project within two hours travel of 90 percent or more of District XI population. Nevertheless, HCAC's facility would increase the number of people who would be within two hours of long-term adult psychiatric facilities by less than 1 percent. The patients in District XI will not experience serious problems in obtaining inpatient care of the type proposed in the absence of the service proposed by HCAC. There is presently adequate and accessible long-term hospital inpatient services for District XI population based on the existing and approved facilities in District X (Southwinds Hospital, Florida Medical Center) and District XI (Grant Center). There are two approved but not yet open long-term psychiatric facilities in District X, Broward County. Florida Medical Center holds a CON for 60 long-term adult psychiatric beds to be located in Lauderdale Lakes and Southwinds Hospital holds a 75-bed CON with 60 beds counted for long-term treatment of adult and geriatric patients to be located in Andy Town. In addition, there are 238 long-term state hospital beds at South Florida State Hospital in Broward County. Although the need for long-term psychiatric beds is assessed on a district-wide basis, it is reasonable to consider psychiatric beds in Broward County (District X) as an alternative to HCAC's proposal because they are within two hours access of individuals within the two counties. Likewise, it is reasonable to consider approved beds because need is projected for a future date. Not counting approved beds would overestimate need and result in duplication of services. FINANCIAL FEASIBILITY HCAC has not demonstrated that the 120-bed project or the 105-bed facility is financially feasible in the short or the long term. The projection of revenues and expenses in the pro forma (120-bed project) and the forecasted income statement (105-bed project) were flawed to such an extent that financial feasibility of the project was not shown. IMPACT ON COSTS AND COMPETITION If HCAC's project were to be built, a likely result is increased charges for the provision of services in the area. HCAC's proposed facility would negatively impact the availability of psychiatric nurses. There is a shortage of psychiatric nurses in Dade County and it is difficult to recruit and hire R.N.s with psychiatric experience. In order to hire nurses in a time of shortage, hospitals must recruit staff from other facilities. Shortages can increase the cost of recruitment and the cost of salaries. Charter is a hospital located in District XI and consists of 88 beds, 80 of which are licensed as short-term psychiatric beds and eight of which are licensed as short-term substance abuse beds. Short-term psychiatric inpatient care is defined in Rule 10-5.011(1)(o), Florida Administrative Code, as "a service not exceeding three months and averaging a length of stay of 30 days or less for adults." HCAC's proposed facility, if approved, would have a negative economic impact on Charter. It is very likely that many of the patients at the proposed HCAC facility would experience lengths of stay between 45 and 60 days. Charter treats a significant number of patients (approximately 15 percent) who stay longer than 30 days. Because of the difficulty of initially identifying patients who would require either short or long-term stays, many of Charter's patients could be lost to the HCAC project. Charter could suffer a loss of up to 657 patient days per year if HCAC's proposed facility is approved. This loss of patients would impair Charter's ability to have certain types of programs, equipment and staff. PROVISION OF HEALTH CARE SERVICES TO MEDICAID PATIENTS AND THE MEDICALLY INDIGENT HCAC's project does not propose a significant amount of indigent care and HCAC has no history of providing health care services to Medicaid patients and the medically indigent. OCCUPANCY RATE FOR EXISTING LONG-TERM HOSPITAL PSYCHIATRIC BEDS Grant Center Hospital is the only existing long-term psychiatric facility in District XI. It has 140 beds and specializes in treating children and adolescent patients. Its occupancy rate at the time of review for the preceding year was approximately 67 percent. The appropriate period to calculate occupancy rate of existing facilities in this case is July 1985 to July 1986 because this is the most recent 12-month period preceding application decision. The occupancy rate of all psychiatric beds within District XI was below 80 percent. HCAC'S PROPOSED NEED METHODOLOGY At the hearing, W. Eugene Nelson testified on behalf of HCAC on the need for the proposed long-term adult psychiatric beds. Mr. Nelson was accepted as an expert in the field of health care planning, including psychiatric bed need assessment. Mr. Nelson performed his analysis in District XI using the Graduate Medical Educational National Advisory Committee (GMENAC) methodology. The need methodology proposed by HCAC is inappropriate to adequately and accurately predict need for long-term adult psychiatric beds in District XI. The GMENAC study is a national study based on national data developed to determine physician requirements in 1990 for 23 medical specialities. GMENAC estimates the prevalence of certain psychiatric disorders among the general population and estimates the number of those persons who need care for their conditions in differing treatment settings ranging from outpatient services to 24-hour institutional care. HCAC's methodology, utilizing the GMENAC study, predicted a gross need of 895 beds in District XI in the applicable horizon (July 1991). The total number of existing long-term psychiatric beds in the entire State of Florida is only 836 beds, and the majority of those beds are experiencing occupancy levels under 65 percent. Many of these long-term facilities have been around for a period of at least three years and are still experiencing low occupancy. Therefore, the low levels are probably not based on the fact that the facilities are in a start-up mode. HCAC's bed need computation is as follows: Adult Long Term Psychiatric Bed Requirements (Excludes Alcohol, Drug Abuse, Mental Retardation, Organic Brain Syndrome and "other" Conditions) District XI: July 1991 Condition Admission Rate Schizophrenia & Other Psychoses 99 Affective Disorder Psychosis 20 Affective Disorder Neuroses 60 Neuroses and Personality Disorders 199 20 Projected 1991 Population Age 18+ 1,459,437 Total Projected Admissions 2,904 Average Length of Stay 90 Projected Patient Days Target Occupancy 80.00 261,385 percent Total Beds Required 895 Beds Currently Available 438 South Florida State Hospital (450 X .48) Residential Treatment Facilities 216 233 Net Beds Needed 496 The projected 1991 population for District XI for age 18 and above is 1,459,473. The population projections were received from the Office of the Governor. The anticipated admissions per 100,000 is calculated to be 199 for the conditions listed. The total projected admissions for 1991 is 2,904. The 2,904 projected long-term care admissions when multiplied by the average length of stay of 90 days generates 261,385 projected patient days in the 1991 horizon period in District XI. The 261,385 patient days is then divided by 365 days in the year, and then by 80 percent, the latter of which is contained in the rule as the optimum or desired occupancy for long-term psychiatric beds. This yields a total gross long-term psychiatric bed requirement for adults and geriatrics of 895 beds. In performing his analysis, Mr. Nelson used Table 4, page 22 of the GMENAC Study which lists information for mental disorders requiring care by treatment setting. The prevalence rate of 199 admissions per 100,000 population was based on the study's projection of the mental disorders listed requiring a "24-hour" treatment setting. Nelson used a projected 90-day length of stay in his computations. There is nothing in the GMENAC document that sets forth the average length of stay of persons reflected in the 24-hour column. Therefore, it is misleading to assume that persons admitted subject to the 199 per 100,000 admissions rate will actually experience an average length of stay as long as 90 days. For HCAC's admission rate to be valid, all of the facilities in District XI would have to average a 90-day length of stay. This is an unreasonable assumption. Nationwide, only a small percentage of all psychiatric admissions experience a length of stay as long as 90 days. In computing beds currently available in District XI, Mr. Nelson did not consider nursing home beds, adult congregate living facility beds, or the 135 long-term psychiatric beds that have been approved for two facilities in District X (Broward County). Nelson also did not consider whether short-term facilities were capable or willing to take additional patients for long-term treatment. Thus, the computation of beds currently available in the HCAC methodology is unreasonably low. HCAC's need methodology generated a long-term psychiatric bed to population ratio of .61 per thousand. DHRS' rule for short-term psychiatric beds was a population ratio of .35 per thousand. Short-term care facilities have admission rates two to three times greater than long-term facilities and nationwide statistics establish that only 4 percent of all psychiatric patients stay longer than 90 days. It is not reasonable for the bed rate for long-term adult psychiatric beds to be higher than the rate for short-term psychiatric beds. Mr. Nelson excluded organic brain syndrome diagnosis from his analysis and admission rate based on an assumption that many of those patients are in nursing homes. Nelson did not use nursing home beds in computing his need methodology because he believed that eliminating the organic brain syndrome category from the Table 4, page 22, 24-hour column in the GMENAC study eliminates the need for considering nursing home beds in the inventory. For that approach to be valid, the number of organic brain syndrome patients that go to long-term psychiatric facilities would need to cancel out the number of patients in other diagnostic categories who go to nursing homes. Nelson did not consult or review any data concerning the number or percentage rates of schizophrenics and other mentally ill patients in nursing homes or the number of organic brain syndrome people being treated in long-term psychiatric facilities. In addition, Nelson did not know what percentage, if any, of the GMENAC projected admissions were nursing home admissions. In computing existing beds, Nelson listed two types of facilities previously existing in District XI which were applicable to his methodology: the state hospital (216 beds) and residential treatment facilities (233 beds). The correct number of beds available for adults from District XI in the state hospital is 238. The actual number of beds for residential facilities is 335. Dr. Howard Fagin testified as an expert in health planning and feasibility analysis, including psychiatric bed need assessment and feasibility. In Dr. Fagin's opinion, Nelson's bed need methodology is incorrect and the conclusions drawn are wrong because Nelson used an inappropriate length of stay based on the GMENAC study and also incorrectly identified the applicable beds which should be considered for comparable facilities under the GMENAC study and, therefore, his total numbers in terms of gross and net beds needed are incorrect. Dr. Fagin's critique of Mr. Nelson's bed need methodology is persuasive and credible. HCAC has failed to show that its proposed need methodology could accurately project the need for long-term psychiatric beds in District XI.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that CON Application No. 4854 by Health Care Advisors Corporation, Inc. be DENIED. DONE and ORDERED this 1st day of March, 1988 in Tallahassee, Leon County, Florida. W. MATTHEW STEVENSON Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of March, 1988. COPIES FURNISHED: Lesley Mendelson, Esquire Assistant General Counsel Department of Health and Rehabilitative Services Fort Knox Executive Center 2727 Mahan Drive, Suite 308 Tallahassee, Florida 32308 H. Darrell White, Esquire Gerald B. Sternstein, Esquire Post Office Box 2174 Tallahassee, Florida 32302 William E. Hoffman, Esquire 2500 Trust Company Tower 25 Park Place Atlanta, Georgia 30303 George N. Neros, Jr., Esquire 101 North Monroe Street Monroe-Park Tower Suite 900 Tallahassee, Florida 32301 Donna H. Stinson, Esquire The Perkins House Suite 100 118 North Gadsden Street Tallahassee, Florida 32301 R. S. Power, Esquire Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
The Issue Kindred Hospitals East, LLC ("Kindred") and Select Specialty Hospital-Palm Beach, Inc. ("Select-Palm Beach"), filed applications for Certificates of Need ("CONs") with the Agency for Health Care Administration ("AHCA" or the "Agency") seeking approval for the establishment of long-term care hospitals ("LTCHs") in Palm Beach County, AHCA District 9. Select-Palm Beach's application, CON No. 9661, seeks approval for the establishment of a 60-bed freestanding LTCH in "east central" Palm Beach County about 20 miles south of Kindred's planned location. Kindred's application, CON No. 9662, seeks approval for the establishment of a 70-bed LTCH in the "north central" portion of the county. The ultimate issue in this case is whether either or both applications should be approved by the Agency.
Findings Of Fact Long Term Care Hospitals Of the four classes of facilities licensed as hospitals by the Agency, "Class I or general hospitals," includes: General acute care hospitals with an average length of stay of 25 days or less for all beds; Long term care hospitals, which meet the provisions of subsection 59A-3.065(27), F.A.C.; and, Rural hospitals designated under Section 395, Part III, F.S. Fla. Admin. Code R. 59A-3.252(1)(a). This proceeding concerns CON applications for the second of Florida's Class I or general hospitals: LTCHs. A critically ill patient may be admitted and treated in a general acute care hospital, but, if the patient cannot be stabilized or discharged to a lower level of care on the continuum of care within a relatively short time, the patient may be discharged to an LTCH. An LTCH patient is almost always "critically catastrophically ill or ha[s] been." (Tr. 23). Typically, an LTCH patient is medically unstable, requires extensive nursing care with physician oversight, and often requires extensive technological support. The LTCH patient usually fits into one or more of four categories. One category is patients in need of pulmonary/respiratory services. Usually ventilator dependent, these types of LTCH patients have other needs as well that requires "complex comprehensive ventilator weaning in addition to meeting ... other needs." (Tr. 26). A second category is patients in need of wound care whose wound is life-threatening. Frequently compromised by inadequate nutrition, these types of LTCH patients are often diabetic. There are a number of typical factors that may account for the seriousness of the wound patient's condition. The job of the staff at the LTCH in such a case is to attend to the wound and all the other medical problems of the patient that have extended the time required for care of the wound. A third category is patients with some sort of neuro-trauma. These patients may have had a stroke and are often elderly; if younger, they may be victims of a car accident or some other serious trauma. They typically have multiple body systems that require medical treatment, broken bones and a closed head injury for example, that have made them "very sick and complex." (Tr. 27). The fourth category is referred to by the broad nomenclature of "medically complex" although it is a subset of the population of LTCH patients all of whom are medically complex. The condition of the patients in this fourth category involves two or more body systems. The patients usually present at the LTCH with "renal failure ... [and] with another medical condition ... that requires a ventilator ..." Id. In short, LTCHs provide extended medical and rehabilitative care to patients with multiple, chronic, and/or clinically complex acute medical conditions that usually require care for a relatively extended period of time. To meet the definition of an LTCH a facility must have an average length of inpatient stay ("ALOS") greater than 25 days for all hospital beds. See Fla. Admin. Code R. 59A-3.065(34). The staffs at general acute care hospitals and LTCHs have different orientations. With a staff oriented toward a patient population with a much shorter ALOS, the general acute care hospital setting may not be appropriate for a patient who qualifies for LTCH services. The staff at a general acute care hospital frequently judges success by a patient getting well in a relatively short time. It is often difficult for general acute care hospital staff to sustain the interest and effort necessary to serve the LTCH patient well precisely because of the staff's expectation that the patient will improve is not met in a timely fashion. As time goes by, that expectation continues to be frustrated, a discouragement to staff. The LTCH is unlike other specialized health care settings. The complex, medical, nursing, and therapeutic requirements necessary to serve the LTCH patient may be beyond the capability of the traditional comprehensive medical rehabilitation ("CMR") hospital, nursing home, skilled nursing facility ("SNF"), or, the skilled nursing unit ("SNU"). CMR units and hospitals are rarely, if ever, appropriate for the LTCH patient. Almost invariably, LTCH patients are not able to tolerate the minimum three (3) hours of therapy per day associated with CMR. The primary focus of LTCHs, moreover, is to provide continued acute medical treatment to the patient that may not yet be stable, with the ultimate goal of getting the patient on the road to recovery. In comparison, the CMR hospital treats medically stable patients consistent with its primary focus of restoring functional capabilities, a more advanced step in the continuum of care. Services provided in LTCHs are distinct from those provided in SNFs or SNUs. The latter are not oriented generally to patients who need daily physician visits or the intense nursing services or observations needed by an LTCH patient. Most nursing and clinical personnel in SNFs and SNUs are not experienced with the unique psychosocial needs of long-term acute care patients and their families. An LTCH is distinguished within the healthcare continuum by the high level of care the patient requires, the interdisciplinary treatment model it follows, and the duration of the patient's hospitalization. Within the continuum of care, LTCHs occupy a niche between traditional acute care hospitals that provide initial hospitalization care on a short-term basis and post-acute care facilities such as nursing homes, SNFs, SNUs, and comprehensive medical rehabilitation facilities. Medicare has long recognized LTCHs as a distinct level of care within the health care continuum. The federal government's prospective payment system ("PPS") now treats the LTCH level of service as distinct with its "own DRG system and ... [its] own case rate reimbursement." (Tr. 108). Under the LTCH PPS, each patient is assigned an LTC- DRG (different than the DRG under the general hospital DRG system) with a corresponding payment rate that is weighted based on the patient diagnosis and acuity. The Parties The Agency is the state agency responsible for administering the CON Program and licensing LTCHs and other hospital facilities pursuant to the authority of Health Facility and Services Development Act, Sections 408.031-408.045, Florida Statutes. Select-Palm Beach is the applicant for a free-standing 60-bed LTCH in "east Central Palm Beach County," Select Ex. 1, stamped page 12, near JFK Medical Center in AHCA District 9. Its application, CON No. 9661, was denied by the Agency. Select-Palm Beach is a wholly owned subsidiary of Select Medical Corporation, which provides long term acute care services at 83 LTCHs in 24 states, four of which are freestanding hospitals. The other 79 are each "hospitals-in-a- hospital" ("HIH" or "LTCH HIH"). Kindred is the applicant for a 70-bed LTCH to be located in the north central portion of Palm Beach County in AHCA District 9. Its application, CON No. 9662, was denied by the Agency. Kindred is a wholly owned subsidiary of Kindred Healthcare, Inc. ("Kindred Healthcare"). Kindred Healthcare operates 73 LTCHs, 59 of which are freestanding, according to the testimony of Mr. Novak. See Tr. 56-57. Kindred Healthcare has been operating LTCHs since 1985 and has operated them in Florida for more than 15 years. At the time of the submission of Kindred's application, Kindred Healthcare's six LTCHs in Florida were Kindred-North Florida, a 60-bed LTCH in Pinellas County, AHCA District 5; Kindred-Central Tampa, with 102 beds, and Kindred-Bay Area- Tampa, with 73 beds, both in Hillsborough County, in AHCA District 6; Kindred-Ft. Lauderdale with 64 beds and Kindred- Hollywood with 124 beds, both in Broward County, ACHA District 10; and Kindred-Coral Gables, with 53 beds, in Dade County, AHCA District 11. The Applications and AHCA's Review The applications were submitted in the first application cycle of 2003. Select-Palm Beach's application is CON No. 9661; Kindred's is CON No. 9662. Select-Palm Beach estimates its total project costs to be $12,856,139. Select-Palm Beach has not yet acquired the site for its proposed LTCH, but did include in its application a map showing three priority site locations, with its preferred site, designated "Site 1," located near JFK Medical Center. At $12,937,419, Kindred's estimate of its project cost is slightly more than Select-Palm Beach's. The exact site of Kindred's proposed LTCH had not been determined at the time of hearing. Kindred's preference, however, is to locate in the West Palm Beach area in the general vicinity of St. Mary's Hospital, in the northern portion of Palm Beach County along the I-95 corridor. This is approximately 15 to 20 miles north of Select's preferred location for its LTCH. There is no LTCH in the five-county service area that comprises District 9: Indian River, Okeechobee, St. Lucie, Martin, and Palm Beach Counties. There are two LTCHs in adjacent District 10 (to the south). They have a total of 188 beds and an average occupancy of 80 percent. The Agency views LTCH care as a district-wide service primarily for Medicare patients. At the time of the filing of the applications, the population in District 9 was over 1.6 million, including about 400,000 in the age cohort 65 and over. About 70 percent of the District 9 population lives in Palm Beach County. More than 70 percent of the District's general acute care hospitals are located in that county. Kindred's preferred location for its LTCH is approximately 40 to 50 miles from the closest District 10 LTCH; Select-Palm Beach is approximately 25 to 35 miles from the closest District 10 LTCH. The locations of Select Palm-Beach's and Kindred's proposed LTCHs are complementary. The SAAR Following its review of the two applications, AHCA issued its State Agency Action Report ("SAAR"). Section G., of the report, entitled "RECOMMENDATION," states: "Deny Con #9661 and CON #9662." Agency Ex. 2, p. 43. On June 11, 2003, the report was signed by Karen Rivera, Health Services and Facilities Consultant Supervisor Certificate of Need, and Mr. Gregg as the Chief of the Bureau of Health Facility Regulation. It contained a section entitled "Authorization for Agency Action" that states, "[a]uthorized representatives of the Agency for Health Care Administration adopted the recommendations contained herein and released the State Agency Action Report." Agency Ex. 2, p. 44. The adoption of the recommendations is the functional equivalent of preliminary denial of the applications. In Section F. of the SAAR under the heading of "Need," (Agency Ex. 2, p. 40), the Agency explained its primary bases for denial; it concluded that the applicants had not shown need for an LTCH in AHCA District 9. The discussions for the two, although not precisely identical, are quite similar: Select Specialty Hospital-Palm Beach, Inc.(CON #9661): The applicant's two methodological approaches to demonstrate need are not supported by any specific discharge studies or other data, including DRG admission criteria from area hospitals regarding potential need. The applicant also failed to provide any supporting documentation from area physicians or other providers regarding potential referrals. It was further not demonstrated that patients that qualify for LTCH services are not currently being served or that an access problem exists for residents in District 9. Kindred Hospitals East, L.L.C. (CON #9662): The various methodological approaches presented are not supported by any specific DRG admission criteria from area hospitals suggesting potential need. The applicant provided numerous letters of support for the project from area hospitals, physicians and case managers. However, the number of potential referrals of patients needing LTCH services was not quantified. It was further not demonstrated that patients that qualify for LTCH services are not currently being served or that an access problem exists for residents in District 9. Id. At hearing, the Agency's witness professed no disagreement with the SAAR and continued to maintain the same bases contained in the SAAR for the denials of the two applications The SAAR took no issue with either applicant's ability to provide quality care. It concluded that funding for each applicant was likely to be available and that each project appeared to be financially feasible once operating. The SAAR further stated that there were no major architectural concerns regarding Kindred's proposed facility design, but noted reservations regarding the need for further study and revision of Select Palm-Beach's proposed surgery/procedure wing, as well as cost uncertainties for Select Palm Beach because of such potential revisions. By the time of final hearing, however, the parties had stipulated to the reasonableness of each applicant's proposed costs and methods of construction. The parties stipulated to the satisfaction of a number of the statutory CON criteria by the two applicants. The parties agreed that the applications complied with the content and review process requirements of sections 408.037 and 409.039, Florida Statutes, with one exception. Select reserved the issue of the lack of a Year 2 of Schedule 6, (Staffing) in Kindred's application. The form of Schedule 6 provided by AHCA to Kindred (unlike other schedules of the application) does not clearly indicate that a second year of staffing data must be provided. The remainder of the criteria stipulated and the positions of the parties as articulated in testimony at hearing and in the proposed orders that were submitted leave need as the sole issue of consequence with one exception: whether Kindred has demonstrated that its project is financially feasible in the long term. Kindred's Long Term Financial Feasibility Select-Palm Beach contends that Kindred's project is not financially feasible in the long term for two reasons. They relate to Kindred's application and are stated in Select Palm Beach's proposed order: Kindred understated property taxes[;] Kindred completely fails to include in its expenses on Schedule 8, patient medical assistance trust fund (PMATF) taxes [citation omitted]. Proposed Recommended Order of Select-Palm Beach, Inc., p. 32, Finding of Fact 97. Raised after the proceeding began at DOAH by Select- Palm Beach, these two issues were not considered by AHCA when it conducted its review of Kindred's application because the issues were not apparent from the face of the application. AHCA's Review of Kindred's Application Kindred emerged from a Chapter 11 bankruptcy proceedings on April 20, 2001, under a plan of reorganization. With respect to the events that led to the bankruptcy proceeding and the need to review prior financial statements, AHCA made the following finding in the SAAR: Under the plan [of reorganization], the applicant [Kindred] adopted the fresh start accounting provision of SOP 90-7. Under fresh start accounting, a new reporting entity is created and the recorded amounts of assets and liabilities are adjusted to reflect their estimated fair values. Accordingly, the prior period financial statements are not comparable to the current period statements and will not be considered in this analysis. Agency Ex. 2, p. 30. The financial statements provided by Kindred as part of its application show that Kindred Healthcare, Kindred's parent, is a financially strong company. The information contained in Kindred's CON application filed in 2003 included Kindred Healthcare's financial statements from the preceding calendar year. Kindred Healthcare's Consolidated Statement of Operations for the year ended December 31, 2002, showed "Income from Operations" to be more than $33 million, and net cash provided by operating activities (cash flow) of over $248 million for the period. Its Consolidated Balance Sheet as of December 31, 2002, showed cash and cash equivalents of over $244 million and total assets of over $1.6 billion. In light of the information contained in Kindred's CON application, the SAAR concluded with regard to short term financial feasibility: Based on the audited financial statements of the applicant, cash on hand and cash flows, if they continue at the current level, would be sufficient to fund this project as proposed. Funding for all capital projects, with the support of its parent, is likely to be available as needed. Agency Ex. 2, p. 30 (emphasis supplied). The SAAR recognized that Kindred projected a "year two operating loss for the hospital of $287,215." Agency Ex. 2, p. Nonetheless, the SAAR concludes on the issue of financial feasibility, "[w]ith continued operational support from the parent company, this project [Kindred's] is considered financially feasible." Id. The Agency did not have the information, however, at the time it reviewed Kindred's application that Kindred understated property taxes and omitted the Public Medicaid Trust Fund and Medical Assistance Trust Fund ("PMATF") "provider tax" of 1.5 percent that would be imposed on Kindred's anticipated revenues of $11,635,919 as contended by Select-Palm Beach. Consistent with Select Palm-Beach's general contentions about property taxes and PMATF taxes, "Kindred acknowledges that it likely understated taxes to be incurred in the operation of its facility." Kindred's Proposed Recommended Order, paragraph 50, p. 19. The parties agree, moreover, that the omitted PMATF tax is reasonably projected to be $175,000. They do not agree, however, as to the impact of the PMATF tax on year two operating loss. The difference between the two (approximately $43,000) is attributable to a corporate income tax benefit deduction claimed by Kindred so that the combination of the application's projected loss, the omitted PMATF tax, and the deduction yields a year two operating loss of approximately $419,000. Without taking into consideration the income tax benefit, Select-Palm Beach contends that adding in the PMATF tax produces a loss of $462,000. Kindred and Select-Palm Beach also disagree over the projection of property taxes by approximately $50,000. Kindred projects that the property taxes in year two of operation will be approximately $225,000 instead of the $49,400 listed in the application. Select-Palm Beach projects that they will be $50,000 higher at approximately $275,000. Whether Kindred's or Select-Palm Beach's figures are right, Kindred makes two points. First, if year two revenues and expenses, adjusted for underestimated and omitted taxes, are examined on a quarterly basis, the fourth quarter of year two has a better bottom line than the earlier quarters. Not only will the fourth quarter bottom line be better, but, using Kindred's figures, the fourth quarter of year two of operations is profitable. Second, and most importantly given the Agency's willingness to credit Kindred with financial support from its parent, Kindred's application included in its application an interest figure of $1.2 million for year one of operation and $1.03 million for year two. Kindred claims in its proposed recommended order that "[i]n reality ... this project will incur no interest expense as Kindred intends to fund the project out of cash on hand, or operating capital, and would not have to borrow money to construct the project." Id., at paragraph 54, p. 20. Through the testimony of John Grant, Director of Planning and Development for Kindred's parent, Kindred Healthcare, Kindred indicated at hearing that its parent might, indeed, fund the project: A ... Kindred [Healthcare] would likely fund this project out of operating capital. Like I said, in the first nine months of this year Kindred had operating cash flow of approximately $180 million. So it's not as if we would have to actually borrow money to complete a project like this. Q And what was the interest expense that you had budgeted in Year Two for this facility? A $1,032,000. Q ... so is it your statement then that this facility would not owe any interest back to the parent company? A That's correct. Tr. 221-222 (emphasis supplied). If the "financing interest" expense is excluded from Kindred's statement of projected expenses in Schedule 8 of the CON application, using Kindred's revised projections, the project shows a profit of approximately $612,0002 for the second year of operation. If Select-Palm Beach's figures and bottom line loss excludes the "finances interest" expense, the elimination of the expense yields of profit for year two of operations in excess of $500,000. If the support of Kindred's parent is considered as the Agency has signaled its willingness to do and provided that the project is, in fact, funded by Kindred Healthcare rather than financed through some other means that would cause Kindred to incur interest expense, Kindred's project is financially feasible in the long term. With the exception of the issue regarding Kindred's long term financial feasibility, as stated above, taken together, the stipulation and agreements of the parties, the Agency's preliminary review contained in the SAAR, and the evidence at hearing, all distill the issues in this case to one overarching issue left to be resolved by this Recommended Order: need for long term care hospital beds in District 9. Need for the Proposals From AHCA's perspective prior to the hearing, the only issue in dispute with respect to the two applications is need. This point was made clear by Mr. Gregg's testimony at hearing in answer to a question posed by counsel for Select-Palm Beach: Q. ... Assuming there was sufficient need for 130 beds in the district is there any reason why both applicants shouldn't be approved in this case, assuming that need? A. No. (Tr. 398). Both applicants contend that the application each submitted is superior to the other. Neither, however, at this point in the proceeding, has any objection to approval of the other application provided its own application is approved. Consistent with its position that both applications may be approved, Select-Palm Beach presented testimony through its health care planner Patricia Greenberg3 that there was need in District 9 for both applicants' projects. Her testimony, moreover, rehabilitated the single Kindred methodology of three that yielded numeric need less than the 130 beds proposed by both applications: Q ... you do believe that there is a need for both in the district. A I believe there's a need for two facilities in the district. Q It could support two facilities? A Oh, absolutely. Q And the disagreement primarily relates to the conservative approach of Kindred in terms of not factoring in out-migration and the narrowing the DRG categories? A Correct. ... Kindred actually had three models. Two of them support both facilities, but it's the GMLOS model that I typically rely on, and it didn't on the surface support both facilities. That's why I reconciled the two, and I believe that's the difference, is just the 50 DRGs and not including the out-migration. That would boost their need above the 130, and two facilities would give people alternatives, it would foster competition, and it would really improve access in that market. Tr. 150-51. Need for the applications, therefore, is the paramount issue in this case. Since both applicants are qualified to operate an LTCH in Florida, if need is proven for the 130 beds, then with the exception of Kindred's long term financial feasibility, all parties agree that there is no further issue: both applications should be granted. No Agency Numeric Need Methodology The Agency has not established a numeric need methodology for LTCH services. Consequently, it does not publish a fixed-need pool for LTCHs. Nor does the Agency have "any policy upon which to determine need for the proposed beds or service." See Fla. Admin. Code R. 59C-1.008(2)(e)1. Florida Administrative Code Rule 59C-1.008(2), which governs "Fixed Need Pools" (the "Fixed Need Pools Rule") states that if "no agency policy exist" with regard to a needs assessment methodology: [T]he applicant will be responsible for demonstrating need through a needs assessment methodology which must include, at a minimum, consideration of the following topics, except where they are inconsistent with the applicable statutory or rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, subdistrict or both; Medical treatment trends; and Market conditions. Fla. Admin. Code R. 59C-1.008(2)(e)2. The Fixed Need Pools Rule goes on to elaborate in subparagraph (e)3 that "[t]he existence of unmet need will not be based solely on the absence of a health service, health care facility, or beds in the district, subdistrict, region or proposed service area." Population, Demographics and Dynamics The first of the four topics to be addressed when an applicant is responsible for demonstrating need through a needs assessment methodology is "population, demographics and dynamics." The Agency has not defined service areas for LTCHs. Nonetheless, from a health planning perspective, it views LTCH services as being provided district-wide primarily for Medicare patients. Consistent with the Agency's view, Select-Palm Beach identified the entire district, that is, all of AHCA District 9, as its service area. It identified Palm Beach County, one of the five counties in AHCA District 9, as its primary service area. In identifying the service area for Select-Palm Beach, Ms. Greenberg drew data from various sources: population estimates for Palm Beach County and surrounding areas; the number of acute care hospital beds in the area; the number of LTCH beds in the area; the types of patients treated at acute care hospitals; and the lengths of stay of the patients treated at those hospitals. AHCA District 9 has more elderly than any other district in the State, and Palm Beach County has more than any other county except for Dade. Palm Beach County residents comprise 71% of the District 9 population. It is reasonably projected that the elderly population (the "65 and over" age cohort) in Palm Beach County is projected to grow at the rate of 8 percent by 2008. The "65 and over" age cohort is significant because the members of that cohort are most likely to utilize hospital services, including LTCH services. Its members are most likely to suffer complications from illness and surgical procedures and more likely to have co-morbidity conditions that require long- term acute care. Persons over 65 years of age comprise approximately 80 percent of the patient population of LTCH facilities. Both Select-Palm Beach and Kindred project that approximately 80 percent of their admissions will come from Medicare patients. Since 90 percent of admissions to an LTCH come from acute care facilities, most of the patient days expected at Select-Palm Beach's proposed LTCH will originate from residents in its primary service area, Palm Beach County. When looking at the migration pattern for patients at acute care facilities within Palm Beach County, the majority (90 percent) come from Palm Beach County residents. Thus, Select- Palm Beach's projected primary service area is reasonable. Just as Select-Palm Beach, Kindred proposes to serve the entire District. Kindred proposes that its facility be based in Palm Beach County because of the percentage of the district's population in the county as well as because more than 70% of the district's general acute care hospitals are in the county. Its selection of the District as its service area, consistent with the Agency's view, is reasonable. Currently there are no LTCHs in District 9. Availability, Utilization and Quality of Like Services The second topic is "availability, utilization and quality of like services." There are no "like" services available to District residents in the District. Select-Palm Beach and Kindred, therefore, contend that they meet the criteria of the second topic. There are like services in other AHCA Districts. For example, AHCA District 10 has at total of 188 beds at two Kindred facilities in Fort Lauderdale and Hollywood. The Agency, however, did not present evidence of their quality, that they were available or to what extent they are utilized by the residents of AHCA District 9. Medical Treatment Trends The third topic is medical treatment trends. Caring for patients with chronic and long term care needs is becoming increasingly more important as the population ages and as medical technology continues to emerge that prolongs life expectancies. Through treatment provided the medically complex and critically ill with state of the art mechanical ventilators, metabolic analyzers, and breathing monitors, LTCHs meet needs beyond the capability of the typical general acute care hospitals. In this way, LTCHs fill a niche in the continuum of care that addresses the needs of a small but growing patient population. Treatment for these patients in an LTCH, who otherwise would be cared for without adequate reimbursement to the general acute care hospital or moved to an alternative setting with staff and services inadequate to meet their needs, is a medical trend. Market Conditions The fourth topic to be addressed by the applicant is market conditions. The federal government's development of a distinctive prospective payment system for LTCHs (LTC-DRG), has created a market condition favorable to LTCHs. General acute care hospitals face substantial losses for the medically complex patient who uses far greater resources than expected on the basis of individual diagnoses. Medicare covers between 80 and 85 percent of LTCH patients. The remaining patients are covered by private insurance, managed care and Medicaid. LTCH programs allow for shorter lengths of stay in a general acute care facility, reduces re-admissions and provide more discharges to home. These benefits are increasingly recognized. Numeric Need Analysis Kindred presented a set of needs assessment methodologies that yielded numeric need for the beds applied for by Kindred. Select-Palm Beach did the same. Unlike Kindred, however, all of the needs assessment methodologies presented by Select-Palm Beach demonstrated numeric need in excess of the 130 beds proposed by both applications. Select-Palm Beach's methodologies, overall, are superior to Kindred's. Select-Palm Beach used two sets of needs assessment methodologies and sensitivity testing of one of the sets that confirmed the methodology's reasonableness. The two sets or needs assessment methodologies are: (1) a use rate methodology and (2) length of stay methodologies. The use rate methodology yielded projected bed need for Palm Beach County alone in excess of the 130 beds proposed by the two applicants. For the year "7/05 - 6/06" the bed need is projected to be 256; for the year "7/06 - 6/07" the bed need is projected to be 261; and, for the year "7/07 - 6/08" the bed need is projected to be 266. See Select Ex. 1, Bates Stamp p. 000036 and the testimony of Ms. Greenberg at tr. 114. If the use rate analysis had been re-computed to include two districts whose data was excluded from the analysis, the bed need yielded for Palm Beach County alone was 175 beds, a numeric need still in excess of the 130 beds proposed by both applicants. The use rate methodology is reasonable.4 The length of stay methodologies are also reasonable. These two methodologies also yielded numeric need for beds in excess of the 130 beds proposed. The two methodologies yielded need for 167 beds and 250 beds. Agency Denial The Agency's general concerns about LTCHs are not without basis. For many years, there were almost no LTCH CON applications filed with the Agency. A change occurred in 2002. The change in the LTCH environment in the last few years put AHCA in the position of having "to adapt to a rapidly changing situation in terms of [Agency] understanding of what has been going on in recent years with long-term care hospitals." (Tr. 358.) "... [I]n the last couple of years long-term care hospital applications have become [AHCA's] most common type of application." (Tr. 359.) At the time of the upsurge in applications, there was "virtually nothing ... in the academic literature about long- term care hospitals ... that could [provide] ... an understanding of what was going on ... [nor was there anything] in the peer reviewed literature that addressed long-term care hospitals" id., and the health care planning issues that affected them. Two MedPAC reports came out, one in 2003 and another in 2004. The 2003 report conveyed the information that the federal government was unable to identify patients appropriate for LTCH services, services that are overwhelmingly Medicare funded, because of overlap of LTCH services with other types of services. The 2004 report gave an account of the federal government decision to change its payment policy for a type of long-term care hospitals that are known as "hospitals-within- hospitals" (tr. 368) so that "hospitals within hospitals as of this past summer [2004] can now only treat 25 percent of their patients from the host hospital." Id. Both reports roused concerns for AHCA. First, if appropriate LTCH patients cannot be identified and other types of services overlap appropriately with LTCH services, AHCA cannot produce a valid needs assessment methodology. The second produces another concern. In the words of Mr. Gregg, The problem ... with oversupply of long-term care hospital beds is that it creates an incentive for providers to seek patient who are less appropriate for the service. What we know now is that only the sickest patient ... with the most severe conditions are truly appropriate for long-term care hospital placement. * * * ... [T]he MedPAC report most recently shows us that the greatest indicator of utilization of long-term care hospital services is the mere availability of those services. Tr. 368-369. The MedPAC reports, themselves, although marked for identification, were not admitted into evidence. Objections to their admission (in particular, Kindred's) were sustained because they had not been listed by AHCA on the stipulation required by the Pre-hearing Order of Instructions.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be issued by the Agency for Health Care Administration that: approves Select-Palm Beach's application, CON 9661; and approves Kindred's application CON 9662 with the condition that financing of the project be provided by Kindred Healthcare. DONE AND ENTERED this 18th day of April, 2005, in Tallahassee, Leon County, Florida. S DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of April, 2005.
