Findings Of Fact I The Parties Charter Medical of Orange County, Inc., (Charter) is a wholly-owned subsidiary of Charter Medical Corporation, founded in Macon, Georgia in 1969. The parent corporation operates approximately 92 hospitals throughout the country, including Florida. Most of its hospitals are psychiatric or substance abuse facilities. Orlando Regional Medical Center (ORMC) is a 1,119- bed, nonprofit medical system comprised of four divisions. In downtown Orlando it operates a 630-bed tertiary care hospital and a 255-bed Arnold Palmer Hospital for women and children. A Sand Lake campus is located 10 miles southwest of Orlando, off I-4, and includes medical/surgical beds and 32 licensed short-term psychiatric beds. ORMC's St. Cloud Campus in Osceola County, south of Orlando, includes 84 medical/surgical beds. The Department of Health and Rehabilitative Services (HRS) is the state agency responsible for implementing and enforcing the certificate of need program pursuant to Sections 381.701-.715, F.S. Psychiatric Institute of Orlando, Inc., d/b/a Laurel Oaks Hospital, (Laurel Oaks) is a subsidiary of P1A Psychiatric Hospitals, Inc., which is a subsidiary of National Medical Enterprises (NME). P1A owns approximately 50 psychiatric hospitals throughout the county, including (30-bed Laurel Oaks, in southwest Orange County, a short-term psychiatric and substance abuse facility for children and adolescents Health Management Associates, Inc., (HMA) is a health management company which owns or operates 16 hospitals in the southeastern United States, including four psychiatric hospitals in Florida. HMA's Crossroads University Behavioral Center is a 100-bed free-standing psychiatric hospital in northeast Orange County. Its 60 adult beds and 40 adolescent beds opened in January 1989 as a licensed long-term facility, but it has been operating continually as a short-term facility. The Applications Charter proposes to develop a new free-standing 60- bed psychiatric hospital (40 beds for adults, 10 beds for adolescents and 10 beds for children). It plans a wide range of treatment modalities utilizing a multi-disciplinary team approach, tailored to the age and needs of the patient. Although no specific site has been selected, several have been identified in southwest Orange County. Charter anticipates the total cost for the project will be $7,783,000. Charter's patients will be primarily commercially insured (71%), with 15% Medicare and 4% indigent. Charter has committed to serve this share of indigent for the first two years of operation. As a specialty hospital, Charter is not eligible to accept Medicaid patients. ORMC proposes to build a 60-bed free-standing facility on a 7.2 acre site within 40 acres it already owns at Sand Lake and adjacent to its existing Sand Lake Hospital, for a total project cost of $6,678,935. No new licensed beds are required as ORNC will transfer its 32 short term beds from the sixth floor of the Sand Lake Hospital and will convert 28 of its licensed medical/surgical beds from its downtown hospital. The 60 beds will consist of 30 adult and 30 adolescent short term beds. Since the existing 32 beds are primarily adult beds, ORMC's project will be adding adolescent beds to the inventory in District 7. Proximity to Sand Lake Hospital will facilitate shared services, including engineering, dietary and laundry. ORMC also expects the joint use of therapists at its psychiatric facility and its existing brain injury rehabilitation unit at Sand Lake. Because the facility will be added to ORMC's general hospital license, it can and will accept Medicaid patients. ORMC has committed to serve 20% Medicare, 8% Medicaid and 8% indigent patients. ORMC will likely seek an outside management firm to operate its psychiatric facility. The Review On August 23, 1988, HRS published a need for 140 short-term psychiatric beds in District 7. Its SAAR issued in January 1989, recommended approval of a total of 137 beds. When the SAAR was amended in March 1989, to include the Charter approval, the total surged to 197 approved beds. Even after First Hospital withdrew its application for 55 beds, the total approved exceeded the published need for the 1993 horizon year by two beds. Numeric Need The short-term psychiatric bed need rule is found at Rule 10- 5.011(1)(o) , F.A.C. "Short-term" is defined as an average length of stay of 30 days or less for adults, and 60 days or less for children and adolescents under 18 years. A favorable need determination will not normally be given to an applicant unless a bed need exists according to sub-paragraph (1)(o)4 of "the rule". Rule 10-5.011(1)(0)4, F.A.C. provides as follows: Bed allocations for acute care short term general psychiatric services shall be based on the following standards: A minimum of .15 beds per 1,000 population should be located in hospitals holding a general license to ensure access to needed services for persons with multiple health These beds shall be designated as short term inpatient hospital psychiatric beds. 20 short term inpatient hospital beds per 1,000 population may be located in specialty hospitals, or hospitals holding a general license. The distribution of these beds shall be based on local need, cost effectiveness, and quality of care considerations. The short term inpatient psychiatric bed need for a Department service district shall be projected 5 years into the future based on the most recent available January or July population estimate prior to the beginning to the respective batching cycle. The projected number of beds shall be based on a bed need ratio of .35 beds per 1,000 population. These beds are allocated in addition to the total number of general acute care hospital beds allocated to each Department District under Paragraph 10-5.011(1)(m). The net need for short term psychiatric beds shall be calculated by subtracting the number of licensed and approved beds from the number of projected beds. The population estimates are based on population projections by the Executive Office of the Governor. Occupancy Standards. New Facilities must be able to project an average 70% occupancy rate for adult psychiatric beds and 60% for children and adolescent beds in the second year of operation, and must be able to project an average 80% occupancy rate for adult beds and 70% for children and adolescent short term psychiatric inpatient hospital beds for the third year of operation. No additional short term inpatient hospital adult psychiatric beds shall normally be approved unless the average annual occupancy rate for all existing adult short term inpatient psychiatric beds in a service district is at or exceeds 75% for the preceding 12 month period. No additional beds for adolescents and children under 18 years of age shall normally be approved unless the average annual occupancy rate for all existing adolescent and children short term hospital inpatient psychiatric beds in the Department district is at or exceeds 70% for the preceding 12 month period. Hospitals seeking additional short term inpatient psychiatric beds must show evidence that the occupancy standard defined in paragraph six is met and that the number of designated short term psychiatric beds have had an occupancy rate of 75% or greater for the preceding year. Unit size. In order to assure specialized staff and services at a reasonable cost, short term inpatient psychiatric hospital based services should have at least 15 designated beds. Applicants proposing to build a new but separate psychiatric acute care facility and intending to apply for a specialty hospital license should have a minimum of 50 beds. The parties do not dispute that application of the formula yields a need for 140 beds, the total published in the applicable fixed need pool. Nor do the parties dispute that the occupancy standard was met, since HRS uses the lower standard of 70% as a threshold for determining whether need should be published. The parties agree that approval of both Charter's and ORMC's applications results in an excess of two beds over the published need. There is substantial dispute as to whether that excess is justified, and as to the composition of the beds as "speciality hospital" or "general hospital" beds. The only provision in agency rules or policy for exceeding bed need calculations is when "not normal" or "special" circumstances exist in the District. HRS' Policy Manual for the Certificate of Need program, dated October 1, 1988, provides in Section 9-6 B. (3): If a qualified applicant exist but the proposed project exceeds the beds or services identified in the fixed need pool, the department may award beds or services in excess of the pool when warranted by special circumstances as defined in rule 10- 5.011(1)(b), 1-4, F.A.C. and, specifically for nursing homes Rule 10-5.011(1)(K)2.j. F.A.C. (Laurel Oaks Exhibit #10, P. 9-2) The referenced sections of Rule 10-5.011(1)(b), F.A.C., relate to the enhancement of access--primarily economic access and access by underserved groups. Access is addressed in Part VII, below. No evidence was presented regarding special problems of access in District 7. Rather, HRS asserts that its excess approval was based on "rounding up" the numbers of beds, and on the favorable occupancy rates in the district. In its SAAR, HRS calculated the following occupancy rates by age cohort in the district: Adult 75.8% Child/Adolescent 74.8%; and in Orange County: Adult 57.4% Child/Adolescent 100. The adult rate is therefore slightly above the 75% minimum in the district, and substantially below the minimum in Orange County. The child/adolescent rate is above the 70% minimum in both the district and county. HRS appropriately does not utilize occupancy in beds other than licensed short term psychiatric bed in calculating its rates as it would be difficult to compute the number of available beds (medical/surgical, long term psychiatric, etc.). The rule specifies that a minimum of .15 beds per 1000 population "should" be allocated to hospital1s holding a general license and that .20 beds per 1000 population may be located in either speciality hospitals or hospitals holding a general license. Of the 140 beds needed in District 7, 75 may be located in a speciality hospital under this formula. 30 speciality beds were awarded to West Lake and are unchallenged. The Charter application for 60 speciality beds exceeds by 15, the 45 speciality beds left to be allocated. The State and Local Health Plans The State Health Plan is dated 1985-1987. Goal 1 is the only portion of the plan that is relevant in this review. It essentially reiterates the need methodology described above, regarding the .35 beds per 1000 population and the 70% and 75% annual occupancy thresholds. The applicable local health plan is the 1988 local health plan for District 7. This plan divides the district into "planning areas": Brevard, Osceola, Seminole and Orange -- the four counties within the district. Planning areas, unlike subdistricts, are more in the nature of guidelines and do not carry the same legal weight as subdistricts. Both applicants are committed to submit data to the local health councils, as provided in recommendation #2. Both applicants have committed to provide a fair share of care to the underserved, although ORMC's commitment is substantially greater and has a proven record to support it. Recommendation #5 provides that no new short-term psychiatric or substance abuse beds shall be approved until all existing beds in the planning area are operating at or above 75% occupancy for the most recent twelve months for which data is available from the local health council. This criteria is barely met when adult and children/adolescent occupancy is combined, and is not met by the occupancy rate for adult beds in Orange County. Financial Feasibility The pro formas of both applicants, which are no more than best guess estimates, are generally reasonable, based upon the experience of the applicants' existing programs. Charter's proposal makes no provision for management fees, although such fees are remitted to the parent company by its subsidiaries and are reported to the Health Care Cost Containment Board. Charter anticipates that it would not incur additional corporate overhead to support this facility if it is built. In recent years ORMC's psychiatric unit has lost money in its operation when overhead is factored into the cost. Its Program Director, Jeffrey Oppenheim, reasonably anticipates the new facility will make a profit, as it will serve a better mix of age cohorts and will offer a more desirable setting than its limited facility now located on the sixth floor of a medical/surgical hospital. The financial feasibility of both applications depends on the programs' ability to attract patients. That ability is not seriously questioned. Both applications have substantial experience in operating financially efficient health care programs. Quality of Care and Accessibility No evidence was presented to challenge either applicant's ability to provide quality care. Nor, however, was the quality of care of existing alternative programs at issue. Geographic access in District 7 is not a problem, and none suggests that the access standard in Rule 10-5.011(1)(o)5.g., F.A.C., is not met (travel time of 45 minutes or less for 90% of the service area population). Charter's inability to provide Medicaid services and its time-limited commitment to serve even 4% indigents amount to only minimal contribution to the economically underserved population. In the past, ORMC has been a receiving facility for Baker Act patients and it anticipates it will again when the psychiatric program has its new quarters. It is only one of two hospitals in Orange County eligible to provide Medicaid services and is the fifth highest provider of charity and Medicaid in the State of Florida, according to Medical Health Care Cost Containment Board data. Impact on Existing Facilities and Competition Positive competition among providers already exists in District 7. There are eleven existing short term psychiatric programs in the four-county area, including both speciality and general hospitals, and adult, children and adolescent programs. Only three obtained an occupancy rate of more than 75% for the fiscal period ending June 1988. The Availability of Health Manpower There is a shortage of nurses, qualified social workers and counsellors in District 7. HMA has experienced problems in recruiting staff at its Orlando facility. Competition for these staff has caused salaries to rise, and consequently the cost of providing services has risen. Turnover results when staff are attracted to new facilities, causing training problems and affecting quality of care. Charter has the corporate resources to conduct effective recruiting, but has no experience recruiting in the Orlando area. ORMC, a large diverse facility, with good opportunity for lateral and upward mobility, has experienced few problems staffing its programs. The Availability of Alternatives Eight of eleven District 7 short term psychiatric facilities have operated below 75% occupancy in the last two years. These under-utilized facilities are plainly alternatives for new projects proposing the same services. Neither applicant is proposing novel or innovative services in psychiatric care. That licensed long term psychiatric facilities such as HMA, are operating short term programs does not justify the approval of new short term beds, but rather suggests these programs could be converted, with little or no capital outlay, into short term programs. Conversion of under-utilized acute are beds to short term psychiatric beds is also an alternative in District 7. Acute care bed occupancy rates in each county of District 7 failed to reach 60% in the most recent 12-month period of available data. The criterion of Rule 10-5.011(1)(o)5.f., F.A.C. favors the conversion of under-utilized beds in other hospital services unless conversion costs are prohibitive. There has been a trend in the last several years away from inpatient care and toward less restrictive treatment modalities. Both applicants acknowledge this trend with their inclusion of partial hospitalization programs in their plans. ORMC has no reasonable alternative to building a new facility if it is to maintain its inpatient psychiatric program. There is an increasing demand for the medical surgical beds it currently occupies on the sixth floor of Sand Lake Hospital. There is no appropriate space in its downtown facilities. Balancing the Criteria Comparative Review and Summary As reflected above, not all of the relevant statutory and rule criteria have been met by these applicants. There remains, however, the planning horizon numerical need for additional short term psychiatric beds. While that need could likely be met with the utilization of beds that are not licensed for the provision of short term care, such a solution frustrates state licensing requirements. Three alternative dispositions exist: to deny both ORMC and Charter applications, leaving an unmet need in this cycle for 86 beds; to grant one application only; or to approve both and exceed the need by two beds. HRS argues that the two-bed difference is of little consequence and that the excessive number of specialty beds if Charter is approved is irrelevant, as no general hospital is currently competing for the beds. It is not possible to conjecture that appropriate general hospital applicants will participate in a near future cycle, but it is certain that if those beds are awarded in this cycle to a specialty hospital, they will not be available in a future cycle. Nothing requires that all beds identified in a fixed pool must be awarded in that cycle. The converse follows when, as here, other considerations weigh against approval of additional beds. Between the two applicants, ORMC more consistently meets the rule and statutory criteria. Although it still proposes a substantial capital outlay, (ORMC) relies on conversion of existing licensed beds and results in less impact on other existing programs. Its contribution to the underserved population is more substantial; it proposes more needed adolescent, rather than adult beds; and it does not violate the .15/.20 general hospital, specialty hospital bed balance. That balance needs to be maintained in this case to insure competition among Medicaid providers. In summary, the evidence supports approval of ORMC's application and denial of Charter's.
Recommendation Based on the foregoing, it is hereby, RECOMMENDED That a Final Order be entered denying CON number 5691 to Charter Medical of Orange County, Inc.; and granting CON #5697 to Orlando Regional Medical Center. DONE AND RECOMMENDED this 15th day of February, 1990, in Tallahassee, Leon County, Florida. MARY CLARK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of February, 1990. APPENDIX TO THE RECOMMENDED ORDER IN CASES NO. 89-1358,89-1366.89-1368,89-2039 & 89-2041 The following constitute rulings on the findings of fact proposed by each party: Charter Medical of Orange County, Inc. Adopted in substance in paragraph 1. Adopted in substance in paragraph 2. Adopted in paragraph 3. Adopted in paragraph 4. Adopted in paragraph 5. 6.-17. Adopted in statement of the issues. 18. Adopted in paragraphs 6 and 7. 19.-36. Rejected as unnecessary, except as summarized in paragraph 6. 37. Addressed in paragraph 30. 38.-5O. Rejected as unnecessary, except as summarized in paragraph 36. 51.-57. Rejected as unnecessary, except at summarized in paragraph 7. 58.-6I. Adopted in paragraph 16. 62.-69. Rejected as unnecessary and contrary to the methodology in the rule. 70. Adopted in substance in paragraph 16. 71.-77. Rejected as unnecessary. 78. Rejected as contrary to the evidence and law. "Not normal" does not include high occupancy rates in several facilities. 79.-8I. Adopted in summary in paragraph 21. 82.-83. Rejected as immaterial. The evidence in this case supports maintenance of the balance, notwithstanding past practice. 84. Adopted in paragraph 15. 85.-103. Rejected as unnecessary. 104. Rejected as contrary to the law and evidence. 105. & 106. Adopted in paragraph 22. 107.-109. Adopted in paragraph 23. 110. & 111. Rejected as unnecessary. 112. & 113. Adopted in paragraph 24. Rejected as unnecessary. Adopted in substance in paragraph 25. 116.-149. Rejected as unnecessary. 150. Adopted in substance in paragraphs 26 and 29. 151.-161. Rejected as unnecessary. 162.-164. Adopted in substance in paragraph 27. 165.-171. Rejected as unnecessary. 172. Rejected as contrary to the evidence. 173.-180. Rejected as immaterial and unnecessary. 181. Adopted in paragraph 5. 182.-190. Rejected as unnecessary. Adopted in substance in paragraph 43. Rejected as contrary to the evidence. 193.-198. Rejected as unnecessary. 199. Rejected as contrary to the evidence. 200.-206. Rejected as unnecessary. Rejected as contrary to the evidence. Rejected as unnecessary. Adopted in paragraph 8. 210.-213. Rejected as unnecessary. 214. Adopted by implication in paragraph 33. 215.-218. Rejected as unsupported by the weight of evidence. Rejected as unnecessary. & 221. Rejected as contrary to the weight of evidence. 222. Adopted in summary in paragraph :28. 223.-238. Rejected as unnecessary. Orlando Regional Medical Center Adopted in paragraph 2. Adopted in paragraph 9. 3.-7. Rejected as unnecessary. Adopted in paragraph 9. Rejected as unnecessary. Adopted in substance in paragraph 42. Rejected as unnecessary. Adopted in substance in paragraph 42. Adopted in summary in paragraph 12. Adopted in paragraph 1. Rejected as ummaterial. Adopted in paragraph 6. Adopted in paragraph 4. Adopted in paragraph 15. Addressed in the preliminary statement. Adopted in paragraph 14. Rejected as unnecessary. 22.-24. Adopted in summary in paragraph 16. Adopted in paragraph 15 and conclusion of law #7. Adopted in substance in paragraph 21. Adopted in paragraph 15. Rejected as unnecessary. 29 & 30. Adopted in paragraph 9. Adopted in paragraph 20. Adopted in paragraph 22. Rejected as unnecessary. Adopted in paragraph 23. Adopted in paragraph 23. 36 & 37. Adopted in paragraph 24. Adopted in paragraph 11 and 33. Adopted in paragraph 8. Adopted in paragraph 11. 41 & 42. Rejected as unnecessary. Adopted in summary in paragraph 25. Rejected as unnecessary. Rejected as cumulative and unnecessary. Rejected as unnecessary. Adopted in summary in paragraph 26. 48.-52. Rejected as unnecessary. Adopted in paragraph 10. Rejected as contrary to the weight of evidence (the finding as to no alternatives). The finding regarding Park Place is unnecessary. Rejected as cumulative and unnecessary. Adopted in paragraph 42. Rejected as cumulative and unnecessary. Adopted in paragraph 9. Adopted in paragraph 7. Adopted in paragraph 36. Rejected as cumulative and unnecessary. Adopted in paragraph 30. 63.-66. Rejected as unnecessary. 67. Adopted in paragraph 47. The Department of Health and Rehabilitative Services 1. & 2. Addressed in Preliminary Statement. Adopted in paragraphs 6. and 9. Adopted in paragraph 24. Adopted in paragraph 20. Adopted in paragraph 36. 7.-9. Rejected as contrary to the weight of evidence. Adopted in paragraph 30. Rejected as contrary to the weight of evidence. Rejected as unnecessary. Adopted in paragraph 26. Rejected as contrary to the evidence. Adopted in paragraph 33. Adopted in substance in paragraph 32. Adopted by implication in paragraphs 30 and 34. Rejected as contrary to the evidence. Adopted in summary in paragraph 13. Adopted in paragraph 15. Rejected as contrary to the weight of evidence. Rejected as contrary to the evidence. The policy is found in HRS' Policy Manual. Rejected as immaterial. Adopted in paragraph 21. Rejected as unnecessary. 26 & 27. Adopted by implication in 23. Rejected as unnecessary. Rejected as contrary to the evidence. Rejected as immaterial. Rejected as unnecessary. Rejected as contrary to the evidence. 33 & 34. Rejected as unnecessary. Adopted in summary in paragraph 46. Rejected as contrary to the evidence, and immaterial (as to the ratio). Rejected as contrary to the definition "not normal" and immaterial. 38 & 39. Rejected as argument. Adopted in paragraph 16. Adopted in paragraph 20. Rejected as unnecessary. 43 & 49. Rejected as argument. Laurel Oaks Hospital Adopted in paragraph 1. Adopted in paragraph 2. Adopted in paragraph 3. Adopted in paragraph 4. Adopted in paragraph 5. Rejected as unnecessary. Adopted in paragraph 13. & 9. Addressed in Preliminary Statement. 10. Adopted in paragraph 18. 11.-21. Rejected as unnecessary and immaterial. Adopted in paragraph 6. Adopted in paragraph 8. Adopted in paragraph 7. Adopted in paragraph 9. Adopted in paragraph 11. Adopted in paragraph 9. Adopted in paragraph 10. Adopted in paragraph 11. Adopted in paragraph 9. Adopted in paragraph 14. Rejected as unnecessary. Rejected as contrary to the evidence. The term is "should", not "shall". Adopted in paragraph 15. 36 Adopted in paragraph 13. 37.-40. Adopted in paragraph 16. 41 & 42. Adopted in paragraph 18. 43 & 44. Rejected as immaterial and unnecessary. 45.-47. Rejected as argument and unnecessary. 48 & 49. Adopted in paragraph 21. Rejected as unnecessary. Adopted in substance in paragraph 16. 52 - 54. Rejected as unnecessary. 55 & 56. Adopted in summary in paragraph 20. 57.-61. Rejected as unnecessary or argument. 62.-65. Adopted in summary in paragraphs 20 and 23. 66 & 67. Adopted in paragraph 22. 68. Adopted in paragraph 23. 69.-72. Rejected as unnecessary or cumulative. 73 & 74. Adopted in substance in paragraph 24. 75. Rejected as contrary to the evidence. 76.-78. Rejected as unnecessary. Rejected as contrary to the evidence. Adopted in paragraphs 30 and 31. Adopted in paragraph 37. 82.-85. Rejected as unnecessary. 86. Adopted in paragraph 30. 87 & 88. Rejected as unnecessary. Adopted in paragraph 34. Adopted in paragraph 41. Adopted in paragraphs 38 and 39. 92.-95 Rejected as immaterial and unnecessary. Adopted in substance in paragraph 39. Adopted in paragraph 35. Adopted in paragraph 30. Rejected as cumulative. Rejected as contrary to the evidence. 101-112. Rejected as unnecessary. Adopted in paragraph 27. Rejected as unnecessary. Adopted in paragraph 35. 116-121. Rejected as cumulative or unnecessary. Health Management Associates1 Inc:. (HMA) 1. & 2. Adopted in paragraph 6. Adopted in paragraph 1. Adopted in paragraph 6. 5.-6. Rejected as unnecessary. 7.-11. Adopted in paragraph 9. Adopted in paragraph 10. Adopted in paragraph 12. Rejected as unnecessary. Adopted in paragraph 16. Adopted in paragraphs 15 and 23. Adopted in paragraph 25. Adopted in paragraph 16. Adopted in paragraphs 16 and 18. 20 Adopted in paragraph 19. Adopted in paragraph 15. Adopted in paragraph 21. 23 & 24. Rejected as unnecessary. 25 & 26. Adopted in paragraph 5. 27.-51. Rejected as unnecessary. 52. Adopted in paragraph 35. 53.-55. Rejected as unnecessary. COPIES FURNISHED: Stephen A. Ecenia, Esquire Michael J. Cherniga, Esquire Roberts, Baggett, LaFace & Richard 101 East College Avenue Tallahassee, FL 32301 James M. Barclay, Esquire Cobb, Cole & Bell 315 South Calhoun Street Tallahassee, FL 32301 Steven R. Bechtel, Esquire Mateer, Harbert & Bates 225 East Robinson Street Orlando, FL 32802 Edgar Lee Elzie, Esquire MacFarlane, Ferguson, Allison & Kelly First Florida Bank Building, Suite 804 Tallahassee, FL 32401 C. Gary Williams, Esquire R. Stan Peeler, Esquire Ausley, McMullen, McGehee, Carothers & Proctor 227 South Calhoun Street Tallahassee, FL 32301 John Brennan, Jr., Esquire Bonner & O'Connell 900 17th street, Suite 1000 Washington, D.C. 20006 Robert S. Cohen, Esquire Haben & Culpepper 306 North Monroe Street Tallahassee, FL 32301 John Miller, General Counsel HRS 1323 Winewood Blvd. R. S. Power, Agency Clerk HRS 1323 Winewood Blvd. Tallahassee, FL 32399-0700
The Issue The issue is whether the Agency for Health Care Administration should approve Petitioner’s application for a Certificate of Need to establish a 54-bed freestanding long-term care hospital in Escambia County.
Findings Of Fact Parties Select-Escambia is a subsidiary of Select Medical Corporation (Select), which has been in the business of operating LTCHs since the 1980’s. Select currently operates 99 LTCHs in 27 states, including three in Florida. Select’s Florida LTCHs are located in Orlando, Miami, and Panama City. The Orlando and Panama City LTCHs were formerly operated by SemperCare, Inc. (SemperCare), which Select acquired in January 2005. Three other Select LTCHs –- in Tallahassee, Orlando, and Alachua County -- have been approved by the Agency, but are not yet operational. The Tallahassee LTCH, which was also formerly a SemperCare facility, was originally projected to open in 2006, but that date is no longer certain. The Agency is the state agency responsible for administering the CON program and for licensing LTCHs and other health care facilities. Application Submittal and Review and Preliminary Agency Action In the second batching cycle of 2004 for hospital beds and facilities, Select-Escambia filed with the Agency an application for a CON to establish a 54-bed freestanding LTCH in Escambia County. There were no co-batched applications comparatively reviewed by the Agency with Select-Escambia's application, CON 9800. Select-Escambia’s application was complete, and it satisfied the applicable submittal requirements in the statutes and the Agency's rules. The Agency’s review of Select-Escambia’s application complied with the applicable statutory and rule requirements. The Agency’s review culminated in a SAAR issued on December 10, 2004. The SAAR recommended denial of CON 9800, primarily based upon Select-Escambia’s failure to demonstrate to the Agency’s satisfaction that there is a need for the proposed Escambia County LTCH. The determination in the SAAR that Select-Escambia failed to adequately demonstrate need for its proposed LTCH was largely based upon a 2004 report by MedPAC, which is an organization that advises Congress on issues related to Medicare. The MedPAC report concluded that LTCH patients need to be better defined so as to ensure that the patients treated at LTCHs are of the highest severity and cannot be more cost- effectively treated in other care settings. The Agency formally published notice of its intent to deny CON 9800 in the Florida Administrative Weekly, and Select- Escambia thereafter timely filed a petition challenging the Agency’s denial of its application. The Agency reaffirmed its opposition to Select- Escambia’s application at the hearing through the testimony of Jeffrey Gregg, the bureau chief over the Agency’s CON program. LTCHs Generally An LTCH is defined by statute and Agency rule as “a hospital licensed under chapter 395 which meets the requirements of 42 C.F.R. s. 412.23(e) and seeks exclusion from the Medicare prospective payment system for inpatient hospital services.” LTCHs provide extended medical and rehabilitative care to patients with multiple, chronic, and/or clinically complex acute medical conditions. They serve a patient population whose average length of stay (ALOS) exceeds 25 days. There are two types of LTCHs: hospital-within-a- hospital (HIH) and freestanding. Both types are accepted in the industry, and both types are found in Florida and nationwide. HIH LTCHs are located in the same building or on the same campus as a traditional acute care hospital, which is referred to as the “host hospital.” HIH LTCHs contract with the host hospital for ancillary services such as laboratory and radiology services. HIH LTCHs get the vast majority of their admissions from the host hospital, whereas freestanding LTCHs tend to get their admissions from a number of different hospitals. LTCHs fit into the continuum of care between traditional acute care hospitals and traditional post-acute care facilities such as nursing homes, skilled nursing facilities (SNFs), hospital-based skilled nursing units (SNUs), and comprehensive medical rehabilitation (CMR) facilities. LTCHs are designed to serve patients that would otherwise have to be maintained in a traditional acute care hospital (often in the ICU) where the reimbursement rates may be insufficient to cover the costs associated with a lengthy stay, or be moved to a traditional post-acute care facility where the patient may not receive the level of care needed. Patients with co-morbidities, complex medical conditions, or frailties due to age are typically appropriate LTCH patients, particularly if the patient would otherwise remain in the ICU of a traditional acute care hospital. For such patients, an LTCH is likely the most appropriate setting from both a financial and patient-care standpoint. There is a distinct population of patients who, because of the complexity or severity of their medical condition, are best served in an LTCH. However, there is an overlap between the population of patients that can be served in an LTCH and the population of patients that could also be well- served in the ICU of an acute care hospital or a traditional post acute care setting with ventilator capability. Indeed, as noted in the MedPAC report, “[i]n the absence of LTCHs, clinically similar patients are principally treated in acute hospitals or in freestanding SNFs that are equipped to handle patients requiring a high level of care.” Because of the overlap in patients, it is important for LTCHs to adopt detailed admission criteria to ensure that the LTCH (rather than a SNF, SNU, or CMR) is the most appropriate care setting for the patient. InterQual, which is a private organization that establishes standards for quality of care for a variety of health care settings, has developed model admission criteria for LTCHs. The Interqual criteria are designed to ensure that the LTCH is the most appropriate care setting for the patient, and they are referenced in the MedPAC report as an example of the type of admission criteria that LTCHs should adopt to ensure that they are not treating patients that should be treated in another setting. Mr. Gregg and Karen Rivera, the supervisor of the CON program, acknowledged in their deposition testimony that an LTCH’s use of the InterQual criteria would, at least to some degree, address the Agency’s concern that LTCHs might be serving patients that should be served in a more traditional, less- intensive (and/or less-costly), post-acute care setting. Select utilizes the InterQual criteria as part of its admission process at its existing LTCHs, and it intends to utilize those criteria at its proposed Escambia County LTCH. Specifically, Select’s nurses screen patients prior to admission and, again, shortly after admission to ensure they are LTCH- appropriate patients. Additionally, Select’s nurses and care teams periodically evaluate each patient to ensure that the LTCH is still the most appropriate care setting for the patient and to determine whether the patient is ready for discharge, either to a traditional post-acute care setting or to home. Select also utilizes a third-party organization to review and assess the patient-outcomes achieved at each of its LTCHs. This is a quality assurance/improvement tool because it allows Select to compare and “benchmark” the performance of its LTCHs against each other and against other LTCHs nationwide and it helps to identify functions or services that need improvement. LTCH services are most highly utilized by persons in the 65 and older (65+) age cohort because those persons are more likely to have complex and/or co-morbid medical conditions that require long-term acute care. In calendar year 2003, for example, approximately 77 percent of LTCH patients in Florida were in the 65+ age cohort and approximately 51 percent were in the 75 and older (75+) age cohort. The typical LTCH patient is still in need of considerable acute care, but a traditional acute care hospital may no longer be the most appropriate or lowest cost setting for that care. The vast majority of LTCH admissions are patients transferred directly from a traditional acute care hospital. It is not uncommon for an LTCH patient to be transferred on life support from a critical care unit or ICU after the patient has been diagnosed and stabilized. Nursing homes, SNFs, SNUs, CMR facilities, and home health care are not appropriate for the typical LTCH patient because the patient's acuity level and medical/therapeutic needs are higher than those generally treated in those settings. Indeed, unlike traditional post-acute care settings, which typically do not admit patients who still require acute care, the core patient-group served by LTCHs are patients who require considerable acute care through daily physician visits and intensive nursing care in excess of eight hours of direct patient care per day. LTCH patients are often discharged to a traditional post-acute care facility such as a nursing home, SNF, CMR facility, or home health care. Thus, those facilities cannot be considered as "substitutes" for LTCHs, even though there is some overlap between the services provided to lower acuity LTCH patients and higher acuity patients in those traditional post- acute care facilities. The family of a patient in an LTCH is generally encouraged to be more involved in the patient’s care than it would be if the patient was in the ICU of a traditional acute care hospital. For example, the visiting hours at LTCHs are typically more liberal than the visiting hours of the ICU at a traditional acute care hospital. Medicare reimbursements are the primary source of revenue for LTCHs because, on average, 75 to 85 percent of LTCH patients are covered by Medicare. In this case, Select-Escambia projected that approximately 77 percent of the patient days at its proposed Escambia County LTCH would be generated by Medicare patients. In 2002, the federal government adopted a Medicare prospective payment system (PPS) specifically for LTCHs. That system recognizes the LTCH patient population as being distinct from the patient populations treated by traditional acute care hospitals and post-acute care facilities such as nursing homes, SNFs, SNUs, and CMR facilities, even though there may be some overlap between the patient populations served by LTCHs and those other types of facilities. Under the LTCH PPS, services are reimbursed by Medicare at a predetermined rate that is weighted based upon the patient's diagnosis and acuity, regardless of the cost of care. This reimbursement system is similar to, but uses Diagnosis Related Groups (DRGs) that are different than the DRGs used in the PPS for traditional acute care hospitals. The Medicare reimbursement rates for services to long- stay patients in an LTCH are generally higher than the reimbursement rates for the same services to long-stay patients at a traditional acute care hospital. As a result, there is a financial incentive for hospitals to transfer their long-stay patients to an LTCH. In August 2004, the federal regulations governing Medicare reimbursements for LTCHs were substantially amended. One significant change in the regulations is that the number of admissions that an HIH LTCH can receive from its host hospital and still qualify for reimbursement under the LTCH PPS is generally capped at 25 percent. The effect of that change is that new HIH LTCHs will not be viable in most instances. LTCHs in Florida At the time CON 9800 was filed, there were 12 LTCHs operating in Florida with a total of 799 licensed beds. There were an additional four approved but not yet licensed LTCHs, including the three Select facilities referenced above. There are no licensed or approved LTCHs in District 1, which consists of Escambia, Santa Rosa, Okaloosa, and Walton Counties. There is at least one licensed or approved LTCH in each health planning district, except for Districts 1 and 9.2 The closest Florida LTCH to Escambia County is the former SemperCare (now Select) facility in Panama City, which is in District 2. That facility, which opened in early 2003, is a 30-bed HIH LTCH, and is approximately 100 miles and a two-hour drive from Pensacola. There is or soon will be an LTCH in Mobile, Alabama, which is approximately 60 miles from Pensacola. There was no evidence presented regarding the type, size, utilization, or quality of care at that facility. The existing Florida LTCHs are well-utilized. According to the SAAR, the overall occupancy rate for the Florida LTCH beds was approximately 68 percent in 2003, and several of the facilities had occupancy rates in excess of 80 percent. The newer facilities -– Select’s Miami LTCH, which opened in December 2002, and the former SemperCare (now Select) LTCH in Orlando, which opened in June 2003 -- had considerably lower occupancy rates, which as discussed in the Select-Marion Recommended Order (page 23), is to be expected. If the beds and patient days for those facilities are excluded from the calculation in the SAAR, the overall occupancy rate for the Florida LTCH beds in 2003 would have been slightly above 71 percent. The existing Florida LTCHs receive a majority of their admissions from the county in which they are located, which is consistent with the comment in the MedPAC Report that proximity to an LTCH “quadruples the likelihood that a [patient] will use a long-term care hospital.” Florida LTCHs served patients in 174 of the 527 DRGs in calendar year 2003, but 50 of the DRGs accounted for 91 percent of the cases and 93 percent of the patient days. By far, the most commonly treated DRG is No. 475, which is “respiratory system diagnosis with ventilator support.” Select-Escambia’s Proposed LTCH Select-Escambia’s proposed LTCH will be a 54-bed freestanding facility in 54,090 square feet of new construction. The precise location of the proposed LTCH is not yet known. However, Select-Escambia conditioned approval of its CON application on the facility being located in Escambia County, and the application states that the facility will be located "proximate to the area acute care hospitals." The service area for the proposed LTCH is Escambia County and a 40-mile radius around Pensacola. The service area extends into Alabama on the west and into Santa Rosa and Okaloosa Counties on the east. It excludes Walton County. The service area is reasonable based upon the facts discussed in Part D(2)(a) below, particularly the concentration of the population and the acute care beds in Escambia County, the large elderly population in Escambia County, and the large in-migration to (and small out-migration from) Escambia County for acute care services. The bed complement at the proposed LTCH will be 35 private rooms (five of which are ICU-level), 8 semi-private rooms, and three isolation rooms (one of which is ICU-level). The facility will also include a surgical suite, a gym for physical and occupational therapy, a pharmacy, and laboratory and x-ray facilities. The total project cost is approximately $17.1 million. That cost will be funded by Select from its net cash flow from operations and through borrowings from Select’s bank. The services at the proposed LTCH will include the same “core” services found at other Select LTCHs. Those services are the treatment of pulmonary and ventilator patients, neuro-trauma and stroke patients, medically complex patients, and wound care. Select-Escambia has not negotiated patient transfer agreements with any of the area hospitals, but the CON application does include letters of support from Sacred Heart Hospital-Pensacola in Escambia County and North Okaloosa Medical Center in Okaloosa County. It is not unusual for patient transfer agreements not to have been negotiated at the CON-stage of the development of a new LTCH. The proposed LTCH was projected to open approximately two years after approval of the CON, or in November 2006. That date has been delayed as a result of this proceeding, but the two-year construction period is reasonable. The need projections in the application focus on the first two years of the facility’s operation, 2007 and 2008, as do the utilization and financial projections. Select-Escambia projects that its proposed LTCH will have 8,819 patient days in its first year of operation, and 14,054 patient days in its second year of operation. Those patient days equate to utilization rates of 45 percent in the first year and 71 percent in the second year. Those projections are reasonable and attainable. Select-Escambia projects that its proposed LTCH will generate a net loss of approximately $2.18 million in the first year of operation, and a net profit of approximately $1.19 million. Those projections are reasonable and attainable based upon the utilization projected. In addition to the letter of support from the two hospitals referenced above, the CON application includes letters of support from physicians, local politicians and businesses, the operator of rehabilitation clinics in Pensacola, and the medical director of several nursing homes in Pensacola. The letters of support attest to the general unavailability of LTCH services in Escambia County and, as discussed below, several of the letters specifically state that the traditional post-acute care settings in the area are inadequate for patients in need of long-term acute care. Statutory and Rule Criteria The statutory criteria applicable to the review of Select-Escambia’s application are in the 2004 version of Section 408.035, Florida Statutes.3 The Agency’s rules do not contain any specific criteria relating to LTCHs. The general criteria in Florida Administrative Code Rule 59C-1.008(2)(e)2. are applicable because the Agency does not publish a fixed need pool or a need methodology for LTCHs. That rule requires the applicant to demonstrate that there is a need for its proposed facility or service. Stipulated Criteria The parties’ Joint Pre-hearing Stipulation includes the following stipulations relating to the statutory criteria4: With respect to compliance with Section 408.035(3), Florida Statutes, it is agreed that Select-Escambia has the ability to provide quality programs based on the description of their programs in their CON application and based on the operational facilities of the applicant and/or of the applicant's parent facilities which are JCAHO certified. With respect to compliance with Section 408.035(4), Florida Statutes, it is agreed that Select-Escambia has the ability to provide the necessary resources including health personnel, management personnel and funds for capital operating expenditures, for project accomplishment and operation. With respect to compliance with Section 408.035(6), Florida Statutes, it is agreed that the immediate financial feasibility of the Select-Escambia project is not in dispute. It is further agreed by all parties that the long term financial feasibility of Select-Escambia is not in dispute. The parties agree that, if the projected levels are realized (i.e., need) with respect to compliance there is no disputed issue with respect to compliance with Section 408.035(7), Florida Statutes, in that the project will foster competition that promotes quality and cost effectiveness. The parties agree there are no disputed issues with respect to compliance with Section 408.035(8), Florida Statutes, which relates to an applicant's proposed costs and methods of proposed construction for the type of project proposed. The parties agree there is no disputed issues with respect to compliance with 408.035(9), Florida Statutes, as it relates to Medicaid patients in that Select's Medicaid provision (conditions - Schedule C) exceeds the state average. Section 408.035(10), Florida Statutes, is not at issue with respect to a review of the CON application filed by Select-Escambia. In light of those stipulations, the only statutory criteria still at issue are those relating to “need” –- Section 408.035(1),5 (2), and (5), Florida Statutes -- and the charity care component of Section 408.035(9), Florida Statutes. The issue of “need” was identified as the dispositive issue in this case. Mr. Gregg acknowledged in his testimony at the hearing and in his deposition that other than the issue of “need” there is no basis to deny Select-Escambia’s application. Criteria Related to “Need” The statutory criteria in Section 408.035(1), (2), and (5), Florida Statutes –- i.e., need for the proposed service; availability, quality of care, accessibility, and extent of utilization of the service in the district; and the extent to which the proposed service will enhance access in the district - encompass essentially the same factors that are enumerated in Florida Administrative Code Rule 59C-1.008(2)(e)2. Mr. Gregg testified at the hearing that where there is no LTCH in a district (as is the case in District 1), the Agency presumes that there is some amount of need for LTCH services in the district. However, Select-Escambia has the burden to demonstrate the extent of that need. Demographic, Market, etc. Factors Showing Need Each of the four counties in District 1 is relatively long and narrow. The counties extend from the Gulf of Mexico to the south and the Florida-Alabama line to the north. Escambia County is the westernmost county in District 1, and Walton County is the easternmost county in the district. Santa Rosa County is immediately to the east of Escambia County, and Okaloosa County is between Santa Rosa and Walton Counties. A 40-mile radius around Pensacola, which is the largest city in Escambia County, encompasses all of Santa Rosa County and almost all of Okaloosa County. Although much of Walton County is outside of that radius, it (and all of District 1) is within an hour and a half drive of Pensacola. Walton County is bordered on the east by Washington and Bay Counties, which are in District 2. Panama City, which currently has an LTCH, is in southern Bay County. District 1 had a population of 670,283 in July 2004, with approximately 45.6 percent of that population located in Escambia County. Approximately 13.4 percent of the July 2004 population in District 1 was in the 65+ age cohort, and 5.98 percent of that population was in the 75+ age cohort. Those percentages were lower than the statewide averages of 17.8 percent in the 65+ age cohort and nine percent in the 75+ age cohort. The population of District 1 and the percentages of the population in the 65+ and 75+ age cohorts are almost the same as the population and percentages in District 2, which has one operational (Panama City) and one approved (Tallahassee) LTCH. The population of District 1 is projected to grow approximately 6.91 percent to 716,585 by July 2009, which is five-year planning horizon applicable to this case. The five-year growth rate in District 1 is lower than the 7.93 percent rate that the state as a whole is projected to grow over the same period. However, the projected five-year growth rate in the 65+ and 75+ age cohorts, which most heavily utilize LTCH services, are higher than the statewide growth rates in those age cohorts. Specifically, the 75+ age cohort in District 1 is projected to grow 13.85 percent by July 2009, which is a higher percentage than any other health planning district in the state and nearly twice the statewide rate of 6.33 percent. The 65+ age cohort in District 1 is projected to grow 11.36 percent by July 2009, which is higher than the 9.94 percent statewide rate and higher than all but three of the other health planning districts. Walton County is projected to grow at a higher rate, both as a whole and in the 65+ and 75+ age cohorts, over the applicable five-year planning horizon than any of the other counties in District 1. The higher growth rate is due in large part to the fact that Walton County is considerably smaller than the other District 1 counties. From a raw population perspective, there will be considerably more growth in Escambia and Santa Rosa Counties than in Walton County over the applicable five-year planning horizon. The population of Walton County is expected to increase by only 7,400 persons over that period, while the population of Escambia and Santa Rosa Counties are expected to increase by almost 27,000 persons. As of December 2003, there were approximately 1,800 acute care beds in District 1 at 11 hospitals. For calendar year 2003, the district-wide average occupancy of those beds was 52.4 percent. The three largest hospitals in District 1 are located in Escambia County. Those hospitals -- Baptist Hospital, Sacred Heart Hospital-Pensacola, and West Florida Regional Medical Center -- are all similar in size and account for approximately 1,135 (or 62.6 percent) of the acute care beds in District 1. Sacred Heart Hospital-Pensacola provided a letter of support for Select-Escambia's proposed LTCH, as did two hospitals in Okaloosa County (i.e., Sacred Heart Hospital of the Emerald Coast and North Okaloosa Medical Center). The data presented in the CON application (at pages 000118 to 000121) shows that between 62.4 and 68.4 percent of the “long-stay patients” in District 1 were in the three Escambia County hospitals; that those hospitals had a relatively high (28.8 to 31.6 percent) in-migration rate of long-stay patients from outside of Escambia County; and that there is very little (1.3 to 3.6 percent) out-migration of Escambia County long-stay patients to other District 1 hospitals. Only one District 1 resident was admitted to a Florida LTCH in calendar year 2003, which is a strong indication that LTCH services are not reasonably accessible to District 1 residents even with the establishment of the Panama City LTCH in early 2003. The Panama City LTCH, which is approximately 100 miles from Pensacola, is too far away from Escambia County to be a reasonable alternative for residents of that county. The same is true for the other counties in District 1, except for Walton County which is geographically closer to Panama City than it is to Pensacola. The Panama City LTCH was not expected to serve District 1. According to the SAAR that recommended approval of that LTCH, the facility was projected to get 60 percent of its admissions from its host hospital, Bay Medical Center, and only two of the potential LTCH referrals were projected to come from a District 1 hospital. Those referrals were projected to come from Santa Rosa Medical Center in Santa Rose County, and none of the referrals to the Panama City LTCH were projected to come from Escambia County. Those projections are consistent with the experience of the Panama City LTCH since it opened in early 2003. Only five or six patients from Escambia County have been referred to the Panama City LTCH, and none have chosen to be admitted to the facility. There are no LTCHs or “like services” in District 1 because, as more fully discussed in Part C(1) above, the traditional post-acute care settings such as SNFs, CMRs, and hospital-based SNUs are not substitutes for LTCHs. The data presented in the CON application shows that in calendar year 2003 there were 500 patients treated in District 1 hospitals with LTCH-appropriate DRGs who were in the hospital for a collective 13,942 days beyond the geometric mean length of stay (GMLOS),6 which corresponds to an average of 27.9 days beyond the GMLOS. It is reasonable to expect that that those patients would have been discharged to a post-acute care setting if they no longer needed acute care, and because there were available CMR, SNU, and SNF beds in the district,7 it is reasonable to infer that the patients were still in need of long-term acute care and/or that the available post-acute care facilities did not offer the requisite level of intensive care. This inference is corroborated by the letters of support from local physicians that were included in the CON application. For example, the October 7, 2003, letter to Mr. Gregg from Dr. Donna Jacobi states that: Our skilled nursing facilities and subacute units have had difficulty in managing complex, more unstable patients One facility was equipped and staffed for ventilator patients when it opened; now that ward is for routine SNF care. Our rehabilitation institute is not the place for these patients either – they may be too ill for three hours of therapy daily. Currently some of these patients remain in acute care much longer than necessary and are subjected to iatrogenic [sic] risks, depression, and possible further decline in functional status while becoming more medically stable. Others bounce back and forth between nursing home and hospital, and a few leave our area of the state to find care elsewhere – far from their family and friends who are very important to their recovery. A LTACH [sic] would provide the opportunity for them to remain here in a supportive environment.[8] Letters of support such as Dr. Jacobi’s and those quoted in Endnote 8, with detailed information about the inability to place patients in existing facilities, are the type that the Mr. Gregg identified in Select-Marion (page 60, endnote 5) as being the most useful to the Agency in “validating” the applicant’s numeric need projections. In sum, the demographic and market conditions described above, coupled with the letters of support from local physicians and two of the acute care hospitals in District 1, support the establishment of an LTCH in the district, and more specifically, in Escambia County. Quantification of the Need / Numeric Need Select-Escambia presented two different methodologies in its application to quantify the need for LTCH beds in District 1. The methodologies are similar, but not identical to the methodology recently accepted by the Agency in Select- Marion.9 The methodologies presented in the application each define the potential patients for Select-Escambia’s proposed LTCH as the “long-stay patients” in the existing District 1 acute care hospitals with “LTCH-appropriate DRGs.” That approach is reasonable from a health planning perspective because, as discussed in Part C(1) above, an LTCH is likely the most appropriate setting for such patients from a financial and patient-care standpoint. The methodologies differ in their definition of what constitutes a “long-stay patient,” but they both use the GMLOS as the starting point, which is reasonable from a health planning perspective. Both methodologies define the “LTCH-appropriate DRGs” as the 50 DRGs that are most commonly treated in the existing Florida LTCHs. The focus on the “top 50” DRGs was reasonable from a health planning perspective because those DRGs account for more than 91 percent of the cases and 93 percent of the patient days at the existing Florida LTCHs. GMLOS+15 Methodology The first methodology presented in the application –- “the GMLOS+15 methodology” –- identified all of the patients treated in the District 1 hospitals with LTCH-appropriate DRGs whose length of stay was at least 15 days longer than the GMLOS for the DRG. A similar definition of long-stay patients was accepted by the Agency in Select-Marion. There were a total of 500 potential LTCH patients identified through Select-Escambia’s GMLOS+15 methodology. According to the data included in the CON application (at page 000120), 30 of those patients were Walton County residents and 55 resided outside of District 1. Select-Escambia calculated a total of 19,409 potential LTCH patient days that would be generated by the 500 identified long-stay patients, which equates to an average daily census (ADC) of 53. According to Select-Escambia's health planner (Transcript, at 131), the 19,409 patient-days included all of the days in the patient’s hospital stay as potential LTCH patient days, and not just that portion of the stay that exceeded the GMLOS. The inclusion of all of the days in the patient’s hospital stay as potential LTCH patient days is not reasonable because the vast majority of LTCH patients are transferred from an acute care hospital at some point during the patient’s hospital stay, typically at or after the GMLOS. The effect of including all of the days in the patient’s hospital stay as potential LTCH patient days rather than just the days after the GMLOS is an overstatement of the potential LTCH patient days and the ADC calculated under the GMLOS+15 methodology in Select-Escambia’s application. If only the days beyond the GMLOS were included (as was done in Select-Marion), the result would be 13,941 potential LTCH patient days. If the 875 days attributable to Walton County residents and the 1,596 days attributable to non-District 1 residents were excluded (see Exhibit P2, at 000121), then the total would be 11,471 potential LTCH patient days. The ADC of 53 calculated by Select-Marion under the GMLOS+15 methodology is not reliable because it was based upon the 19,409 patient days. Using the 13,941 or 11,471 patient days referenced above would result in an ADC of 38.2 or 31.4, respectively. Based upon an 80 occupancy standard, those ADCs would translate into a projected need for 40 to 48 LTCH beds in District 1. If a 75 percent occupancy standard was used, the projected LTCH bed need would be 42 to 51 beds. The lower numbers in each of those ranges reflect the exclusion of the patient days attributable to Walton County residents and non- District 1 residents; the higher numbers in those ranges reflect the inclusion of those residents. An 80 percent occupancy standard was accepted by the Agency in Select-Marion and was also used by Select in Select- Sarasota. As stated in the Recommended Order in Select-Marion (at page 37), the 80 percent occupancy standard “better reflects the lower bed turn-over by LTCH patients than does the 75 percent occupancy standard typically applied to traditional, ‘short-term’ acute care hospitals.” GMLOS+7 Methodology The second methodology presented in the application - – “the GMLOS+7 methodology” –- uses a broader definition to identify the potential LTCH patients in District 1. It includes all of the patients with LTCH-appropriate DRGs who were treated in the District 1 hospitals and whose lengths of stay were at least seven days longer than the GMLOS. The broader definition of long-stay patients in the GMLOS+7 methodology resulted in 1,498 potential LTCH patients (see Exhibit P2, at 000117 (Table 1-16(b)), 000120), as compared to the 500 potential LTCH patients identified through the GMLOS+15 methodology. The Agency did not expressly take issue with the broader definition used in the GMLOS+7 methodology to identify the potential LTCH patients, and it cannot be said based upon the record evidence in this case that the definition is inherently unreasonable. In calculating the potential LTCH patient days under the GMLOS+7 methodology, Select-Escambia only included the days that the patient stayed in the hospital beyond the GMLOS, which are referred to in the application as “excess days.” See Transcript, at 132. A similar approach was used in the methodology accepted by the Agency in Select-Marion. The following table, which is derived from the data in Table 1-16(a) in the CON application, summarizes the number of excess days generated by patients in the District 1 hospitals based upon the patient’s county of residence: Escambia County 11,434 Okaloosa County 5,634 Santa Rosa County 3,194 Subtotal: District 1 Residents except for Walton County 20,262 Walton County 1,410 Subtotal: All District 1 residents 21,672 Outside of District 1 2,340 Total 24,012 Select-Escambia then converted the excess days into “forecasted LTCH cases” by dividing the most conservative figure –- the 20,262 days, which excluded Walton County residents and non-District 1 residents -- by the 33.6 ALOS at Select’s existing freestanding LTCHs. The result –- 603 cases –- was then inflated based upon the projected growth rate in District 1 to determine the number of forecasted LTCH cases in 2007 and 2008, which were projected to be the first two years of operation for Select-Escambia’s proposed LTCH. The forecasted cases were then converted into “forecasted LTCH days” by multiplying the number of cases by the same 33.6 ALOS. The conversion of the excess days into forecasted LTCH cases and then back into forecasted LTCH days based upon a 33.6 ALOS is not reasonable because, according to the CON application,10 the initial calculation of the excess days is intended to reflect the number of days that patients would likely spend in the LTCH rather than the short-term acute care hospitals in District 1 if an LTCH was available in the area. The ALOS experienced by Select at its other facilities is irrelevant to that issue. The effect of the conversion step in Select- Escambia’s GMLOS+7 methodology is an overstatment of the forecasted LTCH patient days, as can be seen through a comparison of the data in Tables 1-16(a) and 1-16(b) in the CON application. Table 1-16(b) shows the number of cases associated with the excess days calculated in Table 1-16(a). The 1,498 total cases identified on Table 1-16(b) correlate to the 24,012 total excess days identified on Table 1-16(a). As a result, there is an average of only 16.03 excess days per case. Stated another way, the long-stay patients identified through the GMLOS+7 methodology are staying in the hospital an average of 16.03 days longer than the GMLOS. It is those 16.03 days/case that make up the potential LTCH patient days, but the conversion described above appears to assume that those same patients would stay in Select-Escambia’s proposed LTCH for 33.6 days. There is no logic or reason to that assumption, and as a result, the patient days, ADC, and bed need reflected in Table 1-17 of the application are not reliable. The most reliable projection of bed need that can be calculated based upon the data presented in connection with the GMLOS+7 methodology is derived from the Excess Table 1-16(a), to wit: Bed Need Days ADC (at 80%) Escambia only 11,434 31.3 40 District 1 excluding Walton and non-District 1 20,262 55.5 70 District 1 including Walton; excluding non- District 1 21,672 59.4 75 Accordingly, the GMLOS+7 methodology projects a need for 70 to 75 LTCH beds, depending upon whether Walton County residents are included in the calculation, with 40 of the beds attributable to the excess days generated by Escambia County residents alone. Ultimate Findings Regarding Numeric Need Using the most conservative figures produced by the respective need methodologies presented in the application, there is a need for between 40 (see Finding of Fact 107) and 70 (see Findings of Fact 119 and 120) LTCH beds in District 1. It is reasonable to expect that the “actual” bed need is towards the mid-point of that range -- 55 beds -- because Select-Escambia’s proposed LTCH will likely get some of the potential LTCH admissions from Walton County, as well as some of the potential LTCH admissions from outside of District 1; because as many as seven percent of the facility's patient days will be attributable to patients whose diagnoses are not within the “top 50” DRGs used in the methodologies to identify the potential LTCH patients; and because the methodologies and the fiqures reflected in the preceeding paragraphs do not take into account the growth in admissions and patient days between 2003 (the period used in the methodologies) and 2007 (when Select- Escambia's proposed LTCH is projected to open) that is expected as the population of District 1 grows, particularly in the 65+ and 75+ age cohorts. Accordingly, the preponderance of the evidence establishes that there is a numeric need for the 54 LTCH beds proposed by Select-Escambia. Other Disputed Criteria Section 408.035(9), Florida Statutes, requires consideration of the “applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent.” The statutory reference to “the medically indigent” encompasses what are typically referred to as charity patients. Select-Escambia conditioned the approval of its CON application on the provision of two percent of the patient days at its proposed LTCH to Medicaid patients and 0.8 percent of the patient days to charity patients. It was stipulated that Select-Escambia’s commitment to Medicaid patients exceeds the statewide average for LTCHs, which according to the SAAR is 1.24 percent of patient days. Select-Escambia’s commitment to charity patients is slightly lower than the statewide average for LTCHs, which is 0.94 percent of patient days.11 When viewed collectively, Select-Escambia’s commitment to Medicaid and charity patients -- 2.8 percent of patient days -- exceeds the statewide average for LTCHs of 2.18 percent of patient days. The commitments to Medicaid and charity patients in Select-Escambia’s CON application were based upon Select’s experience at its other LTCHs, and they are reasonable and attainable in District 1. The fact that Select-Escambia’s commitment to charity patients is slightly lower than the statewide average for LTCHs is not significant under the circumstances of this case. Indeed, Mr. Gregg conceded at the hearing that it is not an independent basis to deny Select-Escambia’s application, and that the Agency will accept Select-Escambia’s proposed charity commitment of 0.8 percent of patient days if the CON is ultimately approved.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Agency issue a final order approving Select-Escambia’s application, CON 9800. DONE AND ENTERED this 17th day of June, 2005, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of June, 2005.
The Issue Whether there is a need for an additional 31 short-term psychiatric beds for Broward County?
Findings Of Fact I. General. History of Case. In June of 1984, the Petitioner filed an application with the Respondent for a certificate of need to add 31 short- term psychiatric beds to its existing facility. The certificate of need sought by the Petitioner was assigned certificate of need #3372 by the Respondent. The Respondent denied the Petitioner's application for certificate of need #3372. On October 25, 1984, the Petitioner filed a Petition for Formal Administrative Hearing with the Respondent challenging its proposed denial of the Petitioner's application. The Petition was filed with the Division of Administrative Hearings by the Respondent and was assigned case number 84-4037. Biscayne, Memorial and Charter were granted leave to intervene by Orders dated January 28, 1985, April 26, 1985 and July 9, 1985, respectively. The final hearing was held on November 19 and 21, 1985 in Ft. Lauderdale, Florida and February 24 and 25, 1986 in Tallahassee, Florida. The Petitioner's Proposal. The Petitioner originally sought to add 31 short-term psychiatric beds to its existing facility. If approved, the additional beds would have increased its current licensed beds from 334 to 365 beds. The Petitioner proposed to meet projected need for short-term psychiatric beds in Broward County for 1989. In its original application, the Petitioner proposed to provide services to children, adolescents, adults and the elderly. No distinct psychiatric units were proposed. The total cost of the original proposal was estimated to be $209,368.00. At the final hearing, the Petitioner proposed to relinquish 31 medical/surgical beds and to add 31 short-term psychiatric beds to meet projected need for short-term psychiatric beds in Broward County for 1989. The Petitioner will end up with a total of 334 licensed beds, the same number it now has, if its application is approved. The total cost of the proposal presented at the final hearing was $337,169.00, which is accurate and reasonable. The 31 proposed beds will be divided into a 15-bed dedicated adolescent unit and a 16-bed dedicated geropsychiatric unit. Adults will generally not be treated by the Petitioner. Involuntary admissions will be treated by the Petitioner, although there was some evidence to the contrary. The sixth floor of the Petitioner's existing facility will be converted into space for the new psychiatric units. The Petitioner changed the estimated staffing for its proposal between the time it filed its original application and the final hearing. The changes were not significant. During the 1985 legislative session, the Florida Legislature enacted Section 394.4785(1)(b), Florida Statutes (1985). This,, Section requires that most adolescents be separated from other patients for purposes of psychiatric treatment. Some of the modifications of the Petitioner's application which were made at the final hearing were made in order to conform with this Section. The changes in the Petitioner's proposal which were made between the time it filed its original application with the Respondent and the time of the final hearing are not substantial enough to require that the Petitioner's application, as modified, be remanded to the Respondent for further consideration. The Parties; Standing. The Petitioner is a 334-bed, for-profit, general acute-care hospital. The Petitioner is a full service hospital providing general medical services. The Petitioner has a medical staff of more than 400 physicians, including a department of psychiatry. The Petitioner is owned by National Medical Enterprises, one of the largest health care providers in the country. The Petitioner is located in Hollywood, Florida, which is located in the southern portion of Broward County, Florida. Broward County is the only County in the Respondent's service district 10. The Petitioner's primary service area consist of the southern portion of Broward County from State Road 84 in the North to the Broward-Dade County line in the South. Memorial is a not-for-profit general acute care hospital located in southern Broward County. Memorial holds License #1737, issued on June 1, 1985, which authorizes Memorial to operate 74 short-term psychiatric beds. This license is valid for the period June 1, 1985 to May 31, 1987. Memorial was also authorized to operate 74 short-term psychiatric beds in its license issued for the 2-year period prior to June 1, 1985. Memorial is located a short distance from where the Petitioner is located in southern Broward County. Memorial and the Petitioner share the same general primary service area. Most of the physicians on the staff at Memorial are also on the Petitioner's staff. Memorial is subsidized by tax revenues for providing indigent care for southern Broward County. About 17 percent of Memorial's revenue is attributable to bad debt and indigent care. If the Petitioner's application is approved it is likely that the Petitioner will take patients from Memorial. It is also likely that the patients taken from Memorial will be other than indigent patients. If the Petitioner were to achieve a 75 percent occupancy rate and 50 percent of its patients come from Memorial, Memorial would lose a little over $1,000,000.00 in terms of 1985 dollars. It is unlikely, however, that the Petitioner will achieve an occupancy rate of 75 percent and, more importantly, it is unlikely that 50 percent of the Petitioner's patients will come from Memorial. The loss of patients from Memorial which would be caused by approval of the Petitioner's application will, however, result in a financial loss to Memorial which may effect its ability to provide quality care. Additionally, the loss in paying patients could increase the percentage of indigent patients at Memorial and, because a portion of the cost of caring for indigents is covered by paying patients at Memorial, could result in a further loss in revenue and an increase in tax support. The public may have difficulty accepting a public hospital, such as Memorial, as a high-quality hospital if the public hospital is perceived to be a charity hospital. It is therefore important for a public hospital to attract a significant number of paying patients to its facility to avoid such an image. It is unlikely that the number of patients which may be lost to the Petitioner by Memorial is sufficient to cause the public to perceive that Memorial is a charity hospital. Biscayne is a 458-bed, general acute-care hospital located on U.S. 1 in northern Dade County, Florida, just south of the Broward County line. Biscayne's facility is located within about 5 miles of the Petitioner's facility. Biscayne is about a 5 to 10 minute drive from the Petitioner. Dade County is not in service district 10. It is in service district 11. Of the 458 licensed beds at Biscayne, 24 are licensed as short-term psychiatric beds and 24 are licensed as substance abuse beds. The rest are licensed as medical/surgical beds. Ten of the medical/surgical beds at Biscayne are used as a dedicated 10-bed eating disorder (anoxeria nervosa and bulimirexia) unit. These 10 beds are not licensed for such use. A separate support staff is used for the 10-bed eating disorder unit. Approximately 60 percent of Biscayne's medical staff of approximately 400 physicians are residents of Broward County. Most of these physicians are also on the medical staff of other hospitals, principally the Petitioner, Memorial and Parkway Regional Medical Center, which is located in northern Dade County. Most of its staff have their business offices in southern Broward County. Biscayne's service area includes southern Broward County and northern Dade County. Approximately 60 percent of Biscayne's patients are residents of southern Broward County. Biscayne markets its services in southern Broward County. Eighty percent of Biscayne's psychiatric patients are elderly. Many types of psychotic and psychiatric disorders are treated at Biscayne. Biscayne offers psycho-diagnostic services, crisis stabilization services, shock therapy services, individual therapy services and group therapy services. Biscayne has had difficulty in recruiting qualified staff for its psychiatric unit. Biscayne currently has 4 vacancies for registered nurses, 4 vacancies for mental health assistants and 1 vacancy for an occupational therapist in its psychiatric unit. Biscayne recruits nurses who are certified in mental health nursing. They have not always been successful in finding such nurses. Therefore, Biscayne provides educational programs to help train its nursing staff. These programs are necessary because of the unavailability of experienced nurses for its psychiatric unit. The Petitioner has projected that most of its patients for its proposed psychiatric units will come from southern Broward County, where Biscayne gets approximately 60 percent of its patients. The Petitioner plans to try to convince psychiatrists currently using existing providers, except Hollywood Pavilion, to refer their patients to the proposed psychiatric units. Since Biscayne and the Petitioner share some of the same physicians, it is likely that many of the patients cared-for by the Petitioner will come form Biscayne and other providers in southern Broward County, including Memorial. The loss of patients at Biscayne, if the Petitioner's proposal is approved, will result in a loss of revenue to Biscayne which may affect its ability to provide quality care. Charter was an applicant for a certificate of need to construct a free-standing psychiatric facility in Broward County. In its application Charter sought approval of long-term and short-term psychiatric beds. Charter's application was filed with the Respondent in August of 1983. It was filed for review by the Respondent in a batching cycle which preceded the batching cycle in which the Petitioner's application was filed. In December of 1983, the Respondent proposed to approve Charter's application and authorize a project consisting of 16 short-term adolescent psychiatric beds, 16 long-term adolescent psychiatric beds, 16 long-term substance abuse beds and 12 long-term children's psychiatric beds. The Respondent's proposed approval of Charter's application was challenged. Following an administrative hearing, it was recommended that Charter's application be denied. Final agency action had not been taken as of the commencement of the hearing in this case. Subsequent to the date on which the final hearing of this case commenced, the Respondent issued a Final Order denying Charter's certificate of need application. This Final Order is presently pending on appeal to the First District Court of Appeal. Charter does not have an existing facility offering services similar to those proposed by the Petitioner in Broward County or anywhere near the Petitioner's facility. When the Orders allowing Memorial, Biscayne and Charter to intervene were issued by Hearing Officer Sherrill, Mr. Sherrill determined that if the Intervenor's could prove the facts alleged in their Petition to Intervene they would have standing to participate in this case. Memorial and Biscayne have in fact proved the allegations contained in their Petitions to Intervene. Based upon all of the evidence, it is therefore concluded that Memorial and Biscayne have standing to participate in this proceeding. Both Memorial and Biscayne will probably lose patients to the Petitioner if its proposal is approved resulting in a loss of revenue. This loss could affect quality of care at Memorial and Biscayne. Also, it is possible that both would lose some of their specialized nursing personnel to ;the Petitioner to staff its proposed psychiatric units. Charter has failed to establish that it has standing to participate in this proceeding. The potential injury to Charter is too speculative. II. Rule 10-5.11(25), F.A.C. A. General. Whether a certificate of need for short-term psychiatric beds should be approved for Broward County is to be determined under the provisions of Section 381.494(6)(c), Florida Statutes (1985), and the Respondent's rules promulgated thereunder. In particular, Rule 10-5.11(25), F.A.C., governs this case. Under Rule 10-5.11(25)(c), F.A.C., a favorable determination will "not normally" be given on applications for short-term psychiatric care facilities unless bed need exists under Rule 10-5.11(25)(d), F.A.C. B. Rule 10-5.11(25)(d) , F.A.C. Pursuant to Rule 10-5.11(25)(d)3, F.A.C., bed need is determined 5 years into the future. In this case, the Petitioner filed its application with the Respondent in 1984, seeking approval of additional short-term psychiatric beds for 1989. The Petitioner did not change this position prior to or during the final hearing. Therefore, the planning horizon for purposes of this case is 1989. Under Rule 10-5.11(25)(d)3, F.A.C., bed need is determined by subtracting the number of "existing and approved" beds in the service 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 in the service district. 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. Bed need is determined under the Respondent's rules on a district-wide basis unless the service district has been sub- divided by the Respondent. District 10 has not been subdivided by the Respondent. Therefore, bed need for purposes of this case under Rule 10-5.11(25)(d), F.A.C., is to be determined based upon the population projections for all of Broward County for 1989. The projected population for Broward County for 1989 is 1,228,334 people. Based upon the projected population for Broward County for 1989, there will be a need for 430 short-term psychiatric beds in Broward County in 1989. The evidence at the final hearing proved that there are currently 427 licensed short-term psychiatric beds in Broward County. During the portion of the final hearing held in November of 1985, evidence was offered that proved that there were also 16 approved short-term psychiatric beds for Broward County. These short-term beds were part of the application for the certificate of need sought by Charter. Subsequently, however, a Final Order was issued by the Respondent denying Charter's application. Therefore, the 16 short-term psychiatric beds sought by Charter do not constitute "existing and approved" short-term psychiatric beds in Broward County for purposes of this case. Subsequent to the conclusion of the final hearing in this case, the First District Court of Appeal reversed a Final Order of the Respondent denying an application for a certificate of need for a free-standing 10 -bed psychiatric facility, including 80 additional short-term psychiatric beds, for Broward County. Balsam v. Department of Health and Rehabilitative Services, So.2d (Fla. 1st DCA 1986). As indicated in Finding of Fact 23, Memorial is licensed to operate 74 short-term psychiatric beds. Memorial is in fact operating all 74 of these licensed beds. Memorial filed an application with the Respondent for certificate of need #1953 in October of 1981 in which Memorial indicated that it planned to reduce the number of short-term psychiatric beds it had available by 24 beds. Memorial's certificate of need application involved an expenditure of capital and did not specifically involve an application for a change in bed inventory at Memorial. Memorial also represented that it would reduce the number of its available short-term psychiatric beds by 24 in a bond prospectus it issued in September of 1983. The Respondent approved Memorial's certificate of need application. Despite Memorial's representations that it would reduce its short-term psychiatric bed inventory, the beds are still in use in Broward County. Memorial has no plans to close any beds and the Respondent does not plan to take any action against Memorial to require it to stop using 24 of its short-term psychiatric beds. Hollywood Pavilion is licensed to operate 46 short- term psychiatric beds in Broward County. In 1985, 475 patients were admitted to Hollywood Pavilion and its occupancy rate was 62.3 percent. In fact, Hollywood Pavilion had more admissions than Florida Medical Center had to its psychiatric unit. It therefore appears that other physicians find Hollywood Pavilion acceptable. Hollywood Pavilion is accredited by the Joint Commission on Accreditation of Hospitals. The Petitioner presented the testimony of a few physicians who questioned the quality of care at Hollywood Pavilion. These physicians indicated that they did not use Hollywood Pavilion. At least one of the physicians indicated, however, that he did refer patients to other physicians whom he knew admitted patients to Hollywood Pavilion despite his feeling that the quality of care at Hollywood Pavilion was poor. This action is inconsistent with that physician's opinion as to the lack of quality of care at Hollywood Pavilion. His opinion is therefore rejected. The other physicians' opinions are also rejected because very little evidence was offered in support of their opinions and because of the contrary evidence. Based upon a consideration of all of the evidence concerning the quality of care at Hollywood Pavilion, it is concluded that the Petitioner failed to prove that the 46 short-term psychiatric beds licensed for use and available for use at Hollywood Pavilion should not be counted as existing short- term psychiatric beds in Broward County. Coral Ridge Hospital is licensed to operate 74 short- term psychiatric beds in Broward County. The average length of stay at Coral Ridge Hospital during 1984 and 1985 was almost 80 days. The average length of stay at Coral Ridge Hospital has been in excess of 40 days since 1980 and in excess of 60 days since 1983. The average length of stay at Coral Ridge Hospital is in excess of the average length of stay for which short-term psychiatric beds are to be used under the Respondent's rules. Rule 10-5.11(25)(a), F.A.C., provides that short-term beds are those used for an average length of stay of 30 days or less for adults and 60 days or less for children and adolescents under 18 years of age. Rule 10-5.11(26)(a), F.A.C., provides that long-term beds are those used for an average length of stay of 90 days or more. The psychiatric beds at Coral Ridge Hospital, based upon an average length of stay for all of its beds, falls between the average length of stay for short-term beds and long-term beds. The occupancy rate at Coral Ridge Hospital for 1985 was between 40 percent and 50 percent. Therefore, it is possible that a few patients at Coral Ridge Hospital with a very long length of stay could cause the overall average length of stay of the facility to be as long as it is. Coral Ridge Hospital will probably take short-term psychiatric patients because of its low occupancy rate. Therefore, there are at least 29 to 37 short-term psychiatric beds available for use as short-term psychiatric beds at Coral Ridge Hospital. The Petitioner failed to prove how many of the licensed short-term psychiatric beds at Coral Ridge Hospital are not being used for, and are not available for use by, short-term psychiatric patients in Broward County. It cannot, therefore, be determined how many, if any, of the licensed short-term beds at Coral Ridge Hospital should not be treated as existing short-term psychiatric beds in Broward County. Based upon the foregoing, the 427 licensed short-term psychiatric beds in Broward County should be treated as "existing" beds for purposes of determining the need for short- term psychiatric beds under Rule 10-5.11(25)(d), F.A.C. There is a net need for short-term psychiatric beds in Broward County for 1989 of only 3 additional beds under Rule 10- 5.11(25)(d)3, F.A.C. If the 80 short-term psychiatric beds approved by the First District Court of Appeal in Balsam are taken into account, there will be a surplus of 77 short-term psychiatric beds in Broward County for 1989 under Rule 10- 5.11(25)(d)3, F.A.C. Based upon an application of Rule 10-5.11(25)(d)3, F.A.C., there is no need for the additional 31 short-term psychiatric beds sought by the Petitioner. Rule 10-5.11(25)(d)1, F.A.C., provides that 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. Some patients who need psychiatric care also need other medical services which can better be obtained in an acute care hospital. This fact is taken into account by the requirement of Rule 10-5.11(25)(d)1, F.A.C. Based upon the projected population for Broward County in 1989, there should be a minimum of 184-short-term psychiatric beds in hospitals holding a general license in Broward County. There are currently 243 short-term psychiatric beds in hospitals holding a general license in Broward County. Therefore, the standard of Rule 10-5.11(25)(d)1, F.A.C., has been met without approval of the Petitioner's proposal. There is no need for additional short-term psychiatric beds in general hospitals in Broward County for 1989. Rule 10-5.11(25)(d)4, F.A.C., provides that applicants for short-term psychiatric beds must be able to project an occupancy rate of 70 percent for its adult psychiatric beds and 60 percent for its adolescent and children's psychiatric beds in the second year of operation. For the third year of operation, the applicant must be able to project an 80 percent adult occupancy rate and a 70 percent adolescent and children's occupancy rate. The beds sought by the Petitioner will be managed by a professional psychiatric management company: Psychiatric Management Services (hereinafter referred to as "PMS"). PMS is owned by Psychiatric Institutes of America, a subsidiary of National Medical Enterprises. Because of the lack of need for additional short-term psychiatric beds in Broward County, it is doubtful that the Petitioner can achieve its projected occupancy rates as required by Rule 10-5.11(25)(d)4, F.A.C. Rules 10-5.11(25)(d)5 and 6, F.A.C., require that certain occupancy rates normally must have been met in the preceding 12 months before additional short-term psychiatric beds will be approved. The facts do not prove whether the occupancy rates provided by Rule 10-5.11(25)(d)5, F.A.C., have been met because the statistics necessary to make such a determination are not available. The evidence failed to prove that the occupancy rates of Rule 10- 5.11(25)(d)6, F.A.C. have been met. The average occupancy rate for short-term psychiatric beds in Broward County for 1985 was between 64.8 percent and 68.4 percent. Occupancy rates in Broward County for short-term psychiatric beds have not reached 71 percent since 1982. These rates are well below the 75 percent occupancy rate provided for in Rule 10-5.11(25)(d)6, F.A.C. This finding is not refuted by the fact that Florida Medical Center added 59 beds in 1984 and the fact that occupancy rates at most general hospitals exceeded 75 percent in 1985. Based upon the average occupancy rate in Broward County for 1985, there were approximately 100 empty short-term psychiatric beds in Broward County on any day. Rule 10-5.11(25)(d)7, F.A.C. requires that short-term psychiatric services provided at an inpatient psychiatric hospital should have at least 15 designated beds in order to assure specialized staff and services at a reasonable cost. The Petitioner's proposal to add 31 short-term psychiatric beds meets this requirement of the rule. C. Rule 10-5.11(25)(e), F.A.C. Rule 1O-5.11(25)(e)1, F.A.C., requires that an applicant prove that its proposal is consistent with the needs in the community as set out in the Local Health Council plans, local Mental Health District Board plans, State Mental Health Plan and needs assessment data. The Petitioner has failed to meet this requirement. The Petitioner's proposal is inconsistent with the District 10 Local Health Plan, the Florida State Health Plan and State and Local Mental Health Plans. In particular, the Petitioner's proposal is inconsistent with the following: The District 10 Local Health Plan's recommendation that applications not be approved if approval would result in an excess number of beds under the Respondent's bed need methodology; The District 10 Local Health Plan's recommendation concerning occupancy standards for the district (75 percent during the past 12 months); The position of the Florida State Health Plan that inpatient psychiatric services are a setting of last resort; The recommendation of the District 10 Mental Health Plan that alternatives to hospitalization for psychiatric services should be encouraged; and The recommendation of the Florida State Mental Health Plan that less restrictive treatment alternatives should be encouraged. Rule 10-5.11(25)(e)3, F.A.C., requires that applicants indicate the amount of care to be provided to underserved groups. The Petitioner's representations concerning its plans to provide indigent care contained in its application are misleading, in that the Petitioner represented that it would not turn away indigents. At the final hearing, the Petitioner indicated that it will generally provide care to indigents only on an emergency basis. Patients who need indigent care on a non-emergency basis will be referred to Memorial. Also, once an indigent patient who needs emergency care has stabilized, that patient will be transferred to Memorial for care. The Petitioner accepts few Medicaid and indigent patients. During 1985, the Petitioner treated 21 Medicaid patients out of a total of 6,800 patients. Only 1.5 percent of its total revenue was for uncompensated care. During 1984, the Petitioner treated 22 Medicaid patients out of a total of 7,321 patients. Only 1.2 percent of its total gross revenue was for uncompensated care. Memorial is subsidized by tax revenues for providing indigent care, or southern Broward County. Because Memorial provides indigent care, indigent patients are usually referred to Memorial if they do not need emergency care or are transferred to Memorial after they stabilize if they do need emergency care. There are other hospitals in northern Broward County which provide similar indigent care. It is therefore common practice to refer patients to those hospitals. Rule 10-5.11(25)(e)5, F.A.C., provides that development of new short- term psychiatric beds should be through the conversion of underutilized beds in other hospital services. The Petitioner's proposal to convert 31 medical/surgical beds for use as short-term psychiatric beds meets this provision. Rule 10-5.11(25)(e)7, F.A.C., provides that short- term 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 is no geographic access problem in Broward County. At least 90 percent of the population of Broward County is within a maximum of 45 minutes driving time under average driving conditions to existing short-term psychiatric services in Broward County. The Petitioner's proposal will not significantly enhance geographic access in Broward County. III. Statutory Criteria. Need for Services. The Respondent has approved two certificates of need authorizing the addition of a total of 135 long-term psychiatric beds for Broward County. The addition of 135 long-term beds probably means that additional short-term beds in Broward County which have been used for patients requiring longer treatment will be available. If the additional long-term beds free up short-term beds, the occupancy rate of short-term psychiatric beds in Broward County would be even less than it has been during the past 12 months, if other things remain equal. Both Memorial and Florida Medical Center have been using short-term psychiatric beds for the care of long-term patients. Once the new long-term psychiatric beds are operational, more short-term psychiatric beds will be available in Broward County. Existing Providers. In addition to the short-term psychiatric beds available at Coral Ridge Hospital and Hollywood Pavilion, short- term psychiatric beds are available at the following existing facilities in the service district: Ft. Lauderdale Hospital: 64 beds Florida Medical Center: 74 beds Imperial Point: 47 beds Broward General Medical Center: 48 beds There is no geographic distribution problem in district 10. Generally, the Petitioner did not prove that existing short-term psychiatric beds in Broward County are not available, efficient, appropriate, accessible, adequate or providing quality of care. The Petitioner also did not prove that existing facilities are over-utilized. No new services are proposed by the Petitioner. The evidence did prove that there is usually a waiting list for short-term psychiatric beds at Memorial and that physicians have resorted to various devices to get their patients into short-term psychiatric beds at Memorial. Specialized adolescent psychiatric services are available in the service district at Ft. Lauderdale Hospital and at Florida Medical Center. Ft. Lauderdale Hospital has 24 short- term psychiatric beds dedicated to the treatment of adolescents. Florida Medical Center has 20 short-term psychiatric beds dedicated to the treatment of adolescents. Broward General Medical Center and Imperial Point also provide children/adolescent services. Treatment for eating disorders is provided and available at Imperial Point and Florida Medical Center. Florida Medical Center solicits patients from all parts of the service district. Geropsychiatric short-term psychiatric beds are available in the service district at Hollywood Pavilion, Imperial Point and Ft. Lauderdale Hospital. Florida Medical Center has a closed adult psychiatric unit and often treats persons over 60 years of age. It also has a 26-bed adult short-term psychiatric unit with 2 specialized treatment programs: one for eating disorders and the other for stress and pain management. The Petitioner has proposed to provide a dedicated geropsychiatric unit to meet the needs of geriatric patients which are different from those of adults generally. Although there are no such dedicated geropsychiatric units in the service district, the Petitioner failed to prove that geriatrics are not receiving adequate care from existing providers. Quality of Care. The Petitioner is accredited by the Joint Commission on Accreditation of Hospitals. The Petitioner has established adequate quality control procedures, including educational programs and a quality assurance department. These quality control procedures will also be used to insure quality of care in the proposed psychiatric units. The psychiatric units will be managed by PMS. PMS specializes in the management of psychiatric units in acute care hospitals. PMS has programs for adolescents and geriatrics. These programs will be available for use in the proposed psychiatric units. PMS also has a large variety of programs, services and specialists available to establish and maintain quality of care at the Petitioner. The Petitioner will be able to provide quality of care. Alternatives. The Petitioner did not prove that available and adequate facilities which may serve as an alternative to the services it is proposing do not exist in Broward County. Economies of Scale. The Petitioner's parent corporation, National Medical Enterprises has purchasing contracts available for use by the Petitioner in purchasing items needed for the proposed psychiatric units. These contracts can result in a reduction of costs for the proposed project. Staff Resources. PMS will help in recruiting staff for the proposed psychiatric units. Recruiting will be done locally but the Petitioner also has the ability to recruit specialized staff on a broader geographic scale. There is a shortage of nursing personnel for psychiatric services in southern Broward County and northern Dade County. Since the Petitioner plans to recruit locally, this could cause existing providers to lose specialized nursing personnel to the Petitioner. If the Petitioner causes vacancies at existing facilities, this could adversely affect quality of care. Financial Feasibility. The total projected cost of the project ($337,169.00) can easily be provided by National Medical Enterprises, the parent corporation of the Petitioner. The Petitioner's financial projections are unrealistic to the extent of the projected utilization and revenue for the proposed psychiatric units. Based upon the projected need of only 3 short-term psychiatric beds (or possibly a surplus of 77 beds) for 1989, the Petitioner's projected utilization and revenue for its proposal is rejected. The Petitioner has proved immediate financial feasibility but has failed to prove the proposal is financially feasible in the long-term. Impact of Proposal. The Petitioner's proposal could adversely effect the costs of providing health services in Broward County. This is especially true in light of the lack of need for additional short-term psychiatric beds in Broward County. Because of the high quality of the services the Petitioner proposes to provide, competition in Broward County could be enhanced and ultimately benefit consumers, if there was a need for the proposed additional beds. If a hospital has an image of being a charity hospital serving the needs of underserved groups, the hospital can experience difficulty in attracting paying patients and have difficulty in getting consumers to accept the high quality of the services of the hospital. Although it is likely that the Petitioner will take paying patients away from Memorial, it is unlikely that the number of patients lost could substantially affect the public's image of Memorial. The effect the Petitioner's proposal will have on Memorial is limited by the fact that the Petitioner is only seeking 31 beds and they are only short-term psychiatric beds. Memorial provides a variety of services and psychiatric services are only a small part of those services. I. Construction. It the Petitioner's proposal is approved, 11,500 square feet on the sixth floor of the Petitioner's hospital will be renovated and converted for use for the two proposed psychiatric units. The renovations can be made quickly. There will be space for 16 beds in a geropsychiatric unit and 15 beds in an adolescent unit. There will be a separate lobby for the psychiatric units and the elevators to the lobby will be strictly controlled. The two units will be separated and adequate security precautions will be taken to keep the two units separate. The ceilings in both units will be modified to insure security. Nurse stations will be provided for both units. Visibility from the nurse stations will be fair. Space is provided for a dayroom for each unit and there will be a class room and four rooms for therapy. These spaces will barely be adequate to meet the various needs of patients. With adequate planning and coordination, patients' needs can be met. There is inadequate space in the proposed facility for physical activities for patients.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the certificate of need application filed by the Petitioner for certificate of need #3372 should be denied. DONE and ENTERED this 15th day of May, 1986, 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 15th day of May, 1986. COPIES FURNISHED: Michael J. Glazer, Esquire AUSLEY, McMULLEN, McGEHEE, CAROTHERS & PROCTOR Post Office Box 391 Tallahassee, Florida 32302 Lesley Mendelson, Esquire Assistant General Counsel Department of Health and Rehabilitative Services Building One, Suite 407 1323 Winewood Boulevard Tallahassee, Florida 32301 James C. Hauser, Esquire MESSER, VICHERS, CAPARELLO, FRENCH & MADSEN Post Office Box 1876 Tallahassee, Florida 32302 Kenneth G. Oertel, Esquire Eleanor A. Joseph, Esquire OERTEL & HOFFMAN, P.A. Post Office Box 6507 Tallahassee, Florida 32313-6507 Cynthia S. Tunnicliff, Esquire CARLTON, FIELDS, WARD, EMMANUEL SMITH & CUTLER, P.A. Post Office Drawer 190 Tallahassee, Florida 32302 Mr. William Page, Jr. Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
The Issue Whether Certificate of Need Application Number 9099, filed by Columbia/JFK Medical Center, L.P., d/b/a JFK Medical Center, to convert 20 skilled nursing beds to 20 acute care beds, meets the criteria for approval.
Findings Of Fact Columbia/JFK Medical Center, L.P., d/b/a JFK Medical Center (JFK) is the applicant for Certificate of Need (CON) Number 9099 to convert a 20-bed hospital-based skilled nursing unit (SNU) to 20 general acute care or medical/surgical beds. The construction cost is approximately $117,000, of the total project cost of $151,668. JFK is an affiliate of Columbia Hospital System (Columbia), the largest for-profit hospital chain in the United States. The Agency for Health Care Administration (AHCA) is the state agency which administers the CON program for health care services and facilities in Florida. JFK is a 343-bed hospital located in Atlantis, Florida, in Palm Beach County, AHCA District 9, Subdistrict 5. Pursuant to a previously approved CON, an additional 24 acute care beds are under construction at JFK, along with 12 CON-exempt observation beds, at a cost of approximately $4 million. In August 1998, JFK was allowed to convert 10 substance abuse beds to 10 acute care beds. Other acute care hospitals in District 9 include the Petitioners: St. Mary's Hospital, Inc. (St. Mary's), and Good Samaritan Hospital, Inc. (Good Samaritan), which are located in northern Palm Beach County, AHCA District 9, Subdistrict 4, approximately 11 and 9 miles, respectively, from JFK. The remaining hospitals in District 9, Subdistrict 5, in southern Palm Beach County, and their approximate distances from JFK are as follows: Wellington (8 miles), Bethesda (7 miles), West Boca (18 miles), Delray (12 miles), and Boca Raton Community (17 miles). JFK and Delray are both "cardiac" hospitals offering open heart surgery services, with active emergency rooms, and more elderly patients in their respective service areas. The parties stipulated to the following facts: JFK's CON application was submitted in the Agency for Health Care Administration ("AHCA") second hospital batching cycle in 1998, and was the only acute care bed application submitted from acute care bed District 9, Subdistrict 5. AHCA noticed its decision to approve JFK's CON 9099 by publication in Volume 25, Number 1, Florida Administrative Weekly, dated January 8, 1999. Good Samaritan and St. Mary's each timely filed a Petition for Formal Administrative Proceeding challenging approval of JFK's CON application. By Order dated March 17, 1999, the cases arising from those petitions were consolidated for the purposes of all future proceedings. JFK has the ability to provide quality care and has a record of providing quality of care. §408.035(1)((c), Fla. Stat. JFK's CON application, at Schedule 6 and otherwise, projects all necessary staff positions and adequate numbers of staff, and projects sufficient salary and related compensation. See, §408.035(1)(h). JFK has available the resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation. See, §408.035(1)(h), Fla. Stat. JFK's CON application proposal is financially feasible in the immediate term. §408.035(1)(i), Fla. Stat. JFK's CON application proposal is financially feasible in the long term, except, Good Samaritan and St. Mary's contend as it relates to projected utilization. §408.035(1)(i), Fla. Stat. Schedules 9 and 10 and the architectural schematics in JFK's application are complete and satisfy all applicable CON application requirements. Schedule 1 in the application is complete, reasonable, and not at issue. JFK's proposed construction/renovation design, costs, and methods of construction/renovation are reasonable and satisfy all applicable requirements. See, §408.035(1)(m), Fla. Stat. JFK's CON application satisfies all minimum application content requirements in Section 408.037(1), Florida Statutes; except that Good Samaritan and St. Mary's contend that subsection (1)(a), is not satisfied. JFK certified that it will license and operate the facility if its CON proposal is approved. See, §408.037(2), Fla. Stat. JFK's Letter of Intent was timely filed and legally sufficient. See, §408.039(2)(a) and (c), Fla. Stat. Good Samaritan does not provide cardiac catheterization services, angioplasty, or open heart surgery. St. Mary's does not provide elective angioplasty or open heart surgery services. JFK is one of the hospitals to which Good Samaritan and St. Mary's transfer patients in need of inpatient cardiac catheterization services, angioplasty, and open heart surgery. Neither Good Samaritan nor St. Mary's have any present plans to apply for CON approval to add skilled nursing beds or acute care beds. The parties also stipulated that Subsections 408.035(1)(e), (f), (g), (h) - as related to training health professionals, (j), (k), and (2), Florida Statutes, are not at issue or not applicable to this proposal. For the batching cycle in which JFK applied for CON Number 9099, AHCA published a fixed need of zero for District 9, acute care subdistrict 5. In the absence of a numeric need for additional acute care beds in the subdistrict, JFK relied on not normal circumstances to support the need for its proposal, including the following: delays in admitting patients arriving through the emergency room to inpatient beds, delays in moving patients from surgery to recovery to acute care beds, and seasonal variations in occupancy exceeding optimal levels and, at times, exceeding 100%. Good Samaritan and St. Mary's oppose JFK's CON application. In general, these Petitioners claimed that other problems cause overcrowding in the emergency room at JFK, that the type of beds proposed will not be appropriate for the needs of most patients, that "seasonality" is not unique to or as extreme at JFK, and that a hospital-specific occupancy level below that set by rule cannot constitute a special or not normal circumstance. If JFK achieves the projected utilization, experts for Good Samaritan and St. Mary's also projected adverse financial consequences for those hospitals. Rule 59C-1.038(5) - special circumstances During the hearing, the parties stipulated that the numeric need for new acute care beds in the subdistrict is zero. The rule for determining numeric need also includes the following provision: (5) Approval Under Special Circumstances. Regardless of the subdistrict's average annual occupancy rate, need for additional acute care beds at an existing hospital is demonstrated if the hospital's average occupancy rate based on inpatient utilization of all licensed acute care beds is at or exceeds 80 percent. The determination of the average occupancy rate shall be made based on the average 12 months occupancy rate for the reporting period specified in section (4). Proposals for additional beds submitted by facilities qualifying under this subsection shall be reviewed in context with the applicable review criteria in section 408.035, F.S. The applicable time period for the special circumstances provision is calendar year 1997. JFK's reported acute care occupancy was 76.29% in 1997, and 79.7% in 1998, not 80%, as required by the rule. JFK and AHCA take the position that other special circumstances may, nevertheless, be and have been the basis for the approval of additional acute care beds. JFK also maintained that the reported average occupancy levels understated the demand for and actual use of its inpatient beds. Due to seasonal fluctuations caused by the influx of winter residents, JFK reached or exceeded 100% occupancy on 5 or 6 days, exceeded 80% occupancy on 20 days, and averaged 90.9% occupancy, in January 1999. In February 1999, the average was 96.5%, but was over 100% on 8 days, and over 90% on 25 days. In March 1999, the average occupancy was 90.1%, but exceeded 100% on one day, and 90% on 17 days. In recent years, the "season" also has extended into more months, from approximately Thanksgiving to Easter or Passover. It also includes flu season which disproportionately affects the health of the elderly. JFK also demonstrated that occupancy varies based on the day of the week, generally highest on Mondays, Tuesdays, and Wednesdays and lowest on weekends. JFK's acute care beds were also occupied by patients who were not classified as 24-hour medical/surgical inpatients. Others included observation and 23-hour patients, covered by Medicare or health maintenance organizations (HMOs). Some of those patients were classified initially as outpatients to lower reimbursement rates, but routinely subsequently reclassified and admitted as inpatients. In fact, during the applicable time period for determining occupancy, Medicare allowed patients to be classified as outpatients for up to 72-hour hospital stays. Subsequently, Medicare reduced the allowable hospital stay to 48 hours for all "outpatients," according to AHCA's expert witness. When not classified as inpatients, patients are not counted in average occupancy rates which are based solely on the admitted inpatient census, counted each midnight. For example, in February 1999, the average daily census for 23-hour patients was 10.8 patients, which, when combined with 24-hour patients, results in an average occupancy of 99.7% for the month. Due to the Medicare classification system, some but not all of the so- called 23-hour patients affect the accuracy of the inpatient utilization data. According to AHCA's expert witness, however, numeric need cannot be determined because of JFK's failure to quantify the number of Medicare patients who actually affected the acute care bed utilization. The 23-hour or observation patients may use, but do not require CON-approved and licensed acute care beds. Instead, those patients may be held in either non-CON, non-licensed "observation" beds or in licensed acute care beds. As AHCA determined, to the extent that 23-hour patients in reality stayed longer, and adversely affected JFK's ability to accommodate acute care patients, their presence can be considered to determine if special circumstances exist. Combining 24-hour and 23-hour patients, JFK experienced an occupancy rate of 80% in 1996, and 85.7% in 1997. While some of the 23-hour patients were, in fact, outpatients who should not be considered and others stayed from 24 hours up to 3 days and should be considered, JFK's proportion of Medicare services is important to determining whether special circumstances based on acute care utilization exist. With 74% of all JFK patients in the Medicare category, but without having exact numbers, it is more reasonable than not to conclude that the occupancy level is between the range of 76.29% for acute care only and 85.7% for acute care and 23-hour patients. A reasonable inference is that JFK achieved at least 80% occupancy of patients who were in reality inpatients in its acute care beds in 1997. The expert health planner for the Petitioners conceded that bed availability declines, capacity is a constraint, and high occupancy becomes a barrier to service at some level between 80 and 83% occupancy. In a prior CON filed on behalf of Good Samaritan for a 4-bed addition to an 11-bed neonatal intensive care unit (NICU), the same expert asserted that 76% occupancy was a reasonable utilization standard. That occupancy level was based on the desire to maintain 95% bed availability. An exact comparison of the occupancy levels in this and the NICU case, however, is impossible due to the small size of the NICU unit and the fact that the applicant met the occupancy level in that rule for special circumstances. The statistical data on the number patients actually using acute care beds at JFK in excess of 24-hours despite their classification, supports its claim of overcrowding. Emergency Room Conditions JFK described overcrowding in its emergency department as another special circumstance creating a need for additional acute care beds. The emergency room at JFK has 37 bays each with a bed and another 15 to 17 spaces used for stretchers. Eighteen parking spaces are reserved for ambulances in front of the emergency department. It is not uncommon for a patient to wait in the JFK emergency room up to 24 hours after being admitted to the hospital, before being moved to an acute care bed. In February 1999, after having converted 10 substance abuse beds to acute care beds in October 1998, JFK still provided 234 patient days of acute care in the emergency department. The waiting time for patients to receive a bed after being admitted through the emergency department ranged from 10 hours to 5 days in the winter, and from an average of 6 hours up to 24 hours in the summer. While JFK claims that the quality of care is not adversely affected, it does note that patient privacy and comfort are compromised due to the noise, lights, activity, and lack of space for visitors in the emergency room. JFK's patients tend to be older and sicker than the average. As a result, more patients arriving at its emergency room are admitted to the hospital. In the winter of 1998, JFK was holding up to 35 acute care inpatients at a time in the emergency room. Nationally, from 15% to 20% of emergency room patients are admitted to hospitals. By contrast, almost twice that number, or one-third of JFK's emergency room patients become admitted inpatients. Emergency room admissions are also a substantial number of total admissions at JFK. In calendar year 1998, slightly more than 65% of all inpatient admissions to JFK arrived through the emergency room, most by ambulance. Ambulance arrivals at any particular hospital are often dictated by the patient's condition, with unstable patients directed to the nearest hospital. Once patients are stabilized in the emergency room at JFK, those requiring obstetric, pediatric, or psychiatric admissions are transferred from JFK which does not provide those inpatient services. Emergency room patients in need of acute care services provided at JFK, like the neonates at issue in the prior Good Samaritan application, are unlikely candidates for transfer The emergency room at JFK receives up to 50,000 patient visits a year, up from approximately 32,000 annual visits five years ago. JFK operates one of the largest and busiest emergency departments in Palm Beach County. Due to overcrowding in the emergency department at Delray Hospital, in southern Palm Beach County, patients have been diverted to other facilities, including JFK. In terms of square footage, JFK's emergency room does not meet the standards to accommodate the 52 to 54 bays and stretchers and related activities. JFK lacks adequate space for support services which should also be available in the emergency department. The Petitioners asserted that enlarging the emergency room will alleviate its problems. JFK demonstrated, however, that regardless of the physical size of the emergency room, optimal patient care requires more capacity to transfer patients faster to acute care beds outside the emergency department. Conditions in Other Departments Of 343 operational beds at JFK at the time of the final hearing, 290 were monitored or telemetry acute care beds, 30 were critical care beds, and 23 were non-monitored, non-critical care beds. Most of the monitored beds are in rooms equipped with antennae to transmit data from electrodes and monitors when attached to patients. When monitoring is not necessary, the same beds are used by regular acute care patients. The large number of monitored beds located throughout the hospital in various units reflects JFK's largely elderly population and specialization in cardiology. In 1998, 820 inpatient cardiac catheterizations (caths) were performed at JFK. Petitioners Good Samaritan and St. Mary's transferred 90 and 28 of those cath patients, respectively to JFK. In the first five months of 1999, 449 caths were performed, including procedures on 35 patients transferred from Good Samaritan and 16 from St. Mary's. Cath lab patients are held in the lab longer after their procedures when beds are not available in cardiac or the post- anesthesia care units. The Petitioners suggested that cath lab patients could be placed in a 12-bed holding area added to the lab in July 1999; however, that space was expected to be filled by patients being prepared for caths. Open heart surgery is available in Palm Beach County at three hospitals, Delray, JFK and Palm Beach Gardens. Patients admitted to JFK for other primary diagnoses often require cardiac monitoring even though they are not in a cardiac unit. The additional 24 beds which were under construction at the time of the final hearing will also be monitored beds. The 20 beds at issue in this proceeding will not be monitored. The Petitioners questioned whether non-monitored beds will alleviate overcrowding at JFK where so many patients require monitoring. JFK physicians in various specialties testified concerning conditions in other areas of the hospital. A nephrologist, who consults primarily in intensive care units, described the backlog and delay in moving patients from intensive care into acute care beds. A cardiologist noted that patients are taking telemetry beds they do not need because there is no other place to put them. A general and vascular surgeon described the overcrowding as a problem with the ability to move patients from more to less intensive care when appropriate. Elective surgeries have been delayed to be sure that patients will have beds following surgery. The evidence presented by JFK supports the conclusion that the additional acute care beds will assist in alleviating overcrowding in other hospital units, including backlogs in the existing monitored beds. JFK has established as factual bases for special circumstances that its high occupancy exceeds the optimal much of the year, aggravated by seasonal fluctuations; that it has relatively large emergency room admissions over which it has no control; and that its intensive care and monitored beds are not available when needed. Number of Beds Needed With the conversion, in 1998, of 10 substance abuse beds to acute care beds and the 1999 construction of 24 of 40 additional beds requested by JFK, the number of licensed and approved beds at JFK increased to 367. In addition, with CON- exemption, JFK has added observation beds. As a result of AHCA's partial approval of the previous JFK request for new construction and due to unfavorable changes in Medicare reimbursement policies for hospital-based SNUs, JFK now seeks this 20-bed conversion. JFK ceased operating the SNU in October 1998, after Medicare reimbursement changed to a system based on resource utilization groups (RUGs). JFK was unable to operate the SNU without financial losses, that is, unable to cover its patient care costs under the RUGs system. The proposal to convert the beds back to acute care, as they were previously licensed will allow JFK to reconnect existing oxygen lines in the walls and to use the beds for acute care patients. Although Good Samaritan and St. Mary's suggested that JFK can profitably operate a SNU, there was no evidence presented other than its previous occupancy levels which were very high, and the fact that Columbia is not closing all of its SNUs. The Petitioners also question JFK's ability to use its SNU beds for acute care and/or observation patients. AHCA, however, took the position that acute care licensure is required for beds in which acute care patients are routinely treated. Otherwise, the agency would not have accurate data on utilization, bed inventory, and the projected need. In order to demonstrate the number of beds needed, JFK's expert used historical increases in admissions. Some admissions data was skewed because the parent corporation, Columbia, closed Palm Beach Regional in 1996, and consolidated its activities at JFK. Excluding from consideration the increase of 3,707 admissions from 1995 to 1996, JFK's expert considered approximately 800 as reasonable to assume as an average annual increase. That represents roughly the mid-point between the 1996 to 1997 increase of 605, and the 1997 to 1998 increase of 1,076 admissions. A projected increase of 800 admissions for an average 5-day length of stay would result in an increase of 4,000 patient days a year which, at 80% occupancy, justifies an increase of 14 beds a year. Considering the closing of Palm Beach Regional, the number of beds in the subdistrict will have been reduced by 170. At the hearing, JFK's expert also relied on 3.3% annual patient day increase to project the number of beds needed, having experienced an increase of 5.8% from 1997 to 1998. Using this methodology, JFK projected a need for 20 additional acute care beds by 2002, and over 40 more by 2004. That methodology assumed patient growth in the excess of population growth and, necessarily, an increase in market share. JFK's market share increased in its primary service area from approximately 19% in 1993 to 27% in 1997. But the market share also slightly declined from 1997 to 1998. AHCA's methodology for determining the number of beds needed was based on the entire population of Palm Beach County, not just the more elderly southern area. It also assumed that JFK's market share would remain constant. Using this more conservative approach than JFK, AHCA projected a need for 383 acute care beds, or 16 beds added to the current total of 367 licensed and approved beds, at an optimal 75% occupancy by the year 2004. AHCA relied on a projection of 104,959 total patient days in 2004. Using the same methodology, JFK's expert determined that total projected patient days for 1998 would have been 94,225, but the actual total was 98,126 patient days. AHCA's methodology underestimates the number of beds needed, but does confirm that more than 16 additional beds will be needed by 2004. AHCA's reliance on 75% as an optimal future occupancy level as compared to the hospital-specific historical level of 80% was criticized, as was the use of the year 2004 as a planning horizon. The rule requires 80% occupancy for a prior reporting period and does not establish any planning horizon. Good Samaritan and St. Mary's used 80% occupancy in their analysis of bed need. At 80% occupancy, Petitioners projected an average daily census of 265 patients in 331 beds in 2001, or 268 patients in 334 beds in 2002, and 270 patients in 358 beds in 2003, as compared to 367 existing and approved beds. The Petitioners' projection is an underestimate of bed-need based on the actual average daily census of 269 patients in 1998. The Petitioners' methodology erroneously projects a need for fewer licensed beds than JFK has currently, despite the special circumstances evincing overcrowding. At 80% occupancy, based on the special circumstances rule, a hospital exceeds the optimal level and needs more beds. But, according to the Petitioners, 80% is a future occupancy target for the appropriate planning horizon of 2002. As AHCA's expert noted, it is illogical to use 80% as both optimal and as an indication of the need for additional beds. Similarly, it is not reasonable to use a planning horizon which coincides with the time when more beds will be needed. Therefore, the use of 75% for the five-year planning horizon of 2004 is a reasonable optimal target, as contrasted to the need for additional beds when 80% occupancy is reached at some future time beyond the planning horizon. AHCA's underestimate of need at 16 more beds by 2004, and JFK's overestimate of need at 40 more beds by 2004, support the conclusion that the requested addition of 20 beds in this application is in a reasonably conservative range. Rule 59C-1.038(6)(a) and Subsection 408.035(l)(n) - service and commitment to medically indigent; and Rule 59C-1.038(6)(b) - conversion of beds Rule 59C-1.038(6), Florida Administrative Code, also includes the following criteria: Priority consideration for initiation of new acute care services of capital expenditures shall be given to applicants with documented history of providing services to medically indigent patients or a commitment to do so. When there are competing applications within a subdistrict, priority consideration shall be given to the applications which meet the need for additional acute care beds in a particular service through the conversion of existing underutilized beds. Subsection (a) of the Rule, overlaps with District 9 health plan allocation factor one, which must be considered pursuant to Subsection 408.035(1)(a), and with the explicit criterion of Subsection 408.035(1)(n), Florida Statutes. All three require a commitment to and record of service to Medicaid, indigent and/or handicapped patients. JFK agreed to have its CON conditioned on 5% of the care given in the 20 new beds to Medicaid and charity patients. The commitment for the 24 beds under construction is 3% for Medicaid and charity patients. If charity patients are defined as those with family incomes equal to or below 150% of federal poverty guidelines, JFK provided $2.9 million in charity care in calendar year 1998, and $720,000 as of April for 1999. JFK provided an additional 3% to 5% in Medicaid care. The Medicaid total includes Palm Beach County Health Care District patients, who are also called welfare patients. The charity care provided by JFK is equivalent to approximately 1% of its gross revenue. JFK explained its relatively low Medicaid care as a function of its relatively limited services for people covered by Medicaid, particularly, the young who utilize obstetrics and pediatrics. JFK pointed to the differing demographics in Palm Beach County with more elderly, who have Medicare coverage, located in its primary service area. Excluding pediatric and obstetric care, Medicaid covered 6.7% of patients in southern Palm Beach County as compared to 16.3% in northern Palm Beach County. Of the Medicaid patients, 2.9% in the southern area as compared to 6% in the northern area are adults. On this basis, JFK established the adequacy of its historical Medicaid and indigent care, and of its proposed commitment. Subsection (6)(b) of Rule 59C-1.038 is inapplicable when, as in this case, there are not competing applications to compare. Subsection 408.035(1)(a) - other local health plan factors and Subsection 408.035(1)(o) - continuum of care District 9 allocation factor 2, favoring cost containment practices, is enhanced by the proposed conversion rather than the new construction of beds. Within the Columbia group of hospitals, there is an effort to avoid unnecessary duplications of services. JFK caters to an elderly population and to providing cardiology, neurology, and oncology services. Columbia's Palms West provides pediatric and obstetric care. Another Columbia facility in Palm Beach County, Columbia Hospital, specializes in inpatient psychiatric services. The elimination of the hospital-based SNU at JFK does eliminate one level of care in the system, contrary to the criteria. District 9 health plan allocation factor 3 requires favorable consideration of plans, like JFK's, to convert unused or underutilized beds. In this case, the JFK SNU was highly utilized but unprofitable. There is no evidence that alternative placements in free-standing nursing homes are inappropriate or unavailable. Minor inefficiencies result from the time lag for transfers during which skilled nursing patients remain in acute care beds. To some extent, the inefficiencies were already occurring while JFK operated the SNU due to its high average census of 18 or 19 patients in a total of 20 SNU beds. Those inefficiencies are outweighed by the low cost conversion of 20 beds for $117,000, particularly as compared to its prior 24-bed construction for $4 million. In general, the applicable local health plan allocation factors support the approval of the JFK application. Rule 59C-1.030 - needs access for low income, minorities, handicapped, elderly, Medicaid, Medicare, indigent or other medically underserved In general, the proposal is intended to increase access to JFK's services by decreasing waiting times for admissions. The services are used by a large number of elderly patients, who are primarily covered by Medicare. JFK demonstrated that the population in its service area also tends to be wealthier than the population in northern Palm Beach County. Medicaid and indigent access to care at JFK is consistent and reasonable given the demographic data presented. Access for elderly Medicare patients will be enhanced by the proposal. Subsection 408.035(1)(b) - accessibility, availability, appropriateness, and adequacy of like and existing services Good Samaritan and St. Mary's argue that hospitals below 75% occupancy are available alternatives to JFK's patients. Yet, those facilities are not viable alternatives for unstable patients admitted through the emergency room. Neither is it appropriate to transfer patients who need services provided at JFK. JFK does not allege that any problems exist at other facilities, but only that it is affected by special circumstances. From January to June 1998, the closest hospitals to JFK experienced wide-ranging occupancy levels from 92% at Delray, the hospital with services most comparable to those at JFK, to 57% at Bethesda, and 47% at Wellington. The wide range in occupancy rate is further indication of uniqueness of the need for patients to access services available only at Delray and JFK. Subsection 408.035(1)(d) - outpatient care or other alternatives Admitted inpatients have no alternatives to their need for acute care beds. Subsection 408.035(1)(h) - alternative use of resources and accessibility for residents The continued use of the 20 beds as a SNU was suggested as an alternative. As noted, however, that proved to be financially unprofitable at JFK, in comparison to the low cost conversion to acute care beds. AHCA reasonably rejected the idea that of the beds being designated "observation" beds when used for acute care patients. In addition, in 1996, JFK estimated the cost of moving patients from bed to bed in the hospital due to the shortage of appropriate beds, when needed, at up to $1 million. This project is intended to meet a facility-specific need based on the demand for services at JFK from patients who cannot reasonably initially be sent or subsequently transferred to other hospitals. As such, JFK's additional beds do not meet the criterion for accessibility for all residents of the district. Subsection 408.035(1)(i) - utilization and long-term financial feasibility Good Samaritan and St. Mary's contend that JFK's proposal includes unrealistically high utilization projections for the additional 20 beds. Using 98,000 patient days in 1998, which excludes any days attributable to skilled nursing beds, total utilization projected in the second year is 78.4%. For the additional 20 beds, projected utilization is 77.4%. The expert for Good Samaritan and St. Mary's disagreed with the allocation of patient days between the existing and additional beds. If 80% utilization is assigned to existing 367 beds, as he suggested, then the average annual occupancy of the 20 new beds would be only 50%. The financial break-even point for the project, however, is 50 to 75 patient days, or 10 to 15 patients with average lengths of stay of 5 days. Therefore, even with the lower projected occupancy of 50%, or an average of 10 beds at any time, the project is financially feasible in the long-term. In reality, a separate allocation of patient days to the 20 new beds is somewhat arbitrary. It is also less important than total projected utilization, since the 20 beds do not represent a separate unit in which specialized services will be provided. The additional beds will become a part of the total medical/surgical inventory. By demonstrating that there will be sufficient total occupancy to exceed the financial break-even point in the newly converted beds regardless of the allocation of patient days to any particular bed, JFK demonstrated the long- term financial feasibility of the proposal for CON 9099. Subsection 408.035(1)(l) - impact on costs; effects of competition If the JFK proposal is approved, Good Samaritan anticipates a loss of 255 patients, or 1,392 patient days, which is equivalent to a financial loss of over $1.5 million. St. Mary's anticipates losses of 158 patients or 973 patient days, and in excess of $1 million. Both hospitals were experiencing overall operating losses in 1999. But, the estimates of financial losses for both hospitals did not take into consideration all of the expense reductions associated with serving fewer patients. Excluding pediatrics and obstetrics, which are not available at JFK, JFK's overlapping service areas with Good Samaritan and St. Mary's are minimal. Good Samaritan's market share in JFK's primary service area is 4.8%, and St. Mary's is 9.3%. Pediatrics and obstetrics contribute 30.7% of total patients at Good Samaritan, and 49.5% at St. Mary's. Physician overlap among the hospitals is also limited. Although 357 doctors admitted patients to JFK and 464 to St. Mary's in the first two quarters of 1998, the number of overlapping doctors was 28. With a total of 379 admitting doctors at Good Samaritan for the same period of time, only 21 were included in JFK's 357 admitting physicians. In general, doctors in the northern Palm Beach County acute care subdistrict seldom admit patients to hospitals in the southern subdistrict, and vice versa. The absence of overlapping medical staff also reflected the differences in the services. Most of the top twenty doctors who admitted patients to Good Samaritan and St. Mary's were obstetricians and pediatricians. When obstetricians and pediatricians are excluded, the number of overlapping doctors for JFK and Good Samaritan is reduced to 15, and for JFK and St. Mary's to 22. In addition to providing different services, to different areas of the County, doctors who practice primarily in one or the other subdistrict served patients in different payor classification mixes. In 1997, JFK's patients were 74% Medicare, consistent with the fact that a larger percentage of elderly patients live in JFK's service area. By contrast, Medicare patients were approximately 48% of the total at Good Samaritan, and 32% of the total at St. Mary's. Historically, the addition of acute care beds at JFK has not affected other hospitals in the district or even the same acute care subdistrict. After the conversion of 10 substance abuse beds in the fall of 1998, the acute care patient days at every hospital in the same subdistrict increased in early 1999 over comparable periods of time in 1998. The assumption that additional beds at JFK will take patients from other hospitals includes the assumption that JFK will draw a larger share of an incremental increase of patients. The assumption is, in other words, that all patients will be new to JFK. The expert health planner for Good Samaritan and St. Mary's conceded that facility-specific overcrowding can justify projections that the additional beds will accommodate the existing census plus growth attributable to increasing population, and will not generate new patients. The expert assumed, nevertheless that from 1478 to 1486 new patients (depending on whether the length of stay is rounded off) would be associated with JFK's project. From that total, the proportional losses allocated were 255 patients from Good Samaritan and 158 patients from St. Mary's. Another underlying assumption increase is that all of the new patients would go to other hospitals if JFK does not add 20 acute care beds. That assumption suggests that all of the patients could receive the services they need at the other facilities, which is not supported by the facts or current utilization data. More likely, with the addition of beds due to overcrowding, some patients will come from the existing hospital census at JFK. It is not reasonable to assume that JFK will have all new patients, nor that all patients could be treated at other hospitals in the absence of JFK's expansion. The proportion of emergency room admissions at JFK is reasonably expected to continue. Patients who arrive at JFK requiring open heart surgery, angioplasties or invasive cardiac caths are reasonably expected to continue to receive those services at JFK, including patients who are transferred to JFK from Good Samaritan and St. Mary's. Based on the failure to support the assumptions, and the differences in service areas, medical staff, specialties, and patient demographics, Good Samaritan and St. Mary's have not shown any adverse impact from the JFK proposal. On balance, considering the statutory and rule criteria for reviewing CON applications, JFK established, as a matter of fact, that it meets the special circumstance criteria related to emergency room admissions, pre- and post-surgical and intensive care backlogs, and average annual occupancy projections in excess of optimal levels.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED That a final order be entered issuing CON 9099 to convert 20 skilled nursing beds to 20 acute care beds at Columbia/JFK Medical Center, L.P., d/b/a JFK Medical Center, on condition that a minimum of 5% of new acute care patient days will be provided to Medicaid and charity patients. The file of the Division of Administrative Hearings, DOAH Case No. 99-0714 is hereby closed. DONE AND ENTERED this 7th day of April, 2000, 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 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 7th day of April, 2000. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Julie Gallagher, General Counsel Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Richard A. Patterson, Esquire Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Thomas A. Sheehan, III, Esquire Moyle, Flanigan, Katz, Kolins, Raymond & Sheehan, P.A. Post Office Box 3888 West Palm Beach, Florida 33402 Stephen A. Ecenia, Esquire Thomas W. Konrad, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. Post Office Box 551 Tallahassee, Florida 32302-0551 Robert D. Newell, Jr., Esquire Newell & Terry, P.A. 817 North Gadsden Street Tallahassee, Florida 32303-6313
The Issue Whether the Agency for Health Care Administration has a policy regarding the determination of the need for long term care beds which constitutes a rule and, if so, whether rulemaking is feasible and practicable.
Findings Of Fact Vencor Hospitals South, Inc. (Vencor), applied for a certificate of need (CON No. 8614) to establish a 60-bed long term care hospital in Agency for Health Care Administration (AHCA) District 8, for Fort Myers, Lee County, Florida. AHCA is the state agency authorized to administer the CON program for health care services and facilities in Florida. AHCA reviewed and preliminarily denied Vencor's application for CON No. 8614. The reasons for AHCA's actions on this or any other CON application are memorialized in documents called State Agency Action Reports (SAARs). Vencor alleges that the following statement generally describes AHCA's policy in regard to the review of CON applications for long term care hospitals: Long term care is not a separate category of health service, but is instead merely an allowable form of reimbursement pursuant to Medicare regulations. The care provided in acute care hospitals, hospital based skilled nursing beds, "subacute" care in nursing homes, and care at rehabilitation facilities, are all equivalent to the care provided at long term care hospitals. Therefore, in evaluating the need for long term care hospital beds, AHCA will assess the availability of other categories of beds and services to meet the need for the services proposed by the applicant for long term care hospital beds. Need for long term care beds is determined on a regional basis. Prior to 1994, long term care hospitals were not regulated separately and were considered comparable to general acute care hospitals. In 1994, AHCA amended the CON rules to establish long term care beds and hospitals as separate categories of health care providers. In 1994, AHCA defined and continues to the present to define long term care hospital as follows: "Long term care hospital" means a hospital licensed under Chapter 395, Part I, F.S., which meets the requirements of Part 412, subpart B, paragraph 412.23(e), [C]ode of Federal Regulations (1994), and seeks exclusion from the Medicare prospective payment system for inpatient hospital services. Rule 59C-1.002(29), Florida Administrative Code. In the federal regulations referenced by the AHCA rule, long term care hospital is more specifically defined as a hospital with an independent governing structure, an average length of stay greater than 25 days, referral of at least 75 percent of total patients from separate hospitals, and which meets the requirements for Medicare participation. 42 CFR Ch. IV, Subch. B, Pt. 412, Subpt. B, s. 412.23. AHCA also distinguishes long term care in its rules governing the conversions from one type of health care provider to another. The applicable conversion rules provide: "Conversion from one type of health care facility to another" means the reclassification of one licensed facility type to another licensed facility type, including reclassification from a general acute care hospital to a long term care hospital or specialty hospital or from a long term care hospital or specialty hospital to a general acute care hospital. Rule 59C-1.002(14), Florida Administrative Code (emphasis added); and "Conversion of beds" means the reclassification of licensed beds from one category to another including, for facilities licensed under Chapter 395, F.S., conversion to or from acute care beds, neonatal intensive care beds, hospital inpatient psychiatric beds, comprehensive medical rehabilitation beds, hospital inpatient substance abuse beds, distinct part skilled nursing facility beds, or beds in a long term care hospital; and, for facilities licensed under Chapter 400, Part I, F.S., conversion to or from skilled beds and intermediate care beds in a facility that is not certified for both skilled and intermediate nursing care if such conversion effects a change in the level of care of 10 beds or 10 percent of the total bed capacity of the facility within a 2-year period, or conversion to or from sheltered beds and community beds. Rule 59C-1.002 (15), Florida Administrative Code (emphasis added). AHCA also defined "substantial change in health services" to include: The conversion of a general acute care or specialty hospital licensed under Chapter 395, Part I, F.S., to a long term care hospital. Rule 59C-1.002(41)(c), Florida Administrative Code. Taken together AHCA's rules recognize long term care hospitals or beds as a separate and distinct category. Elfie Stamm was responsible for the development of the rules and is currently the chief of the CON and Budget Review Office at AHCA. Ms. Stamm testified in a 1994 rule challenge case, when AHCA was drafting a rule with a numeric need methodology for long term care beds, that: long term care hospitals serve patients who cannot be cost effectively treated in an acute care hospital, who do not have the same needs for the same types of service; it would not be fair for an applicant for the new construction of a long term care hospital to be compared to an acute care hospital; comprehensive medical rehabilitation (CMR) services are different than services in a long term care hospital; a long term care hospital with an average length of stay of 25 days or more is different from an acute care hospital that generally has a length of stay of 5 to 6 days but provides a full range of services; the patient populations in long term care hospitals are different from those in an acute care hospital in terms of overall patient characteristics, including older than average age, higher percentage of patients with particular diagnoses, such as ventilator dependency, higher overall mortality rates than acute care hospitals, and a much higher percentage of admissions by referrals from acute care hospitals. [T. 262-283]. See also Tarpon Springs Hospital Foundation, etc. v. AHCA, et al., DOAH Case No. 94-0958RU (R.O. 8/2/94). On behalf of AHCA, Ms. Stamm testified in this proceeding that: AHCA has changed its mind on whether or not it is appropriate to leave a patient in an acute care setting rather than transfer to long term care, specifically with regard to cost-effectiveness. [T. 373]. AHCA has not changed its mind and still says acute care hospitals and long term care hospitals should be reviewed separately, because if they would be reviewed comparatively, . . . there would be no chance for any [long term] beds ever because we don't show any need for acute care beds anywhere in the state. [T. 376]. But in evaluating Vencor's application for long term care hospitals in District 8 that would be located in Lee County, the Agency viewed hospital-based skilled nursing units, community nursing home subacute beds and comprehensive medical rehab beds throughout the entire district as existing and like potential alternatives to the proposed project. [T. 389]. AHCA does not necessarily agree that CMR services are different from long term care hospital services. [T. 265]. AHCA does not have a clearly identified population group for whom long term care would be more cost-effective, or to determine a numeric need methodology. [TR. 324]. Although there is a population that does need services that exceed 25 days or prolonged ventilator service, AHCA is not sure what is the most appropriate setting for their care because of inadequate data on comparative costs and outcomes. [TR. 327-8]. AHCA attributes its change in position to the publication titled Subacute Care: Policy Synthesis And Market Area Analysis, submitted to the Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, on November 1, 1995, by Lewin-VHI, Inc. The document is commonly referred to as the Lewin Report. The Lewin Report concludes that long term care hospitals serve patients who are also served in other subacute settings, including CMR beds and hospitals, acute care hospital skilled nursing units, and skilled nursing units in freestanding nursing homes. As a result of the conclusions in the Lewin Report, AHCA maintains that it is unable to develop a numeric need methodology without an identifiable patient population. AHCA has not, however, repealed the rules establishing long term care as a separate type of health care service. Rather, the agency intends to wait for additional studies, including one being conducted for Vencor. The Medicare prospective payment system (PPS) for acute care hospitals created the market for subacute and long term care. Under the PPS, acute care hospitals receive a fixed payment based on the patient's diagnosis or diagnostic related group (DRG). Upon discharge to a subacute or long term setting, the patient's care is no longer reimbursed on a fixed basis, but at actual, reasonable costs. AHCA maintains that financial pressures created the current system, but without cost/benefit or outcomes analyses to demonstrate the appropriateness of using long term care hospitals. Therefore, AHCA considered the occupancy levels of acute care hospitals and available nursing home beds in determining the need for Vencor's project. AHCA has no rule defining subacute care, no inventory of subacute care units in nursing homes, and no reporting requirements from which it can determine the level of care or services provided in hospital based skilled nursing units. AHCA has no reports on specific levels or types of services provided in CMR beds. AHCA, nevertheless, presumed that the services are like those provided in long term care beds based on the Lewin Report. In rejecting Vencor's attempts to distinguish itself from other types of health care providers, AHCA relied, in part, on its finding that 1995 District 8 acute care hospital occupancy averaged 47.69 percent and peaked at 60.26 percent. By not adopting rules for determining the numeric need for long term care, AHCA also failed to establish the appropriate service area for determining need. AHCA considers the need for long term care services on a regional basis. In support of AHCA's decision to deny a long term care hospital application in District 9, Ms. Stamm's predecessor, Elizabeth Dudek, testified that long term care is a regional service. As further evidence of AHCA's position, the SAARs issued by AHCA on long term care hospital applications, have examined available services beyond the limits of the district. AHCA contends that long term care is regional, but determines its need by comparison to available hospital based skilled nursing units and subacute beds in community nursing homes, which are evaluated on a subdistrict basis, and CMR services which are tertiary but evaluated on a district-wide basis. See Finding of Fact 22. Since November 1995, AHCA has preliminarily denied all CON applications for long term care hospitals. Its policy of comparing the need for long term care to available beds in nursing homes and other types of hospitals is consistently repeated in the portions of the SAARs which address need. In analyzing the need for long term care hospitals in AHCA District 1, the SAAR dated January 10, 1997, includes the following statements: Vencor Hospitals South, Inc. defines its patient population as those currently being treated in ICUs and belonging to roughly 10 DRGs (which account for approximately 83% of Vencor patients. . . .) However these DRGs could also [be] appropriate for acute care, hospital based freestanding skilled nursing care, skilled nursing facility care and comprehensive medical rehabilitation care and the applicant does not demonstrate that these services are not available to residents of District 1. and The applicant [Baptist Health Affiliates Inc.] also discusses the differences between its proposed patient population and that of an acute care hospital, nursing home and those treated at home. However, there is no documentation provided which demonstrates the applicant's potential patients could not receive appropriate care in the District's existing rehabilitation facility, hospital based or nursing home skilled subacute nursing units. . . . Vencor Exhibit 12, pages 3-4 and 8. AHCA reviewed a CON application filed by Columbia of Pinellas County, Inc., to convert acute care beds to a long term care hospital in District 5, and concluded: The patient population represented by the DRGs listed above (by the applicant) are typical of freestanding nursing home with subacute units and hospital based SNUs in the state. There appear to be strong similarities between the subacute patient population of nursing homes/units and those of a long term care hospital. Vencor Exhibit 13, page 8. The SAAR issued on the Columbia of Pinellas County CON application continued with an extensive discussion of the Lewin Report. The SAAR reported AHCA's finding that CMR hospitals are alternatives since they admit patients who do not fit federal guidelines for CMR admissions (being able to tolerate three hours of therapy a day), and who might otherwise be in long term care hospitals. In the SAAR issued after the review of long term care applications for District 7, the same statement appears: The patient population represented by the DRGs listed above [by Orlando Regional Hospital] are typical of freestanding nursing home with subacute units and hospital based SNUs in the state. There appear to be strong similarities between the subacute patient population of nursing homes/units and those of a long term care hospital. Vencor Exhibit 14, page 11. Finally, in reviewing applications from Palm Beach County in District 9, AHCA concluded again: The applicant states that generally speaking the long term care hospital patients have respiratory complications, . . . tracheostomies, . . . chronic diseases, an infectious process requiring antibiotic therapy, . . . skin complications . . . need a combination of rehabilitation and complex medical treatment or are technology dependent individuals requiring high levels of nursing care. However, these patients could also [be] appropriate for acute care, hospital based skilled nursing care, skilled nursing facility care and comprehensive medical rehabilitation care and the applicant does not demonstrate that these services are not available to the residents of District IX. Vencor Exhibit 15, page 4. AHCA relies on the statutory review criteria in Subsection 408.035(1)(b), Florida Statutes, as authority for its consideration of all beds and facilities which may serve the same patients. That provision requires consideration of: (b) The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care facilities and health services in the service district of the applicant. The expert witness for AHCA, however, distinguished between "like and existing" services for purposes of determining numeric need and the statutory criteria. She noted that once numeric need is established and published for nursing beds or CMR beds, for example, that same category of beds outside the appropriate health service planning subdistrict or district is not considered "like and existing." Similarly, within the district or subdistrict, there is a factual issue in each case but no presumption that beds of a different category are "like and existing." AHCA contends that it has no policy related to long term care and any comparable services. Since 1995, long term care CON applicants, according to AHCA, have failed to meet the requirements of Rule 59C-1.008(e), which provides in pertinent part: If no agency policy exists, the applicant will be responsible for demonstrating need through a needs assessment methodology which must include, at a minimum, consideration of the following topics, except where they are inconsistent with the applicable statutory or rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, subdistrict or both; Medical treatment trends; and Market conditions. (Emphasis added). AHCA's argument ignores the fact that its expert witness provided competent, substantial evidence that it has redefined and expanded the meaning of "like services" for purposes of demonstrating need through a needs assessment methodology. It also ignores the fact that AHCA has expanded the comparison of need beyond the geographical limits of the district. AHCA's argument that it is waiting for additional data before adopting a need methodology, including data from a Vencor study, is to no avail since AHCA has already changed its policy. After reviewing a total of eighteen CON applications for long term care hospitals, AHCA has issued two CONs, one as part of a settlement agreement and the other approving an application filed by St. Petersburg Health Care Management, Inc. (St. Petersburg), for CON 8213. The St. Petersburg application demonstrated need using an identical methodology prepared by the same health planner as Vencor in this case. Referring to CON 8213, AHCA's expert witness candidly admitted . . . "I want to make clear that particular application was actually submitted and approved prior to the Lewin study." (T. 393). Subsequent to the Lewin study, AHCA has consistently denied applications for long term care beds or hospitals.
Findings Of Fact On August 12, 1982, CPC, a hospital-operating corporation whose home office is in California, submitted to Respondent HRS an application fee and application for a Certificate of Need to construct a 60-bed adolescent acute care psychiatric and substance abuse hospital in Melbourne, Florida. Projected cost was to be $3,571,220 of which approximately $685,000 was to be in the form of local equity and the balance of approximately $2,730,000, constituting approximately 80 percent of the total cost, was to be in the form of a 20-year loan from CPC at 12 percent annual interest. Project development costs are projected to be $30,000; architectural and soil testing fees, $109,500; construction costs, $2,452,680; land acquisition, $350,000; interest during construction, $188,856; and fixed and movable equipment, $371,965. The facility will include a 15-bed locked intensive care psychiatric unit, a 25-bed open psychiatric unit, a 17-bed substance abuse unit and a 3-bed detoxification unit. The facility will have a total of almost 35,000 square feet of which almost 23,000 square feet will be devoted to the nursing units. The facility will be situated on 17 acres of land, the site plan for which calls for outdoor eating facilities, ball fields and other athletic opportunities. The intent of the developers is to make the facility as close to the campus situation as is possible, considering the nature of the operation. The facility will be built at no more than $60 per square foot, which includes all site preparation-- clearing, building, fencing, lighting, nurses' call system--all inclusive except for furniture and professional equipment. Staffing projections for the facility which are considered adequate by both CPC and state agencies include the following major categories: Registered nurses (psychiatric); Licensed practical nurses; Mental health specialists; Secretarial; Alcohol and drug counselors; Occupational therapists; Recreational specialists; Educational director; Special education teachers; Psychologists; Social workers; Administration; A medical director (1/2 time); and An alcohol and drug treatment director (1/2 time). The projected ratio of staff to patient for the first year (66.7 staff members to 33 patients) is approximately 2.07 to 1. CPC's other hospitals in Florida, both full-service hospitals as opposed to specialty hospitals, have a staff to patient ratio somewhat lower. Personnel cost is a significant factor in budgeting for total expenses. Projected equipment costs are not considered unreasonable. CPC operates 20 acute psychiatric facilities in nine states and the United Kingdom, and its hospitals are all accredited by the Joint Commission on the Accrediation of Hospitals. All CPC hospitals are contracting members of the Blue Cross Association. It anticipates charging $227 per day on the open adolescent unit, $224 per day on the closed adolescent unit and $227 per day on the alcohol and drug abuse unit during the first year. CPC anticipates that in the first year of operation, it will realize 10 percent of its patient income from Medicaid (Baker Act), 80 percent from insurance and 3 percent from private pay patients, and attributes a figure equal to 5 percent of income to indigents and 2 percent to bad debts. It is the intention of CPC to seek Baker Act patients to account for 10 percent of its patient days and will work with state and local agencies and the courts to seek patients and funds for providing care to adolescents. CPC projections, not successfully shown to be unreasonable, reflect an anticipated net income after taxes of $120,000 for the first year of operation and $335,000 for the second year. These figures are based, as was stated above, on Baker Act funding of 10 percent of the patient load. At the present time, BMHC receives all Baker Act funds in the area, and additional funds from this source may not be available. If not, the absence of Baker Act funds would have a negative impact on the local CPC facility's financial position unless those patients were replaced by patients from other programs like child services or private pay patients based on the projected need. CPC authorities feel their projected occupancy rate of plus or minus 70 percent for the second year of operation is conservative and should be higher. The lower (60 percent) occupancy rate of CPC's other two Florida hospitals, difference in program from that proposed here, nonetheless has not resulted in either being financially unfeasible. Projected equipment for the facility, though heavily attacked by HCA as being inadequate, has not been so shown. Similarly, the testimony that it would be impossible for CPC ton construct and equip the facility for the price quoted is not persuasive. There are decided differences between the facilities in design, construction and equipment. It cannot be said, however, that either is inadequate for the purpose. The differences, where they exist, appear to be primarily related to style and preference, and do not relate directly to safety or the suitability of the facility to serve as a psychiatric hospital. CPC proposes a highly structured program for each patient--all of whom will be adolescents. A team proposal for treatment of the individual patient will be developed when the patient is first admitted and will include several major factors. The first will be medical treatments, as necessary as well as the second, psychotherapy treatments by doctors, psychologists, and in group therapy when indicated. Also of importance is a school special education program using a curriculum from the patients' own school district. This program is important both to keep the patient's grade level up and as a support mechanism therapeutically. They propose, also, a structured recreational therapy and conjunctive therapy in which something is always happening for that patient. Finally, CPC will include a family therapy situation wherein, as is possible, the patient's family will come in for counseling to educate them as to the problem their patient has so that when the patient comes out, the family can cope with it. As the patient, here, improves, he or she is brought into group therapy with the family. Since the purpose of all this is to get the patient back into the community when ready for that, CPC proposes to start a program of partial hospitalization that is flexible to meet the circumstances (days out--nights in/weekdays in--weekends out). The theory will be to provide whatever is best for that patient in a sequential progression with more and more freedom and a gradual transition into a course of outpatient treatment. There is not thought of developing an outpatient treatment program for use as an initial treatment. All partial patients will develop from former inpatients. HCA, a hospital-operating corporation whose home office is in Tennessee, also submitted an application for a Certificate of Need to construct and operate a 60-bed acute care freestanding psychiatric and substance abuse hospital in Melbourne, Florida. Projected cost of the facility is to be $5,713,998 of which 40 percent would be equity and 60 percent ($3,428,399) would be long-term debt at 13 percent interest for 20 years. Project development costs are projected to be $75,000--all in legal and accounting fees; $178,323 in architectural and engineering fees; financing costs of capitalized interest of $198,747; construction costs of $3,430,866; equipment costs (fixed and movable) of $1,274,478; and land acquisition and other related costs of $556,584. The facility will include 20 adolescent psychiatric beds, 20 adolescent substance abuse beds and 20 adult/geriatric psychiatric beds. The facility will have a total of almost 39,000 square fee of which almost 19,000 square feet will be devoted to the nursing units. The remainder will be used by administrative, office and other services. The facility will be located on 31 acres of land which will also be the site for a proposed general hospital for which HCA intends to seek approval. Staffing projections for this facility, which are considered adequate by both HCA and state agencies, include the following major categories: Nursing; Psychology; Activities; Social services; Education; Administration; Business office; Medical records; Dietary; Housekeeping; and Engineering/maintenance. The projected ration of staff to patient for the first year (67.4 staff members to 33 patients) is approximately 2.04 to 1, roughly equivalent to that of CPC. HCA operates 301 hospitals throughout the United States, 23 of which are psychiatric hospitals. In addition to the psychiatric hospitals, many of its general hospitals have psychiatric units. All of its presently operating units are full accredited. It anticipates charging $260 per day during 1984-85 and $275 per day during 1985-86. HCA anticipates that during its first year of operation, it will realize 5 percent of its patient income from Medicaid, 10 percent from Medicare, 15 percent from insurance, 65 percent from private and 5 percent from other. HCA omitted any reference to Baker Act in its application because at this time such funds are fully committed elsewhere and not available and, as a result, felt it would be imprudent to include these funds in financial projections. However, if these funds were to become available, as unlikely as that may be, HCA would consider taking these patients. In any case, HCA projections reflect an anticipated net income after taxes of $2,000 for the first year of operation and $61,000 for the second year. Up until approximately two years ago, HCA only had two hospitals in its psychiatric program. Since that time, acquisitions and construction have brought the inventory up to its present strength. HCA acquired HCI, an organization which has had extensive experience in operating 20 psychiatric hospitals. HCA has a large cadre of people available to help start up new hospitals and shore up existing programs. It operates a center for heal studies, and its informational branch produces its own continuing education films and other materials. Its treatment programs are developed by its local staff based on input by professionals in the local community and designed to meet the needs of the local community. Once developed and implemented, all HCA programs are periodically evaluated by central teams who visit the local site. If a problem is found, HCA sends out experts in that problem area to fix it. It is HCA policy, however, to provide as much autonomy to the local staff as is possible, though staff, both professional and nonprofessional, are recruited locally and from other areas. HCA's position is that these factors have a major positive impact on patient care and treatment in that it insures currency of ideas and treatment modalities. HCA's proposed treatment program was described as to each category of patient. As to adults, it follows a "therapeutic community approach" which starts with a pleasing residential building and furnishings. All persons contacting patients are trained in the patient's needs and how to react to the patient. This would include such peripheral people as maintenance and support personnel. There would be a specific treatment plan for each patient with the patient's day planned out totally for every hour of the day, including recreation designed for that patient's needs. Little time is provided for the patient to be confined to the sleeping room. HCA anticipates the average length of stay (ALOS) for an adult psychiatric patient will be 21 days. As to the adolescent psychiatric patient, the prescribed treatment program will be basically the same as for adults except that HCA would provide an active school program, staffed by HCA employees, which would interface with the local school system. The patient day would be geared to the adolescent's needs. HCA proposes few children facilities because child programs require a specially designed program with a higher staff to patient ration than is anticipated here because of the need for play therapy and family involvement. HCA officials believer the child patient can successfully be integrated into the adolescent hospital unit without difficulty until the patient can be transferred to a specialized facility elsewhere. The ALOS for adolescent psychiatric patients will be 45 days. The substance abuse programs will be similar to those for the psychiatric units with specialization on drug abuse counseling and interface with Alcoholics Anonymous. ALOS here is expected to be 35 days. It must be recognized, however, that theories of treatment change rapidly. That proposed in HCA's Certificate of Need would not necessarily be that ultimately used upon approval if a change is justified. HCA's expert, Dr. Winston, contends, from a clinical standpoint, it is better to operate without locked units if possible, and categories of patients are better separated. However, he contends it is perfectly all right and may even be superior to have the different classes of patient in the same facility. This position is corroborated by other psychiatric experts who testified that one of the reasons for the need for an adolescent psychiatric hospital is the clinically undesirable requirement, currently existing in the area, for adolescent and even children psychiatric patients to be placed in units with adult psychiatric patients. It is obvious, then, that all agree that a separate adolescent unit is clinically needed in the area. The size, configuration and location remain to be established. The issue of need can and must be divided into two categories. One is the actual need for the implementation of psychiatric services for children and adults. The other is the need established for psychiatric beds in the area in accordance with the formulas established by HRS. First to be discussed is the actual service need. CPC's Vice President for Psychiatric Hospital Development, in developing the proposal for this project, first did a desk audit regarding population growth potential and the like for Brevard County and the surrounding contiguous counties. Thereafter, he made a number of visits to the area during which he spoke with as many area psychiatrists as he could. He also toured the BMHC and its inpatient facility, as well as the other two hospitals in the immediate area, Holmes Regional Medical Center, which does not have a psychiatric unit, per se, and Wuesthoff Hospital, which does. He also talked with court and school officials familiar with the area's mental health problems. From his investigation and conversations, CPC's expert found that BMHC's inpatient facility, consisting of 28 beds, was oriented primarily to adult psychiatric patients, as was Wuesthoff's 30-bed psychiatric unit. (In that regard, Wuesthoff's plan to convert five psychiatric beds to some other service, thus reducing the number of psychiatric beds in Brevard County, has been approved by HRS, if not already implemented as of this writing. From this it was concluded, and the evidence does establish, that there are no psychiatric facilities in Brevard County specifically for adolescents. The consensus among the psychiatrists and psychologists in the subject area, whose testimony was presented, was that there is a definite need in the Brevard County area for adolescent psychiatric and substance abuse beds. Adolescents requiring psychiatric or substance abuse treatment are treated on an outpatient basis if possible because of a reluctance to confine adolescents in an adult psychiatric ward. If outpatient treatment is not possible, the less than desirable alternative is to admit the adolescent patient to an adult unit for only so long as is necessary to make other arrangements for inpatient care. Currently, relatively few adolescent inpatient facilities exist. Among the better are those at the University of Florida in Gainesville, in Miami, several out of state and, while not a psychiatric hospital, a special school in Orlando--all of which have waiting lists. Community surveys were made by both marketing representatives and by facilities experts from HCA, as well. It was their opinion that a need exists in the subject service area for both adolescent and adult psychiatric beds, and that both HCA's and CPC's proposals would fill the need for substance abuse beds. HCA's position is that not all new beds would be adolescent beds. A need exists for adult beds in Brevard County because the predictions of the Bureau of Business and Economic Research (BBER), while indicating a general population increase for the area, also indicates that the adolescent population will decline. BBER projections have not been totally accurate for Brevard County in the past because of aerospace fluctuations in the area, however. In fact, the HCA prediction is for an adult population growth rate three to four times as fast as that for children and adolescents, thereby placing a strain on the available adult psychiatric beds. HCA's expert disagreed with the CPC expert's method of establishing clinical need (interviews with practictioners). It was felt this is a supply-driven opinion as opposed to a demand-driven opinion, is unsupported by data, is imprecise and not accurate, and is therefore not reliable for health planning purposes. To the contrary, the professional opinions stated by CPC's witnesses were equally as persuasive as those of their opponents. The psychiatrists and psychologists referenced above unanimously concluded that professionally it is better to admit adolescents to adolescent programs and units. Mixing of patients is quite disruptive to both categories of patient. In the opinion of the experts who testified here, where adolescent psychiatric patients are confirmed with adult patients (such as at Wuesthoff), they sleep in the same room, eat with them, smoke with them and discuss adult problems all day long. The doctors feel the continued closeness of this type is not only not therapeutic, but is sometimes counter therapeutic. In the case of adolescents, a major part of therapy is re-integration of the patient into the family; and if the unit is not near the family (as is presently the case with the out-of-town and out-of-state units referenced above), this is difficult. Also, liaison between the inpatient's doctor and the outpatient therapy is difficult when the unit is not local. As a result, at least some of the practitioners in the area have stopped seeing certain categories of patients because there is no facility currently in the area who can provide the necessary environment. For example, Dr. McClure, a psychiatrist, has stopped seeing adolescent substance abuse patients. If a facility currently in the area who can provide the necessary environment. For example, Dr. McClure, a psychiatrist, has stopped seeing adolescent substance abuse patients. If a facility became available, he would resume that segment of his practice. Dr. Slade, a clinical psychologist, has stopped seeking out patients who might need hospitalization because there is currently nothing in the area available to fill that need. It one were to come, she would again start seeing that category of patient. From the above, it can clearly be seen a clinical need for an adolescent psychiatric facility exists. Whether it should be freestanding, as proposed by both CPC and HCA, or a part of an existing hospital psychiatric unit is another question. Both proposals here are for freestanding units and, as a result, only that concept will be considered. Turning to the issue of bed need, at the time CPC's original Certificate of Need application was submitted, the Florida State Health Plan contained no methodology for establishing bed need for psychiatric hospitals. Such as now been promulgated and shows a need for 156 short-term psychiatric beds and 44 substance abuse beds in District VII, which includes Brevard, Orange, Osceola and Seminole Counties. This is based on a projected population base for the district in 1988 of 1,230,180 people. Applying the state methodology of 0.35 beds per 1,000 population, five years into the future resulted in a total projected bed need of 431 beds. Subtracting from that the 275 existing and approved beds leaves an unsatisfied psychiatric bed need of 156 for the district. Authority to designate subdistrict bed needs has been delegated to the district health councils. Brevard County has been subdivided into a subdistrict, but bed needs have not been allocated to the subdistricts. However, even if the 40 (total 60 minus 20 substance abuse) psychiatric beds are approved for Brevard County, this falls well within the total need figure for the district and leaves 116 beds remaining for the other three counties. Both CPC's and HCA's proposals call for 40 psychiatric beds. Both are, therefore, compatible with the State Plan. Rule 10-5(25)(d)5, Florida Administrative Code, states that no additional short-term inpatient hospital adult psychiatric beds shall normally be approved unless the annual occupancy rate for all existing beds in the service district for the prior 12-month period is at or exceeds 75 percent. As to adolescent beds, the criterion is 70 percent. There is not evidence of bed utilization percentages for either category districtwide. There is however, evidence establishing that the criteria have been met since 1980 for adult beds in Brevard County, a subdistrict; and since there are currently no short-term adolescent psychiatric beds in the subdistrict, that use percentage requirement is meaningless. Also, both applicants project meeting the requirements in Rule 10-5(25)(d)4 for 70 percent occupancy rate by the third year for adolescent short-term (CPC predicts 72 percent the second year). At the present time, two separate facilities provide adult short-term inpatient psychiatric care in Brevard County. They are Wuesthoff Memorial Hospital in Rockledge, Florida, which has 30 beds (predicted to be reduced to 25), and the Brevard Mental Health Center and Hospital, which operates an outpatient facility in Titusville and Rockledge and a 28-bed inpatient facility in Melbourne. This facility is a $2.6 million dollar facility constructed on 8 percent bond financing, and is fully accredited. BMHC receives all Baker Act patients in Brevard County and, in addition, provides care and treatment to indigents. Of its $1,238,000 revenue for last year, it received $468,000 for Baker Act patients, $156,000 in county matching funds and $614,000 form other patient fees. Its expenses for the same period last year were $1,250,000, for a deficit of $12,000. It is, both in theory and actuality, a nonprofit operation with 78 percent of its patients being indigent. Baker Act funds provided a total of $614,000. At $156 per day per bed, this equals 4,000 bed days, which, when divided by 365, shows that 11 paid beds are provided for Baker Act patients. In addition to Baker Act patients, BMHC also provides other beds for indigents. The terms of the Baker Act contract require all clients referred be accommodated. These additional patients provide insurance funds equivalent to 2.5 more beds, or a total of 13.5 beds provided by Baker Act matching funds and related insurance. BMHC is generally 85 percent occupied, which relates to 25.2 of the 28 beds. Subtracting the 13.5 Baker Act beds from the 25.2 leaves 11.7 beds for private patients. The average charge for private patients at BMHC is $230, which includes physicians' services. Their collection rate of 87.5 percent reduces that on average to an actual income of $200 per private bed day. Medicare, which accounts for 38 percent of BMHC's income, reimburses at a rate of $168 per day. If, as a result of the establishment of either of the two proposed facilities, BMHC were to lose one bed year of patients, it would represent a dollar loss of $73,000. This constitutes a serious thereat to a nonprofit organization, such as BMHC, because of the possibility of a loss of patients to a private hospital, even if its charges were higher. To some people, exclusiveness is more important than cost. A loss of one bed's revenue would jeopardize the free care presently provided by BMHC. A loss of two beds' revenue would make a reduction in the free care provided a certainty. Brevard County has an ongoing relationship with BMHC. It provides an annual operating subsidy for the currently existing facilities and, in addition, has guaranteed a bond issue for the building of the south county facility. It also provides a number of in-kind services. If BMHC were to become financially insolvent for any reason, the county would have to step in and pay off the bonds, but it could not and would not take over the operation of the facility. As a result of the above, the county is opposed to any threat to the financial health of BMHC. It feels that while the proposal of CPC would not constitute a threat, that of HCA would because the full range served of the latter could and probably would draw away some of the private pay patients now going to BMHC. This alternative drawing power would adversely affect BMHC's ability to stay in business eventhough, according to the HRS methodology, there is room in the county for additional adult beds for which BMHC is applying. In that regard, however, the county authorities concede that if it could be demonstrated that an additional provider could come in without adversely affecting the operation of BMHC, they would not oppose it. The District Mental Health Board for Brevard County (DMHB) has also taken a position in this area. Created by the Legislature, DMHB is charged with identifying the need for services in the county, the resources available to satisfy them and the gaps between. To a certain extent, it also funds the operations monitors them, evaluates them and produces the District Plan for them, the latest edition of which is for the years 1983 through 1987. This plan, which takes about a year to develop, is based on input provided by the mental health professionals, organizations and community representatives. It is used as a basis for the allocation of available funds and upon which to request funds from the Legislature. Neither CPC's nor HCA's application is contained in this plan; and though both applicants have made presentations to the Board, the Board has not taken a position favoring either. However, the plan as it currently exists proposes an additional 20 adult psychiatric beds which, it is anticipated , would be located under BMHC's auspices at its Melbourne site and for which BMHC made timely application. BMHC provides 80 percent of the mental health services in Brevard County now in all categories--adult, child and adolescent--and is rated excellent. In the opinion of the Director of DMHB, who is aware of BMHC's financial picture, approval of either proposal would have a negative impact, but that of HCA would be worse because of the likelihood it would draw adult paying patients away from BMHC. If that happened, it would jeopardize BMHC's financial position and its relationship with the county. In that regard, the District Plan goal, "to provide for the availability of comprehensive community alcohol, drug abuse and mental health services to persons in Brevard County, regardless of their ability to pay, "would best be complemented by the CPC proposal because: (1) it is limited to adolescents and would not risk drawing adult pay patients from BMHC; (2) it integrates with other existing services; and (3) it has the least restrictive admissions policy. On the other hand, in the opinion of Dr. Milton Schoeman, a health care consultant testifying on behalf of HCA, CPC's proposal, providing for adolescent beds only, will not help meet the need for general psychiatric beds projected for 1988. Of the 67 new beds needed, 40 would go to specialty hospitals, such as proposed by both CPC and HCA, and 27 would go to psychiatric units in general hospitals. These figures are for all ages of patients. Even though the HRS rules are silent on the issued of bed allocation between adults and adolescents, to permit CPC to use all 40 specialty hospital beds for adolescents would be inconsistent with the formula. He also is of the opinion that HCA's proposal will not materially affect BMHC's operation. To the contrary, according to HCA adolescents would be inconsistent with the formula. He also is of the opinion that HCA's proposal will not materially affect BMHC's operation. To the contrary, according to HCA witnesses, the HCA program would have a positive impact on BMHC's program in that its presence will make the community more aware and conscious of the need for mental health, and by cross- cooperation with BMHC in staffing and patient split. This has been shown in other areas where HCA was first seen as a threat by the existing hospital treating Baker Act patients. However, both hospitals now work together on joint programs to do the best possible for the patients. The fear of competition, HCA contends, is normally not realized. The type of facility represented by BMHC generally operates a shorter term, crisis intervention type program, one substantially different from that of HCA. As such, it does not lose patients to the longer term program of HCA. HRS has taken a position in opposition to HCA's proposal, concluding that CPC's application would fill the need for adolescent care with less impact on the current provider, BMHC. While HCA's programs are of high quality, they are almost identical to those currently offered by BMHC. It is unlikely that HCA will get any Baker Act funds under the current funding situation. If HCA were to be approved and built and would result in the loss to BMHC of only one bed/year in income ($73,000), this would have a severe adverse impact on BMHC's operation. On the other hand, the CPC would be less likely to duplicate services already being furnished. There are already two existing providers for adult patients; and while BMHC's utilization is high, Wuesthoff's is not, being only 62 percent after five years of operation. Under these circumstances, it would, in all probability, be a duplication of service to provide additional adult beds at this time. In addition to the differences in building layout, construction costs and equipment costs, previously found to be satisfactory in both cases, much evidence was produced by both sides to show that their proposal was economically more feasible and would result in lower patient costs. Conversely, the proposing parties presented evidence to show that the figures and statistics relied upon by their opposition were flawed and unreliable. After thorough saturation with offer and rebuttal, it is ultimately concluded that again the difference is one of style rather than substance. Neither part has been shown, by competent convincing evidence, to be materially superior to or inferior to the other. This issue will not be decided, therefore, on the basis of the ability to provide the service since both have been shown to be fully capable of doing so in a creditable fashion.
Recommendation It is accordingly RECOMMENDED That HRS approve Petitioner CPC's application for a Certificate of Need to construct and operate a 60-bed freestanding adolescent inpatient psychiatric facility in Brevard County, Florida, and deny the similar application of Petitioner HCA. RECOMMENDED this 10th day of February, 1984, in Tallahassee, Florida. COPIES FURNISHED: Morgan L. Staines, Esq. 2204 East Fourth Street Santa Ana, California 92705 Jon C. Moyle, Esq. Donna H. Stinson, Esq. 118 North Gadsden Street Suite 100 Tallahassee, Florida 32301 Eric B. Tilton, Esq. 702 Lewis State Bank Building Tallahassee, Florida 32301 John Antoon, II, Esq. 970 Michigan Avenue Building C Cocoa, Florida 32922 ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings Department of Administration 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of February, 1984. Claire D. Dryfuss, Esq. Department of Health and Rehabilitative Services 1317 Winewood Boulevard Building 1, Room 406 Tallahassee, Florida 32301 Mr. David Pingree Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 =================================================================
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 Harbour Shores Hospital is a 60-bed short-term psychiatric facility, with 36 adult beds and 24 adolescent beds. The facility opened in October 1985, and had an occupancy of 62 percent at the time of the final hearing in March 1986. T. 14, 20. The hospital is an integral part of Lawnwood Medical Center, Inc., located in Ft. Pierce, Florida, and Lawnwood is owned by Hospital Corporation of America. T. 13-14. Hospital Corporation of America now operates 5,000 psychiatric beds in the United States. T. 18. Lawnwood Medical Center, Inc. (Lawnwood), submitted an application for certificate of need number 3363 on June 14, 1984, for the conversion of 12 short-term psychiatric beds to 12 short-term inpatient hospital substance abuse beds. T. 15. No construction is needed to convert these 12 beds. T. 16. The Department of Health and Rehabilitative Services (HRS) initially denied the application. T. 106. All references in this order to Harbour Shores Hospital shall include the Petitioner, Lawnwood, unless specifically stated otherwise. The parties stipulated that the only issue in this case is need and any ancillary issue which is based upon need. T. 4-5. HRS has a rule governing short and long-term hospital inpatient hospital substance abuse beds, which is rule 10-5.11(27), Florida Administrative Code. Subparagraph (f)1 of the rule contains what HRS calls bed allocations" and calculates need for a health service district as a whole. Harbour Shores Hospital is located in St. Lucie County in Health District IX. District IX is composed of St. Lucie, Indian River, Martin, Okeechobee, and Palm Beach Counties. HRS Ex. 2, p.7. The District IX Local Health Council has identified two subdistricts for purposes of allocating short term psychiatric and substance abuse beds. Subdistrict 1 is St. Lucie, Martin, Indian River, and Okeechobee Counties, and subdistrict 2 is Palm Beach County. HRS Exhibit 2, p. 7; T. 110. HRS proposes to determine need as of January 1989 using the date of the application as the starting point for the five year period specified in rule 10- 5.11(27)(f)1, Florida Administrative Code. T. 107-6. The basis of this decision is a new policy by HRS to implement the Gulf Court decision. There is a need for only 1 additional short-term substance abuse bed in District IX by January 1989 based upon Rule 10-5.11(27)(f)1, Florida Administrative Code. T. 109. HRS Exhibit 1. HRS proposes also to refer to such need for short term substance abuse beds as indicated by local health council plans, relying upon rule 10- 5.11(27)(h)3, Florida Administrative Code. T. 110. The local health plan for District IX allocates needed beds based upon the subdistricts described above. HRS Exhibit 2, p. 6. Further, the local health plan has adopted the method of HRS found in rule 10-5.11(27), supra, for calculating need, and calculates such need using the HRS rule factor of .06 substance 3. All references in this order to Harbour Shores Hospital shall include the Petitioner, Lawnwood, unless specifically stated otherwise. The parties stipulated that the only issue in this case is need and any ancillary issue which is based upon need. T. 4-5. HRS has a rule governing short and long term hospital inpatient hospital-substance abuse beds, which is Rule 10-5.11(27), Florida Administrative Code. Subparagraph (f)1 of the rule contains what HRS calls bed "allocations" and calculates need for a health service district as a whole. Harbour Shores Hospital is located in St. Lucie County in Health District IX. District IX is composed of St. Lucie, Indian River, Martin, Okeechobee, and Palm Beach Counties. HRS Ex. 2, p.7. The District IX Local Health Council has identified two subdistricts for purposes of allocating short-term psychiatric and substance abuse beds. Subdistrict 1 is St. Lucie, Martin, Indian River, and Okeechobee Counties, and subdistrict 2 is Palm Beach County. HRS Exhibit 2, p.7; T. 110. HRS proposes to determine need as of January 1989 using the date of the application as the starting point for the five-year period specified in Rule 10-5.11(27)(f)1, Florida Administrative Code. T. 107-8. The basis of this decision is a new policy by HRS to implement the Gulf Court decision. There is a need for only 1 additional short-term substance abuse bed in District IX by January 1989 based upon Rule 10-5.11(27)(f)1, Florida Administrative Code. T. 109. Exhibit 1. HRS proposes also to refer to such need for short term substance abuse beds as indicated by local health council plans, relying upon rule 10- 5.11(27)(h)3, Florida Administrative Code. T. 110. The local health plan for District IX allocates needed beds based upon the subdistricts described above. HRS Exhibit 2, p. 6. Further, the local health plan has adopted the method of HRS found in rule 10-5.11(27), supra, for calculating need, and calculates such need using the HRS rule factor of .06 substance abuse beds per 1,000 population in each of the two subdistricts. HRS Exhibit 2, pp. 5 and 8, paragraph II. Using current estimates of the populations of each subdistrict in January 1909, HRS projects that subdistrict 1 will have a surplus of 15 substance abuse beds in 1989, and all net need (16 beds) will be in subdistrict 2, which is Palm Beach County. T. 111; HRS Exhibit 1. HRS has not adopted these subdistricts by rule. T. 128-29. There was no evidence to substantiate the reasonableness of the subdistricts adopted in the local health plan. T. 131. The following is a summary of the existing and approved short-term substance abuse beds in District IX, showing county of location, and occupancy rates for 1985: Humana Hospital 16 Licensed Indian River 8509 Sebastian Lake Hospital 16 Licensed Palm Beach 3558 Palm Beaches Fair Oaks 17 Licensed Palm Beach 3807 Savannas 20 Approved St. Lucie Hospital Beds Status County Patient Days Occupancy 145.7% 60.7% 60.7% The number of patient days at Fair Oaks, however, is for four months, August, October, November, and December 1985. Thus, the actual number of patient days, 1269, has been multiplied by 3 to obtain an estimate for an entire year. T. 23- 24, 61-62. The occupancy rate is the number of patient days divided by the product of the number of days in the year (365) and the number of licensed beds. Using the statistics in paragraph 10, the average occupancy rate for the three existing facilities in District IX was 88.8 percent. If one assumes, as did Petitioner's expert, that the utilization rates for short-term substance abuse beds will at least remain the same as in 1935, with the addition of the 20 new beds at Savannas Hospital, District IX may have an occupancy rate of 63.8 percent and subdistrict 1 may have an occupancy rate of 64.8 percent . The 20 new beds at the Savannas Hospital are those granted to Indian River Community Mental Health Center, Inc., and are projected to open in November 1986. T. 83. As discussed above, Harbour Shores Hospital had been in operation about five months by the time of the March 1986 hearing, and its 60 short term psychiatric beds were averaging 62 percent occupancy, which is about 15 percent above the occupancy projected in its certificate of need application. T. 38. Harbour Shores serves patients from the four counties of subdistrict 1, St. Lucie, Martin, Indian River, and Okeechobee, and serves a significant number of patients from Palm Beach County as well; three to four percent of its patients also come from Brevard and Broward Counties. T. 19. About 80 percent of the patients at Harbour Shores in the first five months of its operation had a substance abuse problem secondary to the primary diagnosis of mental illness. T. 30, 50, 63. This is consistent with experience throughout Florida. T. 63. Most of these "dually diagnosed" patients have been through a detoxification program before entering Harbour Shores Hospital. T. 30. In its beginning months of operation, Harbour Shores has had patients referred from the courts, law enforcement agencies, community and social agencies, physicians, and from HRS. T. 21-22, 59. Harbour Shores can expect to obtain substance abuse referrals from these agencies. Staff at Harbour Shores works with the DWI Board, Students Against Drunk Driving, and school administrative personnel. T. 39-40. In October and November 1985, Harbour Shores received 38 requests from physicians, the courts, law enforcement agencies, and social agencies, for admission of patients for substance abuse treatment. T. 22, 49. There is no evidence that Harbour Shores had any such requests in December 1985 or January 1986. In February 1986, it had 14 such requests, and in March to the date of the hearing, it had 5 requests. T. 48. There is no evidence as to whether these requests were for short or long-term substance abuse services, or whether these were requests from different patients or multiple requests from the same patient. There is also no evidence that the persons requesting substance abuse treatment were not adequately treated at existing facilities. Thus, the data from these few months is not an adequate basis for determining future need for short term substance abuse beds. Ms. Peggy Cioffi is the coordinator for the Martin County Alcohol and Drug Abuse Program. Deposition, Ms. Peggy Cioffi, p. 2. Ms. Cioffi testified as to the need for substance abuse services in her area. She did not testify as an expert witness. Her program is primarily designed to assist the County Court in referrals of misdemeanants and others within the Court's jurisdiction who need substance abuse services. Id. Ms. Cioffi has difficulty placing persons needing inpatient or residential treatment. Id. at p. 3. She related an example of a county prisoner who asked to be detained in jail three months for lack of an alcohol program. Id. at p. 4. Ms. Cioffi did not state whether this person needed residential or inpatient hospital care. She also had recently reviewed a 14 page county court docket and determined that 67 percent of those charged represented alcohol or drug related offenses. Id. Ms. Cioffi did not clearly show how she was able to infer this fact. Further, Ms. Cioffi was unable to tell from this statistic how many of these defendants needed short term inpatient hospital substance abuse treatment. Id. at p. 6. She stated that a very high percentage of these could benefit from some kind of services, but did not separate the kinds of services, Id. at p.7. Ms. Cioffi stated that she often had to wait to find a place for a person in the following facilities: Dunklin, CARP, and Alcohope. Id. at p. 5. Ms. Cioffi stated that these were "residential" facilities, but she did not state whether these facilities were the equivalent of short-term inpatient hospital substance abuse facilities. These facilities are located in District IX, Id. at p. 7, but are not short-term in patient hospital substance abuse beds licensed as such. See paragraph 10 above. See also T. 96-99. In summary, although Ms. Cioffi identified a generalized need for residential or hospital substance abuse treatment, she did not draw any distinction between the two services. If there was a similarity, she did not provide evidence of the similarity. Lacking evidence in the record that need for residential treatment programs can be used to show need for inpatient hospital beds, Ms. Cioffi's testimony is insufficient to show need for the services sought by the Petitioner. The Honorable Marc Cianca is a County Judge in St. Lucie County. Deposition, Judge Marc Cianca, p. 2. Judge Cianca was of the opinion that his area attracted semi-young people with substance abuse problems in greater numbers than the retirement population. Id. at 17-18. He frequently was frustrated in his efforts to find substance abuse services for defendants in his Court. Id. at 3-5. Judge Cianca felt that most of the people he saw needed long-term therapy, beginning with inpatient services, followed by long-term follow-up programs. Id. at 12-14. Like the testimony of Ms. Cioffi (which concerned the same group of persons before the County Court), Judge Cianca did not clearly distinguish need for short-term inpatient hospital substance abuse services from need for all other forms of substance abuse treatment, and the record on this point is silent as well. For this reason, Judge Cianca's opinion that 100 short-term inpatient hospital substance abuse beds are needed must be rejected. The testimony of Ms. Cioffi and Judge Cianca is insufficient as a predicate for determining need for the inpatient hospital beds sought by the Petitioner for another reason, and that is the lack of evidence that the persons identified as needing substance abuse services will have the ability to pay for such services at Petitioner's facility, or that third party payment will be available for them. The people in need in Ms. Cioffi's testimony normally do not have funds to pay for treatment. Cioffi, p. 8. Similarly, a substantial number of the people in need seen by Judge Cianca do not have insurance coverage and would not be able to use Harbour Shores unless they qualified for Medicaid and unless Harbour Shores took all of those qualified for Medicaid. Id. at 7, 15-16. A substantial number of the persons needing substance abuse treatment do not have jobs or insurance and must rely upon "welfare" for services. Id. at 15, 17. These persons cannot afford certain programs, and must rely upon state aid through programs such as those provided by Indian River Community Mental Health Center, and for these programs there is always a waiting list. Id. at There is no evidence that any of these persons are eligible for Medicaid. Ms. Sharon Heinlen, Director of Planning and Development for Harbour Shores Hospital, who testified for the Petitioner as an expert in health planning and hospital administration, had not studied the Medicaid population in the area to determine need. T. 76. Although Harbour Shores had about 15 percent of its psychiatric patient days devoted to Medicaid patients, T. 33, the validity of this percentage for substance abuse patients, or for the reasonably near future, was not established by other evidence. Petitioner's formal application for this certificate of need projects 5 percent of its gross revenues from Medicaid and another 5 percent devoted to bad debt, indigents, and Baker Act cases. Petitioner's Exhibit 1, p. 5. But the application does not state whether this percentage will be evenly distributed among psychiatric and substance abuse patients. In any event, the percentages of indigent care and Medicaid care are too small to satisfy the need identified by Judge Cianca and Ms. Cioffi. Stated another way, the need identified by those two witnesses is not relevant to Petitioner's application except with respect to a small percentage. Harbour Shores plans to have after care for substance abuse patients. T. 40. The Savannas Hospital is the name of the hospital to be completed in November 1986 to provide, among other services, 20 short term inpatient hospital substance abuse beds under the certificate of need granted to Indian River Community Mental Health Center, Inc. T. 82-83. The primary service area of the Savannas Hospital will be the same four counties as now served by Harbour Shores Hospital, as well as Palm Beach County. T. 84. The Savannas Hospital intends to be licensed. T. 84. The Savannas Hospital is located in Port St. Lucie, in St. Lucie County. T. 95-96. The service proposed is a comprehensive substance abuse service. T. 87. Five of the twenty substance abuse beds will be devoted to detoxification. T. 92. The Savannas Hospital will be operated by the Mediplex Group in partnership with Indian River Community Mental Health Center, Inc. T. 82. The land will be owned by Mediplex. T. 95. The Savannas Hospital will be a private, for profit, hospital, while the Mental Health Center will be a not-for- profit facility. T. 86. The Savannas Hospital publicly states that it will take five percent indigent patients, which does not include Medicare. T. 87. There is no commitment to provide more indigent care. T. 89. All other patients acre expected to be fully paying. T. 93. The actual figure for free or nonpaying patients has not yet been calculated. T. 94. The Savannas Hospital will not serve Medicaid substance abuse patients because it is a freestanding facility. T. 36, 86. Humana Hospital Sebastian is the closest facility to Harbour Shores currently in operation providing inpatient short-term hospital substance abuse services, and Humana Sebastian can accept Medicaid patients. T. 59. Ms. Elizabeth Dudek testified for HRS as an expert in health planning and certificate of need review in Florida. Ms. Dudek has reviewed all of the applications made in District IX for substance abuse beds since November 1983, and as a supervisor, has reviewed all of the applications in the state for substance abuse beds. T. 104. She has been in contact with the District Alcohol, Drug Abuse, and Mental Health Program Office and has attended public hearings, as well as administrative hearings, concerning substance abuse beds in District IX. T. 104-05. She also listened to all of the evidence presented at the final hearing. It was Ms. Dudek's opinion that there was no need for the substance abuse beds sought by the Petitioner. T. 127-28. Ms. Sharon Heinlen was also qualified as an expert in health planning, as well as hospital administration. T. 13. Ms. Heinlen has only recently moved to Florida, T. 11, 66, and stated that she did not know Florida well enough to know what might be the best thing to advocate in Florida with respect to whether all hospitals should provide all services. T. 65-66. She had conducted studies of District IX, however. T. 66. The average occupancy rates for District IX testified to by Ms. Heinlen were mathematically incorrect, and the correct lower rates do not support her opinion that additional short term substance abuse beds are needed. See FF 11. The fact that about 80 percent of the psychiatric patients now are at Harbour Shores Hospital also have a substance abuse problem does not necessarily support Ms. Heinlen's opinion as to need. See FF 12. This statistic is consistent with experience in all of Florida, and therefore should be accommodated by the HRS numeric need methodology. Moreover, it must be inferred that hospitalization of these patients as psychiatric patients was proper, rather than as substance abuse patients, and that even if additional substance abuse beds were available, these patients still would need to be in a psychiatric bed for treatment of the primary diagnosis. As discussed in FF 14, the data concerning recent requests for substance abuse services at Harbour Shores Hospital is not sufficient to conclude that a need exists for additional beds. As discussed in FF 17, Ms. Heinlen did not have an adequate basis for any opinion as to the need for short-term substance abuse beds for Medicaid patients in District IX. Finally, Ms. Heinlen testified that there was a waiting list for patients to be admitted to licensed short-term substance abuse beds at Fair Oaks and Lake Hospital, but the testimony was hearsay. T. 28. Since this evidence conflicts with the relatively low occupancy rates at these same facilities, and has not otherwise been corroborated by non-hearsay evidence, it must be rejected as a basis for a finding of fact. Further, due to the conflict with the low occupancy rates, it is rejected as a basis for Ms. Heinlen's expert opinion. In summary, Ms. Heinlen's expert opinion that there is a need for short-term, inpatient hospital substance abuse beds in District IX must be rejected. It is the position of HRS that even if the rule showed a need, the occupancy factor would be a factor in showing no need. T. 134. Conversely, if the rule showed no need, the occupancy factor would be one factor among others which night show need. Id.
