The Issue Whether the certificate of need application to convert 30 acute care beds to 30 adult psychiatric beds at Broward General Medical Center meets the statutory and rule criteria for approval.
Findings Of Fact The North Broward Hospital District (NBHD) is a special taxing district established by the Florida Legislature in 1951 to provide health care services to residents of the northern two-thirds of Broward County. NBHD owns and operates four acute care hospitals: Coral Springs Medical Center, North Broward Medical Center, Imperial Point Medical Center (Imperial Point), and Broward General Medical Center (Broward General). NBHD also owns and/or operates primary care clinics, school clinics, urgent care centers, and a home health agency. FMC Hospital, Ltd., d/b/a Florida Medical Center (FMC) is a 459-bed hospital with 74 inpatient psychiatric beds, 51 for adults separated into a 25-bed adult unit and a 26-bed geriatric psychiatric unit, and 23 child/adolescent psychiatric beds. FMC is a public Baker Act receiving facility for children and adolescents and operates a mental health crisis stabilization unit (CSU) for children and adolescents. FMC also operates separately located facilities which include a partial hospitalization program, an adult day treatment program, and a community mental health center. At Florida Medical Center South, FMC operates another day treatment program and partial hospitalization program. The Agency for Health Care Administration (AHCA) is the state agency which administers the certificate of need (CON) program for health care services and facilities in Florida. The NBHD applied for CON Number 8425 to convert 30 acute care beds to 30 adult psychiatric beds at Broward General. Broward General operates approximately 550 of its total 744 licensed beds. It is a state Level II adult and pediatric trauma center and the tertiary referral center for the NBHD, offering Level II and III neonatal intensive care, pediatric intensive care, cardiac catheterization and open heart surgery services. Broward General has 68 adult psychiatric beds and is a public Baker Act receiving facility for adults. Public Baker Act receiving facilities have state contracts and receive state funds to hold involuntarily committed mental patients, regardless of their ability to pay, for psychiatric evaluation and short-term treatment. See Subsections 394.455(25) and (26), Florida Statutes. Although they serve different age groups, both FMC and Broward General are, by virtue of contracts with the state, public Baker Act facilities. When a Baker Act patient who is an indigent child or adolescent arrives at Broward General, the patient is transferred to FMC. FMC also typically transfers indigent Baker Act adults to Broward General. At Broward General, psychiatric patients are screened in a separate section of the emergency room by a staff which has significant experience with indigent mental health patients. If hospitalization is appropriate, depending on the patient's physical and mental condition, inpatient psychiatric services are provided in either a 38-bed unit on the sixth floor or a 30- bed unit on the fourth floor of Broward General. In July 1995, Broward General also started operating a 20-bed mental health CSU located on Northwest 19th Street in Fort Lauderdale. Prior to 1995, the County operated the 19th Street CSU and 60 CSU beds on the grounds of the South Florida State Hospital (SFSH), a state mental hospital. Following an investigation of mental health services in the County, a grand jury recommended closing the 60 CSU beds at SFSH because of "deplorable conditions." In addition, the grand jury recommended that the County transfer CSU operations to the NBHD and the South Broward Hospital District (SBHD). As a result, the SBHD assumed the responsibility for up to 20 CSU inpatients a day within its existing 100 adult psychiatric beds at Memorial Regional Hospital. The NBHD assumed the responsibility for up to 40 CSU inpatients a day, including 20 at the 19th Street location. The additional 20 were to be redirected to either the 68 adult psychiatric beds at Broward General or the 47 adult psychiatric beds at Imperial Point. CSU services for adult Medicaid and indigent patients in the NBHD service area were transferred pursuant to contracts between the NBHD and Broward County, and the NBHD and the State of Florida, Department of Children and Family Services (formerly, the Department of Health and Rehabilitative Services). Based on the agreements, the County leases the 19th Street building in which Broward General operates the CSU. The County also pays a flat rate of $1.6 million a year in monthly installments for the salaries of the staff which was transferred from the County mental health division to the NBHD. The County's contract with the NBHD lasts for five years, from December 1995 to September 2000. Either party may terminate the contract, without cause, upon 30 days notice. The State contract, unlike that of Broward County, does not provide a flat rate, but sets a per diem reimbursement rate of approximately $260 per patient per day offset by projected Medicaid revenues. The State contract is renewable annually, but last expired on June 30, 1997. The contract was being re-negotiated at the time of the hearing in November 1997. Based on actual experience with declining average lengths of stay for psychiatric inpatients, the contract was being re-negotiated to fund an average of 30, not a maximum of 40 patients a day. If CON 8425 is approved, NBHD intends to use the additional 30 adult psychiatric beds at Broward General to meet the requirements of the State and County contracts, while closing the 19th Street CSU and consolidating mental health screening and stabilization services at Broward General. NBHD proposes to condition the CON on the provision of 70 percent charity and 30 percent Medicaid patient days in the 30 new beds. By comparison, the condition applicable to the existing 68 beds requires the provision of 3 percent charity and 25 percent Medicaid. When averaged for a total of 98 beds, the overall condition would be 23.5 percent charity and 26.5 percent Medicaid, or a total of 51 or 52 percent. The proposed project will require the renovation of 10,297 gross square feet on the fourth floor of Broward General at a cost of approximately $450,000. The space is currently an unused section of Broward General which contains 42 medical/surgical beds. Twelve beds will be relocated to other areas of the hospital. The renovated space will include seclusion, group therapy, and social rooms, as well as 15 semi- private rooms. Twelve of the rooms will not have separate bathing/showering facilities, and seven of those will also not have toilets within the patients' rooms. Need in Relation to State and District Health Plans - Subsection 408.035(1)(a), Florida Statutes The District 10 allocation factors include a requirement that a CON applicant demonstrate continuously high levels of utilization. The applicant is given the following evidentiary guidelines: patients are routinely waiting for admissions to inpatient units; the facility provides significant services to indigent and Medicaid individuals; the facility arranges transfer for patients to other appropriate facilities; and the facility provides other medical services, if needed. Broward General does not demonstrate continuously high utilization by having patients routinely waiting for admission. Broward General does meet the other criteria required by allocation factor one. The second District 10 allocation factor, like criterion (b) of the first, favors an applicant who commits to serving State funded and indigent patients. Broward General is a disproportionate share Medicaid provider with a history of providing, and commitment to continue providing, significant services to Medicaid and indigent patients. In fact, the NBHD provides over 50 percent of both indigent and Medicaid services in District 10. See also Subsection 408.035(1)(n), Florida Statutes. Allocation factor three for substance abuse facilities is inapplicable to Broward General which does not have substance abuse inpatient services. Allocation factor 4 for an applicant with a full continuum of acute medical services is met by Broward General. See also Rule 59C-1.040(3)(h), Florida Administrative Code. Broward General complies with allocation factor 5 by participating in data collection activities of the regional health planning council. The state health plan includes preferences for (1) converting excess acute care beds; (2) serving the most seriously mentally ill patients; (3) serving indigent and Baker Act patients; (4) proposing to establish a continuum of mental health care; (5) serving Medicaid-eligible patients; and (6) providing a disproportionate share of Medicaid and charity care. Broward General meets the six state health plan preferences. See also Rule 59C-1.040(4)(e)2., Florida Administrative Code, and Subsection 408.035(1)(n), Florida Statutes. Broward General does not meet the preference for acute care hospitals if fewer than .15 psychiatric beds per 1000 people in the District are located in acute care hospitals. The current ratio in the District is .19 beds per 1,000 people. Rule 59C-1.040(4)(3)3, Florida Administrative Code, also requires that 40 percent of the psychiatric beds needed in a district should be allocated to general hospitals. Currently, approximately 51 percent, 266 of 517 licensed District 10 adult inpatient psychiatric beds are located in general acute care hospitals. On balance, the NBHD and Broward General meet the factors and preferences of the health plans which support the approval of the CON application. See also Rule 59C- 1.040(4)(e)1. and Rule 59C-1.030, Florida Administrative Code. Numeric Need The parties stipulated that the published fixed need pool indicated no numeric need for additional adult inpatient psychiatric hospital beds. In fact, the numeric need calculation shows a need for 434 beds in District 10, which has 517 beds, or 83 more than the projected numeric need. In 1994- 1995, the District utilization rate was approximately 58 percent. The NBHD asserts that the need arises from "not normal" circumstances, specifically certain benefits from closing the 19th Street CSU, especially the provision of better consolidated care in hospital-based psychiatric beds, and the establishment of a County mental health court. The NBHD acknowledges that AHCA does not regulate CSU beds through the CON program and that CSU beds are not intended to be included in the calculation of numeric need for adult psychiatric beds. However, due to the substantial similarity of services provided, NBHD contends that CSU beds are de facto inpatient psychiatric beds which affect the need for CON- regulated psychiatric beds. Therefore, according to the NBHD, the elimination of beds at SFSH and at the 19th Street CSU require an increase in the supply of adult psychiatric beds. The NBHD also notes that approval of its CON application will increase the total number of adult psychiatric hospital beds in Broward County, but will not affect the total number of adult mental health beds when CSU and adult psychiatric beds are combined. After the CSU beds at SFSH closed, the total number of adult mental health beds in the County has, in fact, been reduced. NBHD projected a need to add 30 adult psychiatric beds at Broward General by combining the 1995 average daily census (ADC) of 48 patients with its assumption that it can add up to 10, increasing the ADC to 58 patients a day in the existing 68 beds. Based on its contractual obligation to care for up to 40 CSU inpatients a day, the NBHD projects a need for an additional 30 beds. The projection assumed that the level of utilization of adult inpatient psychiatric services at Broward General would remain relatively constant. With 40 occupied beds added to the 48 ADC, NBHD predicted an ADC of 88 in the new total of 98 beds, or 90 percent occupancy. The assumption that the ADC would remain fairly constant is generally supported by the actual experience with ADCs of 48.1, 51.5, and 45.8 patients, respectively, in 1995, 1996, and the first seven months of 1997. NBHD's second assumption, that an ADC of 40 CSU patients will be added is not supported by the actual experience. Based on the terms of the State and County contracts, up to 20 CSU patients have already been absorbed into the existing beds at the Imperial Point or Broward General, which is one explanation for the temporary increase in ADC in 1996, while up to 20 more may receive services at the 19th Street location. In 1996 and 1997, the ADC in the 19th Street CSU beds was 15.3 and 14.2, respectively, with monthly ranges in 1997 from a high of 17 in April to a low of 12 in June. The relatively constant annual ADCs in psychiatric and CSU beds are a reflection of increasing admissions but declining average lengths of stay for psychiatric services. The NBHD also projects that it will receive referrals from the Broward County Mental Health Court, established in June 1997. The Court is intended to divert mentally ill defendants with minor criminal charges from the criminal justice system to the mental health system. Actual experience for only three months of operations showed 7 or 8 admissions a month with widely varying average lengths of stay, from 6 to 95 days. The effect of court referrals on the ADC at Broward General was statistically insignificant into the fall of 1997. Newspaper reports of the number of inmates with serious mental illnesses do not provide a reliable basis for projecting the effect of the mental health court on psychiatric admissions to Broward General, since it is not equipped to handle violent felons. One of Broward General's experts also compared national hospital discharge data to that of Broward County. The results indicate a lower use rate in Broward County in 1995 and a higher one in 1996. That finding was consistent with the expert's finding of a growth in admissions and bed turnover rate which measures the demand for each bed. The expert also considered the prevalence of mental illness and hospitalization rates. The data reflecting expected increases in admissions, however, was not compared to available capacity in the County nor correlated with declining lengths of stay. The District X: Comprehensive Health Plan 1994 includes an estimate of the need for 10 CSU beds per 100,000 people, or a total of 133 CSU beds needed for the District. FMC argues that the calculation is incorrect because only the adult population should be included. Using only adults, FMC determined that 116 CSU beds are needed which, when added to 434 adult psychiatric beds needed in the February 1996 projection, gives a bed need for all mental health beds of 550. That total is less than the actual combined total number of 567 mental health beds, 517 adult psychiatric beds plus 50 CSU beds in 1995. Whatever population group is appropriate, the projection of the need for CSU beds is not reliable based on the evidence that, since the end of 1995, CSU services have been and, according to NBHD, should continue to be absorbed into hospital- based adult psychiatric units. For the same reason, the increase in adult psychiatric bed admissions from 1995 to 1996 does not establish a trend towards increasing psychiatric utilization, but is more likely attributable to the closing of CSU beds at SFSH. FMC's expert's comparison of data from three selected months in two successive years is also not sufficient to establish a downward trend in utilization at the 19th Street CSU, neither is the evidence of a decline in ADC by one patient in one year. Utilization is relatively static based on ADCs in existing Broward County adult psychiatric beds and in CSU beds. FMC established Broward General's potential to decrease average lengths of stay by developing alternative non-inpatient services as FMC has done and Broward General proposes to do. See Finding of Fact 37. Based on local health council reports, FMC's data reflects a rise in the ADC at Broward General to 52.7 in 1996, and a return to 46 in the first seven months of 1997. Using a 14.2 ADC for the 19th Street CSU, FMC projects that Broward General will reach an ADC of approximately 60 in the first year of operations if the CON is approved, not 88 as projected. Broward General acknowledged its capacity to add 10 more patients to the ADC without stress on the system. Having already absorbed 20 of up to 40 CSU patients at Imperial Point and Broward General in 1996 and 1997 resulting in an ADC of 48, and given the capacity to absorb 10 more, the NBHD has demonstrated a need to accommodate an ADC of 10 more adult psychiatric patients at Broward General, or a total ADC of 68 patients. The need to add capacity to accommodate an additional 10 patient ADC was not shown to equate to a need for 30 additional beds, which would result in an ADC of 68 patients in 98 beds, or 69 or 70 percent occupancy. Special Circumstances - Rule 59C-1.040(4)(d) The psychiatric bed rule provides for approval of additional beds in the absence of fixed numeric need. The "special circumstance" provision applies to a facility with an existing unit with 85 percent or greater occupancy. During the applicable period, the occupancy at Broward General was 74.15 percent. However, occupancy rates have exceeded 95 percent in the CSU beds on 19th Street. If up to 20 patients on 19th Street are added to the 48 ADC at Broward General, the result is that the existing 68 beds will be full. A full unit is operationally not efficient or desirable and allows no response to fluctuations in demand. Therefore, the state has established a desirable standard of 75 percent occupancy for psychiatric units, a range which supports the addition of 10 to 15 psychiatric beds at Broward General. Available Alternatives - Subsection 408.035(1)(b) and (d), Florida Statutes, and Rule 59C-1.040(4)(e)4., Florida Administrative Code The psychiatric bed rule provides that additional beds will "not normally" be added if the district occupancy rate is below 75 percent. For the twelve months preceding the application filing, the occupancy rate in 517 adult psychiatric beds in District 10 was approximately 58 percent. FMC's expert noted that each day an average of 200 adult psychiatric beds were available in District 10. Broward General argues that the occupancy rate is misleading. Five of the nine facilities with psychiatric beds are freestanding, private facilities, which are ineligible for Medicaid participation. Historically, the freestanding hospitals have also provided little charity care. One facility, University Pavilion, is full. Of the four acute care hospitals with adult psychiatric beds, Memorial Hospital in the SBHD, is not available to patients in the NBHD service area. Imperial Point, the only other NBHD facility with adult psychiatric beds, is not available based on its occupancy rate for the first seven months of 1997 of approximately 81 percent, which left an average of 9 available beds in a relatively small 47-bed unit. That leaves only Broward General and FMC to care for Medicaid and indigent adult psychiatric patients. FMC is the only possible alternative provider of services, but Broward General was recommended by the grand jury and was the only contract applicant. The occupancy rate in FMC's 51 adult beds was approximately 80 percent in 1995, 73 percent in 1996, and 77 percent for the first seven months in 1997. FMC has reduced average lengths of stay by having patients "step down" to partial hospitalization, day treatment and other outpatient services of varying intensities. The same decline in average lengths of stay is reasonably expected when Broward General implements these alternatives. Adult psychiatric services are also accessible in District 10 applying the psychiatric bed rule access standard. That is, ninety percent of the population of District 10 has access to the service within a maximum driving time of forty- five minutes. The CSU license cannot be transferred to Broward General. Broward County holds the license for CSU beds which, by rule, must be located on the first floor of a building. Although Broward General may not legally hold the CSU license and provide CSU services on the fourth floor of the hospital, there is no apparent legal impediment to providing CSU services in psychiatric beds. Quality of Care - Subsection 408.035(1)(c), Florida Statutes and Rule 1.040(7), Florida Administrative Code Broward General is accredited by the Joint Commission on Accreditation of Health Care Organizations. The parties stipulated that Broward General has a history of providing quality care. Broward General provides the services required by Rule 59C-1.040(3)(h), Florida Administrative Code. Services Not Accessible in Adjoining Areas; Research and Educational Facilities; Needs of HMOs; Services Provided to Individuals Beyond the District; Subsections 408.035(1)(f),(g),(j), and (k), Florida Statutes Broward General does not propose to provide services which are inaccessible in adjoining areas nor will it provide services to non-residents of the district. Broward General is not one of the six statutory teaching hospitals nor a health maintenance organization (HMO). Therefore, those criteria are of no value in determining whether this application should be approved. Economics and Improvements in Service from Joint Operation - Subsection 408.035(1)(e), Florida Statutes The consolidation of the psychiatric services at Broward General is reasonably expected to result in economies and improvements in the provision of coordinated services to the mentally ill indigent and Medicaid population. Broward General will eliminate the cost of meal deliveries and the transfer of medically ill patients, but that potential cost-saving was not quantified by Broward General. Staff and Other Resources - Subsection 408.035(1)(h), Florida Statutes The parties stipulated that NBHD has available the necessary resources, including health manpower, management personnel, and funds to implement the project. Financially Feasibility - Subsection 408.035(1)(h) and (i), Florida Statutes The parties stipulated that the proposed project is financially feasible in the immediate term. The estimated total project cost is $451,791, but NBHD has $500,000 in funds for capital improvements available from the County and $700,000 from the Florida Legislature. As stipulated by the parties, NBHD has sufficient cash on hand to fund the project. Regardless of the census, the County's contractual obligation to the NBHD remains fixed at $1.6 million. The State contract requires the prospective payment of costs offset by expected Medicaid dollars. If the number of Medicaid eligible patients decreases, then state funding increases proportionately. The state assumed that 20 percent of the patients would qualify for Medicaid, therefore it reimburses the per diem cost of care for 80 percent of the patients. One audit indicated that 30 percent of the patients qualified for Medicaid, so that State payments for that year were higher than needed. The State contract apparently makes no provision to recover excess payments. The application projects a net profit of $740,789 for the first year of operations, and a net profit of $664,489 for the second year. If the State contract with NBHD is renewed to contemplate an average of 30 patients per day as opposed to up to 40 patients per day, then annual revenue could be reduced up to $400,000. Projected net profit will, nevertheless, exceed expenses when variable expenses are reduced correspondingly. If 20 state funded patients are already in psychiatric beds, and 20 more could be transferred from 19th Street, the result is an ADC of 68. Based on the funding arrangements, there is no evidence that the operation of a total of 98 beds could not be profitable, even with an ADC of 68, although it would be wasteful to have 30 extra beds. Impact on Competition, Quality Assurance and Cost-Effectiveness - Subsection 408.035(1)(l), Florida Statutes With a maximum of 68 inpatients or more realistically, under the expected terms of a renegotiated State contract, 58 to 60 inpatients in 98 beds, Broward General will reasonably attempt to expand the demand for its inpatient psychiatric services. Within the NBHD's legal service area, one-third of adult psychiatric patients not admitted to Broward General are admitted to FMC. Assuming a proportionate impact on competitors, FMC's expert projected that one-third of approximately 30 unfilled beds at Broward General will be filled by patients who would otherwise have gone to FMC. The projection of a loss of 9 patients from the ADC of FMC is reasonably based on an analysis showing comparable patient severity in the most prevalent diagnostic category. Given the blended payor commitment of approximately 51 or 52 percent total for Medicaid and charity in 98 beds, Broward General will be able to take patients from every payor category accepted at FMC. The loss of 9 patients from its ADC can reduce revenues by $568,967 at FMC. The impact analysis is reasonably based on lost patient days since most payers use a per diem basis for compensating FMC. For example, although Medicare reimbursement is usually based on diagnosis regardless of length of stay, it is cost-based for the geriatric psychiatric unit. Net profit at FMC, for the year 1996-1997, was expected to be approximately $4.5 million. FMC will also experience increased costs in transporting indigent patients from FMC to Broward General for admission and treatment. Because of the additional distance, the cost to transfer indigent patients is $20 more per patient from FMC to Broward General than it is from FMC to the 19th Street CSU. FMC typically stabilizes indigent adult psychiatric inpatients, then transfers them to either the 19th Street CSU or Broward General. From March through September of 1997, FMC transported approximately 256 indigent patients from FMC to the 19th Street CSU. In terms of quality assurance, the consolidation of psychiatric services at Broward General will allow all patients better access to the full range of medical services available at Broward General. The NBHD's operation of the 19th Street CSU is profitable. Approval of the CON application should reasonably eliminate all costs associated with operation of the 19th Street facility, and shift more revenues from the State and County contracts to Broward General. Some savings are reasonably expected from not having meal deliveries to 19th Street or patient transfers for medical care. The NBHD did not quantify any expected savings. Costs and Methods of Construction - Subsection 408.035(1)(m), Florida Statutes Broward General will relocate 12 of 42 medical/surgical beds and convert 30 medical/surgical beds to 30 adult psychiatric beds on one wing of the fourth floor, which is currently unused. Fifteen semi-private medical/surgical patient rooms will be converted into semi-private adult psychiatric rooms. Existing wards will be converted to two social rooms, one noisy and one quiet. With the removal of the walls of some offices, the architect designed a group therapy room. An existing semi-private room will be used as a seclusion room. Of the fifteen semi-private rooms, twelve will not have bathing or showering facilities and seven will not have toilets within the patients' rooms. At the time the hospital was constructed, the state required only a lavatory/sink in each patient room. AHCA's architect agreed to allow Broward General to plan to use central bathing and toilet facilities to avoid additional costs and diminished patient room sizes. Because the plan intentionally avoids construction in the toilets, except to enlarge one to include a shower, there is no requirement to upgrade to Americans With Disabilities Act (ADA) standards. Therefore, the $23,280 construction cost contingency for code compliance is adequate. Although the projected construction costs are reasonable and the applicable architectural code requirements are met, the design is not the most desirable in terms of current standards. Patient privacy is compromised by the lack of toilets for each patient room. Past and Proposed Provision of Services to Promote a Continuum of Care in a Multi-level System - Subsection 408.035(1)(o), Florida Statutes Broward General is a tertiary acute care facility which provides a broad continuum of care. Because it already operates the CSU and provides CSU services in adult psychiatric beds, the proposal to relocate patients maintains but does not further promote that continuum of care. Broward General's plan to establish more alternatives to inpatient psychiatric care does promote and enhance its continuum of care. Capital Expenditures for New Inpatient Services - Subsection 408.035(2), Florida Statutes Broward General is not proposing to establish a new health service for inpatients, rather it is seeking to relocate an existing service without new construction. The criteria in this Subsection are inapplicable. Factual Conclusions Broward General did not establish a "not normal" circumstance based on the grand jury's findings and recommendations. The grand jury did not recommend closing 19th Street facility. Broward General did generally establish not normal circumstances based on the desirability of consolidating mental health services at Broward General to provide a single point of entry and to improve the quality of care for the 19th Street facility patients. Broward General failed to establish the need to add 30 beds to accomplish the objective of closing the 19th Street facility. Although the existing beds at Broward General may reasonably be expected to be full as a result of the transfer of 19th Street patients, the addition of 30 beds without sufficient demand results in an occupancy rate of 69 or 70 percent, from an ADC of 68 patients in 98 beds. Broward General has requested approximately twice as many beds as it demonstrated it needs. Broward General's CON application on balance satisfies the local and state health plan preferences. In general, FMC is the only alternative facility in terms of available beds, but is not the tax-supported public facility which the grand jury favored to coordinate mental health services. Broward General meets the statutory criteria for quality of care, improvements from joint operations, financial feasibility, quality assurance, cost-effectiveness, and services to Medicaid and indigent patients. The proposal is not the most desirable architecturally considering current standards. More importantly, Broward General did not demonstrate that it can achieve its projected occupancy without an adverse impact on FMC. The NBHD proposal will add too many beds to meet the targeted state occupancy levels in relatively a static market. Broward General's application does not include a partial request for fewer additional beds which would have allowed the closing of 19th Street, while maintaining some empty beds for demand fluctuations and avoiding an adverse impact on FMC.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration deny the application of the North Broward Hospital District for Certificate of Need Number 8425 to convert 30 medical/surgical beds to 30 adult psychiatric beds at Broward General Medical Center. DONE AND ENTERED this 21st day of April, 1998, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 21st day of April, 1998. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Paul J. Martin, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Paul Vazquez, Esquire Agency For Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Stephen A. Ecenia, Esquire R. David Prescott, Esquire Rutledge, Ecenia, Underwood, Purnell & Hoffman, P.A. Post Office Box 551 Tallahassee, Florida 32302-0551 David C. Ashburn, Esquire Gunster, Yoakley, Valdes-Fauli & Stewart, P.A. 215 South Monroe Street, Suite 830 Tallahassee, Florida 32301
Findings Of Fact CPC is an international health care company specializing in psychiatric care. It operates 25 hospitals in the United States and three in Great Britain. Its proposed Orlando hospital would be its fourth Florida facility. CPC has not yet selected a site for the proposed facility, but anticipates a South Orange County or Osceola County location. Site factors such as cost, services and zoning are obviously not determined and the estimated project cost of $6,776,125 is subject to substantial change. It has prepared basic architectural plans, however, which were shown to provide adequate space and necessary health care features for its proposal. The CPC facility would be "freestanding" and not a part of any larger medical complex. It would provide a range of psychiatric and substance abuse services for adolescent and adult patients, emergency evaluation, family therapy and follow-up care. CPC policy provides that up to 5 percent of gross annual revenue may be allocated for indigent care. Thus, some indigent patients could be treated. However, no specific commitment in this regard was made. CPC has adequate funds to finance this project "in-house" and anticipates no difficulty in obtaining necessary medical staffing. In view of this company's resources and experience, its ability to fund this project and adequately staff it are reasonably certain. OGH is a nonprofit 171-bed osteopathic acute care facility located in Orange County, seven miles east of downtown Orlando. It has been operated as a nonprofit facility since 1945, and has existed at its present location since 1960. In 1981, HRS issued a Certificate of Need authorizing OGH to add 70 medical-surgical beds to its facility by constructing four new floors to an existing building, including a top (sixth) floor which is now proposed for the OGH substance abuse program. The additional cost of construction is estimated to be $500,000. OGH proposes to apply osteopathic principles to its substance abuse program. Of the approximately 60 doctors of osteopathy in Orange County, most are admitted to the staff of OGH and not to the allopathic facilities in Orange County, which require that doctors of osteopathy have postgraduate training in an allopathic residency program. The proposed OGH facility would thus be the only one available to these physicians and would provide an opportunity for osteopathic practice and training in substance abuse. This would also be the only program of this type available to substance abuse patients who seek osteopathic treatment in Orange County. There are patient care advantages to locating a substance abuse program within an acute care hospital such as OGH, since patients who require substance abuse treatment frequently require other services provided by a general hospital. The program proposed by OGH would have such auxiliary hospital services readily available where the CPC program would not. OGH has made tentative arrangements for the additional health care and management personnel required by its proposal. OGH will provide some indigent care and anticipates that it will continue to experience a "bad debt" rate of about 9 per cent, which includes indigent care costs. Intervenor, Florida Hospital (FH), consists of three major campuses in the Orlando metropolitan area, (Orlando, Orange County; Altamonte Springs, Seminole County; and Apopka, Orange County). FH is a not-for-profit tertiary care hospital owned by the Seventh Day Adventist Church. It has been in operation for approximately 75 years and currently has 943 beds. As of the date of the hearing, FH had 99 beds in its facility dedicated to psychiatric and substance abuse services with 2 in Altamonte Springs, 51 in the main Orlando campus building and 24 in a building adjacent to the Orlando campus main hospital building. FH has been providing psychiatric and substance abuse services for approximately 25 years, but does not currently have any beds designated specifically for substance abuse patients. At the time of the hearing, FH had under construction and scheduled to be completed in October, 1984, a 56-bed, freestanding psychiatric facility which is to be located approximately 600 feet from the main Orlando campus building, consisting of 24 adult general psychiatric beds, 16 substance abuse beds and 16 adolescent psychiatric beds. During FH's current fiscal year, which began January 1, 1981, there has been a decrease in patient days in the hospital in general and a decline in occupancy in the psychiatric treatment program. At the time of the hearing, the occupancy level for the pregram was approximately 60 percent and had been less than 75 per cent during the calendar years 1982, 1983 and 1981 (through August), with a projection of 62 percent for all of 1984. The opening of the facility by Intervenor, West Lake Hospital (WLH) in May, 1984, has had the effect of reducing the number of patient days and percentage of occupancy at FH. Intervenor, WLH, is located in Longwood, Seminole County, Florida, (HRS District VII) and provides psychiatric and substance abuse treatment. Forty-eight percent of its patients come from Orange County and it estimates that as many as 60 percent of those patients would go to another facility in Orange County, were one available. Since its opening in May, 1984, the WLH facility has had an occupancy level of less than 75 per cent for its 80-bed facility. Both intervenors oppose grant of the CPC application, but neither opposes grant of the OGH application. HRS Rules 10-5.11(25)(d) and 27(f), Florida Administrative Code (FAC), set forth the methodology to be used in computing bed need for short term psychiatric and substance abuse treatment. Beds are allocated within each health planning district on the basis of a five year projection. The proposed facilities would be located in HRS Health Planning District VII. Thus, projections, allocations and computations are based on health planning data applicable to this district. Although CPC seeks to create a sub-district consisting of Orange and Osceola Counties for evaluation of its application, there is no basis in these rules or in existing health plans for this proposed subdivision. The projected bed need for District VII (1989) is as follows: A. Short term psychiatric Existing and approved beds 368 Tentatively approved beds 60 1/ Total existing and approved 428 Total need 454 2/ Net need 26 B. Short term substance abuse Existing and approved beds 40 Tentatively approved beds 26 3/ Total existing and approved 66 Total need 78 4/ Net need 12 The above referenced rules, while providing for a minimum number of psychiatric beds in general hospitals, require no corresponding minimum number of beds in freestanding specialty hospitals, nor do they establish any preference for freestanding hospital beds. Should a freestanding facility be viewed as desirable, the new psychiatric treatment center at Florida Hospital is essentially freestanding, and would meet any such need. Further, the inventory of short term psychiatric beds indicates that the limited existing need is within the category of general hospital beds, rather than the specialty hospital category. HRS Rule 10-5.11(25)(d)5, F.A.C. provides that no additional short term psychiatric beds shall normally be approved unless the average annual occupancy rate for all existing psychiatric beds in the district exceeds 75 percent (for adult services) or 70 percent (for adolescent and children's services) for the preceding twelve months. Virtually all of the psychiatric beds in District VII have been for adult services. For calendar year 1983, the occupancy rate for short term psychiatric beds in District VII was approximately 73.5 percent. For the 12-month period from July, 1983 through June, 1984 the occupancy rate had declined to 71.7 percent. Thus, the occupancy standard for short term psychiatric beds was not met. Similarly, Rule 10-5.11(27)(h)1, F.A.C. provides that no additional inpatient substance beds will normally be approved unless the average occupancy rates for all existing hospital based substance abuse inpatient beds is at or exceeds 80 percent for the preceding twelve months. Since the occupancy rate for substance abuse beds during the 12-month period of July, 1983 through June, 1984 was in the low sixties, this standard was not met.
Recommendation Based on the foregoing, it is RECOMMENDED that the Department of Health and Rehabilitative Services enter a Final Order granting the application of Orlando General Hospital to establish a 26-bed substance abuse treatment program and denying the application of Community Psychiatric Centers to construct a 105-bed short term psychiatric and substance abuse facility in District VII. DONE and ENTERED this 20th day of December, 1984 in Tallahassee, Florida. R. T. CARPENTER Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of December, 1984.
The Issue The issue in these consolidated cases is whether proposed amendments to Rule 10-5.011(1)(o), and (p) F.A.C. relating to certificates of need for hospital inpatient general psychiatric services, are invalid exercises of delegated legislative authority, as defined in Section 120.52(8), F.S.
Findings Of Fact Metamorphosis of the Rules Prior to 1983, hospitals were not separately licensed, and certificates of need (CON) were not required for the designation of beds for psychiatric and substance abuse services. In 1983, statutory amendments to Chapter 381, F.S. addressed psychiatric beds as reviewable projects in the CON program. In 1983, HRS adopted rules establishing four new categories of beds, now found in Rules 10-5.011(1)(o), (p), and (q), F.A.C.: Short-term psychiatric, long-term psychiatric, and short and long-term substance abuse. At the time that the categories were created, HRS conducted an inventory of the hospitals, asking how many beds were designated in each category. Based on the responses, published in the Florida Administrative Weekly, future projections of need were made and applications were considered for CONs. Another category of psychiatric beds was not included in the 1983 rules. Intensive residential treatment programs for children and adolescents were created by statute in 1982, and are defined in Section 395.002(8), F.S. as: a specialty hospital accredited by the Joint Commission on Accreditation of Hospitals which provides 24-hour care and which has the primary functions of diagnosis and treatment of patients under the age of IS having psychiatric disorders in order to restore such patients to an optimal level of functioning. These facilities, called IRTFs, may become licensed as hospitals pursuant to Section 395.003(2)(f), F.S., but as hospitals they must obtain CON approval pursuant to Sections 381.702(7) and (12), F.S. and Section 381.706(1) (b), F.S. IRTFs have no statutory or regulatory restrictions on length of stay and were approved by HRS at one time under an unwritten policy that there be one such facility available in each HRS planning district, without regard to the availability of other long or short term psychiatric programs. In 1985, HRS proposed a rule amendment which would have eliminated the short and long term distinction, as well as the distinction between psychiatric services and substance abuse services. Six months later, the proposed rule amendment was withdrawn. It was highly controversial; several challenges were filed; objections were made by various local health councils; and a new administrator took over. The agency decided to rework its proposed change~;. The agency next began the process of revision in 1987, and in 1988 convened a workshop group to review an issue paper prepared by agency staff. Another work group met in 1989 to consider the consolidation of psychiatric and substance abuse rules. HRS staff reviewed literature on the subjects of substance abuse and psychiatric services, including literature relating to access by indigent patients and the provision of services to children and adolescents. Staff prepared rule drafts which were circulated in- house, including the alcohol, drug abuse and mental health program office; and to such outside groups as the Association of Voluntary Hospitals of Florida, the Florida Hospital Association and the League of Hospitals. The proposed rule amendments which are the subject of this proceeding were filed on January 19, 1990 (substance abuse), and on January 26, 1990 (inpatient psychiatric services) in the Florida Administrative Weekly. The Parties HRS administers the CON program pursuant to Section 381.701, et seq., F.S. (1989). The CON program regulates entry into the Florida health care market by providers through review and approval of certain capital expenditures, services and beds. The petitioner, Florida League of Hospitals, Inc. is a nonprofit corporation which is organized and maintained for the benefit of investor-owned hospitals which comprise its membership. The remaining petitioners and intervenors are current providers of hospital inpatient psychiatric services, long and short term, and of inpatient substance abuse services, long and short term. The petitioners and intervenors are all substantially affected by the proposed rules and have stipulated to the standing of all parties in this proceeding. Abolishing Distinctions Between Long-Term & Short-Term Psychiatric Beds "Short term hospital inpatient psychiatric services" is defined in existing rule 10-5.011(1)(o)1, FAC, as follows: Short term hospital inpatient psychiatric services means a category of services which provides a 24-hour a day therapeutic milieu for persons suffering from mental health problems which are so severe and acute that they need intensive, full-time care. Acute psychiatric inpatient care is defined as a service not exceeding three months and averaging length of stay of 30 days or less for adults and a stay of 60 days or less for children and adolescents under 18 years. "Long term psychiatric services" is defined in existing rule 10- 5.011(1)(p)1., FAC as a category of services which provides hospital based inpatient services averaging a length of stay of 90 days. Neither rule addresses services to adults with an average length of stay (ALOS) of 30-90 days, or services to children and adolescents with a 60-90 day ALOS. Because of this, and the "averaging" process, long term hospitals legitimately serve "short term" patients and short term hospitals may serve "long term" patients. One party has calculated than a long term facility could legally provide short term services for 80% of its patients, and long term services for only 20% of its patients and still have an ALOS of 90 days. Under the existing rules a facility must file a CON application to convert from long term to short term beds, or vice versa, and is subject to sanctions for failure to comply with the designation on its CON. The proposed changes would repeal rule 10-5.011(1) (p), FAC regarding long term services, and would amend rule 10- 5.011(1) (o), FAC to delete the definition of short term services, thereby permitting facilities to serve patients without regard to length of stay. The proposed changes are supported by several factors upon which a reasonable person could rely. Substantial changes have occurred in the last decade in clinical practices and in third party reimbursement to reduce the ALOS for hospital inpatient psychiatric care. Prior to the 1960s, there was no distinction between long and short term care, as all hospital based care was long term with an emphasis on psychoanalytic therapy. Beginning in the 1960s, the concept of community mental health programs evolved with an emphasis on deinstitutionalization of patients in large public "asylums" and with a goal of treatment in the least restrictive environment. In more recent years the trend has spread to the private sector. Improvements in the availability and use of psychiatric drugs, the use of outpatient care or partial hospitalization, and improved follow up care have led to a dramatic decrease in ALOS. Long term care is costly, and whether third party payors have been a driving force, or are merely responding to the trends described above, long term inpatient reimbursement is virtually nonexistent. During the 19805, most insurance companies imposed a 30-day limit on psychiatric inpatient care or imposed monetary limits which would have effectively paid for less than a 90-day term. CHAMPUS, the program providing insurance to military dependents, was providing long term coverage in 1982, but by 1986 its coverage was rarely available for more than 30-60 days, and today, under CHAMPUS' case management system, 30 days is a "luxurious amount". Other large third-party payors such as Blue Cross/Blue Shield have similar limits or aggressively use case management (the close scrutiny of need on a case by case basis) to limit reimbursement for inpatient care. Of the two or three long term facilities in existence at the time that HRS' rules were originally adopted, only one, Anclote Manor still reported an ALOS of over 90 days by 1989, dropping from an ALOS of 477.9 days in 1986 to 145.4 days in 1989. At the same time its occupancy rate dropped below 50%. There is an interesting dialogue among experts as to whether there still exists a clinical distinction between long term and short term inpatient psychiatric care. Studies at the Florida Mental Health Institute found no difference in rate of rehospitalization over a 12 month period between patients who were in a nine week program and patients from Florida State Hospital with a 500 day length of stay. Some mental health practitioners are looking now at treating the chronic psychiatric patient with repeated short term hospital stays and less intensive care between episodes, rather than a single long term inpatient stay. Other practitioners maintain that a long term psychiatric problem is behavioral in nature and requires a total life readjustment and longer length of stay. Whichever practice may be preferable, the facts remain that fewer and fewer mental patients are being treated with long term hospitalization. The proposed rules would not foreclose any facility from providing long term care, if it finds the need. To the extent that a clinical distinction exists between short and long term care, the existing rules do not address that distinction, except from a wholly arbitrary length of stay perspective. The existing rules no longer serve valid health care objectives. Existing providers with short term CONs are concerned that the allowing long term facilities to convert will further glut an underutilized market and will result in an increase in vacant beds and a rise in the cost of health services, contrary to the intent of the CON program. Intensive residential treatment facilities (IRTFs), which will be folded into the need methodology for children and adolescent beds, have no current restrictions on length of stay and may already compete with impunity with the short term providers. Moreover, long term facilities are also providing substantial short term care as a result of the trends discussed above. HRS has not consistently enforced the length of stay restrictions of long term providers' CONs. Whether those CONs were improvidently granted is beside the point. The capital costs have already been incurred; the beds are available; and the beds are being used, in part, for short term services. Abolishing the distinction is a rational approach to current conditions. And in determining that all existing providers would be placed in the same position regarding length of stay, HRS avoids the regulatory nightmare of trying to enforce limitations on existing providers and approving new beds without limitations. Creating a Distinction Between Adult and Children/Adolescent Beds Rule 10-5.011(1)(o)3.c. creates a CON distinction between general psychiatric services for adults, and those services for children and adolescents. Rule 10-5.011(1)(o)4., as proposed, would create separate need criteria for hospital inpatient general psychiatric services for adults and for children/adolescents. Adolescents are defined in Rule 10- 5.011(1)(o)2.a., as persons age 14 through 17 years. Persons over 17 years are adults, and under 14 years are children. There are valid clinical reasons to distinguish between programs fob the separate age groups. Although there is some overlap, differing therapies are appropriate with different ages. The types of services offered to adults are not the same as those which are offered to children. Children, for example, often receive academic educational services while being hospitalized. Adults receive career or vocational counseling and marriage counseling. The required separation by age categories would remove some flexibility from providers. However, this is offset by the Department's valid need to track for planning purposes inpatient services to children and adolescents separately from those provided to adults. Based on anecdotal evidence, HRS' Office of Alcohol, Drug Abuse and Mental Health Program Office is concerned about the possible overutilization of hospital inpatient services for children and adolescents and the potential that when insurance reimbursement expires they are discharged without clinical bases. Taking Inventory Under the proposed rule, in order to separately regulate adult and children/adolescent beds, HRS will fix an inventory of uses as of the time that the rule takes effect. For facilities with CONs which already allocate beds between the two groups, the proposed rule will have no effect. For facilities without a designation, as long as adults and children/adolescents are kept in separate programs, the allocation can now be mixed and changed at will. The rule amendment will freeze that use in place. HRS has conducted a preliminary survey to determine the existing uses of psychiatric, substance abuse and residential treatment program beds. The survey of approximately 120 facilities is complete, but is not intended to limit those facilities unless their CON already provides a limit. A final inventory will be taken after the proposed rules become effective. The inventory will be published, and providers will be given an opportunity to contest its findings. The ultimate outcome will be amended CONs and licenses which reflect each facility's mix of adult and children/adolescent beds. The process is a fair and reasonable means of commencing separate regulation of services to these age groups. The Definitions Proposed rules 10-5.011(1)(o)2.1., 2.p., and 2.t.) define "hospital inpatient general psychiatric services", "psychiatric disorder" and "substance abuse", respectively. Each of these provisions defines the terms by reference to classifications contained in the Diagnostic and Statistical Manual of Mental Diseases (DSM-III-R Manual) and equivalent classifications contained- in the International Classification of Diseases (ICD-9 Codes). The rule as originally proposed included the phrase "or its subsequent revisions", after incorporating the manuals by reference. In testimony, and in the parties second agreement (Hearing Office exhibit 3) the phrase is deleted. However, it still appears in proposed rule 10-5.011(1) (o)2.1., perhaps inadvertently. The DSM-III-R is a generally recognized manual for the classification of mental disorders and is widely used by clinicians and medical records professionals to categorize the conditions of patients. The ICD-9 codes are broader than just mental disorders, but they have a section on mental disorders with numbers that are identical to those in the DSM-III-R. Although the manuals are complex and subject to interpretation, clinicians are accustomed to their use and they provide a reasonable guide as to the services which may be provided in an inpatient substance abuse program, as distinguished from an inpatient psychiatric program. Advertising Limited Proposed rule 10-5.011(1)(o)3.d. (as amended in the parties second agreement, Hearing Officer exhibit #3), provides: D. Advertising of services. The number of beds for adult or for children and adolescent hospital inpatient general psychiatric services shall be indicated on the face of the hospital's license. Beds in intensive residential treatment programs for children and adolescents which are licensed as specialty hospital beds will be indicated as intensive residential treatment program beds on the face of the hospital's license. Only hospitals with separately-licensed hospital inpatient general psychiatric services, including facilities with intensive residential treatment programs for children and adolescents which are licensed as specialty hospitals, can advertise to the public the availability of hospital inpatient general psychiatric services. A hospital with separately licensed hospital inpatient general psychiatric services that does not have a certificate of need for hospital inpatient substance abuse services may advertise that they [sic] provide services for patients with a principal psychiatric diagnosis excluding substance abuse and a secondary substance abuse disorder. The Department does not currently have CON, licensure, or other rules which limit the ability of a health care provider to advertise its services, and has never used advertising as a factor in conducting CON review for any proposed services. HRS included provisions regarding advertising in its proposed rules because it had evidence that existing facilities have used misleading advertisements. The evidence came from other providers, rather than consumers. However, it is the consumer whom the agency feels may be confused by advertising which implies that services are available when such services cannot be legally provided under the facility's license. The advertising provision is prospective in nature, seeking to prevent licensed providers from advertising services for which they are not licensed. The provisions do not relate to CON review, and the staff is unclear as to how the rule would be implemented. Licensing and CON review are two separate functions within the agency. Although the term is not defined in the proposed rule, advertising broadly includes word of mouth referrals and public presentations by professionals in the community, as well as traditional media and written advertisements. Properly utilized, advertising helps consumers exercise choice and gain access to needed services. Improper advertising is subject to the regulation of federal and state agencies other than the department. New Need Methodology, with Preferences Proposed Rule 10-5.011(1)(o)4., deletes the existing population ratio methodology and creates a need formula based upon use rate, for adult and children/adolescent inpatient psychiatric services. Certain preferences are also described. 34. Rule 10-5.011(1) (o)4.e.(III) provides: In order to insure access to hospital inpatient general psychiatric services for Medicaid-eligible and charity care adults, forty percent of the gross bed need allocated to each district for hospital inpatient general psychiatric services for adults should be allocated to general hospitals. The same provision for children and adolescent services is found in rule 10-5.011(1)(o)4.h.(III). Medicaid reimbursement is not available for inpatient services in a specialty hospital. 35. Rule 10-5.011(1)(o)4.i. provides: Preferences Among Competing Applicants for Hospital Inpatient General Psychiatric Services. In weighing and balancing statutory and rule review criteria, preference will be given to applicants who: Provide Medicaid and charity care days as a percentage of its total patient days equal to or greater than the average percentage of Medicaid and charity care patient days of total patient days provided by other hospitals in the district, as determined for the most recent calendar year prior to the year of the application for which data are available from the Health Care Cost Containment Board. Propose to serve the most seriously mentally ill patients (e.g. suicidal patients; patients with acute schizophrenia; patients with severe depression) to the extent that these patients can benefit from a hospital-based organized inpatient treatment program. Propose to service Medicaid-eligible persons. Propose to service individuals without regard to their ability to pay. Provide a continuum of psychiatric services for children and adolescents, including services following discharge. The preferences are similar to those in CON rules relating to other types of health services and are intended to implement, in part, the legislative mandate that the agency consider an applicant's ". . . past and proposed provision of health care services to medicaid patients and the medically indigent." Section 381.705(1) (n), F.S. Under Medicaid reimbursement general hospitals are paid a set per diem based on a variety of services provided to all Medicaid patients, regardless of actual cost of the individual service. As psychiatric services are generally less costly than other services on a per diem basis, hospitals may recoup a greater percentage of their costs in serving Medicaid psychiatric patients. This and the fact that public hospitals receive some governmental subsidies do not obviate the need for incentives in the CON program. Not all of the charity care provided by these hospitals is funded and a large amount is written off. Although Petitioners argue that the preferences are not needed, or are too generous, none provide competent evidence that the facilities who do not enjoy the preferences are unduly prejudiced. The 40% allocation of bed need to general hospitals is a guideline, not a maximum, as applied by the agency, and presumes that there are general hospitals competing in any batch in question. It is not intended to frustrate a separate section of the rule which allows a hospital with at least an 85% occupancy rate to expand regardless of need shown in the formula and the occupancy rate district-wide. See 10- 5.011(1) (o)4.d. and g. "Evaluation of Treatment Outcomes" The proposed rules contain three provisions relating to a hospital's evaluation of its patients' treatment outcomes. Rule 10-5.011(1) (o)3.i, includes among "required services", ". . . an overall program evaluation of the treatment outcomes for discharged patients to determine program effectiveness." Rule 10-5.011(1)(o)8.j., requires in the application, A description of the methods to be used to evaluate the outcome of the treatments provided and to determine the effectiveness of the program, including any summary evaluation outcome results for hospital inpatient psychiatric services provided at other facilities owned or operated by the applicant in Florida and other states. The data shall exclude patient specific information. Rule 10-5.011(1)(o)9.e., imposes a similar additional requirement in applications from providers seeking more beds: A summary description of any treatment outcome evaluation of the hospital inpatient general psychiatric services provided at the facility for which additional beds are requested, for children, adolescents or adults as applicable to the facility for the 12-month period ending six months prior to the beginning date of the quarter of the publication of the fixed bed need pool. The purpose of these requirements, according to HRS, is to insure that hospitals will know whether its patients are better off when they leave than when they were admitted to the program. Most hospitals have such knowledge. The terms, "outcome determination", "summary evaluation outcome results", "summary description of treatment outcome evaluation" and "overall program evaluation of treatment outcomes", are nowhere defined in the proposed rules, and the department intends to leave to each applicant or provider the methodology for determining whether its patients are "better off" for having been in its program. Hospitals do not routinely evaluate their patients after discharge and such follow up would be difficult and costly. Most hospitals do, however, establish a treatment plan upon admission, continue to review and revise that plan as needed throughout treatment, and determine the patients' readiness for discharge based on the goals successfully attained. This is the process described by Florida Hospital's Center of Psychiatry Administrative Director. The rules require no more than a description similar to that provided by Florida Hospital. The rules set no standards and do not dictate that follow- up of discharged patients be accomplished, even though post discharge evaluation may be of value and is generally accepted as the best tool for measuring treatment effectiveness. The measurement of treatment outcome is an inexact process and relies on a series of subjective standards which need to be described. HRS does not intend to set those standards and, other than have its applicants demonstrate that a process is in place, the agency has no idea how the required information will impact its CON review. Without definitions and standards, the agency will have no way of comparing one applicant's information with another's. Without specificity and more guidance the rules fail to apprise the applicant of what is required and will provide no meaningful information to the agency in its CON review function. Miscellaneous Provisions The Non-Physician Director. The proposed definition of "Hospital Inpatient General Psychiatric Services" in Rule 10-5.011(1) (o)2.1. includes services provided under the direction of a psychiatrist or clinical psychologist In drafting this definition, agency staff relied on advice from experts at their workshops and on advice from the agency's own Alcohol, Drug Abuse and Mental Health Program Office, to the effect that professionals, other than physicians, are qualified to direct the units. Interpretation and Application. It is not the intention of HRS that its rules be interpreted to override good medical practice or the sound judgement of treating physicians. Thus, the rules would not prohibit stabilization of a patient who is presented to the emergency room of a hospital without a CON for substance abuse or psychiatric services. Stabilized Alzheimers patients may be housed in nursing homes. Nor do the rules prohibit or subject to sanctions the occasional admission of a psychiatric or substance abuse patient to a non-substance abuse or psychiatric bed so long as this occurs infrequently in a hospital without psychiatric or substance abuse programs. "Scatter" beds are not eliminated. Those beds would continue to be licensed as acute-care beds, as they would not be considered part of an organized program, with staff and protocols, to provide psychiatric or substance abuse services. Proposed rule 10-5.011(1)(o)4.h.(v) provides that applicants for IRTPs for children and adolescents seeking licensing as a specialty hospital must provide documentation that the district's licensed non-hospital IRTPs do not meet the need for the proposed service. The department is not seeking specific utilization data in this regard, as such is not available. General information on the availability of alternatives to inpatient hospital services is obtainable from local health councils and mental health professionals in the community. Quarterly Reports. Proposed rule 10-5.011(1)(o)10. requires: Facilities providing licensed hospital inpatient general psychiatric services shall report to the department or its designee, within 45 days after the end of each calendar quarter, the number of hospital inpatient general psychiatric services admissions and patient days by age and primary diagnosis ICD-9 code. The Health Care Cost Containment Board (HCCCB) is already collecting similar quarterly data from providers. The reporting system is being updated and improved but in the meantime HRS is experiencing problems with the type and accuracy of the data it receives from HCCCB. One problem is that HCCCB collects its data with regard to all discharges in a psychiatric or substance abuse diagnostic category, whereas HRS is interested only in data from a psychiatric or substance abuse program. Until the system improves, HRS needs the information it seeks from the providers in order to plan and apply the need methodology. The agency intends to designate local health councils to collect the data and has already worked with them to set up a system. If reports provided to the HCCCB comply with the proposed requirement, HRS has no problem in receiving a duplicate of those reports. The Economic Impact Statement Pursuant to Section 120.54(2), F.S., HRS prepared an economic impact statement for the proposed rule. It was authored by Elfie Stamm, a Health Services and Facilities Consultant Supervisor with HRS. Ms. Stamm has a Masters degree in psychology and has completed course work for a Ph.D. in psychology. She has been employed by HRS for 13 years, including the last ten years in the Office of Comprehensive Health Planning. She is responsible for developing CON rules, portions of the state health plan, and special health care studies. It was impossible for Ms. Stamm to determine how the rule could impact the public at large. The economic impact statement addresses generally the effect of abolishing the distinction between long and short term services and acknowledges that the rule will increase competition among short term service providers. The impact statement also addresses a positive impact on current long term providers.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Based upon an agreement between the petitioner and the respondent, and a later addendum, petitioner received Certificate of Need Number 1460 in February of 1981 granting the petitioner the authority to construct 126 additional general medical/surgical beds but to only license and operate 72 of such beds. The instant proceeding involves petitioner's application for a Certificate of Need to license and operate the remaining 54 beds which have been previously constructed under Certificate of Need Number 1460. St. Joseph's Hospital is a 649-bed full service major referral hospital in Hillsborough County owned and operated by the Franciscan Sisters of Allegheny. Its services include a comprehensive community mental health center, a comprehensive pediatric unit with 88 beds, a radiation therapy center, a 60- bed community cancer center, cardiac catheterization, cardiac surgery and a large and active emergency room. It serves a considerable number of indigent patients and participates in the Medicaid and Medicare programs. Petitioner is now requesting permission to license the regaining 54 beds which were authorized to be constructed pursuant to Certificate of Need Number 1460. The project involves no additional construction or renovation inasmuch as all 126 beds previously authorized have been completed. No capital expenditure will be required in order to place the 54 beds into operation. If the Certificate of Need is granted, petitioner intends to create two specialty medical/surgical units: a 32-bed cardiac surgical unit to accommodate patients from the open heart surgical program and a 22-bed medical unit for psychiatric patients requiring medical treatment. There currently are no other beds available in the hospital to convert for use for the psychiatric patient or for the cardiac surgical unit. Petitioner has been operating, on occasion, at occupancy levels in excess of 90 percent. At times, it has been necessary to place non-emergency patients in the emergency room and have them remain there until beds become available. There are sometimes up to 40 patients on the waiting list for elective surgery. Due to the shortage of empty beds, petitioner cannot now admit new members to its medical staff. Steady operation of the hospital at occupancy levels exceeding 90 percent can have an adverse effect upon the efficiency of the nursing staff and the quality of care offered to patients. Because the bulk of projected growth in Hillsborough County is expected to occur in the center and northwestern area of the county, it is anticipated that the pattern of utilization of petitioner's facility will continue. While the licensing of the 54 additional beds involves no capital expenditure on petitioner's part, it is estimated that, if petitioner is not permitted to license these beds, a total yearly loss of over $3.8 million will be experienced. This figure is the sum of lost net revenues from the beds in the amount of $87,339 and lost net ancillary revenues in the amount of $2.36 million, as well as the absorption of $232,750 in yearly depreciation costs and $1.14 million in committed indirect costs. Petitioner anticipates a loss per patient day, calculated at 100 percent occupancy, of $16.82 if the licensing of the beds is not approved. This would result in an increase of current patient charges by 9.1 percent in order to maintain petitioner's budgeted profit margin. Petitioner is located in HRS District VI which, at the time of the hearing, was composed of Hillsborough and Manatee Counties. Some 81 percent of all beds in the District are located in Hillsborough County. As of the time of the hearing, the District had 3,899 licensed acute care beds, with 606 additional beds having been approved but not yet operational. The generally accepted optimum utilization rate for acute care beds is 80 to 85 percent. For District VI, the overall utilization rate is below the optimum level. In Manatee County, utilization of acute care beds is at 78.3 percent. In Hillsborough County, the utilization level is at 77.4 percent, with the major referral hospitals experiencing a higher level of utilization than the smaller community hospitals. Rule 10-5.11(23), Florida Administrative Code, contains the governing methodology for determining acute care bed needs of the various Districts. Applications for new or additional acute care hospital beds in a District will not normally be approved if approval would cause the number of beds in that District to exceed the number of beds calculated to be needed. Application of the Rule's formula to District VI results in a total acute care bed need of 3,622 projected for the year 1988. Given the 4,505 existing and approved beds in the District, there are 883 excess beds in District VI under the Rule's formula methodology for projecting need. The 1982 Health Systems Plan adopted by the Florida Gulf Health Systems Agency makes no bed need projections for other specialty medical/surgical beds," but shows no need for medical/surgical beds. Rule 10-5.11(23), Florida Administrative Code, provides that other criteria may result in a demonstration of bed need even when the formula approach illustrates no need for beds. When additional beds are approved pursuant to other criteria, those beds are counted in the inventory of existing and approved beds in the area when applying the bed need formula to review future projects. The formula methodology does account for the inflow and outflow of patients in a specific area. While Rule 10-5.11(23) permits the Local Health Councils to adopt subdistrict bed allocations by type of service, the Council for District VI had not adopted its local health plan as of the date of the hearing in this matter. The Rule itself simply addresses the need for general acute care bed needs in the future.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the application of St. Joseph's Hospital, Inc. for a Certificate of Need to license 54 acute care medical/surgical beds be DENIED. Respectfully submitted and entered this 10th day of November, 1983, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of November, 1983. COPIES FURNISHED: Ivan Wood, Esquire David Pingree Wood, Lucksinger & Epstein Secretary One Houston Center Department of Health and Suite 1600 Rehabilitative Services Houston, Texas 77010 1323 Winewood Boulevard Tallahassee, Florida 32301 Steven W. Huss, Esquire 1323 Winewood Boulevard, Suite 406 Tallahassee, Florida 32301
The Issue The issue is whether Hialeah Hospital, Inc. may be licensed for a 21-bed psychiatric unit, without first obtaining a certificate of need, on the basis that it provided psychiatric services before a certificate of need was statutorily required.
Findings Of Fact Background of the Controversy The Parties The Department of Health and Rehabilitative Services (the Department) is responsible for determining whether health care projects are subject to review under the Health Facility and Services Development Act, Sections 381.701- 381.715, Florida Statutes. It also licenses hospitals under Chapter 395, Florida Statutes. The Department's Office of Community Medical Facilities renders decisions about requests for grandfather status which would exempt a psychiatric service offered at hospital from certificate of need review. The Department's Office of Licensure and Certification issues licenses but does not grant grandfather exemptions. A hospital will not receive separate licensure for psychiatric beds unless a certificate of need has been obtained for those beds, or the beds are in a psychiatric unit which had been organized before certificate of need review was required. See Section 381.704(2), Florida Statutes (1987). A hospital can provide inpatient psychiatric services to a patient in one of three ways: a) as a patient housed among the general hospital population, b) as a patient housed in a special unit organized within the hospital and staffed by doctors, nurses and other personnel especially to serve patients with psychiatric diagnoses, or c) in a hospital organized as a psychiatric specialty hospital. Serving patients through methods b and c requires special certificate of need approval and licensure. Most community hospitals place psychiatric patients among the general patient population; few hospitals create a distinct psychiatric unit; fewer hospitals still specialize as psychiatric hospitals. Hialeah Hospital, Inc. is a 411-bed general hospital in Hialeah, Florida. It does not currently hold a certificate of need for licensure of a distinct psychiatric unit. As a result, its reimbursement for psychiatric services from the Federal government for Medicare patients is limited. The Health Care Finance Administration (HCFA) generally reimburses hospitals for services based upon flat rates which are paid according to categories known as diagnostic related groups. Hialeah Hospital now receives reimbursement for services it renders to psychiatric patients on this basis. If it is entitled to a grandfather exemption from certificate of need review, and its distinct psychiatric unit is separately licensed by the Department, Hialeah Hospital will receive cost-based reimbursement for services to psychiatric patients, which will result in higher income to the hospital. Approval of the grandfathering request will not result in a) any capital expenditure by the hospital, b) the addition of staff, or c) a change in the type of services currently offered at the hospital. Just before July 1, 1983, the hospital had an average daily census of 16-17 psychiatric patients. If the psychiatric services the hospital has offered do not qualify for grandfathering, Hialeah Hospital may apply for a certificate of need for a distinct psychiatric unit. Even without a psychiatric certificate of need, Hialeah is still entitled to continue to serve patients with psychiatric diagnoses among its general population, and to receive the lower diagnostic related group reimbursement for those services from HCFA. Palmetto General Hospital is a licensed general hospital with 312 acute care beds and 48 separately licensed psychiatric short-term beds operated as a distinct psychiatric unit. It is located near Hialeah Hospital, and both hospitals serve the same geographic area. The primary markets of both hospitals overlap. They compete for patients, including psychiatric patients. Agency Action Under Review From 1973 to 1979 the license issued to Hialeah Hospital by the Department bore a designation for 21 psychiatric beds, based on information submitted in the hospital's licensure application. The hospital then dropped the psychiatric bed count from its licensure applications. This change probably was caused by a problem generated by an announcement from the Northwest Dade Community Health Center, Inc., the receiving facility for psychiatric emergencies in northwestern Dade County, which includes Hialeah. That center had written to the Hialeah Police Department, informing the police that when the center was not open, it had a crisis worker at the Hialeah Hospital emergency room, and that persons needing involuntary psychiatric hospitalization should be taken to the Hialeah Hospital emergency room. The only other hospital in Hialeah treating psychiatric patients was Palmetto General Hospital, which did not accept, as a general rule, patients who could not pay for care. The Hialeah Police Department thereafter began dropping psychiatric patients at Hialeah Hospital, much to the distress of the Hialeah Hospital emergency room staff. The Hospital thereafter dropped the designation of any of its beds as psychiatric beds on its annual licensure applications. It still received psychiatric patients from Jackson Memorial Hospital when that hospital reached its capacity for psychiatric patients. On its 1980 licensure application Hialeah Hospital collapsed all of its medical, surgical and psychiatric beds into a single figure. This was consistent with its practice of serving medical, surgical and psychiatric patients throughout the hospital. Hialeah Hospital filed similar licensure applications in 1981, 1982, 1983. In 1984 there was a dispute over the total number of beds to be licensed, which was resolved in early 1985. In 1985, after a change in the licensing statute which is discussed below, the Department informed Hialeah Hospital that its application for licensure was incomplete and could not be processed until Hialeah explained its basis for seeking separate licensure for 20 short-term psychiatric beds. In its response, Hialeah's Vice President stated: [W]e felt it was appropriate to indicate that Hialeah Hospital did accept psychiatric admissions. These patients have been randomly placed in the institution, many times based on other primary or secondary diagnoses. The application indicates bed usage, not that it is currently a discrete unit. Hialeah Hospital does currently have a Letter of Intent [on file] for establishment of a discrete med/psych unit. Hialeah Ex. 24a On August 1, 1985, the Department's Office of Licensure and Certification informed Hialeah Hospital by certified mail that the application for licensure of 20 short-term psychiatric beds was denied for failure to have obtained a certificate of need for them or to have obtained an exemption from review [both could only come from the Department's Office of Community Medical Facilities]. The hospital was provided a clear point of entry to challenge this determination through a proceeding under Chapter 120, Florida Statutes, but Hialeah filed no petition for review of that decision. Instead, Hialeah pursued the certificate of need application which it had filed in April, 1985 for separately licensed psychiatric beds. There was no reason to challenge the August 1, 1985, denial because the factual bases alleged by the Department were true--the hospital had no certificate of need for psychiatric beds and had not yet asked the Department's Office of Community Health Facilities to decide whether Hialeah qualified for grandfathered beds. On October 21 and 23, 1986, Hialeah Hospital wrote to the Office of Community Health Facilities seeking a determination that it was entitled to have 21 pyschiatric beds grandfathered on its license. In certificate of need application 4025 Hialeah Hospital sought the establishment of a distinct 69 bed psychiatric unit at Hialeah, with separately licensed beds. The application went to hearing and was denied on its merits on February 17, 1987, in DOAH Case 85-3998. In his recommended order, the Hearing Officer discussed the issue of whether Hialeah Hospital was exempt from certificate of need review because it already had a psychiatric unit. He found that the issue was not appropriately raised in the proceeding before him, which was Hialeah Hospital's own application for a certificate of need to establish a psychiatric unit. He therefore found he lacked jurisdiction to consider the grandfathering issue. Hialeah Hospital v. HRS, 9 FALR 2363, 2397, paragraph 5 (HRS 1987). The Department adopted that ruling in its May 1, 1987, final order. Id. at 2365. A letter dated December 5, 1986, from the Office of Community Medical Facilities denied Hialeah's request to grandfather 21 short-term psychiatric beds on its license and thereby exempt them from certificate of need review, as requested in Hialeah's letters of October 21 and 23, 1986. The Department denied the grandfathering request for four reasons: When the Department conducted a physical plant survey on June 1, 1980, there were no psychiatric beds in operation at the hospital; The hospital bed count verification form returned to the Department on January 31, 1984 by the Director of Planning for Hialeah, Gene Samnuels, indicated that the hospital had no psychiatric beds; An inventory of psychiatric beds had been published by the Department in the Florida Administrative Weekly on February 17, 1984 which showed that Hialeah Hospital had no psychiatric beds, and Hialeah never contested that inventory; The Department had not received evidence demonstrating that psychiatric services were provided "in a separately set up and staffed unit between 1980 and 1985." This letter again gave Hialeah a point of entry to challenge the Department's decision to deny licensure of psychiatric beds and it was the genesis of Hialeah's petition initiating this case. It is significant that the Department's Office of Community Health Facilities gave Hialeah a clear point of entry to challenge the December 5, 1986, grandfathering denial with full knowledge that the Department's Office of Licensure and Certification had denied a request from Hialeah Hospital on August 1, 1985, to endorse psychiatric beds on Hialeah's 1985 license. The Departmental personnel knew that those two denials involved different issues. Once the Office of Licensure and Certification told the hospital it had to produce either a certificate of need or a grandfathering approval to have psychiatric beds endorsed on its license, the hospital had to turn to the Office of Community Health Facilities to get a ruling on its grandfathering claim. The letter of December 5, 1986, was the first ruling on the merits of Hialeah Hospital's claim that it was entitled to have 21 beds grandfathered. History of the Department's Specialty Bed Recognition Psychiatric Beds in Florida Hospitals Before July 1, 1983 Before April 1, 1983 no state statute or Department rule required that psychiatric beds in a hospital be located in physically distinct units. Psychiatric patients could be located throughout a hospital. They were not required to be placed in rooms having distinguishing characteristics, or to use group therapy rooms, dining rooms, or other rooms exclusively dedicated to use by psychiatric patients. There were, of course, hospitals that had distinct psychiatric units, and some entire hospitals which were specifically licensed as psychiatric hospitals. After 1983, a hospital had to obtain a certificate of need to organize what had previously been diffuse psychiatric services into a distinct unit dedicated to serving patients with psychiatric diagnoses. Today no special certificate of need is required to serve psychiatric patients in the general hospital population, but without separate licensure the hospital receives Medicare reimbursement from the federal government for psychiatric patients at the level established by the diagnostic related groups, not cost based reimbursement. Before July 1, 1983 annual hospital licensure application forms asked hospitals to identify their number of psychiatric beds as an item of information. The hospital licenses issued, however, were based on the hospital's total number of general medical-surgical beds, a category which included psychiatric beds. The 1983 Amendments to the Florida Statutes and the Department's Rules on Specialty Beds In April of 1983, the Department adopted a rule which established a separate need methodology for short-term psychiatric beds, Rule 10-5.11(1)(o), Florida Administrative Code. Thereafter, the Legislature amended the statutes governing the hospital licensing, Section 395.003, Florida Statutes (1983) by adding a new subsection (4) which read: The Department shall issue a license which specifies the number of hospital beds on the face of the license. The number of beds for the rehabilitation or psychiatric service category for which the Department has adopted by rule a specialty bed need methodology under s. 381.494 shall be specified on the face of the hospital license. All beds which are not covered by any specialty bed need methodology shall be specified as general beds. Section 4, Chapter 83-244, Laws of Florida (underlined language was added). In the same Act, the Legislature amended the planning law to require hospitals to apply for certificates of need to change their number of psychiatric and rehabilitation beds. Section 2, Chapter 83-244, Laws of Florida, codified as Section 381.494(1)(g), Florida Statutes (1983). The Department's rules defined short-term psychiatric services as: [A] category of services which provide a 24- hour a day therapeutic milieu for persons suffering from mental health problems which are so severe and acute that they need intensive, full-time care. Acute psychiatric inpatient care is defined as a service not exceeding three months and averaging a length of stay of 30 days or less for adults and a stay of 60 days or less for children and adolescents under 18 years. Rule 10- 5.11(25)(a), Florida Administrative Code (1983), effective April 7, 1983. A minimum size for any new psychiatric unit was prescribed in Rule 10- 5.11(25)(d)7., which states: In order to assure specialized staff and services at a reasonable cost, short-term inpatient psychiatric hospital based services should have at least 15 designated beds. Applicants proposing to build a new but separate psychiatric acute care facility and intending to apply for a specialty hospital license should have a minimum of 50 beds. After the effective date of the rule, April 7, 1983, no hospital could organize its psychiatric services into a distinct psychiatric unit using specialized staff unless the unit would have at least 15 beds. This did not mean that a hospital which already had organized a distinct psychiatric unit using specialized staff had to have at least 15 beds in its unit to continue operation. Whatever the number of beds, whether fewer or greater than 15, that number had to appear on the face of the hospital's license. Section 395.003(4), Florida Statutes (1983). To change that number, the hospital had to go through the certificate of need process. Section 381.494(1)(g) Florida Statutes (1983). Those hospitals whose pre-existing units were endorsed on their licenses can be said to have had those units "grandfathered". There is no specific statutory exemption from certificate of need review for pre-existing units, but such treatment is implicit in the regulatory scheme. The Department's Grandfather Review Process To know which hospitals were entitled to continue to operate discrete psychiatric units without obtaining a certificate of need, the Department's Office of Community Medical Facilities had to identify hospitals which had separate psychiatric units before the July 1, 1983, effective date of Section 395.003(4), Florida Statutes (1983). An inventory of beds in the existing psychiatric units also was necessary to process new certificate of need applications. The Department's rule methodology authorized additional beds in psychiatric units based upon a projected need of 15 beds per 10,000 population. Rule 10-5.11(25)(d)1., Florida Administrative Code (1983). The Legislature approved the psychiatric service categories which the Department had already adopted by rule when it enacted Section 4 of Chapter 83- 244, Laws of Florida. The Legislature thereby validated a process the Department had initiated in 1976 with its Task Force on Institutional Needs. That group had developed methodologies to be used throughout the state to determine the need for different types of medical services, because local health systems agencies were reviewing CON applications based upon idiosyncratic methodologies. To develop review criteria for psychiatric services, the Task Force had to both define psychiatric services and determine how it should measure them. In doing so, the Department looked for assistance to publications of entities such as the American Hospital Association and the Joint Commission on Accreditation of Hospitals. According to the American Hospital Association, psychiatric services are services delivered in beds set up and staffed in units specifically designated for psychiatric services. In the Task Force report, a psychiatric bed was defined as: A bed in a clinical care unit located in a short-term, acute care hospital or psychiatric hospital which is not used to provide long-term institutional care and which is suitably equipped and staffed to provide evaluation, diagnosis, and treatment of persons with emotional disturbances. An inpatient care unit or clinical care unit is a group of inpatient beds and related facilities and assigned personnel in which care is provided to a defined and limited class of patients according to their particular care needs. HRS Exhibit 14 at 92 and 1-5. The definition of a psychiatric bed in the Report of the Department Task Force on Institutional Needs is compatible with the requirements of the Florida Hospital Cost Containment Board in its Florida Hospital Uniform Reporting Manual. Reports made by hospitals to the Hospital Cost Containment Board include information about services provided in separately organized, staffed and equipped hospital units. The information provided to the Board assisted the Department in determining which Florida hospitals already were providing psychiatric services in separately organized, staffed and equipped hospital units before separate licensure became necessary. The Department surveyed hospitals to determine the number of existing beds in distinct psychiatric units. It also looked to old certificates of need which referenced psychiatric services at hospitals, reports hospitals had made to the Florida Hospital Cost Containment Board, to past licensure applications the Department had received from hospitals, and to the Department's 1980 physical plant survey. These sources of information were, however, imperfect, for the reasons which follow: 1. Certificates of Need Issued 22. Before July 1, 1983, certificates of need were required for the initiation of new services which involved capital expenditures above a certain threshold dollar amount. Hospitals which had a long-standing psychiatric units would have had no occasion to request a certificate of need for psychiatric services. Review of certificates issued would not turn up a hospital with a mature psychiatric service. 2. Hospital Cost Containment Board Information 23. The reports from hospitals during the early years of the Hospital Cost Containment Board are not entirely reliable, because the hospitals did not yet have uniform accounting systems in place, despite the Board's attempt to establish uniform accounting methods through its reporting system manual. Hospitals commonly made errors in their reports. If the reports were prepared correctly, they would identify hospitals with discrete psychiatric units. Hialeah's HCCB Reports for 1981, 1982 and 1983 indicated that the hospital had no active psychiatric staff, no psychiatric beds and no psychiatric services. 3. Departmental Survey Letters 24. In Spring, 1983, the Department tried to verify the existing inventory of beds for specialty services such as psychiatric services, comprehensive medical rehabilitation services and substance abuse services. There is no record, however, that this survey letter was sent to Hialeah Hospital. In late 1983 or early 1984, the Department again attempted to establish inventories for psychiatric beds and rehabilitation beds. It distributed a cover letter and a form entitled "Hospital Bed Count Verification", which asked hospitals to confirm the Department's preliminary count of the hospital's "number of licensed beds". Hialeah's planner returned the form verifying that Hialeah Hospital was licensed for 411 "acute general" beds and that it had no short or long term psychiatric beds. The answer was correct, for that is the figure which appeared on Hialeah's license at that time. The Department did not ask the hospitals for an average daily census of short-term psychiatric patients. The cover letter for the survey form told hospital administrators that the Department was seeking to verify its preliminary bed count for services for which a special bed need methodology had been established, viz., long and short term psychiatric beds, substance abuse beds and comprehensive medical rehabilitation beds. The cover letter drew attention to the Department's intention to use the data collected from the responses to the form as a beginning inventory for short-term psychiatric beds. The cover letter also cautioned hospitals that when completing the form, they should "keep in mind the service definitions". Copies of the definitions were attached to the form. The appropriate inference to be drawn from the answer given by Hialeah Hospital to the survey form was that in January, 1984, the hospital had no beds organized into a short term psychiatric unit. This is consistent with the later letter from the hospital's vice president quoted in Finding of Fact 6, above. The Department published on February 17, 1984, its base inventory of psychiatric and rehabilitation beds in the Florida Administrative Weekly. The publication stated that "any hospital wishing to change the number of beds dedicated to one of the specific bed types listed will first be required to obtain a certificate of need." 10 Florida Administrative Weekly at 493. Hialeah was shown as having no psychiatric beds. Id. at 498. The notice did not specifically inform the hospitals of the right to petition for a formal hearing to challenge the inventory figures published. 4. Licensure Files 25. Although, the Department's licensure application form listed "psychiatric" as a possible hospital bed utilization category before 1983, these categories were set up for informational purposes only. No definitions were given to hospitals describing how beds should be allocated among the categories available on the form, making those figures unreliable. Before 1980 Hialeah Hospital had listed psychiatric beds on its licensure applications, see Finding of Fact 5, above. Since 1980 it listed no psychiatric beds. 5. Physical Plant Survey The Department performed a physical plant survey in 1980 to determine the total number of beds in service at each hospital. That survey did not attempt to make distinctions between different types of services listed on the survey form. The Department's architect who performed the survey did not attempt to evaluate the quality or intensity of the psychiatric services provided at any hospital. Each of the types of information the Department examined to determine the existing inventory of short-term psychiatric beds in 1983 had weaknesses, and no single source is dispositive. It is difficult to credit the assertion that Hialeah Hospital had a distinct psychiatric unit before July, 1983 which was not reflected in any of these sources of information. The use of multiple sources of information served as a cross-check on information from each source. It is understandable that Hialeah would not have applied for a certificate of need to operate a separate psychiatric unit. Before 1983, no such application was needed if the establishment of the unit entailed an expenditure of money below a threshold amount. All of its reports to the Hospital Cost Containment Board, however, indicate that there was no separate psychiatric service at the hospital and that the hospital had no active psychiatric staff. With respect to the Department's survey letters, while the 1984 survey form itself did not specifically inform hospital administrators that their responses would be used to establish a base inventory of psychiatric beds, the cover letter did make that clear. This should have put the hospital's planner, who filled out the form, on notice that if Hialeah had a discrete, short-term psychiatric service the number of beds in that unit should be listed. What is perhaps the most significant point is that the hospital reported no psychiatric beds on its licensure application at all from 1980 to 1985. Medical doctors in general practice can and do treat psychiatric patients, in addition to doctors who specialize in psychiatry. No doubt patients commonly were admitted to the hospital who had primary diagnoses of psychiatric illnesses. The hospital's licensure filings, however, since 1979 fail to record any psychiatric beds. This is important evidence that the hospital did not regard itself as having any distinct unit organized to provide psychiatric care. The Hospital's 1985 correspondence from the Hospital's vice president to the Department, quoted in Finding of Fact 6 confirms this. The failure to list any psychiatric beds at Hialeah on the Department's 1980 physical plant survey is not significant, since determining the number of psychiatric beds was not the focus of that survey. It is true that the Department never conducted site visits at all hospitals to determine whether they had a) distinct psychiatric units, b) psychiatric medical directors, c) written psychiatric admission and treatment policies, or d) psychiatric policy and procedures manuals. The efforts the Department did make to establish the beginning inventory of psychiatric beds were reasonable, however Hialeah Hospital's Licensure History and Efforts to Obtain Grandfather Status The entries on Hialeah's applications for annual licensure from the Department are cataloged above, and need not be repeated. During the years 1980-84, after it ceased listing psychiatric beds on its licensure application, psychiatric services were still being provided to patients throughout the hospital. In 1984, the hospital engaged in correspondence with the Department over the appropriate number of licensed beds for the hospital as a whole. Ultimately the hospital and the Department agreed that 411 beds should be licensed. In its 1985 licensure application, Hialeah then requested that 20 short-term psychiatric beds be listed on the license. The Office of Licensure and Certification questioned this. Ultimately, the Office of Licensure and Certification refused to endorse those 20 psychiatric beds on the license because there was no certificate of need on file for them, nor any statement from the Office of Community Medical Facilities granting the hospital an exemption from that licensure requirement. Hialeah Hospital did not challenge that decision in a proceeding under Chapter 120, Florida Statutes. The discussions between the hospital and the Department's Office of Community Medical Facilities continued, and by late October, 1986, Hialeah requested the Department to approve 21 short-term psychiatric beds at the facility, and sent the Department backup material which it believed justified a grandfather determination. After review, the Department denied the grandfather request by letter dated December 5, 1986. The Department's Action Regarding Other Grandfathering Requests Hialeah's is not the first request the Department received for grandfathering beds. After June of 1983, when the Legislature required CON approval for hospitals to change their number of psychiatric or rehabilitation beds, a number of institutions made similar requests. 1. Comprehensive Medical Rehabilitation Beds The rule on comprehensive medical rehabilitation beds was developed by the Department at the same time as the rule on psychiatric beds. The Department used a similar process to determine the existing inventory of both types of beds. The Department determined that preexisting comprehensive medical rehabilitation units at Parkway General Hospital, Naples Community Hospital, Orlando Regional Medical Center, Holy Cross Hospital, and University Community Hospital entitled those facilities to grandfathering of their comprehensive medical rehabilitation services. The Department has also determined that a preexisting distinct psychiatric unit at Palmetto General Hospital entitled that institution to grandfather status for its psychiatric beds. Parkway General Parkway General Hospital did not specify rehabilitation beds on its licensure applications for the years 1980 through 1984. The Department denied Parkway's request for endorsement of 12 comprehensive medical rehabilitation beds on its 1985 license because Parkway had not obtained a certificate of need for them or an exemption from review. The Department thereafter determined that Parkway had been providing comprehensive medical rehabilitation services before June, 1983 in a physically distinct and separately staffed unit consisting of 12 beds. It then endorsed 12 beds on Parkway's license, even though the rule which became effective in July, 1983 would require a minimum unit size of 20 beds for any hospital organizing a new comprehensive medical rehabilitation unit. See Rule 10-5.011(24), Florida Administrative Code. Naples Community Hospital The Department granted Naples Community Hospital a grandfather exemption for its rehabilitation beds in February, 1987. In had not listed the rehabilitation beds on its license application for the years 1983-1985, had not returned the Department's bed count verification form, nor did it challenge the bed count which the Department published in the Florida Administrative Weekly. The hospital had applied for and received a certificate of need in January of 1981 to establish a 22-bed rehabilitation unit and that unit began operation in late 1982. The Department ultimately determined that the hospital had provided rehabilitation services in a physically distinct unit and the services were organized and delivered in a manner consistent with applicable regulatory standards. It granted a grandfather request in February, 1987. Orlando Regional Medical Center A grandfather exemption for 16 rehabilitation beds was granted to Orlando Medical Center in 1986. The 16-bed brain injury unit had been authorized by the Department through certificate of need number 2114 before the Department had adopted its rule governing comprehensive medical rehabilitation beds in 1983. The services were provided in a physically distinct unit. The Department determined the 20-bed minimum size for a new unit did not apply to a unit which qualified for grandfathering. Holy Cross Hospital The Department granted a grandfather exemption for comprehensive medical rehabilitation beds to Holy Cross Hospital after a proceeding was filed with the Division of Administrative Hearings to require the Department to recognize the existence of a 20-bed comprehensive medical rehabilitation center. The Department determined by a site visit that Holy Cross had established a separate unit, probably in 1974, long before the Department's comprehensive medical rehabilitation unit rule became effective in July, 1983. The unit had its own policy manual, quality assurance reports, patient screening criteria, and minutes of multidisciplinary team staff conferences. The hospital had neglected to report the unit in its filings with the Hospital Cost Containment Board but the hospital contended that it never treated the unit as a separate unit for accounting purposes, and had not understood the need to report the unit as a distinct one under Hospital Cost Containment Board reporting guidelines. The hospital corrected its reporting oversight. The grandfathering is consistent with the hospital's actual establishment of the unit long before the Department's rules went into effect. University Community Hospital A dispute over whether to grandfather a comprehensive medical rehabilitation unit which went through a Chapter 120 administrative hearing and entry of a final order involved University Community Hospital (UCH). The Department initially determined that the nine comprehensive medical rehabilitation beds at UCH had been in existence before July, 1983 and were exempt from certificate of need review. That decision was challenged in a formal administrative proceeding by a competing hospital, Tampa General. The competitor was successful, for both the Hearing Officer in the recommended order and the Department in the final order determined that University Community Hospital's 9 bed rehabilitation unit was not entitled to be grandfathered. University Community Hospital v. Department of Health and Rehabilitative Services, 11 FALR 1150 (HRS Feb. 14, 1989). In determining that grandfathering was inappropriate, the Department found that the hospital had not prepared separate policies and procedures for its rehabilitation unit before the rule on comprehensive medical rehabilitation beds became effective, and that the unit did not have a physical therapy room on the same floor as the patients. The beds supposedly dedicated to rehabilitative care were mixed with non- rehabilitative beds, so that a semiprivate room might have one bed used for rehabilitative care and another for an unrelated type of care. This conflicted with the requirement that the rehabilitation unit be physically distinct, with all patients and support services located on the same area or floor, rather than scattered throughout the hospital. The Department also determined that many hospitals offer physical therapy, occupational therapy, or speech therapy, but that to qualify as a comprehensive medical rehabilitation center, these services had to be coordinated in a multidisciplinary approach to the patient's needs, which had not been the case at University Community Hospital. The common strand running through the grandfathering decisions on comprehensive medical rehabilitation beds is that grandfathering is appropriate when a hospital demonstrates that before the comprehensive medical rehabilitation rule became effective in July, 1983, it had a separate unit which met the standards and criteria for a comprehensive medical rehabilitation unit (other than the minimum size for new units). Psychiatric Beds Tampa General Hospital Only two cases involve a decision on whether psychiatric services at a hospital qualify for grandfathering. Tampa General Hospital, which was owned by the Hillsborough County Hospital Authority, operated 93 psychiatric beds in 1981, 71 at Hillsborough County Hospital and 22 at Tampa General Hospital. A certificate of need granted in 1981 authorized the expenditure of $127,310,000 for the consolidation of both hospitals and an overall reduction of 14 psychiatric beds after the hospitals were integrated. When the Hillsborough County Hospital Authority obtained its certificate of need, it was not necessary to differentiate between general acute care beds and psychiatric beds for licensure purposes. Increased demand for acute care beds led Tampa General to close its psychiatric unit and make those 22 beds available for ordinary acute care. After the 1983 statutory and rule changes regarding the separate licensure of psychiatric beds, the Hillsborough County Hospital Authority told the Department that Tampa General had no psychiatric beds in operation. On its 1985 licensure application, the Hillsborough County Hospital Authority applied for licensure for 22 psychiatric beds at Tampa General and 77 at Hillsborough Hospital. The Department denied the request for the psychiatric beds at Tampa General. The Final Order entered in Hillsborough County Hospital Authority v. HRS, 8 FALR 1409 (Feb. 16, 1986), determined that there had been a discontinuation in the use of psychiatric beds at Tampa General, and that to allow Tampa General to add psychiatric beds after the statutory and rule changes in 1983 would frustrate the certificate of need process and would be detrimental to good health care planning. Palmetto General Hospital Palmetto General Hospital participated in an administrative hearing in 1975 regarding the disapproval of its proposed expansion, which included the dedication of one floor and 48 beds as a psychiatric unit. The Hearing Officer found that there was a need for psychiatric beds in the community and recommended that the Secretary of the Department issue a certificate of need "for that portion of the applicant's proposed capital expenditures relating to the addition of a 48 bed psychiatric unit". Palmetto General Exhibit 32, at 12, paragraph 2. The order of the Hearing Officer was affirmed by the District Court of Appeal in Palmetto General Hospital, Inc. v. Department of HRS, 333 So.2d 531 (Fla. 1st DCA 1976). The approval of the 48 psychiatric beds is clear only from a review of the Hearing Officer's order. Certificate of Need 292X was issued for the 48 psychiatric beds. Palmetto General exhibit 45. Palmetto received Medicare certification for its psychiatric inpatient unit, and listed 48 short-term psychiatric beds on its licensure applications each year from 1979 to 1983. It failed to show its psychiatric beds on the bed count verification survey form sent by the Department. Palmetto General's chief financial officer told the Department on June 10, 1983 that Palmetto General did not have psychiatric beds in a separately organized and staffed unit. This resulted in the issuance of a license which showed no psychiatric beds. The Department itself wrote to the administrator of Palmetto to learn why the 48 short-term psychiatric beds had not been listed on Palmetto's application for licensure in 1985. Palmetto wrote back and acknowledged that it did have 48 short-term psychiatric beds. A license showing those 48 beds was then issued. Thereafter, staff from the HRS Office of Comprehensive Health Planning took the position that the 48 short-term psychiatric beds should not have been listed on the license, and the Department's Office of Licensure and Certification requested that the 1985 license containing the endorsement for those 48 psychiatric beds be returned to the Department for cancellation. Palmetto then sought an administrative hearing on the attempted cancellation of the license. Palmetto and the Department entered into a Final Order dated March 9, 1986 which agreed that Palmetto met all the requirements for the designation of 48 short-term psychiatric beds on its license. Palmetto, had, in fact, operated a 48 bed psychiatric unit on its third floor since 1981, but moved that unit to the sixth floor in 1985. It was dedicated exclusively to psychiatric patients and there were specific policy and procedure manuals developed and used in dealing with psychiatric patients since 1981. The history of Palmetto's licensure is certainly one replete with contradictions. It is inexplicable that the chief financial officer of the hospital would have told the Department in 1983 that it had no separately organized and staffed psychiatric unit when, in fact, it had such a unit. It was also unclear why it would have shown no psychiatric beds on the bed count verification form returned in late December or early January, 1984, or why its April, 1983, and its 1985/1986 license application forms listed no psychiatric beds. Nonetheless, it had obtained a certificate of need for a psychiatric unit after administrative litigation and an appeal to the District Court of Appeal. The unit was opened and remained continuously in existence. It had appropriate policies and procedures in place for a distinct psychiatric unit as the 1983 statutory and rule amendments required for separate licensure of psychiatric beds. History of Psychiatric Bed Services at Hialeah Hospital Since at least 1958, Hialeah Hospital has had psychiatrists on its medical staff, and the number of psychiatric physicians on staff has increased. Thirteen psychiatrists had admitting privileges at the hospital by 1983; there are now 23 psychiatrists with privileges. As is true with most community hospitals, physicians specializing in psychiatry would admit patients to the general population at Hialeah Hospital if they needed intensive psychotherapy or medication which needed to be monitored by nurses. Patients who were homicidal, suicidal or intensely psychotic were not admitted to Hialeah Hospital. Those patients need a more intensive psychiatric environment, either in a locked psychiatric unit or in a psychiatric specialty hospital. The persons physicians placed at Hialeah through 1983 did not need the intensive services of a discrete psychiatric unit. Hialeah Hospital indicated on its licensure application to the Department that it had 21 psychiatric beds throughout the 1970's, but ceased this listing in the 1980's as set forth in Finding of Fact 5 above. The nature of the services available at the hospital had remained constant. Under the psychiatric diagnosis coding system published in the Diagnostic Statistical Manual III, (which is commonly used by psychiatrists) Hialeah Hospital had an average daily census of 25 patients with primary or secondary psychiatric diagnoses in 1980, and 18 in 1981. Only about 25 percent of those patients had a primary psychiatric discharge diagnosis. The additional patients had secondary psychiatric diagnoses. Hialeah must rely on these secondary diagnoses to argue that its average daily census for psychiatric patients approached 21 beds. It was not until 1985 that Hialeah consolidated its psychiatric services to a medical/psychiatric unit. That unit serves patients with medical and psychiatric diagnosis as well as patients with solely psychiatric diagnoses. Before 1983, there was no medical director of psychiatry at Hialeah Hospital, and no separate policies and procedures for the admission of patients to a psychiatric unit, nor any staff dedicated to the care of psychiatric patients. To be sure, the hospital was in a position to provide quality psychiatric care to patients whose needs were psychotherapy, monitored medication, or individual counseling by psychiatric physicians and nurses. This reflects the reality that not all patients who need to be placed in the hospital for psychiatric care require the services of a separate medical/psychiatric unit. Patients with more acute psychiatric illness do need interdisciplinary approaches to their care. These interdisciplinary approaches are more expensive than serving psychiatric patients in the general hospital population. This is why the Federal government provides higher, cost-based reimbursement to the hospitals with specialty psychiatric licenses. Hialeah has not proven that the psychiatric services it was providing before 1983 were significantly different from those provided in typical community hospitals which did not have distinct psychiatric units. Hialeah's long-standing relationship with the Northwest Community Mental Health Center is not especially significant. Certainly, the Center was aware that Hialeah was a potential source of psychiatric care. Baker Act patients who needed hospitalization were taken there between 1980 and 1983. There was a flow of patients back and forth between the Center and the hospital's inpatient population, and discharge plans by Hialeah's social workers included referrals back to the Mental Health Center for follow-up and outpatient care. Similarly, the Dade-Monroe Mental Health Board knew that Hialeah was a potential provider of inpatient psychiatric services. The predecessor to the current local health council, the health systems agency of South Florida, recorded that there were psychiatric admissions at Hialeah Hospital in the early 1980's, and the health systems agency recommended a conversion of existing beds to psychiatric services because of a need for additional psychiatric services in the area. None of this, however, means that Hialeah had operated a distinct psychiatric unit before 1983 which entitles it to grandfather status.
Recommendation It is recommended that the application of Hialeah Hospital for grandfather status for 21 short-term psychiatric beds, and the inclusion of those short-term psychiatric beds on its license and on the Department's bed inventory be denied. DONE AND ENTERED this 6th day of October, 1989, in Tallahassee, Leon County, Florida. WILLIAM R. DORSEY Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of October, 1989.
The Issue The issue for determination is whether either applicant's request for a CON for IRTP beds should be granted. LORTC's allegation that La Amistad plagiarized portions of another PIA facility's CON application was deemed at hearing to be irrelevant. Likewise, it was determined at hearing and in a post- hearing order entered on November 1, 1988, that the sale of La Amistad to UHS of Maitland, Inc. had no material bearing on the La Amistad application under review here. In the parties' prehearing statement filed on September 26, 1988, the following were agreed: Consideration of the applications at issue is governed by the statutory criteria contained in section 381.705, Florida Statutes and Rule 10- 5.011(1)(b)(1)-(4), Florida Administrative Code. These criteria are either satisfied or are inapplicable: Section 381.705(1)(g), (h), (only as to the following clauses: "the effects the project will have on clinical needs of health professional training programs in the service district; the extent to which the services will be accessible to schools for health professions in the service district for training purposes if such services are available in a limited number of facilities"), (j), Florida Statutes (1987) As to LORTC, the parties stipulated that the criteria in Section 381.705(1)(h) as to availability of funds for capital and operating expenditures is satisfied. This is not a stipulation that the application satisfies the financial feasibility criterion contained in Section 381.705(1)(i). Rule 10-5.011(1)(b)(4)(b) , Florida Administrative Code. Each applicant argues that its application, and not that of the other, should be approved. HRS and West Lake both argue that neither application should be approved.
Findings Of Fact La Amistad is a not-for-profit corporation providing a variety of mental health services to children, adolescents and young adults on campuses in Maitland and Winter Park, Florida since 1970. At the time of hearing La Amistad operated 27 licensed IRTP beds at its Maitland campus. At the time of hearing La Amistad had a contract to sell its residential treatment program, including the beds that are the subject of this proceeding, to Universal Health Services, Inc. The contract was entered into after this CON application was filed. LORTC is a wholly owned subsidiary of PIA, Psychiatric Hospitals, Inc. (PIA), which in turn is wholly owned by NME Hospitals, Inc. PIA owns or operates approximately three residential treatment centers (RTCs) and 58 psychiatric hospitals throughout the country, including Laurel Oaks Hospital in Orange County, Florida, an 80-bed licensed hospital providing short term psychiatric and substance abuse services to children and adolescents. HRS is the state agency charged with the responsibility of implementing and enforcing the CON program, pursuant to Section 381.701-381.715, Florida Statutes. The Intervenor, West Lake, is an 80-bed licensed psychiatric hospital in Longwood, Seminole County, Florida. West Lake has allocated 16 beds to its children's program and 24 beds to its adolescent programs. West Lake is licensed for both long and short-term psychiatric beds. THE APPLICATIONS La Amistad's application requests the conversion of 13 existing beds (currently licensed as child caring beds) to licensed IRTP beds, the demolition of several old buildings and the construction of a new building which will contain a total of 16 IRTP beds. The 13 additional beds would bring La Amistad's IRTP total to 40 beds. The total project cost of La Amistad's proposal is $500,000.00 or $38,462.00 per bed. La Amistad's Maitland facility is located in a residential area and is itself designed to be residential in nature, rather than institutional. The patients prepare their own food under the supervision of a dietician and other staff. They also do their own housekeeping. La Amistad is not a "locked unit". A maximum of 16 patients reside in each "house" on the La Amistad campus. The houses are staffed on a 24-hour a day basis. Like other similar facilities, La Amistad utilizes a multi-discipline team approach to treatment. That is, psychiatrists, nurses, social workers and other staff work together. The treatment team meets weekly to discuss the program and treatment of each patient. Family members may visit and stay at the campus on weekends. Families are encouraged to participate in the treatment process. La Amistad has a full-time school on campus with teachers provided by the Orange County School System. The average length of stay for patients is in excess of Il to 12 months. This is consistent with HRS' understanding that 9-14 months is an average length of stay for an intensive residential treatment program. LORTC's application is for CON approval of a 40-bed IRTP located on the grounds of its existing freestanding psychiatric hospital, Laurel Oaks. The facility is currently under construction and will be operated as a residential treatment center if its IRTP CON is denied. LORTC anticipates serving two out of three of the following groups: adolescents who need long-term care, older children (8 years to 13 years) who need long-term care, and chemically dependent adolescents. The projected average length of stay is 120 days, which stay is consistent with that of other PIA residential treatment centers in Florida. The LORTC facility will be "locked". Meals will be prepared at Laurel Oaks Hospital and will be transported in some, as yet undetermined, manner to the separate building. The geographical area in which LORTC will be located is not residential. The capital cost of the 40 bed facility is projected at $3,291,000.00. The funds, provided by the parent company, NME, will be expended, regardless of CON approval. LORTC also uses a multi-discipline team approach to treatment. Each patient's treatment program will consist of psychiatric support services, educational services and family services. Students will attend academic classes four hours a day at the facility. THE APPLICABLE DISTRICT PLAN AND STATE HEALTH PLAN The District Seven Health Plan does not address needs, policies, or priorities for IRTP facilities for children and adolescents. The State Health Plan addresses very generally the need for mental health and substance abuse services. Goal 1 seeks to: "Ensure the availability of mental health and substance abuse services to all Florida residents in the least restrictive setting." Goal 2 seeks to: Promote the development of a continuum of high quality, cost effective private sector mental health and substance abuse treatment and preventive services". Goal 3 seeks to: "Develop a complete range of essential public mental health services in each HRS district." (Laurel Oaks Exhibit #20). The applications neither violate nor materially advance these goals. In both instances the beds will exist for the provision of mental health services, with or without the certificate of need. La Amistad's proposal clearly presents a "less restrictive alternative" to the more institutional psychiatric hospital. Laurel Oaks is also an alternative, although more institutional than homelike in character. NEED, INCLUDING THE AVAILABILITY OF LIKE OR ALTERNATIVE SERVICES AND INCREASED ACCESSIBILITY IRTP beds are a statutorily defined class of specialty hospital beds: Intensive residential treatment programs for children and adolescents means a specialty hospital accredited by the Joint Commission on Accreditation of Hospitals which provides 24-hour care and which has the primary functions of diagnosis and treatment of patients under the age of 18 having psychiatric disorders in order to restore such patients to an optimal level of functioning. Section 395.002(8), Florida Statutes. Because an IRTP is a hospital, a certificate of need is required. This alone distinguishes an IRTP from a residential treatment program (RTP). In spite of its name, HRS considers an IRTP as a service that is less intensive than a long or short term psychiatric hospital. Generally, the RTP and IRTP have a longer average length of stay than a psychiatric hospital and provide a more homelike setting. No HRS rule further defines the IRTP, and as evidenced by the La Amistad and LORTC proposals, the projected average length of stays vary widely (120 days for LORTC, versus 12-14 months for La Amistad). Long term psychiatric hospitals have an average length of stay of over 90 days. West Lake has treated adolescents in its psychiatric beds as long as a year, although this has not occurred recently. HRS has no rule methodology for calculating the need for IRTP's. However, HRS considers there is a need for at least one reasonably-sized IRTP in each HRS service district. In HRS district VII there are currently two IRTPs: Devereaux, a 100-bed facility in Melbourne, Brevard County, Florida, licensed on February 26, 1988; and La Amistad, with 27 IRTP beds in Orange County, licensed in August, 1988. Although HRS clearly does not limit its approval to only one IRTP per district, it has a policy of waiting to see what the need and demand are before it authorizes an additional program with a CON. Its deviation from this policy regarding approval of the La Amistad beds was adequately explained as a settlement based on the acknowledgment of a prior administrative error. Utilization of the Devereaux beds was not a consideration in that unique case. HRS also uses as a reasonable non-rule policy the requirement that existing programs be 80 percent occupied before additional programs are authorized. This is modeled after the promulgated rule in effect for long-term psychiatric beds. At the time the applications were considered, La Amistad was not licensed and Devereaux had a less than 50 percent occupancy. Conflicting evidence was presented with regard to the accessibility of both La Amistad's 27 beds and Devereaux' 100 beds. Devereaux is approximately one to two hours from the three counties identified as LORTC's primary service area: Seminole, Osceola and Orange. LORTC argues that families who need to actively participate in the patients' treatment are discouraged by the travel distance. However, Laurel Oak Hospital currently refers patients to its sister facilities in Manatee and Palm Beach counties, which are more distant than Devereaux. No patient origin studies of Devereaux were done and LORTC's expert in health and planning conceded that it takes a while for people to become aware of a new facility and its services, and a new facility can stimulate patient migration. The credible weight of evidence is that a travel time of two hours or less would not significantly influence decisions to use the facility. La Amistad is noted for its treatment of schizophrenics. It sponsors seminars attracting participants from a wide geographical area. It does not, however, limit its beds to patients with that diagnosis. In the past approximately 48 percent of La Amistad's beds (its entire facility, not just the IRTP beds) have been utilized by schizophrenics. This does not alone evidence non-accessibility of its IRTP beds. The statutory definition of an IRTP, cited in paragraph 17, above, is broad enough to include the type of care provided in long-term psychiatric hospitals, such as West Lake. The programs described in the applications of both LORTC and La Amistad are similar to the programs currently operated at West Lake for children and adolescents. The multi-disciplinary team monitors the patient's progress with a goal toward reintegration into the community. The patients attend school and receive a wide variety of therapies, with varying intensity: individual and group counseling, activity and occupational therapy, family therapy, vocational planning, and the like. When the patient is admitted, an evaluation is done to determine an anticipated length of stay. Some require a shorter stay, with more intensive therapy; others are more appropriately treated for a longer period, with less intensity. West Lake's program is not full. There are myriad alternative programs for the treatment of children and adolescents in the tri-county area. Seagrave House, the Charlie Program and Boystown are residential programs for children and adolescents who may have received treatment in a hospital but who are not ready to return home and could progress further in a residential program. Mainstream, a partial hospitalization program, is also available to this age group. A partial hospitalization program provides structured daytime treatment with the same therapies offered in a hospital or full residential program, but the patients are able to return home at night. Other existing facilities and programs available in the service district include Parkside Lodge, the Care Unit, the Center for Drug-free Living, Glenbeigh Hospital and Rainbow. Laurel Oaks has referred patients to Rainbow, a residential treatment program for youths with substance abuse problems. La Amistad presented anecdotal testimony from its clinical and other staff regarding the numbers of patients they could refer to La Amistad if the application were approved. In no instance did these witnesses eliminate the other available programs as appropriate alternatives. Several other witnesses testified on behalf of LORTC regarding the need for additional long-term treatment programs for children and adolescents. It is clear, however, that these individuals from the Orange County Public Defender's office, the Orange County Public Schools and the Seminole County Mental Health Center were descrying the need for services for economically disadvantaged youths and those without insurance. Neither La Amistad nor LORTC propose to materially serve that population. Medicaid funds are not available to licensed speciality hospitals and both La Amistad and LORTC will serve patients referred and paid for by HRS, with or without an IRTP CON. The projected percentage of non-pay patient days in both applications is negligible. Any consideration of alternatives in this case must consider the alternatives of the applicants themselves. In both cases, the beds will be available with or without the CON, and the treatment programs are substantially the same with or without the CON. Denial of these applications will not decrease the potential supply of beds in District VII. Indeed, LORTC candidly argues that it is asking only that HRS assist in enhancing financing access to its beds, that CON approval and subsequent licensure will provide increased access to patients with insurance which will not reimburse non- hospital based care. LORTC, and to a lesser degree, La Amistad, insist that approval will positively impact access for privately insured patients. The weight of evidence does not support that basic contention in this case. PIA's non-hospital RTCs in Palm Beach and Manatee County claim to have a 60-70 percent commercial insurance pay or mix. LORTC projects only 67 percent commercially insured patients after its first year of operation. This does not represent an increase. According to its financial experts La Amistad is not projecting any increase in insurance reimbursement because of licensure as an IRTC. Two trends in insurance reimbursement practices were described at length in this proceeding. First, companies are willing to negotiate an "out-of- contract" reimbursement when a non-covered facility is able to show that its services are more appropriate and in the long term, more cost effective than the covered services for a particular patient. Second, insurance companies are carefully scrutinizing long term treatment reimbursement and are limiting coverage in expensive residential programs. Neither trend weighs in favor of approval of these applications. AVAILABILITY OF RESOURCES Nursing costs in health care institutions usually comprise more than 50 percent of the operating costs. It is the largest single budget item in a hospital or health care facility. Throughout the country and in District VII, there is a shortage of nurses and trained allied health personnel. Although Laurel Oaks Hospital is staffed, maintaining its staff of registered nurses is a day-to-day problem. West Lake also experiences difficulty in maintaining qualified staff. No doubt LORTC, with aggressive recruitment will initially attract the personnel it needs. Financial incentives will have to be provided and West Lake's problems will be exacerbated. The additional costs will be passed on to the consumer, thus perpetuating the upward inflation spiral of health care costs. FINANCIAL FEASIBILITY AND EFFECTS ON COMPETITION La Amistad states it intends to finance $450,000.00 of its $500,000.00 total project cost through bank loans, fund raising efforts and personal commitments from board members. Its pro forma, as corrected and updated at the hearing is reasonable, based upon the facility's actual experience in staffing and filling beds. However, the ability of the applicant itself to complete construction for the replacement beds is questionable in light of an admission at hearing by Walter Muller, M.D., the founder and Medical Director of La Amistad. Dr. Muller conceded that one of the reasons for the sale to Universal Health is to obtain adequate funds for the new building. (transcript pages 271-272). LORTC contends that no capital expenditure is relevant here as the facility is being constructed as a non-hospital RTC. For the transfer to IRTC status no additional expenses will be incurred. Regardless of the validity of that contention, the parties have stipulated that funds are available for capital and operating expenditures. LORTC's pro forma is reasonable based on the extensive experience of its parent company with similar facilities, the RTCs in Manatee County and Palm Beach County, and Laurel Oaks Hospital. That experience has not been tested in an area, where, as here, there are existing unfilled IRTPs. As provided in the discussion of need, above, LORTC cannot dismiss West Lake, Devereaux, La Amistad and other facilities offering similar programs. LORTC did not establish conclusively that it could maintain its projected utilization in the face of the potential draw of those other facilities. PIA has been highly successful in marketing its services in the past. If its success prevails and LORTC proves financially feasible, there is substantial evidence that it will be at the expense of West Lake, Devereaux, and the others. There is no evidence that LORTC or La Amistad evaluated the impact of their proposals on other service providers in the area. OTHER REVIEW CRITERIA, INCLUDING QUALIFY OF CARE Both applicants enjoy a reputation for providing good quality mental health services and there is no substantial evidence that this quality will deteriorate if the applications are approved. No competent evidence was presented regarding the failure of either applicant to meet the remaining relevant criteria.
Findings Of Fact 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 a certificate of need to construct a 60-bed short-term inpatient psychiatric hospital should be granted to CPC and whether a certificate of need to construct a 24-bed short-term inpatient psychiatric hospital should be granted to Apalachee?
Findings Of Fact Introduction. CPC. Community Psychiatric Centers, Inc., a proprietary corporation, was formed in 1968 by the merger of 2 existing psychiatric hospitals. It now consists of 24 psychiatric hospitals, two of which are located in Florida, and two subsidiary corporations. On December 16, 1983, CPC submitted to the Department an application for a certificate of need to construct and operate a 60-bed inpatient psychiatric hospital. The 60-beds are to consist of 15 beds for adolescents, 20 beds for adults in an open unit, 10 beds for adults in an intensive care unit and 15 beds for geriatric patients. Apalachee. Apalachee is a not-for-profit corporation. It began approximately 30 years ago as a small clinic. It was incorporated as the Leon County Mental Health Clinic in the 1960's and later changed its name to Apalachee Community Mental Health Services, Inc. Apalachee presently serves over 7,000 clients a year, has a $6,500,000.00 budget and 300 employees. It provides services to 8 north Florida counties: Gadsden, Liberty, Franklin, Leon, Wakulla, Madison, Jefferson and Taylor. Apalachee provides specialized continuums of care for substance abuse, children and geriatrics and basic generic services, including a 24-hour, 365 days-a-year emergency telephone and/or face-to-face evaluations. It also provides a full range of case management, day treatment and residential care primarily aimed at the acute and chronically mentally ill and specific programs for children, such as an adolescent day treatment program and an adolescent residential facility. Apalachee's residential programs include a program called Positive Alternatives to Hospitalization (hereinafter referred to as "PATH"). Apalachee also operates an 8-bed non-hospital medical detoxification program in conjunction with PATH. This program is operated in the same building as PATH. It also operates 3 group homes (an adult, an alcohol abuse and an adolescent half-way house) with 10 clients each (these houses will be expanded to 16 clients each), a geriatric residential facility with 60 to 70 beds and cater Oaks, a long-term residential treatment facility for adolescents. On November 15, 1983, Apalachee applied to the Department for a certificate of need for 24 short-term inpatient psychiatric beds. In its application filed during the final hearing of these cases, Apalachee proposed to construct a facility to house the 24-beds adjacent to its current "Eastside" facility. Its Eastside facility currently houses Emergency Services, PATH and its non-hospital medical detoxification programs. All adult mental health programs of Apalachee will also be located on the site in order to consolidate the full continuum of adult psychiatric care provided by Apalachee. Statutory Criteria. The following findings of fact are made as they pertain to the criteria included in Section 381.494(6)(c) and (d), Florida Statutes (1983), and Section 10-5.11(25), F.A.C. The Need for Psychiatric Services Florida State Health Plan and the District 2 Health Plan. General. The Florida State Health Plan is outdated and the District 2 Health Plan does not contain specific goals as to the need for short-term psychiatric care for District 2, the District the facilities would be constructed in. CPC and Apalachee did, however, address both plans, to the extent applicable, in their applications. The relationship of "need" to these plans, as agreed to by the Department, is not relevant to this proceeding, however. CPC also indicated that it evaluated local bed need by studying socioeconomic, population and employment data and by interviewing local practicing psychiatrists. CPC concluded that additional services were needed and filed its application. Although the Florida State Health Plan and the District 2 Health Plan do not address the question of need, need as determined under the Department's rules is crucial. Section 10-5.11(25), F.A.C., provides that a favorable need determination will "not normally" be given on applications for short-term psychiatric care facilities unless bed need exists under paragraph (25)(d). Under Section 10-5.11(25)(d)(3), F.A.C., bed need is to be determined 5 years into the future by subtracting the number of existing and approved beds in the District from the number of beds for the planning year based upon a ratio of .35 beds per 1,000 population projected for the planning year. The population projection is to be based on the latest mid-range projections published by the Bureau of Economic and Business Research at the University of Florida. The Department has projected a need for 185 total short-term psychiatric beds for District 2 for 1989. There are 82 currently licensed and 35 approved short-term psychiatric beds in District 2. Therefore, for 1989 there is a net short-term psychiatric bed need projected of 68 beds. Based upon the projected population of District 2 for 1990 (537, 567), which is 5 years from 1985, the total bed need is 188 beds. The net bed need for 1990 is 71 beds (188 total beds less 117 licensed and approved beds). The Department did not use this figure because the calculation for bed need for 1990 will not be made by the Department until July of 1985. Pursuant to Section 10-17.003, F.A.C., the total projected short-term psychiatric bed need for District 2 is allocated among 2 subdistricts. Subdistrict 2 consist of Franklin, Gadsden, Jefferson, Leon, Liberty, Madison, Taylor and Wakulla Counties. CPC's and Apalachee's proposed facility will be located in Subdistrict 2. Subdistrict 2 is the same area designated by CPC as its "primary" service area. This rule, which is to be "used in conjunction with Rule 10-5.11(25)(c)(d)(e)" allocates the 1988 short-term inpatient psychiatric and substance abuse projected bed need as follows: Subdistrict 1: 75 Subdistrict 2: 104 Total 179 Because the projected bed need for Subdistrict 2 under this rule is based upon 1988 projections, it is clearly in conflict with the requirement of Section 10-5.11(25)(d)(3), F.A.C., that bed need is to be projected 5 years into the future. The total bed need projected for the District for 1988 is 179 beds; for 1990, the total is 188 beds. Based upon the allocation of total bed need in Section 10- 17.003, F.A.C., the net bed need for Subdistrict 2 for 1988 is 44 beds: 104 total beds less 60 licensed and approved beds in Subdistrict 2. If it is assumed that the 9 additional total beds projected for 1990 should be allocated to Subdistrict 2, the net bed need for 1990 in Subdistrict 2 would be 53 beds (100 beds less 50 licensed and approved beds). No evidence was presented, however, to support the assumption that all 9 additional total beds will be allocated to Subdistrict 2. It is more likely that only 1 or 2 additional beds will be allocated to Subdistrict 2. Based upon the foregoing, the total net bed need for District 2 projected to 1990 is 71 beds and for Subdistrict 2 it is between 44 and 53 beds. CPC. CPC attempted at the hearing to show that its proposal is consistent with the bed need for District 2 as determined under Section 10-5.11(25)(d)(3), F.A.C. In the alternative, CPC has attempted to prove that there is a sufficient need in District 2 for additional short-term psychiatric beds based upon other methodologies and the state of psychiatric care currently being provided in Subdistrict 2. Sources of referral to the proposed CPC facility, according to Mr. John Mercer, will include physicians, the judiciary and legal system, the school system, employers and law enforcement. Referrals are inspected by Mr. Mercer based upon his conversations with physicians (Mr. Mercer did not interview persons from the other referral sources) , his personal experience and the fact that there will be a community relations or marketing position at the proposed facility. Local psychiatrists did testify that they would refer patients to CPC if its facility is approved. They did not, however, testify that they would refer all of their patients to CPC. They also testified that the CPC facility is needed. The local psychiatrists did not, however, indicate that they were aware of all of the facts as established during the proceeding. CPC, in its application, projected, based upon conversations with local physicians, that the facility will serve most of the area designated by the Department as District 2. District 2 is subdivided by CPC into a primary service area, consisting of Franklin, Gadsden, Jefferson, Leon, Liberty, Madison, Taylor and Wakulla Counties, and a secondary service area, consisting of Clay, Calhoun, Gulf and Jackson Counties in Florida and several counties located in extreme southwest Georgia. In Mr. Mercer's opinion, the proposed facility will serve persons from southwest Georgia; specifically, Brook, Decatur, Grady, Seminole and Thomas Counties. Mr. Mercer's opinion was based upon the availability of services in Georgia and conversations he had with Tallahassee physicians. Mr. Mercer's opinion, however, has been given little weight in determining the need for additional short-term psychiatric beds in District 2 based upon the testimony of Jay D. Cushman, an expert in health planning and development. Mr. Mercer's opinion that southwest Georgia residents will use the proposed CPC facility implies that there may be a need for additional short-term psychiatric beds. Mr. Mercer, however, failed to consider travel time and barriers to travel, patient origins or the effect, if any, of outmigration--the number of persons in District 2 who may leave the District for treatment outside the District. Although Mr. Mercer's conversations with local physicians are relevant and of some supportive weight, the local physicians' opinions should have been supported with other evidence. They were not. CPC, in its exhibit 3, projected a bed need of 14.67 beds attributable to southwest Georgia. This figure was arrived at by first assuming a bed need in the area of .35 beds per 1,000 population (119,051). This results in a gross bed need in southwest Georgia of 41.67 beds. From the gross number of beds, 27 existing beds were subtracted to arrive at a net bed need in District 2 attributable to southwest Georgia residents of 14.67 beds. No evidence supporting a conclusion that such a bed need exists in District 2 was presented at the hearing other than Mr. Mercer's opinion that the proposed facility will serve residents from southwest Georgia. It is therefore concluded that there is not a need for 14.67 beds in District 2 attributable to southwest Georgia residents. In its application, CPC projected a need for an additional 195 short- term psychiatric inpatient beds for District 2. This figure was based upon an average of bed need projected by using three different bed need methodologies. The three different methods resulted in a projected bed need of 64 beds, 266 beds and 255 beds. Application of the method which resulted in a bed need of 266 was modified during the hearing. The modification resulted in a bed need of 75.8 beds. Therefore, the bed need based upon the average of all 3 methodologies, as amended would be 131.6 beds. The three methods used by CPC in its application are different than the method used by the Department. None of the methods, based upon Mr. Cushman's testimony, are sound; they are structurally unsound, applied in an unsound manner or both. Under Method I, CPC starts with a projected short-term psychiatric bed need of 1988 of 44 beds, the net bed need as determined in Section 10-17.003, F.A.C. This figure is then increased by 9.44 beds for in-migration and 11 beds attributable to an adjustment for "desired occupancy level." As clearly established by Mr. Cushman's testimony, neither of the adjustments are sound. The projected bed need of 64 beds for 1988 pursuant to method I is therefore not a reliable figure. Pursuant to Method II, as modified during the hearing, CPC projected a bed need of 75.8 beds. Method III resulted in a projected net bed need of 255 beds. These projections are based upon a projected average length of stay of 30 days. No evidence was presented to support this projection; in fact, it is unrealistic when compared with the average length of stay of 16 days at similar facilities in Florida. CPC's Florida facilities have also not been able to achieve an average length of stay of 30 days. These formulas are also unrealistic because population figures used were for all of District 2. But existing beds taken into account only included the beds in Subdistrict 2. Finally, occupancy was not taken into account in either of the methods. CPC's Methods II and III are not sound, based upon the foregoing. Apalachee. Apalachee's application is for only 24 inpatient psychiatric beds, which is well below the bed need projected under the Department's methodologies for the District and the Subdistrict. Apalachee has projected that its proposed facilities will serve persons in the 8 counties it currently serves. These counties are the same counties which make up Subdistrict 2. Apalachee has not assumed that any patients will come from outside of the Subdistrict. Apalachee has shown that the patients who will use its facility are clients within its own present system, based upon historical data. This historical data establishes that an average of 10 to 12 Baker Act patients have been admitted to Tallahassee Memorial's psychiatric facility during past years. These persons would be admitted to Apalachee's new facility. Additional patients would consist of Apalachee clients which Tallahassee Memorial's facility will not admit and clients currently going into other Apalachee programs. Accessibility to Underserved Groups. CPC is willing to provide care for Baker Act patients. It has been projected that 5 percent of the proposed facility's patient days will be attributable to Baker Act patients. CPC is also willing to treat Medicaid patients and has again projected that 5 percent of the facility's days will be attributable to Medicaid patients. In addition, CPC has projected that 5 percent of its gross revenue will be set aside for the care of indigent patients which consist of those persons who are unable, at the time of admission, to pay all or a part of the charges attributable to their care. Indigent care may not be provided, however, if the facility is losing money. The provision of indigent care is based upon a CPC policy which was recently agreed upon and applies to new CPC facilities. The policy does not apply at the two existing CPC Florida psychiatric hospitals since they were established before the policy was adopted. Pursuant to the Florida Mental Health Act, Chapter 394, Part II, Florida Statutes, the Department's district administrator designates a facility in the district as the public receiving facility for Baker Act patients. In Subdistrict 2 of District 2, Apalachee has been designated as the public receiving facility. Apalachee is therefore responsible for ensuring that emergency care, temporary detention for diagnosis and evaluation and community inpatient care is available to Baker Act clients. As the public receiving facility in Subdistrict 2, Apalachee will clearly serve Baker Act patients. It has projected that in the first year of operation 40 percent (39.7 percent in the second year) of its patients at the new facility will be indigent and that the indigent patients will be primarily Baker Act patients. Seventy percent of Apalachee's clients are persons who need some type of financial assistance; Medicare, Medicaid and Baker Act. Apalachee has proposed to continue to serve these persons in the new facility. Apalachee's purpose in requesting a certificate of need is to allow Apalachee to provide a continuum of care for more Apalachee clients. In the past, Apalachee has experienced difficulty in obtaining inpatient care for certain Baker Act clients. Additionally, even though those problems have been minimal in the past year, there are some Baker Act clients who need inpatient care who are not appropriate patients for Tallahassee Memorial's psychiatric hospital. These patients are sometimes violent and "acting out." Although Tallahassee Memorial is providing adequate care for most Baker Act patients, some Baker Act patients are not admitted. Additionally, removal of Baker Act patients who are admitted by Tallahassee Memorial from Tallahassee Memorial's facility, as discussed infra, will improve the quality of care at Tallahassee Memorial. The cost of providing inpatient care to Baker Act patients will be less if Apalachee is granted a certificate of need for the requested 24 beds. At present, because of limited Baker Act funds, some Baker Act clients who need inpatient care are placed in other programs. With reduced cost for inpatient care, these clients will be able to receive the inpatient care they need. Additionally, Apalachee will serve forensic clients -- those mental health clients with criminal charges. A full-time forensic psychologist has been provided by Apalachee at the Leon County jail to facilitate this type service. The psychologist also evaluates for Baker Act qualification. According to the Director of the Leon County jail, persons in the jail with psychiatric problems are placed in a single "bull pen." Apalachee's work with forensics has been helpful. Like and Existing Psychiatric Services. The only "like and existing" psychiatric health care services in Subdistrict 2 are provided by Tallahassee Memorial. Tallahassee Memorial is a not-for-profit corporation. It currently owns an existing 60-bed short-term inpatient psychiatric facility located in Subdistrict 2. The facility is operated as a separate department of Tallahassee Memorial. Tallahassee Memorial's psychiatric facility has been continuously operated by or for Tallahassee Memorial since 1979. It was initially known as Goodwood Manor. In 1983, however, the management of the facility was taken over by, and its name was changed to, Behavioral Medical Care (Tallahassee Memorial's facility will be hereinafter referred to as "BMC"). From 1977 to 1979, the facility was owned and operated by Tallahassee Psychiatric Center, Inc., which failed for financial reasons. Prior to 1977 Tallahassee Memorial operated a small psychiatric unit as pert of its hospital. The occupancy rate at BMC for the 12-month period ending September, 1984, was 37 percent. The occupancy rate since 1979 has been consistently low and is low at the present time. There are a number of reasons for the low occupancy rate: a) The physical location and physical plant of BMC. BMC is located in a 2-story building near Tallahassee Memorial. BMC occupies the top floor of the building and a nursing home is located on the first floor. In order to get to BMC, it is necessary to travel through the nursing home. Also, the building is surrounded by a parking lot so there is inadequate outdoor and recreational space around the facility. The facility, which was originally designed as a nursing home, presently consists of one closed unit and one open unit. Patients of all ages and with various problems have to be housed in these 2 units together. Because of the physical plant, patients cannot be separated into adult, adolescent and geriatric units. There also is not enough space for therapy rooms and common areas. b) The reputation of the facility. The reputation in the community of Goodwood Manor has carried over to BMC. The facility is perceived by some as a "crazies place," a place "where violent people go." This reputation is partly attributable to the lack of credibility that psychiatry as a discipline enjoys. It is also partly attributable to the operation of BMC as Goodwood Manor prior to 1982 when Behavioral Medical Care took over management of BMC. c) The type of programs offered. To date, no program has been separately offered and provided or adolescents, children, substance, alcohol and drug abuse patients, or geriatrics. Basically only one structured program has been provided which has been more suited to adult psychotic patients. Closely related to this problem is the fact that BMC has had a poor patient mix. This has been caused in part by the physical plant and in part by the type of patients BMC has had to take in. Some of those patients have been suffering from problems other than psychiatric problems, i.e., persons suffering from DT's, which is a medical disorder, and persons suffering from organic problems which cause behavioral difficulties. d) Marketing. There has been a lack of an effort to market the availability of the facility. e) Training. The programs offered are not as advanced because of the lack of necessary training. f) Practice patterns. Practice patterns of psychiatrists in the community have contributed to the low occupancy. Because there are only a few psychiatrists in the area and the fact that the Tallahassee Memorial facility has primarily been involved in crisis intervention, the average length of stay (6 to 7 days) is much lower than the average length of stay in other parts of the country. This average length of stay has also, however, been caused by the shortage of Baker Act funds. Closely related to this problem is the fact that there are a large number of nonphysicians providing mental health services in Tallahassee who do not admit patients to the hospital and a large number of health maintenance organizations. g) Communication. The low occupancy rate has also been caused, at least in the minds of Drs. Speer, Sebastian and Moore, by the lack of solicitation of their input into the operation of the facility. At least partly because of the problems at BMC, a few patients have been referred to facilities outside of District 2 for care. Tallahassee Memorial has committed itself to eliminating the low occupancy rate at BMC. In 1982, the administration of Tallahassee Memorial felt it had to decide whether it was going to make a commitment to the facility or get out of psychiatric care. It opted for the former. After making the commitment, 2 primary actions were taken. One was to contract for the services of Behavioral Medical Care; the other was to apply for a certificate of need to replace its 60-bed facility with a new one. Behavioral Medical Care is a joint venture formed by 2 corporations, Comprehensive Health Corporation and Voluntary Health Enterprises. Comprehensive Health Corporation is the largest private provider of chemical dependency rehabilitation services in the country. Voluntary Health Enterprises is an affiliate of Voluntary Hospitals of America which services 70 of the nation's largest not-for-profit hospitals, including Tallahassee Memorial. Behavioral Medical Care was formed to provide the highest quality, lowest cost psychiatric and chemical dependency rehabilitation programs possible. Behavioral Medical Care provides consultation services and/or actually carries out programs and is now providing 20 different programs at 16 different facilities. Of these 20 programs, 5 to 8 are psychiatric programs. The first consultation concerning the psychiatric program at Tallahassee Memorial began in the late winter or early spring of 1983. This consultation was provided by Dr. Russell J. Ricci, now chairman of the board and medical director of Behavioral Medical Care. Dr. Ricci reviewed the status of Tallahassee Memorial's program at that time and recommended significant changes be made in 2 phases: one phase to begin immediately and the second to begin after construction of a new psychiatric hospital. Tallahassee Memorial agreed with Dr. Ricci's proposal and contracted with Behavioral Medical Care to carry out the proposal. Behavioral Medical Care began BMC with an orientation period during which time the existing staff was analyzed, new staff members were hired and the entire staff was trained to implement the new program. During this period, admitting physicians were invited to participate in the implementation program. A new inpatient psychiatric program at BMC was then begun. The program was established to achieve the following goals: to restore patients to their optimum mental health; to make patients as comfortable as possible; to maintain the patients' sense of dignity and self worth; to maintain modern and efficient treatment modalities through research and education; to provide maximum freedom of patients to interact with family and community; and to educate the community. The program was established along interdisciplinary lines and is basically an adult program. It includes individual and group therapy, lectures and seminars, social and nursing assessments, physical examination and psychological testing. The ultimate program provided for a patient, however, depends upon the treatment plan prescribed by the attending physician. The program is, however, limited because of the type of patients at BMC and especially because of the physical plant, which consists of only an open unit and a locked unit. Separation of patients for specialized treatment based upon other factors, such as age, is not achievable in the existing facility. The program at BMC is an adequate program but can be improved. The program is, however, intended only as an interim type program. Treatment of geriatrics and adolescents is available but specialized programs for these groups are not available. Dr. Sebastian agreed that since Behavioral Medical Care had begun managing BMC, the programs had improved. Dr. Moore testified that BMC had attempted to change. As part of the interim program, BMC has established more restrictive admission guidelines; not based upon ability to pay but upon clinical needs. Attempts have been made to eliminate psychotics, geriatrics and persons with significant medical problems. These restrictions on admission are designed to limit admission to persons who will benefit from the new program and are consistent with the existing physical plant. The existing staff, established by Behavioral Medical Care, is adequate. Training of the staff began during the orientation period at BMC and continues today. Educational activities have also been directed toward the medical profession in the community in order to gain more credibility for the discipline of psychiatry. Other steps to improve BMC which have been or will soon be taken include the reclassification of BMC as a department of Tallahassee Memorial and the initiation of a crisis intervention and liaison service in the emergency room of Tallahassee Memorial's main hospital. This new service in the emergency room is designed to identify persons being admitted to the hospital with a need for psychiatric services. As a department, BMC conducts formal monthly meetings of physicians at which input into the operation of BMC may be made. Input by psychiatrists is therefore possible at BMC. The second phase of the changes recommended by Dr. Ricci will begin after completion of the second action to be taken by Tallahassee Memorial as part of its commitment to a psychiatric program: the construction of a new 60- bed facility. Tallahassee Memorial filed an application to replace its present facility with a new 64-bed facility. That application was ultimately granted but for only 60 beds. An application to build another facility considered at the same time was denied. As a result of the issuance of the certificate of need to Tallahassee Memorial, construction of a new psychiatric facility has begun and should be completed in the summer of 1985. The total cost of this new facility is $7,225,000.00. This amount, plus the cost of new programs and staff, has been committed by Tallahassee Memorial to BMC. The facility, a two-level structure, is being constructed on a wooded, sloping site next to the present building BMC is located in. Each level will have 30 beds. It will be a state-of-the-art facility and was designed by architects who specialize in the design of psychiatric facilities. The building was designed with input from the medical staff and Behavioral Medical Care. It is being constructed to accommodate separate psychiatric programs and allows flexibility to accommodate changes in the type of programs offered. Once the new facility is completed, BMC will initiate the second phase of Dr. Ricci's proposal. This phase will consist of the implementation of separate specialized psychiatric programs not available at BMC today. Dr. Ricci has recommended the offering of adult, adolescent, geriatric and chemical dependency programs. Tallahassee Memorial has decided to add an adult program, an adolescent program and will probably add a geriatric program. Other programs, such as a chemical dependency program will be considered. The geriatric program will be added if there are a sufficient number of patients in need of such a program admitted to BMC. Based upon the testimony of Dr. Sebastian, there are a sufficient number of patients who need a geriatric program. Assuming that Dr. Sebastian is correct, a geriatric program should be added to BMC. Even if a separate program is not added, geriatric psychiatric services will be available at the new facility. The construction of the new facility will not eliminate all of the problems which have contributed to the low occupancy at BMC. Phase 2 of Dr. Ricci's proposal to Tallahassee Memorial and the other actions which Tallahassee Memorial has indicated they plan to take should, however, eliminate or at least reduce most of the problems. Dr. Sebastian testified that there will not be enough open space around the new facility The new facility will, however, have 2 open court yards, woods on 3 sides of the building and a greenhouse. The reputation of BMC as being a "crazies place" should be improved with the opening of the new facility and the providing of new, more advanced programs. Efforts to educate the medical community will also help. Also, if Apalachee is granted its certificate of need, the elimination of some of the Baker Act patients cared for by BMC who will be cared for by Apalachee should help improve the reputation of BMC. Finally, BMC has already taken some steps to improve its reputation by initiating an interim program, hiring new staff and limiting its admissions. Instituting specialized programs will also help alleviate the low occupancy problem at BMC. The new facility will allow BMC to establish programs which are needed by allowing the separation of patients which could not be accomplished in the existing facility. Again, eliminating some Baker Act patients will help reduce the problems created by the poor patient mix at BMC. Efforts are being made to market BMC's services. Establishing a liaison in Tallahassee Memorial's emergency room, which is planned, should contribute to increasing occupancy. Tallahassee Memorial projected that sizeable numbers of patients in the general hospital need psychiatric services. This program could reach those patients. BMC, however, needs to institute marketing efforts to reach the general public. Formal training of the staff at BMC was started with Behavioral Medical Care's orientation phase and has continued since that time. Not much can be done directly by BMC to improve the practice patterns of psychiatrists in the community. The new facility and improved programs may help. Transfering Baker Act patients to a new facility operated by Apalachee should allow for more economical treatment of those patients and thus allow for longer lengths of stay. Providing specialized programs also should promote longer lengths of stay. Converting BMC to department status and the holding of monthly meetings of admitting physicians has improved the ability of psychiatrists in the community to have a voice in the operation of BMC. Not enough of an effort is being made in this area, however. Three psychiatrists testified about the lack of solicitation of their input. They are obviously dissatisfied. Despite this fact, Dr. Brodsky, the Medical Director of BMC, testified that BMC was working cooperatively with psychiatrists in the community. In the undersigned's opinion, BMC, Tallahassee Memorial and the psychiatrists in the community need to continue to work toward resolving their differences and to work together to improve the occupancy and the psychiatric care provided at BMC. The perceived effect of CPC's proposal and Apalachee's proposal of the various witnesses was mixed. Drs. Speer, Sebastian and Moore all testified that they supported the CPC proposal. Dr. Speer indicated that she supported CPC's proposal over that of Apalachee and that she thought there was a need for CPC. Dr. Speer's opinion was based almost exclusively on a brochure provided to her by CPC. She did not have any familiarity with existing CPC hospitals. She also had only "some familiarity" with Apalachee's programs. The only reason Dr. Speer specifically gave for supporting CPC was the amount of effort CPC had exerted to solicit physician input and the need for cohesiveness among psychiatrists which she felt was promoted by support of the CPC proposal. Dr. Sebastian testified that he supported the CPC proposal because a new hospital would promote competition which would in turn improve the quality of care. Dr. Moore testified that he was familiar with CPC's and Apalachee's proposals and that he supported CPC's. He also stated that the addition of another psychiatric hospital would improve the availability of medical care because of competition. Dr. Moore also testified that a new facility was needed to provide care for the "private segment" which he described as "those people who choose not to go to the local mental health center for treatment, those people who choose to go to psychiatrists for treatment. " Dr. Brodsky testified that the addition of a new facility to the community might improve BMC because of the added competition. Mr. Honaman and Dr. Ricci both agreed that, if CPC's proposal was approved, a new facility could have an adverse impact on BMC which has been operating at a loss of $300,000.00 a year. Dr. Ricci explained that in order to have specialized programs a hospital must have a sufficient number of patients who need the specialized program. Because of the low occupancy rate at BMC, there is concern as to whether a sufficient number of patients will be available to warrant the specialized programs BMC plans to start if the CPC proposal is approved. Apalachee's proposal will not adversely effect BMC. In fact, Mr. Honaman and Ms. Pamela McDowell, both of whom testified on behalf of Tallahassee Memorial, indicated that if Apalachee's facility was approved BMC's ability to provide quality care would be enhanced. Tom Porter, testifying on behalf on the Department, indicated that CPC's and Apalachee's proposals should both be denied because of the low occupancy at BMC and the adverse effect approval of either proposal would have on BMC. Mr. Porter's opinion, however, was based only upon his review of the Petitioners' applications. Mr. Porter made no independent studies as to the impact of the proposals on BMC and was not aware of most of the evidence presented at the hearing. The Ability of the Applicant to Provide Quality of Care. CPC. The services to be available at or provided by the proposed CPC facility include psycho-physiological diagnosis and evaluation, emergency service, milieu therapy (immersion into the clinical environment for structured daily treatment), individual and group therapy, family therapy, occupational therapy, an adolescent school program, a partial hospitalization program, aftercare, community education and related medical services (which will be provided by contracting with other area health care providers). Actual programs to be provided at the facility are to be developed by the physicians who join the medical staff of the facility with the assistance of CPC which has developed model programs which may be used. The staffing projections for the facility are adequate. The manpower projected can provide quality of care and will comply with the standards of the Joint Commission on Accreditation of Hospitals. CPC's experience in operating its 24 existing psychiatric facilities and its philosophy that it will provide quality of care support a finding that CPC does have the ability to provide quality of care. 1/ CPC's proposed physical facility is designed to provide quality of care. The facility will be located in northeast Tallahassee. It will be constructed on a little less than one acre of a 10-acre parcel of land which CPC has a contract to purchase for $400,000.00. Part of the remaining 9-plus acres will be used for parking and recreational space and a substantial portion will be left in its natural state as a buffer. The hospital building itself will consist of a one-story structure with a separate section for each category of proposed beds, a lobby, business and general offices and storage rooms. One section will be used as a 20-bed open adult unit. Another section will be used as a 10-bed adult intensive care unit. This section will be locked. A nursing station will separate the adult intensive care unit and the open adult unit and is designed for visibility down the halls of both units. Two seclusion rooms will be located at the nursing station also to allow for observation from the nursing station. The location of the nursing station will reduce staff responsibility thus reducing the cost of operating the facility. The other two units will consist of a 15-bed adolescent open unit and a 15-bed geriatric unit. These units will be separated by a nursing station designed in the same manner as the nursing station separating the adult units. These units will also be separated by a locked door. There will also be a support structure built next to the hospital which will contain a kitchen, dining hall for all patients, 4 classrooms, 4 multi-purpose rooms, an occupational therapy room and a half-court gymnasium. There is no covered access from the main building to the support structure. The floor plan for the facility is similar to the floor plans used for other CPC hospitals. Therefore, the design costs of the facility will be less than for a new one-of-a-kind facility. Apalachee. In order to ensure quality of care, Apalachee has established a Quality Assurance Committee. Additionally, Apalachee is inspected by the Department and is accredited by the Joint Committee on Accreditation of Hospitals. No evidence was submitted which raises any question as to Apalachee's ability to provide quality of care. The existing building to which Apalachee's proposed facility will be added is located at Apalachee's Eastside facility. Eastside is located on 10 acres of land in northeast Tallahassee. Eastside presently consists of a building in which PATH, the detoxification program and emergency services is located. The building has 12 semi-private rooms and 24 beds. The new facility will be added to the existing building. A total of 13,000 square feet will be added. It will consist of an 18-bed open unit and a 6-bed closed unit. Also to be located at the Eastside facility is a 16-bed long-term adolescent psychiatric hospital which the Department has indicated it will approve. If this facility and the proposed 24-bed facility are built, Apalachee will have a total of 96 beds providing a variety of services. The Availability and Adequacy of Other Psychiatric Services. Apalachee currently provides a wide range of psychiatric health services in Subdistrict 2, including a crisis stabilization unit and short-term residential treatment programs. These services have been used as an alternative to inpatient care in some cases. CPC gave no consideration to these programs in its application. Apalachee did consider these programs and showed that its proposal would compliment its existing programs. As suggested by CPC in its proposed recommended order, Apalachee's existing programs are not a substitute for acute inpatient psychiatric services. Joint, Cooperative and Shared Psychiatric Services. CPC. CPC's operation of 24 psychiatric hospitals provides the potential for joint, cooperative or shared health resources in the operation of its proposed facility. Very little evidence was presented, however, that such potential would be realized if CPC's proposed facility is approved. Evidence was presented that model programs will be "available" for use in developing programs for the proposed facility. CPC also showed that standardized equipment selection and purchasing, and standardized floor plans would be used in establishing the facility. This will effect the short-term financial feasibility of the proposal. Apalachee. By placing the facility at the same location of other Apalachee programs, Apalachee will be able to share some services among programs and thereby reduce costs. For example, kitchen and dining services, staffing, security, purchasing, and maintenance and administrative services will be shared. The integration of Apalachee's existing programs with the proposed facility will promote a continuum of care and thus improve the quality of care. The Need for Research and Education Facilities. 106. Apalachee currently provides training to practitioners pursuant to an agreement with the School of Social Welfare at Florida State University. It also provides internship programs for psychology majors at Florida State University and nursing students at Florida State University and Florida A&M University. It is probable, therefore, that the new facility will be available for training purposes. No proof was offered, however, that indicates there is a need for training programs not being currently met which will be met if either of the proposed facilities is approved. Availability of Resources. 107. Health manpower and management personnel are available to staff the CPC or the Apalachee proposal. CPC and Apalachee also have adequate funds to build the proposed facilities. The adequacy of funds to build and operate the facilities is discussed further, infra. The Immediate and Long-Term Financial Feasibility of the Proposal. CPC. The projected cost of CPC's facility was $5,086,000.00. This amount will be increased for inflation if the facility is delayed another year. CPC will contribute 20 percent of the projected cost of the facility in the form of cash and liquid assets CPC has on hand. Eighty percent of the projected cost will constitute debt of the facility to CPC payable at a 12 percent interest rate over a 20-year period. The immediate financial feasibility of CPC's proposal has clearly been shown. In its application, CPC projected that its facility would generate a net income after taxes in each of the first 2 years of its operation. In its proforma, patient revenues were based upon the following charges per patient day: Adolescent $225.00 Adult, I.C.U. 215.00 Adult Open Unit 210.00 Geriatric 200.00 These projected rates were based upon a 1985 opening date. The rates will therefore be higher if the facility opens in 1987, but, according to Mr. Mercer, the bottom line profitability of the facility will not change. The projected rates, according to Mr. Mercer, are based upon rates charged at other CPC hospitals in Atlanta, New Orleans, Jacksonville and Ft. Lauderdale and interviews with Tallahassee physicians. According to Alton Scott, an expert in health care finance and financial feasibility, the proposed rates are considerably lower than the average rate at CPC's Jacksonville and Ft. Lauderdale hospitals, which was $240.00 for their fiscal year ending in 1984. Mr. Scott did not indicate that he considered the rate at CPC's Atlanta or New Orleans facility, however, which Mr. Mercer also considered in projecting rates for the proposed facility. Mr. Scott's testimony, however, raises a question as to the reasonableness of the proposed facility's rates. CPC's projected gross patient revenue is based upon an occupancy rate of 53 percent in the first year of operation and 75 percent in the second year. CPC projects $2,476,160.00 of gross patient revenue in the first year (an average $212.00 per day rate x 11,680 patient days) and $3,597,075.00 of gross patient revenue in the second year (an average $219.00 per day rate x 16,425 patient days). CPC's average occupancy rates are directly related to the number of admissions and the average length of stay of a patient. In support of the number of admissions projected by CPC, CPC offered the 3 need methodologies discussed, supra. Those methodologies have, however, been rejected as unsound. CPC's admission rates are based only on an assumed census. The assumed census is based upon conversations with physicians and the corporate experience of CPC. Although conversations with physicians and the corporate experience of CPC should be considered, these factors should be considered as support for other evidence as to possible admissions which has not been presented by CPC. What physicians have told Mr. Mercer is not alone sufficient to support assumed admissions. There is no guarantee that local physicians will refer clients only to CPC's facility or that their case load will remain the same. CPC's corporate experience as to length of stay does not add much support since the overall corporate experience of CPC's facilities for the year ending November 20, 1983, shows that the overall occupancy (excluding its Valley Vista facility) was 56.3 percent. This rate of occupancy is well below CPC's projected second year occupancy rate for the Tallahassee facility. The occupancy rate of CPC's Ft. Lauderdale and Jacksonville hospitals was 50.6 percent and 60 percent respectively, which is low for the State. Of all of CPC's psychiatric hospitals only 1 has an occupancy rate over 80 percent. Another problem with CPC's projected occupancy rate is that CPC has projected that 5 percent of its patient days will be attributable to Baker Act patients and 5 percent will be attributable to Medicaid Patients. In order for the proposed facility to receive Baker Act patients it will be necessary that it enter into a contract with Apalachee. No evidence was presented that such a contract could be obtained from Apalachee. As to the percentage of Medicaid patients, it is clear that CPC would not be entitled to receive reimbursement from Medicaid for these patients since its facility will be a free-standing facility and Medicaid does not reimburse for inpatient psychiatric services at free-standing hospitals. Based upon these facts, it appears that the assumption of CPC that a total of 10 percent of its patient days will be attributable to Baker Act and Medicaid patients is of questionable validity. Mr. Mercer's testimony that, even without the Baker Act and Medicaid patients, the projected occupancy could be met is illogical. If the projected revenue attributable to Baker Act and Medicaid patients is eliminated along with the projected expenses attributable thereto, CPC still projected a net after tax profit for its first two years of operation. CPC offered no evidence, however, sufficient to conclude that its projections as to occupancy of other types of patients can be achieved. CPC's projected average length of stay of 30 days is also suspect. It is not consistent with the average length of stay locally, in Florida, nationwide or in CPC's experience. Based upon the foregoing, CPC's projected occupancy levels are not realistic. This directly effects the projected revenues for the proposed facility. Salary and other expenses projected for the facility are also questionable. Nonsalary expenses are significantly lower than CPC's existing Florida facilities which are the lowest in Florida. Salary expenses, projected 2 years in the future, are also lower than present salary levels at CPC's Florida facilities. Again, the salary levels at CPC's 2 Florida hospitals are among the lowest for the 10 Florida facilities providing similar services. These low salaries are also based upon projections for a project which will not open for 2 more years. Despite this fact, they are lower than current salaries at CPC's existing Florida facilities and salaries being paid locally. Apalachee. The projected cost of the addition of the 24-bed facility to Apalachee's existing PATH and detoxification facility is $1,114,339.00. Apalachee will provide $114,339.00 of the necessary funds from its operating fund and the remaining $1,000,000.00 will be obtained from the sale of industrial revenue bonds. The bonds will be 15-year bonds, with a 7 year balloon and were projected at a 10.75 percent annual interest rate (75 percent of the Chase Manhattan Bank prime interest rate). First National Bank has committed to purchase $3,000,000.00 of industrial revenue bonds, which includes the $1,000,000.00 for this project. The immediate financial feasibility of Apalachee's proposal has clearly been shown. In projecting its gross charges for the first 2 years of operation, Apalachee has predicted an occupancy rate of 62.5 percent in the first month of operation increasing to 87.4 percent in the last month of operation of the second year. Gross charges are projected at $1,557,940.00 the first year (6,385 patient days x $244.00 per day rate) and $1,883,648.00 the second year (7,358 patient days x $256.00 per day rate). Apalachee' s projections are reasonable. Although it will be a free-standing psychiatric facility, Apalachee will be able to receive some Medicaid funding under the Department's "centers and clinics" option. Apalachee's projections as to gross charges, deductions from gross charges, and operating expenses are reasonable. Based upon its projections, Apalachee will realize a profit from the new facility in each of its first 2 years of operation. Competition. CPC. The addition of CPC's facility will promote competition in Subdistrict 2, as testified to by Dr. Brodsky, the Medical Director of BMC, among others. Because of the low occupancy at BMC, however, such competition at this time would be harmful. Apalachee. Apalachee's proposed facility will not compete with BMC. Although Apalachee's facility will initially reduce BMC's occupancy, removing the patients Apalachee will serve from BMC will improve the quality of care provided at BMC. Construction. CPC Construction and related costs of the CPC facility will consist of the following: Parking $27,500.00 Project development costs 22,000.00 Architectural/engineering fees 135,000.00 Site survey and soil investigation report 25,000.00 Construction supervision 10,000.00 Construction manager 4,000.00 Site preparation 100,000.00 Construction 3,000,000.00 Contingency 100,000.00 Inflation 270,000.00 These costs are all adequate to cover the cost of these items. These amounts will also be adequate even if construction does not begin until the end of 1985. The projected cost of equipment and furnishings was $500,000.00. This amount is adequate to equip the facility properly. In fact, the projected cost is probably substantially overstated. 2/ Although CPC failed to list in its application all of the equipment and furnishings (only major movable equipment was listed) necessary to equip the facility, adequate equipment and furnishings will be provided. Apalachee. The projected cost of constructing Apalachee's facility consists of the following: Architectural/engineering fees Site survey and soil investigation $75,740.00 report 2,000.00 Construction 876,620.00 Contingency 43,831.00 Inflation 26,298.00 These amounts are sufficient to construct the facility. The cost per square foot of the construction will be $60.00. The cost of equipment needed to equip the new facility is projected at $53,850.00. This amount is adequate for the purchase of the equipment listed in Apalachee's application.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the certificate of need application filed by CPC, case number 84-1614, be denied. It is further RECOMMENDED: That the certificate of need application, as amended, filed by Apalachee, case number 84-1820, be approved. DONE and ENTERED this 10th day of April, 1985, in Tallahassee, Florida. LARRY J. SARTIN 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 10th day of April, 1985.
Findings Of Fact The Parties FRTC is a wholly-owned subsidiary of Charter Medical Corporation which proposes to construct and operate a 60 bed intensive residential treatment program (IRTP) in Bradenton, Florida, which is located in the Department's District VI. The Department is the state agency with the authority and responsibility to consider CON applications. Manatee Palms is an existing residential treatment center in Manatee County, Florida which opened in January, 1987 and is currently operating without a CON. It provides services similar or identical to those proposed by FRTC. Manatee Palms was developed by, and is a subsidiary of, Psychiatric Institutes of America. Its primary service area extends beyond District VI from Orlando to Naples. Manatee Palms is a sixty bed facility providing psychiatric, substance abuse and educational services for juveniles up to 18 years of age, and is licensed by the Department as a child caring facility, as a provider of services to the Department, and for subspecialties involving drug and alcohol programs. It is accredited by the Joint Commission on Accreditation of Hospitals as a residential treatment center. The average length of stay for patients is six months. Occupancy rates have been consistently above projections and have been as high as 97 percent in May, 1987. Manatee Memorial is a full-service acute care hospital and an existing provider of short-term psychiatric services in Bradenton, Florida, with 25 licensed short-term psychiatric beds, nine of which comprise a children's and adolescent unit. It is the Manatee County contract provider of in-patient psychiatric services to the medically indigent, and provides approximately 91 percent of the indigent care in Manatee County. Manatee Memorial does not have, and has never sought, a CON as an IRTP, but does have earlier-batched applications pending for additional short and long term psychiatric beds. Its average length of stay is 35-40 days, and its utilization rate is approaching 100 percent. Manatee Memorial provides services similar or identical to those proposed by FRTC, and its program also utilizes a "levels system" similar to that used by FRTC. The Application and Project On September 15, 1986 FRTC filed a Letter of Intent notifying the Department of its intent to file a CON application for an IRTP for children and adolescents in Bradenton, Florida. On October 14, 1986 FRTC filed CON application number 4825 to obtain specialty hospital licensure as an IRTP. This application was initially approved by the Department on March 10, 1987, after the filing of a completeness response on or about December 23, 1986 at the request of the Department. Manatee Palms and Manatee Memorial timely filed petitions for formal administrative hearings challenging the Department's intent to issue the CON. The project at issue in this case is a 60 bed IRTP situated on a 9.35 acre site. The proposed building will have total gross square footage of approximately 32,000 and has been adapted from a prototype short-term psychiatric hospital design which has been used in approximately 50 locations. The floor plan submitted by FRTC provides for 28 semi-private rooms, three of which are designed to accommodate the handicapped, and one 4- bed assessment unit. Additionally, reasonable and sufficient space is provided for five classrooms, occupational therapy, a gymnasium, three group rooms, three day rooms, a seclusion area, three consult rooms, laundry and storage rooms, a nurses' station, dining room, and an administrative wing. A parking area, multi-purpose court, pool, activities field and drainage retention area are also provided. The parties have stipulated that the building will be energy efficient. Total project cost is reasonably estimated at $4,303,020. As a result of design modifications, the square footage of the project has increased by approximately 1,000 gross square feet and project costs have increased by approximately $69,000 from FRTC's completed application. The Department's Deputy Assistant Secretary for Regulation and Health Facilities, John Griffin, testified that for a project of this size these changes are not considered to be "amendments" to the application. The changes in facility design identified at hearing represent refinements and permissible modifications, rather than application amendments. There is no architectural significance to the changes. Rather, they make the design more appropriate for an IRTP. Specifically, a multi-purpose area was converted to a half-court gymnasium, the occupational therapy and interior mechanical spaces were slightly increased for more storage area, a seclusion room was deleted, the nurses' station was reduced, a 4-bed assessment unit was added, and other minor changes were made. FRTC proposes to offer 24-hour psychiatric services to children and adolescents under the age of 18, who are severely emotionally disturbed, and who are admitted voluntarily, after screening, with a history of prior treatment. Its program elements will include occupational therapy, recreational therapy, group and individual therapy, nursing care, an educational component, psychological testing, counseling and family therapy. The FRTC program will be initiated as a locked intensive program whose goal is to return the patient to his family and to life in a natural setting. Patients who are severely retarded, autistic, or with an active diagnosis of substance abuse will not be admitted. The average length of stay for patients is reasonably projected to be one year, with a range of from 6 months to two years. There are no licensed intensive residential treatment programs (IRTP) for children and adolescents in Manatee County, Florida or in the Department's District VI, which includes Manatee County as well as Hardee, Highland, Hillsborough and Polk Counties. There are also no licensed IRTPs in adjoining Districts V and VIII. Stipulations The parties have stipulated that FRTC has the ability to recruit physicians for this project, and also has funds available for FRTC's capital and operating expenditures. In addition, the parties have stipulated that review criteria concerning the need for research and educational facilities, the extent to which the services will be accessible to schools for health professional, and the special needs and circumstances of health maintenance organizations are not applicable to this CON application. Non-Rule Policy For IRTP The Department currently has no rule governing the approval of IRTP applications for a CON. However, since February 1987 the Department has followed a non-rule policy which presumes there is a need for at least one licensed IRTP of reasonable size in each Departmental service district, and which does not consider the existence of unlicensed residential treatment beds in a district in determining if the presumed need has been met. No changes or revisions in this non-rule policy of the Department are under review. The Department applied this non-rule policy in initially approving the CON application. Based upon the testimony of John Griffin, the Department's Deputy Assistant Secretary who administers the CON program and is responsible for health planning, an IRTP applicant does not have to establish "need" in a particular service district where it wants to locate a facility because the non- rule policy presumes there is a need for one IRTP of reasonable size per district. The applicant must, however, establish that there is not presently a licensed IRTP in the district and that it proposed to establish an IRTP of reasonable size. Griffin was not able to explicate this non-rule policy based upon health planning concerns, considerations or factors. Sharon Gordon-Girvin, Administrator of the Department's Office of Community Medical Services and Facilities, was also unable to articulate or explicate a health planning basis for this policy. Rather, the only basis enunciated at hearing by the Department for this non-rule policy was its statutory interpretation of Sections 395.002(8) and 395.003(2)(f), Florida Statutes, as renumbered by Section 34, Chapter 87-92, Laws of Florida. Need And Consistency With State And Local Health Plans There are no licensed IRTPs in District VI. Manatee Palms is a residential treatment center for children and adolescents located in Manatee County, but it is not licensed by the Department as an IRTP. Relevant issues identified in the District VI Local Health Plan are stated as follows: As a general policy, the least restrictive, most cost effective setting and programs should be used. The State of Florida, as a major purchaser of mental health and substance abuse services, can continue to lead the way by encouraging the development of non-hospital alternatives and by purchasing services from them preferentially. Another important issue in psychiatric care is the trend toward hospitalization of children who have behavior and conduct disorders, and who should more appropriately be served through non-hospital alternatives. . . At the present time, the severe emotionally disturbed or emotionally handicapped (SED/EH) child or adolescent is served in a broad range of programs. There are crisis stabilization units (CSUs) for stabilizing the adult client in acute crisis. Currently CSU services for children and adolescents are not adequate throughout the District. Intensive residential, day/night program, group and foster homes are for the client requiring close supervision. Relevant policies set forth in the District Local Health Plan are as follows: The multi-modality approach as expressed in the community mental health (and substance abuse) system should be considered a model of programming, staffing, facility requirements, costs, etc., against which applications for inpatient services should be reviewed. Review of applications for inpatient psychiatric and substance abuse services should include comment from the Alcohol, Drug Abuse and Mental Health Program Offices of DHRS. No additional psychiatric and/or substance abuse beds should be granted approval unless the capacity of current hospital providers is being fully utilized (75 percent occupancy rate annual). Additional psychiatric and/or substance abuse beds should be through conversion of existing beds. The State Health Plan sets forth the following relevant policies and statements: The goal of (mental health) services is (to) . . . provide educational; mental health treatment; and when needed, residential services for severely emotionally disturbed students. It is the intent of the Legislature that the least restrictive means of intervention be employed based on the individual needs of each patient within the scope of available services . . . The program goals for each component of the network are . . . to provide programs and services as close as possible to the child's home in the least restrictive manner consistent with the child's needs. Sufficient funding for the development of residential treatment and community support services is necessary if the state is to fulfill its commitment to providing services for long term mentally ill persons. These services provide, in the long run, a more humane and cost effective means of meeting the mental health needs of Florida residents. Continued development of long and short term inpatient hospital programs for the treatment of adolescents and children is contrary to current treatment practices for these groups and is, therefore, inappropriate without local data to support the need for these services. Such development can contribute to inappropriate placement, unnecessary costs of treatment, and divert scarce resources away from alternative uses. In addition, the following relevant goals are contained in the State Health Plan: Promote the development of a continuum of high quality, cost effective private sector mental health and substance abuse treatment and preventive services. Bring about changes in third party reimbursement policy for psychiatric and substance abuse care which would promote the development of the most appropriate, cost-effective treatment settings . . . Develop a network of residential treatment settings for Florida's severely emotionally disturbed children by 1989 . . . Develop residential placements within Florida for all SED children currently receiving treatment in out of state facilities by 1990. The FRTC application is consistent with the above cited relevant portions of the state and local health plans. It is consistent with the State Health Plan which reflects and emphasizes the trend toward deinstitutionalization and the current emphasis on education, treatment and residential services for severely emotionally disturbed students rather than what has been the traditional approach to treatment in an institutional setting, a generally more costly approach from a capital cost and staffing perspective. The FRTC application promotes treatment within the State and will assist in reducing out of state placements. Through the report and testimony of Ronald T. Luke, Ph.D., J.D., and despite the testimony of Jay Cushman, both of whom were accepted as experts in health planning, FRTC established the need for, and reasonableness of, its 60 licensed IRTP beds in District VI, with 50 percent occupancy in the first year and 60 percent in the second year, using two bed need assessment methodologies. First, using the ratio of licensed IRTP beds in other service districts to population ages 0-17 years old, a range of .07 to 1.33 beds per 1,000 population is identified. Using 1991 population projections for District VI, the 60 bed FRTC facility would result in a bed to population ratio of .17 per 1,000 population aged 0-17 years. Since there are no licensed beds in the current inventory, no adjustment of this ratio must be made to account for existing beds. Thus, the FRTC application is within the range of ratios of currently licensed IRTPs in other districts, and is therefore reasonable. Second, a utilization methodology identifies an intensive residential treatment bed need of 90 in 1987 to 95 in 1991, with target occupancy rates of 90 percent. This methodology is based upon 1987 and 1991 population projections. Using a census rate per 100,000 population of 21.58 which is appropriately and reasonably derived from national data for residential treatment patients aged 0-17, an average daily census of 74 in 1987 and 78 in 1991 is derived. Thus, FRTC has established a need for its facility in District VI, given its projected occupancy levels, and given that there are no licensed beds currently in the District. It is important to recognize that the bed ratio analysis is based upon licensed intensive residential treatment beds in Florida, and is therefore clearly relevant and credible to the issues in this case. The utilization methodology supports and confirms the need found thorough the bed ratio analysis, although it is noted that this methodology, by using national data, is not based upon licensed beds in Florida, and would therefore not be sufficient, in itself, to establish need. It is, however, persuasive and credible in confirming the bed ratio analysis. Accessibility To All Residents FRTC projects only 1.5 percent indigent care and 8 percent bad debt. Its projection for private pay patients is 25 percent and for insurance covered care is 65.5 percent. This is a marginal and insignificant indigent load. There is no provision for services to state-funded patients. FRTC's projected utilization by class of pay is reasonable. The clear purpose of this application is to enable FRTC to become licensed as a hospital under Section 395.002, Florida Statutes, and thereby enable it to be called a "hospital". It was established through the testimony of Dwight Hood, who was accepted as an expert in health care finance and health care third party payments, that if a facility is licensed as a hospital it has a significant advantage for reimbursement from third parties who more readily reimburse for care in a licensed facility than in an unlicensed residential treatment center. Therefore, accessibility will be increased for those children and adolescents in need of this care whose families have insurance coverage, since it is more likely that payments under such third party coverage will be made at an IRTP licensed as a "hospital" than otherwise. Quality of Care The applicant has clearly demonstrated its ability to provide quality care to its patients, based upon the testimony of C. Hal Brunt, M.D., Robert Friedel, M.D. and G. L. Tischler, M.D., who were accepted as experts in psychiatry, and notwithstanding the testimony of Howard Goldman, M.D., and Glen Lewis, M.D., who were also accepted as experts in psychiatry. FRTC is a wholly owned subsidiary of Charter Medical Corporation which has experience in the operation and management of a residential treatment center, Charter Colonial Institute in Virginia, and also has extensive experience in providing quality health care at five hospitals in Florida, including Charter Hospital of Tampa Bay. The treatment program at FRTC will be adapted to local community needs. In providing quality care, FRTC will assign patients to the correct level of care within the facility by insuring that they are seen by a psychiatrist within 24 hours of admission, and by having each case reviewed by an independent utilization review committee, completing appropriate patient assessments and developing integrated treatment programs which are regularly updated, making appropriate treatment outcome assessments, and providing for continuity of care for patients leaving the IRTP through the development of a community-wide continuum of care. Charter has six out-patient counselling centers located within two hours of the FRTC proposed facility. It is both reasonable and appropriate to structure psychiatric treatment and care in a hospital setting within a "levels system" that rewards and reinforces desired behavior, and FRTC will utilize a "levels system" in its highly goal oriented patient treatment programs. Quality of care is not dependent upon a hospital's environment and physical facilities, according to Dr. Goldman. The floor plan proposed by FRTC is functional and is a proto- typical design used by Charter in approximately fifty locations, although not as an IRTP. The criticisms of the floor plan and facility design to which Maxine Wolfe, Ph.D., and Glen Lewis, M.D., testified do not establish that the applicant will be unable to provide quality care in this facility. While the Petitioners might design a facility differently, and specifically provide for a different orientation of the nurses' station relative to the patient wings, a different location for the dining room, more rooms where a patient can have privacy, and more opportunity for individualized treatment, these preferences do not establish that FRTC's floor plan and design will impair the quality of care rendered at this proposed facility. It is also noted that Dr. Wolfe testified critically about residential treatment in general, and expressed the opinion that residential treatment in a hospital is not beneficial and that children should never be treated in a large facility of any kind under any circumstance. Her testimony clearly establishes her bias and impairs her own credibility and the weight to be given to her testimony in this case. Availability and Adequacy of Alternatives Although there are no licensed IRTPs in District VI residential treatment and/or psychiatric services are currently available to children and adolescents through Manatee Memorial (9 beds), Manatee Palms (60 beds), Glenbeigh (14-16 beds), Sarasota Palms (60-70 beds), Sarasota Memorial Care Center (30 beds), Children's Home in Tampa (68 beds) and Northside Center in Tampa (12 beds). The average of length of stay at the significant majority of these facilities is up to 90 days, and they also attract patients from outside District VI. FRTC proposes to serve patients who require an average length of stay of a year. Some of these facilities serve patients with a dual diagnosis that includes substance abuse whereas FRTC will not. Therefore, these facilities do not offer adequate alternatives for the patients which FRTC is seeking to serve. Further, it was not established that outpatient or ambulatory services represent an adequate and appropriate alternative to an IRTP. Availability of Resources The total project cost of $4,303,020 will be funded through an equity contribution from Charter Medical Corporation and through a conventional loan. Assuming a 50 percent occupancy rate (30 beds) in its first year of operation, the proposed facility will have a staff of 43 positions, 27 of which will represent personnel who will be direct nursing or staff support for the patients, including social workers, psychologists, staff registered nurses, mental health workers, patient care coordinator, nursing supervisors, occupational and recreational therapists and special education teachers. A part-time medical director will also be available. This results in a ratio of 1.4 positions per patient. In comparison, Manatee Palms has a 1.8 staffing ratio based on a census of 55 patients. FRTC has proposed a reasonable and adequate staffing pattern and ratio to treat 30 patients. FRTC will recruit personnel through direct advertising, community contacts, posted notices, job fairs, and school visits. It will compete with unlicensed residential treatment centers, as well as short and long term psychiatric hospitals, in attracting staff for its facility. Although only six mental health workers are identified in FRTC's list of manpower requirements, and it would be beneficial to the level of treatment and care to increase this number, nevertheless, the staffing patterns proposed by FRTC will allow it to render quality care to patients at its facility, based upon 50 percent occupancy in its first year of operation. Staff salaries proposed by FRTC are reasonable and realistic, although its proposed salaries for nurses and mental health workers are higher than that available at Manatee Memorial. Existing facilities may have to increase their salaries to the levels proposed by FRTC to continue to retain and attract qualified staff, particularly nurses and mental health workers. Recruitment difficulties have been experienced in the District VI area for nurses, social workers, mental health workers and occupational therapists. However, it appears that FRTC will be able to attract qualified applicants for all positions due to the level of salaries offered and quality of care provided. Financial Feasibility Net revenues from the first year of operation are projected to be $100,000, which represents 2.3 percent of the capital expenditure as a return on investment. In the second year of operation, net revenues are projected to be $302,000, a 7 percent return on investment. Both years show a fair return on investment, and the pro forma establishes the financial feasibility of this project. In preparing the pro forma for this project, William S. Love, who was accepted as an expert in health care finance, used the reasonable assumption of 50 percent occupancy in the first year of operation and 60 percent in the second year. Despite the testimony of Jay Cushman, who was accepted as an expert health planner, it was not established that FRTC's location will preclude these occupancy rates. Love also assumed patient revenues of $300 per day and an average length of stay of one year. Utilization by class of payor was estimated to be 65 1/2 percent insurance, 25 percent private pay, 8 percent bad debt and 1 1/2 percent indigent care. It was assumed there would be no Medicare or Medicaid. Assumptions regarding patient revenues and utilization by class of payor are reasonable based on the testimony of Love, Luke and Dwight Hood, as well as a survey of insurance benefits available through employers, and despite the testimony of Christopher Knepper, who was accepted as an expert in health care finance. Knepper's testimony is applicable to unlicensed residential treatment centers rather than an IRTP. Therefore, his criticism of the pro forma as underestimating bad debt and overestimating the private pay portion is not persuasive since it disregards the fact that a licensed IRTP, due to its status as a specialty hospital, will have an increased ability to attract patients with insurance and with an ability to pay deductibles and other unreimbursed costs for care. It was established that a residential treatment center licensed as a specialty hospital has a significant advantage in terms of an improved payor mix over unlicensed facilities because of its recognized status with insurance companies. In addition, Knepper's testimony at hearing concerning the financial feasibility of this project conflicted with estimates made during discovery, and his explanation of such discrepancy was not credible. This conflict in Knepper's position at hearing and during discovery reduces the weight to be given to his testimony. FRTC assumed it would not be subject to the indigent care tax, but even if it were subject to the tax this would only add $29,000 in expenses, and therefore not affect the financial feasibility of the project. A management fee will be charged by Charter Medical Corporation, although this is not separately shown on the pro forma. It is the position of FRTC that this fee is associated with home office costs which will exist without regard to this facility. However, this fee, as well as additional construction costs of approximately $70,000, will not affect the financial feasibility of this project since salary costs associated with administration, as well as data processing costs have been separately shown and included on the pro forma as expenses, even though they are sometimes included in a management fee. FRTC's estimate of gross patient revenue of $300 per day for the first year of operation is substantially higher than other facilities offering like services. Net revenues per day during the first year of operation are estimated to be $265.30. Total direct expenses are estimated to be $198.70 for the first year, with total expenses per patient day estimated at $250.50 in the first year. A 7 percent inflation factor was used for the second year of operation, and this is a reasonable inflation factor. Impact On Costs and Competition As previously noted, salary estimates for nurses and mental health workers for this project are above those provided at Manatee Memorial, and therefore could reasonably be expected to increase salaries in these categories for some facilities in the area. The all inclusive charge of $300 per day proposed by FRTC is greater than Manatee Palm's average gross charge of between $270 - $280 per day. It is likely that paying patients, including patients with insurance coverage, who would otherwise be treated at Petitioners' facilities, will be treated at FRTC if this application is approved. However, the extent of such a loss in paying patients due to FRTC is unclear since Manatee Palms is recently receiving greater acceptance by insurers for reimbursement purposes, and Manatee Memorial's estimates of patient losses were based upon impact from both Manatee Palms and FRTC. Reasonableness of Costs The equipment cost estimate of $360,015 is reasonable. This finding is based on the testimony of Susan Hickman, who was accepted as an expert in health care facility equipment. The equipment and beds are appropriate for an IRTP of this size. The total cost of $707,897 for telephones, signage, graphics, interior design and equipment is also reasonable. The construction cost estimate of $2,010,823 is reasonable. This finding is based on the testimony of Patrick A. Regan, who was accepted as an expert in health care facility construction budgeting. Due to the conservative nature of the cost figures, a 2 1/2 percent contingency is adequate, rather than the normal 5-6 percent contingency. The contingency could be used for unbudgeted items such as stucco siding and hard ceilings. FRTC owns the facility site, which was purchased for $664,000.
Recommendation Based upon the foregoing, it is recommended that the Department enter a Final Order approving FRTC's application for CON 4825. DONE AND ENTERED this 22nd day of December, 1987 in Tallahassee, Florida. DONALD D. CONN 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 22nd day of December, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 87-2036, 87-2049 Rulings on the Joint Proposed Findings of Fact filed by FRTC and the Department: 1 Adopted in Findings of Fact 1, 27. 2-4 Adopted in Finding of Fact 6. 5 Rejected as irrelevant and unnecessary. 6-9 Adopted in Findings of Fact 8, 29, but otherwise rejected as cumulative and unnecessary. 10-11 Adopted in Finding of Fact 8. Adopted in Finding of Fact 47. Adopted in Findings of Fact 8, 47. Adopted in Finding of Fact 8. 15-16 Adopted in Finding of Fact 46, Adopted in Finding of Fact 27. Adopted in Finding of Fact 28, but otherwise rejected as irrelevant and unnecessary. Adopted in Findings of Fact 9, 10 but otherwise rejected as unnecessary. Rejected as irrelevant and unnecessary. 21-22 Adopted in Finding of Fact 9. Adopted in Finding of Fact 28, but otherwise rejected as unnecessary. Rejected as unnecessary. Adopted in Findings of Fact 9, 10, 27. Adopted in Finding of Fact 9. 27-30 Adopted in part in Findings of Fact 27, 28, but otherwise rejected as unnecessary. 31 Adopted in Finding of Fact 9. 32-34 Adopted in Findings of Fact 27, 28, but otherwise rejected as unnecessary. Adopted in Finding of Fact 12. Rejected as unnecessary. Adopted in part in Finding of Fact 33, but otherwise rejected as unnecessary. Adopted in Findings of Fact 33, 35. Adopted in Finding of Fact 34. Adopted in Finding of Fact 37. Adopted in Finding of Fact 12. Rejected as unnecessary. Adopted in part in Finding of Fact 39, but otherwise rejected as unnecessary. Adopted in Finding of Fact 40. Adopted in Finding of Fact 42. Adopted in Finding of Fact 39. Adopted in Finding of Fact 40. Adopted in Finding of Fact 38. Adopted in Finding of Fact 39. 50-57 Adopted in Findings of Fact 26, 39, but otherwise rejected as cumulative and unnecessary. 58 Rejected as unnecessary. 59-61 Adopted in Finding of Fact 15, but otherwise rejected as irrelevant, unnecessary or as a conclusion of law. 62 Adopted in Finding of Fact 16. 61 Adopted in Findings of Fact 6, 15, 16. Rejected as unnecessary and irrelevant. Rejected in Finding of Fact 17. Rejected in Finding of Fact 17, but adopted in part in Finding of Fact 26. Rejected as irrelevant and unnecessary. Rejected as unnecessary. 69-72 Adopted in part in Finding of Fact 24, but otherwise rejected as irrelevant since the Department's non-rule policy was not explicated and therefore cannot be relied upon. Rejected as unnecessary and irrelevant since the "reasonableness" of the facility's size is not at issue, the Department having failed to explicate its non-rule policy. Adopted in Finding of Fact 24, but otherwise rejected as cumulative and unnecessary. Adopted in Findings of Fact 9, 31, but otherwise rejected as unnecessary. Rejected in Findings of Fact 24, 33, 35, 39. The proposed average length of stay of one year is found to be reasonable in Finding of Fact 10. Adopted in Findings of Fact 21, 22. 79-81 Adopted in Findings of Fact 19, 23, but otherwise rejected as unnecessary and cumulative. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 11, 18, but otherwise rejected as unnecessary. Adopted in Finding of Fact 31. Rejected as unnecessary. Adopted in part in Findings of Fact 11, 26 but otherwise rejected as unnecessary. 87-88 Adopted in Finding of Fact 3. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 3, 44, but otherwise rejected as unnecessary and cumulative. Rejected as simply a summation of testimony and therefore unnecessary. Adopted in part in Finding of Fact 4, but otherwise rejected as unnecessary. Rejected as simply a summation of testimony and not a Finding of Fact. Rejected as unnecessary and simply a summation of testimony. 95-96 Rejected as irrelevant, unnecessary and in part simply a summation of testimony. 97-98 Rejected as a summation of testimony and otherwise as speculative and irrelevant. 99 Rejected as simply a summation of testimony. 100-103 Rejected as irrelevant. 104 Rejected as a summation of, and argument on, the evidence rather than a Finding of Fact. Rulings on the Proposed Findings of Fact filed by Manatee Palms: Adopted in Findings of Fact 1, 27. Adopted in Finding of Fact 2. Adopted in Finding of Fact 3. Adopted in Finding of Fact 4. Adopted in Finding of Fact 5. Adopted in Finding of Fact 6, but otherwise rejected as irrelevant. Adopted in part in Finding of Fact 7. Rejected as unnecessary, and as simply a statement of position. 9-11 Rejected as unnecessary and as otherwise covered in preliminary procedural matters. Adopted in Finding of Fact 8. Adopted in Finding of Fact 5, but otherwise rejected as unnecessary. Adopted in Finding of Fact 8. Adopted in Findings of Fact 9, 31, but otherwise rejected as simply a summation of testimony and position of the parties. Adopted in Finding of Fact 8. Adopted in Findings of Fact 10, 25, 39, 44. Adopted in Finding of Fact 14, but rejected in Finding of Fact 24. Adopted in Finding of Fact 17, but rejected in Finding of Fact 24. Rejected in Findings of Fact 21, 22, 23. Rejected as simply argument and a statement of position rather than a Finding of Fact. Adopted in part in Findings of Fact 25, 39. Rejected in Findings of Fact 21, 22, 23. 24-26 Rejected in Findings of Fact 19, 20, 23. Adopted in Findings of Fact 19, 44, but rejected in Finding of Fact 23. Rejected in Findings of Fact 23, 24. Adopted in Finding of Fact 17. Adopted in Findings of Fact 16, 17. Adopted in Finding of Fact 17. Rejected as unnecessary. Adopted in Finding of Fact 17. 34-42 Rejected as irrelevant and unnecessary. This is a de novo proceeding through which final agency action will be taken, and therefore preliminary agency findings are irrelevant to a determination of the issues in this case which must be decided based upon evidence presented at hearing. Rejected as simply a statement of position without any citation to the record. Adopted in Finding of Fact 24. 45-46 Rejected in Finding of Fact 24. 47-48 Adopted and rejected in part in Finding of Fact 24. 49-60 Rejected in Finding of Fact 24. Rejected as simply a conclusion of law. Rejected as without citation to the record and as simply a statement of position rather than a Finding of Fact. Rejected as irrelevant. Adopted in part in Finding of Fact 3. Adopted in Finding of Fact 3. 66-70 Rejected as unnecessary and cumulative, since it is established that services are similar or identical to those proposed by FRTC. Adopted in Findings of Fact 3, 44. Rejected as unnecessary and cumulative. Adopted in Finding of Fact 3, but otherwise rejected as cumulative and unnecessary. Rejected in Findings of Fact. 26, 39 and otherwise as irrelevant. Rejected as irrelevant and otherwise not based on competent substantial evidence. Rejected as irrelevant. Adopted in Finding of Fact 30. Rejected as simply a statement of position, without citation to the record. Rejected as simply a conclusion of law. 80-81 Adopted in part in Finding of Fact 8, but otherwise rejected as not based on competent substantial evidence. 82 Rejected as unnecessary. 83-84 Rejected in Findings of Fact 33 and 35, and otherwise as irrelevant. Rejected as simply a conclusion of law. Rejected in Finding of Fact 34. Adopted in Finding of Fact 37. Adopted in Findings of Fact 34, 36. 89-90 Rejected in Findings of Fact 35, 37. Rejected as simply a conclusion of law. Adopted in Finding of Fact 39. Rejected as irrelevant. Rejected in Findings of Fact 38, 39, 42. Adopted in Finding of Fact 39. Rejected as irrelevant. Adopted in part in Finding of Fact 39, but otherwise rejected as irrelevant and unnecessary. 98-100 Adopted in Finding of Fact 39. 101-102 Adopted in Findings of Fact 38, 39. 103-109 Rejected in Finding of Fact 39, and otherwise as not based on competent substantial evidence. Rejected in Findings of Fact 26, 29. Rejected in Finding of Fact 39. Rejected in Finding of Fact 35, and otherwise as irrelevant. Rejected in Findings of Fact 38, 39, 42. Adopted in Finding of Fact 39. 115-117 Adopted and rejected in part in Finding of Fact 40, but otherwise rejected as irrelevant. Adopted and rejected in part in Findings of Fact 8, 40, but otherwise rejected as not based on competent substantial evidence. Rejected in Findings of Fact 38-42. Rejected as a conclusion of law. Rejected as not based on competent substantial evidence. Adopted in Findings of Fact 34, 37. Adopted in Finding of Fact 36. Rejected as not based on competent substantial evidence. Adopted in part in Finding of Fact 45. Rejected as not based on competent substantial evidence and without citation to the record. Rejected as a conclusion of law. 128-129 Rejected as simply a comment on the evidence and not a Finding of Fact. Adopted in part in Finding of Fact 8. Rejected in Finding of Fact 47. Rejected as irrelevant. Adopted in part in Finding of Fact 8, but otherwise rejected as irrelevant and not based on competent substantial evidence. Rejected as simply a statement of position and argument. Rulings on Proposed Findings of Fact filed by Manatee Memorial: 1-2 Adopted in Finding of Fact 1. 3-4 Rejected as irrelevant. 5 Adopted in Findings of Fact 8, 29. 6-7 Rejected as irrelevant to a determination of the issues in this case. 8-10 Adopted in Finding of Fact 3. Adopted in part in Findings of Fact 34, 36, 45. Adopted in Finding of Fact 2. 13-22 Adopted in Finding of Fact 4, but otherwise rejected as irrelevant or unnecessary. Rejected in Finding of Fact 24 and otherwise rejected as not based on competent substantial evidence. Rejected as cumulative and unnecessary. Adopted in Findings of Fact 34, 36. Rejected as speculative and not based on competent substantial evidence. Rejected as irrelevant. Adopted in Finding of Fact 6. Adopted in Findings of Fact 1, 5, 10, but rejected in in Finding of Fact 44. 30-32 Adopted in Finding of Fact 6. 33 Adopted in Finding of Fact 7. 34-39 Rejected as unnecessary. Adopted in Finding of Fact 15. Adopted in Finding of Fact 14. Adopted in Finding of Fact 17. 43-45 Adopted in Finding of Fact 16. Rejected as unnecessary and irrelevant. Since Mr. Griffin is the highest level departmental representative who testified at hearing, his statement of the non-rule policy is presumed to be correct. Rejected in Finding of Fact 16. Rejected in Finding of Fact 16 and otherwise as unnecessary and irrelevant. 49-51 Rejected as irrelevant since this is a de novo hearing by which final agency action will be taken. Rejected as simply a conclusion of law. Rejected in Findings of Fact 21-23. Adopted in Finding of Fact 39. 58-60 Rejected in Findings of Fact 21-23 and otherwise as irrelevant. 61-63 Rejected in Findings of Fact 19, 20, 23. Adopted in Finding of Fact 30, but rejected in Finding of Fact 31. Rejected in Finding of Fact 39 and otherwise as irrelevant. Adopted in Finding of Fact 25 and rejected in Finding of Fact 26. Rejected in Findings of Fact 26, 39, 42. Adopted in part in Findings of Fact 38, 39, 44. Rejected in Findings of Fact 24 and 39. Rejected as speculative, and not based on competent substantial evidence. 71-79 Rejected in Findings of Fact 26, 38, 39 and otherwise rejected as not based on competent substantial evidence. 80-83 Rejected in Findings of Fact 33, 35. Rejected in Findings of Fact 33, 35, 38, 39, 42. Rejected in Findings of Fact 39, 40. Rejected in Findings of Fact 38-42. Rejected in Finding of Fact 37. Adopted in Finding of Fact 33. Rejected in Finding of Fact 33. Rejected in Finding of Fact 35. Rejected in Findings of Fact 27, 33, 35. Rejected in Finding of Fact 37. Rejected as unnecessary. 94-95 Rejected in Finding of Fact 37. 96 Adopted in Finding of Fact 36. 97-100 Rejected in Findings of Fact 28, 29. 101-102 Adopted in Finding of Fact 8. 103-105 Rejected in Finding of Fact 29. 106 Rejected in Finding of Fact 8. 107-109 Rejected in Findings of Fact 27, 28, 29 and otherwise not based on competent substantial evidence. 110 Rejected as irrelevant. 111-112 Rejected in Finding of Fact 9. Rejected in Findings of Fact 9, 27, 28, 29. Adopted in Finding of Fact 8. 115-116 Rejected as irrelevant. Adopted in Finding of Fact 8. Adopted in Finding of Fact 47. Adopted and rejected in Finding of Fact 47. Adopted in Finding of Fact 8 and rejected in Finding of Fact 47. Rejected as irrelevant. Adopted and rejected in Finding of Fact 47. Adopted in part in Findings of Fact 3, 4. Adopted in Findings of Fact 25, 39, 45. 125-127 Rejected as speculative and not based on competent substantial evidence. 128-130 Rejected as irrelevant and unnecessary. COPIES FURNISHED: John Rodriguez, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Michael J. Glazer, Esquire Post Office Box 391 Tallahassee, Florida 32302 Jean Laramore, Esquire Anthony Cleveland, Esquire Bruce A. Leinback, Esquire Post Office Box 11068 Tallahassee, Florida 32302 William Hoffman, Esquire Deborah Winegard, Esquire 2500 Trust Co. Tower 25 Park Place Atlanta, Georgia 30303 Fred W. Baggett, Esquire Stephen A. Ecenia, Esquire Post Office Drawer 1838 Tallahassee, Florida 32302 John T. Brennan, Jr., Esquire 900 Seventeenth Street, N.W., Suite 600 Washington, DC 20006 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 John Miller, Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Fl 32399-0700 =================================================================
Findings Of Fact Background On July 31, 1987, the Department of Health and Rehabilitative Services (HRS) published in the Florida Administrative Weekly an announcement of the fixed need pools for the subject batching cycle, which pertained to the planning horizon of July, 1992. According to the notice, the fixed need pool, which was calculated pursuant to Rules 10-5.008(6) and 10-5.011(m), (n), (o), and (q), Florida Administrative Code, was adjusted according to the occupancy rate thresholds as prescribed by said rules. The net adjusted need for short-term psychiatric beds in District 7 was zero. By letter to HRS dated August 12, 1987, the North Brevard County Hospital District, doing business as Jess Parrish Memorial Hospital (Jess Parrish), provided notice of its intent to apply for a certificate of need to convert 16 beds from medical/surgical to psychiatric. By Application for Certificate of Need dated September 14, 1987, Jess Parrish requested that HRS grant a certificate of need for the conversion of 16 medical/surgical beds to 16 adult short-term psychiatric beds at a cost of $46,100. Jess Parrish is a tax-exempt organization whose board of directors have been authorized by law to levy ad valorem taxes in a special tax district in north Brevard County for the support of the hospital. The main hospital is located at 951 North Washington Avenue in Titusville, which is in north Brevard County. Brevard County is located in HRS District 7. By letter to Jess Parrish dated October 5, 1987, HRS requested additional information. By response dated November 9, 1987, Jess Parrish supplied the requested responses to omissions. By letter dated November 18, 1987, Jess Parrish provided additional information desired by HRS. By letter dated December 22, 1987, Wuesthoff Hospital (Wuesthoff) informed HRS that it objected to the above-described application because of absence of need. The letter states that Wuesthoff maintained an occupancy rate of 74% during the past year in its 25 short-term psychiatric beds. Wuesthoff is located in Rockledge, which is in central Brevard County. By letter and State Agency Action Report dated January 25, 1988, HRS informed Jess Parrish of its intent to issue the requested certificate of need for the conversion of the 16 beds. By Petition for Formal Administrative Hearing filed February 23, 1988, Wuesthoff challenged the intent to award the certificate of need to Jess Parrish and requested a formal hearing. The Application and Approval Process The application for the certificate of need states that Jess Parrish has a total of 210 beds, consisting of 172 medical/surgical beds, 10 obstetric beds, 20 pediatric beds, and 8 intensive care unit beds. The application contains all elements required by law, including a resolution authorizing the application and financial statements. The application and omissions response state that Jess Parrish admitted about 100 psychiatric patients in fiscal year ending 1987. The omissions response adds that Jess Parrish would offer the following programs for its short-term psychiatric patients: continual evaluation, screening, and admissions; individual, family, and group therapy; occupational, recreational, and vocational therapy; psychological and psychiatric testing and evaluation; day hospital and day clinic; family and friends education and support groups; and specialized treatment programs for geriatric psychiatric patients. The omissions response reports that the only facility with adult short-term psychiatric beds within 45 minutes of Jess Parrish is Wuesthoff. The omissions response states that Wuesthoff had experienced the following occupancy rates in its adult short-term psychiatric program: 1984--59%; 1985--66%; 1986-- 7l%; and first three quarters of 1987--71%. The omissions response acknowledges that Jess Parrish and Circles of Care, Inc. (Circles of Care) had jointly prepared the application and that Jess Parrish "plans to employ by contract, Circles of Care, Inc. to operate and manage our unit" if the application is approved. The omissions response includes a letter to HRS dated November 10, 1987, from James B. Whitaker, as president of Circles of Care. The letter describes the 12-year relationship between the two parties, which began when Circles of Care leased its first 12 beds from Jess Parrish between 1974 and 1980. Mr. Whitaker states that the two parties thus "work[ed] out a management agreement; for the new sixteen bed unit that Jess Parrish has requested." In the State Agency Action Report, HRS notes that the project does not conform with Policy 4 of the applicable District 7 Local Health Plan. This policy provides that additional short-term inpatient psychiatric beds may be approved when the average annual occupancy rate for all existing facilities in the planning area equals or exceeds the following rates: adult--75% and adolescents/children--70%. HRS reports a similar discrepancy as to the occupancy standard in the State Health Plan, which incorporates at Objective 1.2 the same 70%/75% standards. HRS states in the State Agency Action Report that the 1986 occupancy rates for short-term psychiatric beds, which averaged 69.98% in Brevard County, were 87% at Circles of Care, 70.6% at Wuesthoff, and 14% at a new facility, C. P. C.--Palm Bay. In addition, for the first six months of 1987, the report states that the occupancy rates, which averaged 63.5% in Brevard County, were 76% at Circles of Care, 71.5% at Wuesthoff, and 43% at C. P. C.--Palm Bay. In calculating numeric need under the rule, HRS concludes that there was a net need for a total of 547 beds in the district, consisting of 312 in specialty hospitals and 235 in general hospitals. Addressing the provision of the District 7 Local Health Plan focusing upon need at the county level, HRS finds that there was a net need for a total of 38 beds. Recognizing the "sub- standard utilization" of existing short-term psychiatric beds, HRS states that the application was justified "mainly because of the enhanced access to services that the project would provide." All of the other criteria were fully satisfied with one irrelevant exception, and the State Agency Action Report concludes: Although the district and county utilization of short-term psychiatric beds falls below the 70% [sic) adult standard, this project merits a Certificate of Need because there exists numeric need in the service area and because the project affords greater access and availability to psychiatric services for underserved groups. Need District and State Health Plans Part 3 of the 1985 District 7 Local Health Plan, published by The Local Health Council of East Central Florida, Inc., sets forth policies and priorities for inpatient psychiatric services. Policy 1 establishes each of the four counties of District 7 as a subdistrict for purposes of planning inpatient psychiatric services. Policy 3 of the 1985 District 7 Local Health Plan provides a specific methodology to allocate beds when the numeric need rule methodology indicates a need for inpatient psychiatric beds. A minimum of .15 beds per 1000 projected population should be allocated to hospitals holding a general license. A total of .20 beds per 1000 projected population may be located in specialty hospitals or hospitals holding a general license. The population projections are for five years into the future. Policy 4 of the 1985 District 7 Local Health Plan provides that additional short-term inpatient psychiatric beds may be approved when the average annual occupancy rates for all existing facilities in the planning area equal or exceed 75% for adult facilities and 70% for adolescents/children facilities. The policy concludes: Additional beds should not be added to the health system' until the existing facilities are operating at acceptable levels of occupancy. Good utilization of existing facilities prior to adding beds aids in cost containment by preventing unnecessary duplication. The 1988 District 7 Local Health Plan, although inapplicable to the subject proceeding, refers to the pending application of Jess Parrish. The plan states: [T]he residents of District 7 appear to be well-served by the existing providers with only a few exceptions. First, residents of north Brevard County (Titusville area) currently have no access to any certified, short-term, inpatient psych services in less than 22 miles. In many driving situations this distance takes longer than 30-45 minutes to traverse. . . . If [the CON that has been tentatively approved] is sustained through litigation and the unit is finally opened availability of these 16 beds should ameliorate, to a large degree, the potential geographic access problems for north Brevard adult/geriatric patients at least. Objective 1.1 of the 1985-1987 State Health Plan states that the ratio of short-term inpatient hospital psychiatric beds to population should not exceed .35 beds to 1000 population. Objective 1.2 states that, through 1987, additional short-term psychiatric beds should not normally be approved unless the service districts has an average annual occupancy of 75% for existing and approved adult beds and 70% for existing and approved adolescents/children beds. Numeric Need Pursuant to HRS Rules Net Need Rule 10-5.011(1)(o)4., Florida Administrative Code, sets forth the HRS numeric need methodology. The rule provides that the projected number of beds shall be determined by applying the ratio of .35 beds to 1000 population to the projected population in five years, as estimated by the Executive Office of the Governor. The relevant projected population for District 7 is 1,564,098 persons. Applying the ratio, the gross number of beds needed in District 7 is 547. The total number of existing and approved short-term psychiatric beds in District 7 in 1987 was 410. There is therefore a net need for 137 short-term psychiatric beds in District 7. The relevant projected population for Brevard County is 441,593 persons. Applying the ratio, the gross number of beds needed in Brevard County is 155. The total number of existing and approved short-term psychiatric beds in Brevard County in 1987 was 117. There is therefore a net need for 38 short- term psychiatric beds in Brevard County. A minimum of .15 beds per 1000 population should be located in hospitals holding a general license, and .20 beds per 1000 population may be located in specialty hospitals or hospitals holding a general license. The calculations disclose that, for District 7, there is a net need of 73 beds in the former category and 65 beds in the latter category. As to Brevard County, the respective numbers are 41 and 4. Rule 10-5.011(1)(o)4.d., Florida Administrative Code, provides that new facilities for adults must be able to project a 70% occupancy rate for the first year and 80% occupancy rate for the third year. Jess Parrish projects that its short-term psychiatric program will experience a utilization rate of 66% at the end of the first complete year of operation and 82% at the end of the third complete year of operation. These projections are reasonable and substantially conform with the requirements of the rule. Rule 10-5.011(1)(o)4.e., Florida Administrative Code, provides that no additional short-term inpatient beds shall normally be approved unless the average annual occupancy rate for the preceding 12 months in a "service district" is at least 75% for all existing adult short-term inpatient psychiatric beds and at least 70% for all adolescents/children short-term inpatient psychiatric beds. HRS considered the 70%/75% occupancy standards in making the July, 1987, announcement of a zero fixed need pool for short-term psychiatric beds in Brevard County. The determination of zero fixed need was a reflection that, although numeric need existed, the occupancy standards had not been satisfied. The incorporation of the occupancy standard into the July, 1987, fixed need calculation represented a deviation from nonrule policy deferring computation of the occupancy levels until the application-review process. The prior announcement of a fixed need pool on February 27, 1987, stated that a number of beds were needed even though the occupancy situation in District 7 was about the same. Subsequent announcements likewise deferred consideration of the occupancy standard. HRS has explicated its nonrule policy of excluding occupancy standards from the calculation of numeric need when publishing fixed need pools. Unlike the relatively simple task of determining the relevant population projection and multiplying it by the proper ratio, application of the occupancy standards, especially at the time in question, required numerous determinations and calculations. By attempting to incorporate the occupancy standards into the calculations upon which the fixed need pool were based, HRS increased the potential for error, which occurred in this case, rather than increased the reliability of the information. Although adequate reason exists for revising the July, 1987, published fixed need pool, Rule 10-5.008(2)(a), Florida Administrative Code, prohibits revisions to a fixed need pool based upon a change in need methodologies, population estimates, bed inventories, or other factors leading to a different projection of need, if retroactively applied. However, the revision of the July, 1987, fixed need pool does not represent a change in need methodologies, population estimates, bed inventories, or other factors leading to a different projection of need, if retroactively applied. The revision to the fixed need pool, which did not represent a change in need methodology or underlying facts, was a result of three legitimate considerations. First, HRS revised the fixed need pool to implement its policy decision to limit the fixed need pool to the numeric need calculation and reserve the calculations of occupancy standards to the application-review process. This consideration does not involve a change in the methodology of determining numeric need or applying occupancy standards. Second, HRS revised the fixed need pool to correct earlier, erroneous calculations. This consideration does not involve a change in the underlying facts, but merely in the computations based upon the same facts. Third, HRS revised the fixed need pool to reflect developing policy in the application of the occupancy standards. HRS decided to apply the more liberal 70% occupancy standard to facilities serving both adults and adolescents/children, exclude from the determination of occupancy levels any facilities serving only age cohorts not served by the applicant, and restrict the 75% occupancy standard to facilities serving adults only. HRS made these changes, which it felt would not harm existing providers, in recognition of the failure of data provided by health-care suppliers to distinguish between adult and adolescents/children admissions and patient days. These considerations approximate a change in methodology, but the revision resulting from such considerations does not violate the rule because HRS already has shown that consideration of the occupancy standards should not take place until after publication of the fixed need pool. In the present case, two facilities in District 7 serve only adolescents/children. These facilities are C. P. C.-- Palm Bay and Laurel Oaks, which is in Orange County. Eliminating their occupancy rates, the district occupancy rate in the year ending June 30, 1987, was 71.9%. Removing the occupancy rate of C. P. C.--Palm Bay from Brevard County, the county occupancy rate during the same period was over 75%. Under the revised policies, Brevard County had a net need of 38 short- term psychiatric beds, applicable occupancy standards in the county and district were satisfied, and the July, 1987, publication of a fixed need pool of zero did not preclude the finding of need under other than "not normal" circumstances. Accessibility Financial Accessibility The primary service area of Jess Parrish is north Brevard County. A higher percentage of the population of this area lives below the poverty level than does the population of any other sub-region of Brevard County. According to the 1980 Census data, the applicable percentages of area residents living below the poverty level were 12.7% in north Brevard County, 10% in central Brevard County, 8.4% in south Brevard County, and 9.6% in Brevard County overall. Partly as a reflection of the different sub-regions and partly as a reflection of the commitment of Jess Parrish to provide access to underserved populations, Jess Parrish provides considerably more services to Medicaid patients than does either of the other major general hospitals in central and south Brevard County. In 1987, 11.5% of the admissions and 8.9% of the patient days at Jess Parrish were Medicaid. The respective numbers are 7% and 6% for Wuesthoff and 5.8% and 3.9% for Holmes Regional Medical Center, which is in Melbourne. A key component of financial accessibility is the effect of the proposed program on Circles of Care. About 55% of the patients of Circles of Care are indigent. Another 17% of its patients earn between the minimum wage and $15,000 annually. Circles of Care has participated in all phases of the application process on behalf of Jess Parrish. The approval of the new program would not have an adverse effect on Circles of Care. To the contrary, the new program at Jess Parrish would provide Circles of Care with more treatment options, especially with respect to indigent patients, whose need for short-term psychiatric services has proven at times difficult to meet. These options are especially valuable at a time when there is no net need in Brevard County for any more short-term psychiatric beds in specialty hospitals, such as Circles of Care. The 52 psychiatric beds licensed to Circles of Care are in two different units contained within a single hospital facility located in Melbourne, which is in south Brevard County. Sheridan Oaks is a 24-bed, private unit, which cannot accept many Baker Act patients without adversely affecting the other patients and the psychiatrists who refer private-pay patients to this unit. The other unit is a public Baker Act receiving facility with 28 beds, for which Circles of Care receives state funds. Unlike Sheridan Oaks, the public receiving facility employs the psychiatrists who work there. About 85-90% of all Baker Act patients in Brevard County come through this public receiving facility, whose occupancy rate was 98% in the year ending June 30, 1987. In addition to these units, Circles of Care operates a mental health outpatient clinic in Titusville, an outpatient/inpatient treatment center in the Rockledge/Cocoa area, numerous social clubs throughout Brevard County for the chronic mentally ill, and numerous public education and awareness programs concerning the treatability of mental illness. Another limitation of being a specialty hospital is that Circles of Care does not qualify for Medicaid reimbursement. Jess Parrish, as a general hospital, qualifies for such reimbursement and projects in its application that 39% of its patient days will be Medicaid and 9% of its patient days will be indigent. Geographic Access Jess Parrish is located at the north end of Brevard County, which runs about 80 miles north-south. Wuesthoff is about 25 miles south of Jess Parrish, and Titusville is about 40 miles north of Melbourne. Intercity north-south traffic uses Interstate 95, which is west of the above-described cities, and U.S. Route 1, which runs through the center of each of these cities. Rule 10-5.011(1)(o)5.g., Florida Administrative Code, provides that short-term inpatient psychiatric services should be located within a maximum travel time of 45 minutes under average travel conditions for at least 90% of the population of the service area. This criterion is presently met without the addition of short-term psychiatric beds at Jess Parrish. This factor is outweighed, however, by another factor in this case. Jess Parrish projects about half of its patients will be indigent or Medicaid, and north Brevard County has a disproportionate share of the county's impoverished residents. Average travel conditions for these persons require public transportation, which, in north Brevard County, is limited to Greyhound/Trailways and local taxi companies. Exclusive of time waiting for the bus and traveling to and from the bus stations, the time for the 25-mile trip between Titusville and Rockledge, of which there are three or four trips daily (excluding off-hour trips), ranges from 25-35 minutes. There is evidence in the record that mentally ill bus passengers do not always make it to their intended destinations by way of intercity buses. The use of available public transportation is therefore problematic, but in any event adds considerable time to the travel time to Wuesthoff for those individuals who do not own a motor vehicle. Effect on Wuesthoff The effect of the conversion of medical/surgical beds to short-term psychiatric beds will have no material effect on Wuesthoff, even though it did reduce the number of short-term psychiatric beds from 30 to 25 in 1986. The occupancy rate for Wuesthoff's short-term psychiatric unit in 1987 was 70.6%. The prime service areas of Wuesthoff and Jess Parrish as to psychiatric admissions do not substantially overlap. Although Jess Parrish may be expected to draw more patients from Wuesthoff's prime service area following commencement of the new operation, many of Jess Parrish's patients will be from the indigent and Medicaid payor classes for which the competition is not intense. The addition of a 16-bed short-term psychiatric unit at Jess Parrish will not materially influence the availability of qualified personnel for Wuesthoff. It appears that Jess Parrish will be able to staff the relatively small 16-bed unit without employing significant numbers of professional employees of Wuesthoff. Some of the relatively few patients whom Wuesthoff can be expected to lose to Jess Parrish involve referrals from Titusville-area physicians, psychiatrists, and psychologists, who will place their patients in the closer facility once it is opened. The negative impact upon Wuesthoff is outweighed in these cases by gains for the patients in continuity of care and community support. Financial Feasibility The short-term financial feasibility is good. Jess Parrish has available to it sufficient funds to undertake the relatively modest capital outlay in constructing the facility, which will consist of about 8000 square feet on an existing floor of the hospital. The long-term financial feasibility is generally good. The financial projections are based on reasonable assumptions, which are largely derived from the actual experience of Circles of Care. The projections accurately estimate revenue sources and expenses. Jess Parrish reasonably projects an adequate supply of patients from a combination of sources, including Circles of Care, existing patients whose diagnoses include psychiatric components, and numerous health-care professionals in north Brevard County. The financial projections contemplate a material contribution by Circles of Care, but project no compensating expenditures. However, this deficiency is largely offset by the likelihood that the financial participation of Circles of Care will be restricted to a share of any excess of revenues over expenses of the new project, possibly excluding reimbursement of fairly minor expenses. If that is the case, the effect of any management agreement would be only to reduce the excess of revenues over expenses enjoyed by Jess Parrish from the operation of the short-term psychiatric unit. The management agreement would not expose Jess Parrish to losses that would not have otherwise existed but for the agreement to make payments to Circles of Care. Under these circumstances, the omission of the information, although material, does not seriously cast into doubt the long-term financial feasibility of the project. Quality of Care The quality of hospital care offered by Jess Parrish is excellent. The quality of the various psychiatric services offered by Circles of Care is also excellent. Both facilities are accredited by the Joint Commission on the Accreditation of Hospitals. The issue in this case involves the quality of care to be expected in the 16-bed short-term psychiatric unit for which Jess Parrish seeks a certificate of need. Circles of Care and Jess Parrish have agreed that Circles of Care will be responsible for recruiting most of the personnel for the new program and will employ the program's medical director, who will be responsible for treatment decisions. In addition, Circles of Care will advise Jess Parrish as to the adoption of policy, which will remain ultimately the responsibility of Jess Parrish. Jess Parrish will employ the head nurse and all other full-time professional staff working in the unit. The tentativeness of the arrangement between Circles of Care and Jess Parrish is partly explained by the desire of both parties to avoid the time and expense of negotiating an agreement in every detail prior to obtaining final approval of the certificate of need. In addition, both organizations were devoting substantial time to the subject litigation, for which Circles of Care was paying a portion of the expenses. In the final analysis, the failure to work out the agreement, although not a positive feature of the application, is not a serious problem for two reasons. First, Circles of Care and Jess Parrish have a long history of mutual cooperation. The relationship began when Jess Parrish leased Circles of Care 16 hospital beds for psychiatric use. Although the arrangement ended several years ago when Circles of Care constructed its Melbourne facility, the two organizations have since cooperated in several less intensive ways. Second, although Circles of Care has superior expertise in the area of mental health, Jess Parrish qualifies by itself to operate the proposed facility. Circles of Care has already provided much of the necessary technical information required for the preparation of budgets and pro formas. Recruiting would probably take somewhat longer without Circles of Care, but the modest construction budget obviously does not involve significant debt service, so that the delay would not be costly. Perhaps the most significant loss from a quality-of-care perspective would be the medical director, whose expertise will be critical. Again, this would be largely a problem of delay only, as Jess Parrish would have to find a replacement, although it appears likely that the director may be Dr. David Greenblum, who is already a member of the active medical staff at Jess Parrish. Given the quality of care provided by Jess Parrish in the past, there is no basis for any concern that, in the unlikely event that the parties fail to negotiate an agreement, Jess Parrish would jeopardize its reputation as a quality 200-bed general hospital in order to commence prematurely a 16-bed short- term psychiatric unit. Other Factors The record does not demonstrate that there are less costly, more efficient, or more appropriate alternatives to the inpatient services proposed in the subject application. There are no crisis stabilization units or short-term residential treatment programs available in Brevard County. The proposed project will have a measurable impact only upon Circles of Care, whose existing inpatient facilities will be enhanced, and Wuesthoff, whose existing inpatient facilities will not be materially affected. In general, these existing services are being used in an appropriate and efficient manner. On the other hand, the beds that Jess Parrish seeks to convert are underutilized in their present designation. The medical/surgical beds at Jess Parrish have been utilized at a rate of less than 60% over the past three years. There are no feasible alternatives to renovation of the existing facilities. The costs and methods of proposed construction are reasonable and appropriate. The approval of the application will foster healthy competition in the area of short-term psychiatric services and promote quality assurance.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Department of Health and Rehabilitative Services enter a Final Order granting the application of Jess Parrish for a certificate of need to convert 16 medical/surgical beds to 16 short-term adult psychiatric beds. DONE and ENTERED this 30th day of June, 1989, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of June, 1989. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-1220 Treatment Accorded Proposed Findings of Jess Parrish 1-6 Adopted or adopted in substance. 7-8 Rejected as irrelevant. 9-10 Adopted or adopted in substance. 11 Rejected as recitation of testimony and subordinate. 12-13 Adopted or adopted in substance. Rejected as irrelevant. Adopted to the extent of the finding in the Recommended Order that there likely will be an agreement between Circles of Care and Jess Parrish. Rejected as unsupported by the evidence that such an agreement exists already. Also rejected as unnecessary insofar as the application can stand on its own without the participation of Circles of Care. 15a Adopted or adopted in substance. 15b-15c Rejected as irrelevant. 15d-15g Adopted in substance, although certain proposed facts rejected as subordinate. However, the first sentence of Paragraph 15f is rejected as against the greater weight of the evidence. 15h Rejected as recitation of testimony. 16-18 Adopted or adopted in substance except that all but the last sentence of Paragraph 18g. is rejected as against the greater weight of the evidence and legal argument. 19 First sentence adopted. 19 (remainder) -22. Rejected as subordinate and recitation of evidence. Generally adopted, although most of the facts are rejected as subordinate in the overall finding and cumulative. Adopted except that sixth sentence is rejected as against the greater weight of the evidence and the seventh sentence is rejected as subordinate. Adopted in substance. First sentence adopted. Remainder rejected as irrelevant. Rejected as irrelevant. Adopted. 28a Rejected as unsupported by the greater weight of the evidence. 28b-28d Adopted or adopted in substance. and 31 Rejected as subordinate. Rejected as unnecessary. 32-50 Adopted or adopted in substance. Treatment Accorded Proposed Findings of HRS 1-11 Adopted or adopted in substance. & 14 Rejected as irrelevant. & 15-16 Adopted. 17 Rejected as unnecessary. 18-74 See rulings on Paragraphs 16-50 in preceding section. Treatment Accorded Proposed Findings of Wuesthoff 1-3 Adopted or adopted in substance. Rejected as irrelevant. Rejected as against the greater weight of the evidence and legal argument. 6-10 & 12 Adopted or adopted in substance. 11 Rejected as against the greater weight of the evidence. Rejected as recitation of testimony and cumulative. Rejected as cumulative except that second sentence is adopted. Rejected as recitation of testimony. Rejected as cumulative, subordinate, and legal argument. Rejected as cumulative except that second sentence is adopted. First clause rejected as against the greater weight of the evidence. Remainder rejected as irrelevant. Rejected as cumulative and subordinate. 20-23 Rejected as irrelevant and unnecessary. Rejected as against the greater weight of the evidence. Rejected as irrelevant and unnecessary. Rejected as cumulative. 27-28 Rejected as irrelevant and unnecessary. 29 Rejected as legal argument. 30-32 Rejected as irrelevant. 33-41 Rejected as against the greater weight of the evidence and subordinate. 42 and 51 Rejected as recitation of evidence. 43-45 Rejected as against the greater weight of the evidence. 46 Rejected as legal argument. 47-50 and 52-54 Rejected as subordinate. 55 Rejected as against the greater weight of the evidence. 56-59 Rejected as irrelevant. 60-66 Rejected as subordinate and recitation of testimony. 67-69 Rejected as against the greater weight of the evidence. 70-73 Rejected as against the greater weight of the evidence and subordinate. 74-78 Adopted. 79 Rejected as against the greater weight of the evidence. 80-82 Adopted. 83-85 Rejected as against the greater weight of the evidence. 86 Rejected as subordinate and against the greater weight of the evidence. 87-91 Adopted or adopted in substance. 92 Rejected as against the greater weight of he evidence. 93-94 Rejected as subordinate. Rejected as against the greater weight of the evidence. Rejected as irrelevant. 97-98 Rejected as against the greater weight of the evidence. Rejected as irrelevant. Rejected as subordinate. 101-102 Rejected as against the greater weight of the evidence. Rejected as partly cumulative and partly legal argument. Rejected as against the greater weight of the 105 evidence Rejected and irrelevant. as against the greater weight of the 106-108 evidence. Rejected as subordinate. 109 110-113 Rejected evidence. Rejected as against the greater weight of as subordinate. the 114-117 118-120 Rejected evidence. Rejected as against the greater weight of as irrelevant and subordinate. the 121-122 Rejected as subordinate. 123 124-125 First sentence adopted in substance. Remainder rejected as subordinate. Rejected as subordinate. 126-129 Rejected as unsupported by the greater weight of evidence. the COPIES FURNISHED: Anthony Cleveland W. David Watkins Oertel, Hoffman, Fernandez & Cole, P.A. Post Office Box 6507 Tallahassee, Florida 32314-6507 John Rodriguez 1323 Winewood Boulevard Building 1, Room 407 Tallahassee, Florida 32399-0700 William B. Wiley Darrell White McFarlain, Sternstein, Wiley & Cassedy, P.A. Post Office Box 2174 Tallahassee, Florida 32316-2174 Stephen M. Presnell MacFarlane, Ferguson, Allison & Kelly Post Office Box 82 Tallahassee, Florida 32302 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
