Findings Of Fact Background On September 28, 1988, First Hospital Corporation of Florida d/b/a First Hospital of Palm Beach County (First Hospital) filed a timely application for the July 1993 planning horizon with the Department of Health and Rehabilitative Services (Department) for a certificate of need (CON) to construct a 48- bed short-term psychiatric specialty hospital, dedicated to the care of children and adolescents, in District IX. 1/ District IX is comprised of Palm Beach, Martin, St. Lucie, Indian River, and Okeechobee Counties. On February 3, 1989, the Department published notice in the Florida Administrative Weekly of its intent to grant First Hospital's application. Petitioners, Lake Hospital & Clinic, Inc. d/b/a Lake Hospital of the Palm Beaches (Lake Hospital), and Community Hospital of the Palm Beaches, Inc. d/b/a Humana Hospital Palm Beaches (Humana), existing providers of psychiatric services to adolescents in Palm Beach County, filed timely petitions for a formal administrative hearing to oppose the grant of the subject application. The matter was referred to the Division of Administrative Hearings for the assignment of a hearing officer to conduct a formal hearing pursuant to section 120.57(1), Florida Statutes, and Savannas Hospital Limited Partnership (Savannas), an existing provider of psychiatric services to adolescents in St. Lucie County, was granted leave to intervene. 2/ The proposed facility At issue in this proceeding is the application of First Hospital for a CON to construct a 48-bed short-term psychiatric specialty hospital dedicated to the care of children and adolescents. This project is, however, only a portion of an 80-bed facility that First Hospital proposes to construct on a 30-acre parcel of land adjacent to Wellington Regional Memorial Hospital in western Palm Beach County. As sited, the proposed facility would be located west of the Florida Turnpike; on the west side of State Road 7 and approximately .2 miles north of Forest Hills Boulevard. The 80-bed facility that First Hospital proposes to construct would consist of a central core area and three attached wings or units. Two of the wings, each containing 24 beds, will be dedicated as short-term psychiatric beds, with one wing for young adolescents (10-14 years of age) and one wing for older adolescents (14-18 years of age). The third wing, consisting of 32 beds, will be dedicated as a residential treatment center (RTC) for adolescents. The central core area would include administrative, therapy, kitchen and dining, gymnasium classroom areas and other support functions, and is essential to the operation of the psychiatric units, but will be shared with the residential treatment unit. A therapeutic preschool program, for children 3-5 years of age, as well as a partial hospitalization program for adolescents, are also proposed to be offered, and will be located in the central core area. 3/ The psychiatric program proposed by First Hospital for its 48-bed short-term psychiatric facility will address emotional and behavioral disorders that may affect adolescents, and which require admission to a short-term acute care facility for treatment. In its application, First Hospital estimates an average length of stay of 45 to 60 days. The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization and adequacy of like and existing health card services in the service district As a touchstone for assessing need within a service district, the Department has established a short-term psychiatric bed need methodology that must normally be satisfied before a favorable need determination will be found. That methodology, codified in Rule 10-5.011(1)(0)(4), Florida Administrative Code, contains two identifiable parts. The first part deals with the mathematical derivation of a net bed need for the planning horizon by assuming a gross bed need ratio of .35 beds per 1,000 population, and reducing that figure by the number of existing and approved beds. Based on the population projections of the Executive Office of the Governor, July 1988 release, application of this methodology derives a net need for 48 short-term psychiatric beds for the July 1993 planning horizon (gross bed need of 480- existing and approved beds of 432 = 48 net bed need. 4/ The second part of the Department's need methodology addresses occupancy standards for existing facilities that must be satisfied before a favorable need determination will normally be found. For short-term child and adolescent beds, the rule mandates an average annual occupancy rate of not less than 70 percent for all such existing facilities for the preceding 12- month period. Here, the proof demonstrates an average annual occupancy rate in excess of 70 percent for the 12-month period preceding the Department's need calculation, and satisfaction of the second part of the Department's need methodology. On August 12, 1988, the Department, pursuant to Rule 10-5.008(2)(a), Florida Administrative Code, published notice of the hospital fixed need pool for the July 1993 planning horizon in the Florida Administrative Weekly. Pertinent to this case, such notice erroneously established a net need for 33 short-term psychiatric beds in District IX. Following publication of the fixed need pool, the Department received information that its calculation of the net need for short-term psychiatric beds in District IX was erroneous. Upon review, the Department established that its initial calculation was in error, and on August 26, 1988, the Department published a notice of correction in the Florida Administrative Weekly, which correctly established a net need for 48 short-term psychiatric beds in District IX for the July 1993 planning horizon. This adjustment to the fixed need pool did not result from any intervening changes in population estimates, bed inventories, or other factors which would lead to different projections of need, but from an error in the Department's mathematical calculation. Under the circumstances, the Department's correction of the fixed need pool was appropriate and timely, and a need for 48 short-term child and adolescent psychiatric beds for the July 1993 planning horizon has been demonstrated. Of the 432 short-term psychiatric beds approved and existing within the district on August 17, 1988, 119 beds were reported to the local health council as dedicated to short-term child and adolescent psychiatric services, and the balance of 313 beds as dedicated to adult psychiatric services. Allocation of the 119 short-term child and adolescent beds was reported as follows: Lake Hospital 26 beds, Fair Oaks 27 beds, Humana 27 beds, Savannas 15 beds, and Lawnwood (Harbour Shores) 24 beds. Lake Hospital is a 98-bed freestanding psychiatric specialty hospital located in Lake Worth, Palm Beach County, Florida, that treats adolescents and adults for psychiatric disorders and substance abuse. As of August 17, 1988, Lake Hospital was licensed to operate 56 short-term psychiatric beds, 26 long- term psychiatric beds, and 16 short-term substance abuse beds. Of the 56 short- term psychiatric beds, 26 beds were approved for adolescent care and 30 beds were approved for adult care. During calendar year 1987, Lake Hospital enjoyed an occupancy rate of 91.8 percent for its 26 short-term psychiatric beds, which were dedicated to the care of adolescents, ages 12- 17. In January 1988, Lake Hospital opened a replacement facility on its campus consisting of a two-story structure with four 18- bed units, and reported to the local health council that two of those units (36 beds) were dedicated to short-term adolescent care in January and February 1988, and that thereafter only 18 beds were dedicated to short-term adolescent care. Based on such utilization, Lake Hospital enjoyed an occupancy rate of 95 percent for the first four months of 1988 and a 93.9 percent occupancy rate for calendar year 1988 for its adolescent beds. 5/ Fair Oaks is a 102-bed free standing psychiatric specialty hospital located in Delray Beach, Palm Beach County, Florida, that treats children, adolescents, and adults for psychiatric disorders and substance abuse. As of August 17, 1988, Fair Oaks was licensed to operate 70 short-term psychiatric beds, 15 long-term psychiatric beds, and 17 short-term substance abuse beds. Of the 70 short-term psychiatric beds, 27 beds were approved for child and adolescent care and 43 beds for adult care. During the calendar year 1987, Fair Oaks' second year of operation, it achieved an occupancy rate of 73.1 percent for its 27 short-term child and adolescent psychiatric beds. For the first four months of calendar year 1988, Fair Oaks enjoyed an occupancy rate of 99.7 percent, and for all of calendar year 1988 an occupancy rate of 91 percent. 6/ Humana is a 250-bed general hospital located in West Palm Beach, Florida. Of its existing beds, 162 are dedicated as medical/surgical beds, and 88 as short-term psychiatric beds. For calendar year 1987, Humana reported to the local health council that 27 of its 88-bed complement of psychiatric beds were dedicated to short- term adolescent services, but declined or neglected to report its utilization so that an average length of stay could be calculated. In fact, Humana did not operate a short-term adolescent program for 1987, but operated a long-term program without Department approval. Pertinent to this conclusion, the proof demonstrated that Humana applied for the development of an 88-bed psychiatric pavilion in 1983. Certificate of Need No. 2647 was issued to Humana on November 17, 1983, for 80 short-term psychiatric beds consisting of 48 adult psychiatric beds, 24 geriatric beds, and 8 adult special beds; and, on January 8, 1985, Humana received CON No. 3237 for the additional 8 short-term adult psychiatric beds. Humana opened its psychiatric pavilion in November 1986, and by January 1987 was serving adolescents, ages 13 through 18, in a 27-bed unit notwithstanding the absence of Department approval. As to the services provided in that unit, the proof is compelling that it was dedicated to long-term adolescent psychiatric services with an average length of stay of approximately 280 days. At some point thereafter, but not earlier than July 1989, Humana also began providing short-term adolescent psychiatric services at its facility. 7/ Following the Department's investigation into Humana's operation of a long-term adolescent psychiatric program, Humana applied for a modification of its CON Nos. 2647 and 3237 to allow it to operate a district adolescent unit. On July 14, 1989, Humana received Department approval, and such CON's were modified to allow 15 short-term adolescent psychiatric beds. This modification is, however, currently the subject of an appeal to the District Court. In the interim, on December 14, 1988, Humana received CON No. 5294 for the addition of 15 short-term beds for adolescents and adults, and on February 25, 1989, Humana received CON No. 5722 for the redesignation of 15 short-term psychiatric beds to 15 long-term beds. Currently, Humana has available 30 short-term psychiatric beds for adolescent use, and 15 long-term beds, but its short-term program is in a start-up mode. Savannas is a 70-bed freestanding psychiatric hospital located in Port St. Lucie, St. Lucie County, Florida, approximately 40 miles north of Palm Beach County, that treats adolescents and adults for psychiatric disorders and substance abuse. As of August 17, 1988, Savannas was licensed to operate 50 short-term psychiatric beds and 20 short-term substance abuse beds. Of the 50 short-term psychiatric beds, 15 beds were approved for adolescent care and dedicated to patients ages 14- 17, and 35 beds were approved for adult care. Savannas opened its facility in October 1987, and for that calendar year reported 1,215 patient days for its short- term adolescent unit, For calendar year 1988, its first full year of operation, Savanna's adolescent unit achieved 3,589 patient days, or an occupancy rate of 65.5 percent. Lawnwood (Harbour Shores) is a general hospital located in Fort Pierce, St. Lucie County, Florida, that, as of August 17, 1988, was licensed to operate 60 short-term psychiatric beds. Of the 60 short-term psychiatric beds, 24 beds were approved for child and adolescent care, and 36 for adult care. The date Lawnwood commenced operations does not appear of record; however, during calendar year 1987, it achieved a 62 percent occupancy rate for its 24-bed adolescent unit. For calendar year 1988, Lawnwood maintained a similar occupancy rate even though Savannas was drawing patients from the same service area to its new facility. Considering the availability, accessibility, extent of utilization and adequacy of short-term child and adolescent beds in the service district at all times pertinent to this case, there exists a need for the 48 beds requested by First Hospital, and such beds should be located in Palm Beach County consistent with the local health plan, discussed infra. The need for the proposed facility in relation to the district plan and state health plan Applicable to this case is the 1985-87 state health plan, which contains the following goals and objectives pertinent to short-term inpatient psychiatric beds: GOAL 1: ENSURE THE AVAILABILITY OF MENTAL HEALTH AND SUBSTANCE ABUSE SERVICES TO ALL FLORIDA RESIDENTS IN A LEAST RESTRICTIVE SETTING. OBJECTIVE 1.1: The ratio of short term inpatient hospital psychiatric beds to Florida's population should not exceed .35 beds per 1000 population thru 1987. RECOMMENDED ACTIONS: a: Restrain increases in the supply of short term inpatient hospital psychiatric beds to no more than .35 beds per 1000 population. OBJECTIVE 1.2: Through 1987, additional short term inpatient hospital psychiatric beds should not normally be approved unless the average annual occupancy rate for all existing and approved adult short term inpatient psychiatric beds in the service district is at least 75% and average annual occupancy for existing and approved adolescent and children beds is at least 70%. RECOMMENDED ACTIONS: a. Restrict approval of additional short term inpatient psychiatric beds to these service districts which have an average annual occupancy of 75% for existing and approved adult beds and 70% for existing and approved adolescent and children beds. GOAL 2.: PROMOTE THE DEVELOPMENT OF A CONTINUUM OF HIGH QUALITY, COST EFFECTIVE PRIVATE SECTOR MENTAL HEALTH AND SUBSTANCE ABUSE TREATMENT AND PREVENTIVE SERVICES. OBJECTIVE 2.1: Define, develop and implement policy regarding the appropriate treatment settings and the role of each setting in the delivery of mental health and substance abuse services by 1987. GOAL 3: DEVELOP A COMPLETE RANGE OF ESSENTIAL PUBLIC MENTAL HEALTH SERVICES IN EACH HRS DISTRICT. First Hospital's application is consistent with the goals and objectives of the state health plan. Here, First Hospital proposes to provide a 24-hour-a-day therapeutic milieu, with an average length of stay of 60 days or less, for children and adolescents suffering from mental health problems which are so severe and acute that they need intensive, full-time care. As such, First Hospital will offer care for those individuals for whom short-term inpatient psychiatric care is the least restrictive setting appropriate, and which care, consistent with the Department's need methodologies, will complement the range of mental health services needed in the district. Also applicable to this case, is the 1988 District IX local health plan. Pertinent to this case, the local health plan divides District IX into two subdistricts when planning for short-term psychiatric beds. Subdistrict one consists of Indian River, Martin, St. Lucie and Okeechobee Counties, and subdistrict two consists of Palm Beach County. In allocating short-term psychiatric beds between subdistricts, the local plan provides: When bed need is shown in District IX for either short-term psychiatric services or substance abuse services in accordance with Chapter 10-5.11 of the Florida Administrative Code, the method for allocating beds among subdistricts shall be based upon projected subdistrict occupancy figures as determined by use-rates during the most recent calendar year in combination with projected subdistrict population figures. New beds shall be allocated to the subdistrict showing the highest projected percent occupancy, to the extent that the projected percent occupancy equal that of the other subdistrict. When projected occupancy figures show parity, any remaining beds shall be allocated based upon each subdistrict's percentage of projected patient days for District IX. All projections shall be five years into the future to correspond with the planning horizon governing the addition of psychiatric and substance abuse beds as set forth in state rule. Applying the local plan's methodology to the facts of this case demonstrates that the beds identified by the Department's need methodology should be allocated to subdistrict two, Palm Beach County, which is the county within which First Hospital proposes to locate. The local plan also requires an examination of an applicant's commitment or record of service to medicaid/indigent and underserved population groups. The First Hospital facility will be a specialty hospital and therefore not eligible to provide medicaid services; however, First Hospital has committed to dedicate 8 percent of its patient days to indigent care. Under such circumstances, First Hospital's application is, on balance, consistent with the local plan. The ability of the applicant to provide quality of care and the applicant's record of providing quality of care First Hospital is a wholly owned subsidiary of First Hospital Corporation, an established provider of psychiatric services to children and adolescents since 1983. As of this date, First Hospital Corporation owns and operates 15 hospitals nationally, and has demonstrated the commitment and ability to provide quality care to its patients. Here, First Hospital's staffing is reasonable, and while the program proposed by First Hospital is generic in nature, and similar to that offered by other short-term providers of such services, it will assure, in light of demonstrated need, that patients needing acute short-term psychiatric services in the district will continue to receive quality care. To the extent that the needs of the district may subsequently evidence the need for more specialized programs, First Hospital has demonstrated its ability to address such needs, and to provide quality programs and services. The availability and adequacy of other health care facilities and services in the service area which may serve as alternatives for the health care facilities and services proposed by the applicant The Department's short-term psychiatric bed rule addresses the need for psychiatric facilities that will treat emotional and behavioral disorders which require admission to a short-term acute care facility for treatment. Where such short- term psychiatric care is indicated, any other type of placement would not be appropriate under existing rules (not long-term, residential treatment, group home, or out-patient care), and there are no alternatives for the services proposed by First Hospital. The availability of resources, including health manpower, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation First Hospital has demonstrated that it either has or can obtain all resources, including health manpower, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation. As heretofore noted, First Hospital Corporation, the parent of the applicant, has provided psychiatric services to children and adolescents since 1983, and currently owns and operates 15 hospitals nationally. It has never experienced any serious difficulty in financing its operations, either start-up or operational, and has in place an existing program for the recruitment and training of medical, administrative, clerical and other personnel that might be needed for the proposed facility. First Hospital Corporation has no other new projects pending at this time, and has committed itself to the project proposed by its subsidiary. Additionally, Dr. Ronald Dozoretz, who is president, chairman of the board, and the principal stockholder of First Hospital Corporation, has the available resources to finance the subject project, and has also committed to do so if necessary. 8/ The extent to which the proposed services will be accessible to all residents of the service district, and the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent As a freestanding psychiatric facility, First Hospital is not eligible to receive Medicaid funds for the treatment of psychiatric disorders; however, it has committed to provide 8 percent of its patient days to the care of patients who qualify as indigent, and has agreed that its CON be so conditioned. In view of this commitment, as well as the demonstrated need within the district for the proposed services, approval of First Hospital's application will increase accessibility to all residents of the district. The probable impact of the proposed project on the costs of providing health services proposed by the applicant. The proof demonstrates that existent facilities in Palm Beach County are operating near capacity, and that to meet expected demand at the planning horizon an additional 48 short- term psychiatric beds are needed. Under such circumstances, approval of First Hospital's application will stimulate competition and promote quality assurance and cost-effectiveness. While the proof establishes the need for 48 additional beds at the horizon year, the protestants to First Hospital's application contend that, due to the finite number of qualified professionals within the area to staff the facility and the finite number of patients requiring such care, they will be adversely impacted if the application is approved. Succinctly, they contend that they may lose staff or be compelled to pay higher salaries, and that they may lose patients and therefore revenue, if the facility is approved. The protestants' proof regarding potential impact to their existing staff or competition for staff was unpersuasive. In light of the number of existing facilities that already offer mental health type services within the district, and therefore currently compete for the same professionals, First Hospital's entry into the market should not significantly impact existing competition. As importantly, the protestants failed to quantify any such impact or otherwise persuasively demonstrate that, assuming they were compelled to pay more to retain or attract competent staff, such increased expense would adversely affect their operation. With regard to the protestants' concerns regarding lost patient days and revenue, the demonstrated need for the additional 48 beds at the horizon year mitigates the potential for any adverse impact to existent providers in the long term. However, this does suggest that First Hospital's application, as proposed, does not demonstrate a potential to significantly adversely affect existent providers in the short term. To the contrary, should First Hospital achieve the level of utilization it projects in its application, its facility would have a significant adverse impact on existing programs. In this regard, First Hospital's application projects that it will achieve 8,956 patient days in 1991, its first year of operation, and 13,193 patient days in 1992, its second year of operation. Through 1991, there will only be a growth of approximately 3,498 patient days over those that were served by existing facilities in 1988, and through 1992, there will only be a growth of approximately 4,664 patient days over those that were served by existing facilities in 1988. Therefore, to achieve it's projected occupancy levels, First Hospital would have to capture 5,458 patient days in 1991 and 8,529 patient days in 1992 from the patient base that had previously been served at existing facilities. Such impact to those facilities, should First Hospital be able to achieve its projected levels of occupancy, would be significant and adverse. 9/ The costs and methods of the proposed construction As heretofore discussed, First Hospital proposes to construct an 80- bed facility on approximately 30 acres of land in Palm Beach County, Florida, which will include the 48 short-term psychiatric beds which are the subject of this proceeding, as well as the 32 residential treatment beds which the Department concluded were not subject to CON review. The 80-bed facility proposed, at 49,142 gross square feet, will consist of a central core area of approximately 25,000 square feet, which includes three wings; an education and activity wing, a food service wing, and an administrative wing. These wings will house the therapy, kitchen and dining, gymnasium, classrooms, administrative offices, and other services necessary to support the psychiatric facility. Attached to the core area, are two psychiatric wings, at 7,592 square feet each, which will each contain 24 beds dedicated to short-term psychiatric care, and one wing, at 8,944 square feet, which will contain 32 beds dedicated as residential treatment beds. On the adjacent grounds, First Hospital also proposed a swimming pool, tennis courts, baseball field, and sports filed. In its application, First Hospital estimated its total project cost for the proposed psychiatric facility at $4,213,522. This project cost was composed of development cost of $61,500, financing/refinancing costs of $259,800, professional services of $162,000, construction costs of $2,503,162, equipment costs of $480,000, and other related costs of $150,000. But for the construction cost category ($2,503,162), First Hospital derived its estimate of total project costs by allocating 60 percent of the cost of each component of the total cost to the psychiatric facility and 40 percent to the residential treatment facility (the 60/40 methodology). In the case of construction costs, First Hospital based its estimate on the square footage of the psychiatric wings and 60 percent of the core area, which derived a gross square footage for this cost item based on 30,184 square feet, to which it added 60 percent of its estimated costs for site preparation and contingency of construction. Based on this premise, First Hospital's proposal is driven by a $76.33 per square foot cost of construction. 10/ Assuming the propriety of First Hospital's 60/40 allocation of costs, its estimate of project costs is still significantly understated. Here, the proof demonstrates that, as opposed to the $76.33 per square foot cost for construction and site preparation costs estimated by First Hospital, the cost for such work will be $105 per square foot, inclusive of construction and site preparation costs. Based on the 30,184 square feet First Hospital allocated to the project, such cost will amount to $3,169,320, which, when added to the 5 percent contingency factor, the $96,000 allocated for the proposed pool, and the addition of 460 square feet to patient rooms needed to meet Department standards, derives a construction cost figure of $3,472,086, as opposed to the $2,503,162 estimated by First Hospital. In addition to straight construction costs, First Hospital also underestimated its equipment costs. In this regard, First Hospital's equipment list omits many necessary items, including: nurse call equipment, a security system, an emergency generator, therapy and recreational equipment, gym equipment, ice machines, defibrillators, crashcarts, educational materials, media equipment, graphic artwork, interior design items, shelving/lockers for staff and patients, housekeeping items, medication carts, and other necessary equipment. Had First Hospital properly calculated its equipment costs, it would have derived a cost of at least $1 million for movable equipment and at least $150,000 for fixed equipment for the 80--bed facility as opposed to the $700,000 for movable equipment and $100,00 for fixed equipment it estimated. Under such circumstances, applying First Hospital's 60/40 methodology would establish an equipment cost for the subject project at $690,000, as opposed to the $480,000 estimated by First Hospital. 11/ Since financing costs and professional services fees would also require an upward adjustment because of the increase in construction and equipment costs, the total cost for the subject project, utilizing First Hospital's 60/40 methodology, would reach at least $5,488,843, as opposed to the $4,213,522 estimated by First Hospital. 12/ The foregoing analysis of construction costs assumed the reasonableness of First Hospital's 60/40) allocation methodology. For reasons discussed infra, First Hospital's allocation methodology is not reasonable, and its construction costs are therefore dramatically understated. In this regard, the proof demonstrated that the core area, consisting of 25,000 square feet, would be necessary to support the 48-bed psychiatric units whether the 32-bed residential treatment unit were built or not, and that it would be more appropriate to combine the core area and the psychiatric area to assess the subject application. When this is done, the construction cost alone for the project calculates to $4,638,501. 13/ In addition to straight construction costs, all of the other estimated project costs appearing on Table 25 of First Hospital's exhibit 1 are also suspect because of its 60/40 methodology; however, for purposes of this analysis item a, project development costs, and item f, other related costs are assumed accurate, as are construction supervision costs and loan fees. Notably, capitalized interest would increase to at least $355,621, architectural/engineering fees would increase to approximately $242,969, and equipment costs would increase to approximately $726,000. With these adjustments alone, the cost of the 48-bed psychiatric project, which includes the core area, comes to approximately $6,821,000, or over $2,607,000 more than First Hospital estimated. 14/ The unreasonableness of First Hospital's 60/40 methodology To assess the financial feasibility of the proposed project, First Hospital's pro formas address only the expected financial performance of the 48 psychiatric beds and ignore the financial feasibility of the 32-bed residential treatment unit, even through First Hospital postulates that such unit will support 40 percent of the cost of the hospital's core area. At hearing, the explanation offered by First Hospital and the Department for not addressing the financial feasibility of the residential treatment unit, as well as the out-patient services, was their contention that such services are not CON reviewable because First Hospital, as regards the residential treatment unit, is not yet a "health care facility" and, as regards the outpatient services, that such services are exempt from review. In this regard, they point to the provisions of Section 381.706(1), Florida Statutes, which provides; . . . all health-care-related projects, as described in paragraphs (a)-(n), shall be subject to review and shall file an application for a certificate of need with the department . . . (c) A capital expenditure of $1 million or more by or on behalf of a health care facility . . . for a purpose directly related to the furnishing of health services at such facility; provided that a Certificate of Need shall not be required for an expenditure to provide an outpatient health service . . . (Emphasis added) They also point to the provision of Section 381.702, Florida Statutes, which contains the following definitions: (7) "Health care facility" means a hospital. . . . (12) "Hospital" means a health care facility licensed under chapter 395. Based on these statutory provisions, First Hospital and the Department conclude that the residential treatment unit and the outpatient services are not CON reviewable because First Hospital is not yet licensed or the outpatient services are exempt. While the logic of First Hospital's and the Department's conclusion seems questionable where, as here, the projects are proposed to be integrated and constructed simultaneously, the Department's reading of the statute comports with its literal reading and is accepted. However, although the residential treatment unit and outpatient services may not be subject to CON review does not suggest that their financial feasibility is not relevant to this proceeding. To the contrary, their financial feasibility is critical if First Hospital's 60/40 methodology is to be considered rational. Here, the 48-bed psychiatric facility proposed by First Hospital is comprised of two 24-bed units and a core unit that provides all necessary support functions, including administrative, therapy, kitchen and dining, gymnasium and classroom areas, for those units. That core area, of 25,000 square feet, is an essential part of the proposed psychiatric hospital; without it there would be no psychiatric hospital, and at a lesser square footage the project would be lacking sufficient space to provide necessary services. When licensed by the Department, the two 24-bed units and the core area will be licensed as a psychiatric hospital. Notwithstanding, the fact that the 25,000 square foot support area is an integral and essential part of the proposed hospital, the Department chose to ignore 40 percent of its costs and expenses in assessing the financial feasibility of the project. The basis for the Department's action was its conclusion that the non-CON reviewable residential treatment unit comprised 40 percent of the overall population of the entire facility (80-beds overall), and that since it would share the core area, 40 percent of the costs of constructing that area, as well as subsequent operating expenses, were not pertinent to an evaluation of the proposed hospital. Here, the Department's reasoning and its conclusion, be they incipient policy, do not have evidentiary support. The psychiatric hospital proposed by First Hospital is, as heretofore noted, the two 24-bed units and the core area. This is the only portion of the project over which the Department has control, and necessarily the only portion that it can assure will be built as proposed; it has no control over whether the residential treatment unit will ever be built or be built as proposed. Therefore, since the core unit is an essential part of the psychiatric hospital, and the residential treatment unit is exempt from CON review, an assessment of the subject application must consider the cost of the entire core area as part of the project under review. While economies of scale permit utilization of the core unit by the residential treatment unit without additional space, this does not detract from the conclusion that the cost of the core is a cost of the hospital. Rather, such excess capacity is fortuitous for First Hospital, and may permit it to spread the expenses of its operation over a larger population base if the residential treatment unit is built. However, to reasonably assess whether those expenses of operation can be spread to or supported by the residential treatment unit to any extent, much less 40 percent, requires an analysis of the financial feasibility of those services. Here, First Hospital offered no proof of the financial feasibility of the residential treatment unit, and there is no rational basis on which any allocation of operating expenses for the core area can be demonstrated to be supportable by it. Accordingly, to assess the financial feasibility of the proposed psychiatric hospital it is necessary to attribute the cost of the core area to the proposed project, as well as the costs of carrying and operating that part of the proposed hospital. 15/ The immediate and long-term financial feasibility of the proposal To assess the financial feasibility of the proposed project, First Hospital's pro forma assumes that it will achieve 8,956 patient days in its first year of operation and 13,193 patient days in its second year of operation, with a per diem patient charge of $500 in year one and $525 in year two, and that it will thereby achieve a gross revenue of $4,478,000 in its first year of operation and a gross revenue of $6,926,325 in its second year of operation. While the proposed patient charges are reasonable, First Hospital's occupancy projections are not supported by persuasive proof and, therefore, it has failed to demonstrate what revenues it could reasonably expect to generate. A facility's projected patient days are typically a product of an informed analysis of projected admissions and projected average length of stay. Here, First Hospital undertook no such analysis, but simply assumed a number of patient days, without any rational predicate in an effort to demonstrate financial feasibility. Notably, there is a clear trend toward shorter lengths of stay in psychiatric hospitals, which was even recognized by First Hospital's Dr. Dozoretz who reasonably expected an average length of stay at the proposed facility of 30 to 40 days. However, First Hospital assumed in its pro forma an average length of stay ranging from 45 to 60 days. Such assumption could not have been the basis for any considered analysis of utilization since it is excessive, as well as too imprecise. Moreover, in testing the reasonableness of a utilization projection, it is also important to consider physician support, the extent of waiting lists, community support, the extent of competition, and the depth of local needs assessment. Here, there is no persuasive proof that First Hospital enjoys any support from local physicians, that there are any waiting lists, that the market is not competitive, that there is any community support for the project, or that it undertook any reasonable assessment of local need. In addition to its failure to demonstrate what utilization level it could reasonably achieve in its first two years of operation, and therefore establish a reasonable estimate of its gross revenue, First Hospital's pro forma also, significantly underestimated building depreciation, equipment depreciation, and interest expense because of its failure to adequately address construction and equipment costs, discussed supra. Had First Hospital properly assessed such costs, by subsuming the psychiatric hospital to include 100 percent of the psychiatric wings and core area, it would have calculated building depreciation at $176,230 per annum, equipment depreciation at $72,600 per annum, and interest at $750,360 per annum. At these rates, assuming the validity of First Hospital's projection of gross revenue, the facility's projected loss in year one would increase from $115,629 to $529,848, and its projected profit in year two of $442,184 would be reduced to $27,965. 16/ As well as underestimating the foregoing expenses, First Hospital's pro forma also significantly underestimates a number of other expenses, including deductions from gross revenue, supplies and other expenses, and the indigent care tax assessment. In this regard, the proof demonstrates that First Hospital underestimated its deductions from revenue by $367,000 in year one and $214,000 in year two; underestimated its supplies and other expenses in year one by at least $645,000, and in year two by at least $561,000; and omitted the indigent care tax assessment of $56,000 in year one and $75,000 in year two. Considering these additional adjustments, First Hospital's project, even assuming its gross revenue projections are reasonable, is not financially feasible in either the short-term or long-term. 17/ The criteria on balance In evaluating the application at issue in this proceeding, none of the criteria established by Section 381.705, Florida Statutes, or Rule 10- 5.011(1)(o), Florida Administrative Code, has been overlooked. First Hospital's failure to demonstrate the financial feasibility of its proposal is, however, dispositive of its application, and such failure is not outweighed by any other, or combination of any other, criteria.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that: As to Case NO. 89-1415, that a final order be entered denying First Hospital's application for Certificate of Need. As to Case NO. 89-1438, that a final order be entered dismissing Humana's petition for formal hearing. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 23rd day of May 1990. WILLIAM J. KENDRICK 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 23rd day of May 1990.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: In November of 1983, HMA filed its application for a Certificate of Need to construct and operate a 60-bed adolescent treatment center in Orlando, Florida. An omissions response was filed by HMA in January of 1984. Thereafter, HRS issued its initial intent to grant the application and PIO requested an administrative hearing. HMA is a privately held corporation which owns or manages twelve or thirteen acute care hospitals in the States of Kentucky, West Virginia, Pennsylvania, Missouri, Texas and Florida, several of which are psychiatric hospitals. The proposed long-term psychiatric treatment facility for adolescents is patterned after a 55-bed program currently operated by HMA in Arlington, Texas. The proposed facility will be a freestanding campus-like setting located on ten to fifteen acres of land in the southern portion of Orlando. The precise site has not yet been selected. The single-story facility will have a total size of approximately 45,000 to 50,000 square feet and will be divided into two separate units which connect into a core area containing various support services, such as offices, a gymnasium, a swimming pool, a media center, and an occupational therapy area. While the location finally selected for the facility will have a bearing on the site costs of the project, the estimated construction costs of approximately 3.1 billion do contain a contingency factor and are reasonable at this stage of the project. Each unit will be served by two interdisciplinary treatment teams headed by a physician or a psychiatrist. Key personnel for the facility, such as department heads and program directors, will most likely be recruited from outside the Orlando area in order to obtain persons with experience in long-term care for adolescents. The treatment program is designed to serve adolescents between the ages of 10 and 19, though the bulk of patients will be middle school and high school individuals between the ages of 13 and 17. While the primary service area will be adolescents in District 7, the remainder of the central Florida region is identified as a secondary service area. A full educational program at the facility is proposed. The concept of the hospital will be to treat the whole person, not just his psychiatric problems, and the treatment program will include and involve family members and other factors which may have a bearing on the adolescent's ability to fit into society. The form of treatment is based upon a "levels" approach -- a form of behavior modification wherein privileges are granted for appropriate behavior and the patient is allowed to move up to the next succeeding level of privileges. It is contemplated that the average length of stay for a patient will be approximately six months -- the average time anticipated for a patient to move from the admission level to the level of discharge. HMA intends to seek accreditation of its proposed facility from the Joint Commission on Accreditation of Hospitals. The total estimated project cost for the proposed facility is $6,307,310.00. Financing is to be obtained either through a local bond issue or by a private lending institution. Based upon an evaluation of HMA's audit reports for the past three years, an expert in bond financing of health care facilities was of the opinion that HMA would be eligible either for a private placement or a bond issue to finance the proposed project. HMA intends to charge patients $325.00 per day, and projects an occupancy rate of 80 percent at the end of its second year of operation. This projection is based upon a lack of similar long-term psychiatric facilities for adolescents in the area, the anticipated, experience at the Arlington, Texas adolescent facility and the anticipated serving of clients from CYF (Children Youth and Families -- a state program which; serves adolescents with psychiatric and mental problems). Although no established indigent care policy is now in existence, HMA estimates that its indigency caseload will be between 3 and 5 percent. It is anticipated that the proposed facility will become a contract provider for CYF for the care and treatment of their clients and that this will comprise 20 percent of HMA's patient population. HRS's Rule 10-5.11(26), Florida Administrative Code, relating to long- term psychiatric beds, does not specify a numerical methodology for quantifying bed need. However, the Graduate Medical Education National Advisory Committee (GMFNAC) methodology for determining the need for these beds is generally accepted among health care planners. The GMENAC study was initially performed in order to assess the need for psychiatrists in the year 1990. It is a "needs- based" methodology, as opposed to a "demand-based" methodology, and attempts to predict the number of patients who will theoretically need a particular service, as opposed to the number who will actually utilize or demand such a service. Particularly with child and adolescent individuals who may need psychiatric hospitalization, there are many reasons why they will not seek or obtain such care. Barriers which prevent individuals from seeking psychiatric care include social stigma, the cost of care, concerns about the effectiveness of care, the availability of services and facilities and other problems within the family. Thus, some form of "demand adjustment" is necessary to compensate for the GMENAC formula's overstatement of the need for beds. The GMENAC formula calculates gross bed need by utilizing the following factors: a specific geographic area's population base for a given age group, a prevalency rate in certain diagnostic categories, an appropriate length of stay and an appropriate occupancy factor. In reaching their conclusions regarding the number of long-term adolescent psychiatric beds needed in District 7, the experts presented by HMA and PIO each utilized the GMENAC formula and each utilized the same prevalency rate for that component of the formula. Each appropriately used a five-year planning horizon. However, each expert reached a different result due to a different opinion as to the appropriate age group to be considered, the appropriate length of stay, the appropriate occupancy factor and the factoring in of a "demand adjustment." In calculating the long-term adolescent psychiatric bed need for District 7 in the year 1989, HMA's expert used a population base of ages 0 to 17, lengths of stay of 150 and 180 days, an occupancy level of 80 percent and an admissions factor of 96 percent. Utilizing those figures, the calculation demonstrates a 1989 need for 158 beds if the average length of stay is 150 days, and 189 beds if the average length of stay is 180 days. If the population base is limited to the 10 to 19 age bracket, the need for long-term psychiatric beds is reduced to between 70 and 90, depending upon the length of stay. From these calculations, HMA's expert concludes that there is a significant unmet need for long-term adolescent psychiatric beds in District 7. This expert recognizes that the numbers derived from the GMENAC formula simply depict a statistical representation or indication of need. In order to derive a more exact number of beds which will actually be utilized in an area, one would wish to consider historical utilization in the area and/or perform community surveys and examine other site-specific needs assessment data. Believing that no similar services or facilities exist in the area, HMA's need expert concluded that there is a need for a 60-bed facility in District 7. In applying the GMENAC methodology, PIO's need expert felt it appropriate to utilize a base population of ages 10 through 17, an average length of stay of 90 days and an occupancy rate of 90 percent. Her calculations resulted in a bed need of 37 for the year 1990. Utilizing a length of stay of 120, 150 and 180 days and a 90 percent occupancy rate, a need of 50, 62 and 75 beds is derived. If an occupancy rate of 80 percent is utilized, as well as a population of ages 10 - 17, the need for beds is 42, 56, 70 and 84, respectively, for a 90, 120, 150 and 180 day average length of stay. The need expert for PIO would adjust each of these bed need numbers by 50 percent in order to account for the barriers which affect the actual demand for such beds. Since the HMA proposed facility intends to provide service only to those patients between the ages of 10 and 19, use of the 0 - 17 population would inflate the need for long-term adolescent psychiatric beds. Likewise, PIO's non-inclusion of 18 and 19 year olds understates the need. PIO's use of a 90-day average length of stay would tend to understate the actual need in light of HMA's proposed treatment program which is intended to last approximately six months. While some demand adjustment is required to properly reflect the barriers which exist to the seeking of long-term adolescent psychiatric care, the rationale of reducing by one-half the number derived from the GMENAC methodology was not sufficiently supported or justified. Even if HMA's calculations were reduced by one-half, a figure of between 79 and 94 beds would be derived. The existence of other long-term adolescent psychiatric beds in District 7 was the subject of conflicting evidence. West Lake Hospital in Longwood, Seminole County, holds a Certificate of Need and a license as a special Psychiatric hospital with 80 long-term beds. However, the Certificate of Need was issued prior to the adoption of Rules 10-5.11(25) and (26), Florida Administrative Code, when anything in excess of 28-days was considered long- term. The West Lake application for a Certificate of Need referred to a four- to-six week length of stay -- or a 28 to 42 day period --for adults, and a ten week, or 70 day length of stay for children and adolescents. In preparing inventories for planning purposes, HRS considers the 40 child and adolescent psychiatric beds at West Lake Hospital to be acute or short-term beds. The West Lake facility is not included in HRS's official inventory of licensed and approved long-term care beds as of October 1, 1984. In fact, the only long-term care beds listed for District 7, in addition to HMA's proposed psychiatric facility, are beds devoted to the treatment of substance abuse. PI0 is the holder of a Certificate of Need to construct and operate a 60-bed short-term adolescent psychiatric hospital in Southwest Orange County, and is currently planning the actual development and construction of the facility. If PIO is not able to reach the census projections contained in its Certificate of Need application, its ability to generate earnings could be adversely impacted. Even a five percent decrease in PIO's census projections would require PIO to either raise its rates or make reductions in direct costs. This could include a decrease in staffing, thus affecting a reduction in the available programs, problems in attracting quality staff and ultimately a reduction in the quality of care offered at the PIO facility. In a batch subsequent to the HMA application, PIO requested the addition of 15 long-term adolescent psychiatric beds and 15 substance abuse beds. When an adolescent psychiatric patient is evaluated for placement in a hospital setting, it is generally not possible to determine how long that patient will require hospitalization. The adolescent psychiatric patient is often very guarded, distrusting both parents and other adults, and it is difficult to obtain full and necessary information from both the patient and the parents. Several weeks of both observation and the gathering of data, such as school records, are necessary in order to access the adolescent patient's degree of disturbance. With respect to treatment programs, there is no sharp medical demarcation between a 60-day period and a 90 day period. Patients in short-term facilities often stay longer than 60 days and patients in long term facilities often stay less than 90 days. The length of stay is very often determined by the parents, in spite of the treatment period prescribed by the physician. The treatment programs in both short-term and long-term psychiatric facilities are very similar, and short- and long-term patients are often treated in the same unit. Staffing for the two types of facilities would be basically the same, with the exception, perhaps, of the educational staff.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that HMA grant HMA's application for a Certificate of Need to construct and operate a 60-bed long-term adolescent psychiatric facility in Orlando, Florida. Respectfully submitted and entered this 9th day of July, 1985, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of July, 1985. COPIES FURNISHED: C. Gary Williams and Michael J. Glazer P. O. Box 391 Tallahassee, Florida 32302 John M. Carlson Assistant General Counsel 1323 Winewood Blvd. Building One, Suite 407 Tallahassee, Florida 32301 Robert S. Cohen O. Box 669 Tallahassee, Florida 32301 David Pingree Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301 =================================================================
The Issue At issue in this proceeding is whether petitioner's request to modify its certificate of need from a 60-bed child/adolescent psychiatric hospital to a 45- bed child/adolescent and 15-bed adult psychiatric facility should be approved.
Findings Of Fact Case status In February 1993, petitioner, Martin H.M.A., Inc., d/b/a SandyPines Hospital (SandyPines), filed an application with the respondent, Agency for Health Care Administration (AHCA), for a modification of its certificate of need (CON) from a 60-bed child/adolescent psychiatric hospital to a 45-bed child/adolescent and 15-bed adult psychiatric hospital. Upon review, AHCA concluded that SandyPines' request could not be accommodated under the modification provisions of Rule 59C-1.019, Florida Administrative Code, and required certificate of need review. Accordingly, AHCA proposed to deny SandyPines' request, and these formal proceedings to review, de novo, the agency's decision were commenced at SandyPines' request. The applicant SandyPines is the holder of certificate of need number 4004 which authorized it to construct a 60-bed child/adolescent psychiatric facility. That facility was constructed and is currently in operation in Tequesta, Martin County, Florida. SandyPines is now, and has been since it commenced operations in January 1990, licensed as a Class III Special Psychiatric Hospital with 60 psychiatric child/adolescent beds. It has never provided adult inpatient psychiatric services and, until approximately October 18, 1993, had never provided any adult outpatient psychiatric services. The adult outpatient psychiatric services currently provided by SandyPines are not subject to CON review. SandyPines's fiscal problems When SandyPines opened in January 1990, no managed care organizations existed in its local market; however, with each passing year managed care has become more prevalent such that currently 45-50 percent of SandyPines admissions are covered by some form of managed care. This has significantly adversely affected SandyPines' revenues such that it lost approximately $600,000 last fiscal year and, absent increased occupancy levels, its continued viability is, at best, questionable. Indeed, if SandyPines continues to operate as currently configured, it projects a loss for the fiscal year ending September 30, 1994, of $1,099,777. Occupancy levels are low, however, for District IX as a whole, due in large measure to the demands for managed care. For the six-month period ending June 1993, the average occupancy rate for child/adolescent psychiatric beds was 35 percent and for adult psychiatric beds 65 percent. To address its faltering business, SandyPines has, as heretofore noted, begun to provide adult psychiatric services on an outpatient basis; however, unless it can combine inpatient adult psychiatric services with the program it is doubtful that its adult program will prove successful. In this regard, SandyPines offered proof, which is credited, that patients and their physicians are looking for what has been termed "one-stop shopping." The patient does not want to go to one facility for outpatient care and another facility for inpatient care, and the referring physicians would rather send all of their patients to one facility that offers a full spectrum of services. Therefore, from a marketing perspective, the addition of adult inpatient psychiatric services at SandyPines would have a positive effect. Whether modification of SandyPines' CON to allow inpatient adult psychiatric services will increase the hospital's daily census and utilization sufficiently to assure its viability is, at best, fairly debatable. To analyze the impact of redesignating 15 child/adolescent beds to 15 adult psychiatric beds, SandyPines made an assumption of an average daily census of 10.5 patients on the 15-bed adult psychiatric unit. Based on such assumption, SandyPines calculated a net income from that unit, for the fiscal year ending September 30, 1994, assuming it opened April 1, 1994, of $589,664, and a net loss for the facility as a whole of $510,113, as opposed to a net loss of $1,099,777 without the adult unit. Based on the same assumptions, SandyPines calculated a net income for the fiscal year ending September 30, 1985, for the adult unit at $1,111,008, and a net income for the facility as a whole with an adult unit at $44,980. As heretofore noted, SandyPines' ability to achieve an average daily census of 10.5 patients is, at best, fairly debatable. To SandyPines' credit, it has an active advertising and marketing department comprised of six people and its director of marketing and business development. This marketing group is constantly striving to develop relationships with referral sources and to develop programs to meet market needs and demands. There was, however, no proof of record to demonstrate any existent commitments in the community or any objective data to support the conclusion that SandyPines could reasonably expect to attain an average daily census of 10.5 patients. Moreover, four of SandyPines' potential competitors for adult psychiatric patients exhibited more than a 78 percent occupancy rate for the first six months of 1993, which may be reflective of among other attributes, a strong existent referral pattern, and the overall District average was only 65 percent, which reflects significant unused capacity. On balance, the proof is not compelling that SandyPines could achieve the occupancy levels it projected. Whether SandyPines achieved its projected occupancy levels for adult services or some lesser level would not, however, significantly adversely impact existing providers. Moreover, the redesignation of beds and the necessary modification of the facility to meet required legal standards of separation of adult and child/adolescent units would require no more than $50,000-$80,000; a capital expenditure well below that which would require CON review. Is modification appropriate Pertinent to this case, Rule 59C-1.109, Florida Administrative Code, provides: A modification is defined as an alteration to an issued, valid certificate of need or to the condition or conditions on the face of a certificate of need for which a license has been issued, where such an alteration does not result in a project subject to review as specified in . . . subsection 408.036(1) . . ., Florida Statutes. Subsection 408.036(1), Florida Statutes, provides in pertinent part: . . . all health-care-related projects, as described in paragraphs (a)-(n), are subject to review and must file an application for a certificate of need with the department. The department is exclusively responsible for determining whether a health-care-related project is subject to review under [ss.408.031-408.045]. * * * (e) Any change in licensed bed capacity. * * * (h) The establishment of inpatient institutional health services by a health care facility, or a substantial change in such services . . . * * * (1) A change in the number of psychiatric . . . beds. Finally, pursuant to the Legislature mandate of Section 408.034(3), Florida Statutes, to "establish, by rule, uniform need methodologies for health services and health facilities," AHCA has promulgated Rule 59C-1.040, Florida Administrative Code, which establishes discrete methodologies for calculating the need for the establishment of inpatient adult psychiatric services and inpatient child/adolescent psychiatric services, and provides for the identification of the number of hospital inpatient psychiatric beds for adults and children/adolescents by facility. As heretofore noted, SandyPines' license designates it as a "Class III Special Psychiatric hospital with 60 Psychiatric Child/Adolescent beds," and the inventory established pursuant to Rule 59C- 1.040(11), Florida Administrative Code, has identified SandyPines' beds as child/adolescent. Resolution of the parties' dispute as to whether SandyPines' proposed conversion of beds from child/adolescent to adult is subject to CON review under Section 408.036(1)(e), (h) and (l), Florida Statutes, and therefore not susceptible to modification under Rule 59C-1.109(1), resolves itself to an interpretation of Section 408.306(1), Florida statutes, and the provisions of Chapter 59C-1, Florida Administrative Code. SandyPines contends that hospital inpatient psychiatric services, as used in Chapter 408, Florida Statutes, and Chapter 59C-1, Florida Administrative Code, is a generic term for the treatment of psychiatric disorders and that its proposal to treat adults, as opposed to children/adolescents, is not a change in health services. Accordingly, SandyPines concludes that the proposed conversion does not constitute "[a] change in licensed bed capacity," "the establishment of inpatient institutional health services by a health care facility, or a substantial change in such services," or " change in the number of psychiatric beds," such that CON review would be required under Section 408.306(e), (h) and (l), Florida Statutes. Contrasted with SandyPines' position, AHCA interprets the foregoing provisions of law, when read in para materia, and with particular reference to Rule 59C-1.040, Florida Administrative Code, as establishing two discrete types of inpatient psychiatric services, to wit: child/adolescent and adult. The separate CON review criteria established by Rule 59C-1.040, Florida Administrative Code, for child/adolescent and adult inpatient psychiatric services is consistent with AHCA's interpretation. Indeed, the rule, among other things, establishes separate bed need methodologies, fixed need pools, bed inventories, utilization thresholds, and minimum unit sizes for child/adolescent and adult services. Granting SandyPines' request would run counter to these CON review criteria by, among other things, altering the District IX inventory of child/adolescent and adult psychiatric beds, as well as awarding adult psychiatric beds when there is no need under the established methodology. Finally, consistent with the provisions of Section 395.003(4), Florida Statutes, the agency has issued SandyPines a license "which specifies the service categories and the number of hospital beds in each bed category [60 psychiatric child/adolescent beds] for which [the] license [was issued]." Granting SandyPines' request would constitute a change in its "licensed bed capacity." Considering the foregoing provisions of law, it is concluded that the interpretation advanced by SandyPines is strained, and the interpretation advanced by AHCA is reasonable. Accordingly, it is found that SandyPines' proposed conversion of 15 child/adolescent psychiatric beds to 15 adult psychiatric beds is subject to CON review because such conversion constitutes "[a] change in licensed bed capacity," "the establishment of inpatient institutional health services by a health care facility, or a substantial change in such services," or "a change in the number of psychiatric beds." Section 408.036(e), (h) and (l), Florida Statutes
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be rendered denying SandyPines' request to modify its certificate of need from a 60-bed child/adolescent psychiatric hospital to a 45-bed child/adolescent and 15-bed adult psychiatric facility. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 14th day of March 1994. WILLIAM J. KENDRICK 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 14th day of March 1994.
The Issue Which, if any, of the four certificate of need applications for short-term psychiatric beds in Department of Health and Rehabilitative Services District 9 should be approved.
Findings Of Fact Description of the Parties The Department of Health and Rehabilitative Services ("HRS") is the agency charged under Chapter 381, Florida Statutes (1991), to make decisions regarding certificate of need ("CON") applications. HRS issued its intent to approve the CON applications of Glenbeigh Hospital of Palm Beach, Inc. ("Glenbeigh"), for 45 beds, and Boca Raton Community Hospital, Inc. ("Boca"), for 15 beds, pursuant to a published fixed need for 67 beds for HRS District IX. HRS also issued its intent to deny the CON applications of Wellington Regional Medical Center, Incorporation ("Wellington") to convert 15 acute care beds to 15 short term adult psychiatric beds, and Savannas Hospital Limited Partnership ("Savannas") to convert 20 substance abuse beds to 20 short term adult psychiatric beds and to add 10 new short term adult beds. District IX includes Palm Beach, Martin, St. Lucie, Okeechobee and Indian River Counties. As a result of Glenbeigh's Notice of Withdrawal filed on April 6, 1993, CON No. 6438 is no longer under consideration in this case. Boca is an existing 394-bed acute care hospital, located one mile north of the Broward County line, and is the applicant for CON No. 6442, to convert 15 medical/surgical beds to 15 adult psychiatric beds, and to delicense an additional 6 medical/surgical beds. Wellington is an existing acute care hospital in Palm Beach County, with 104 acute care medical/surgical beds and 16 substance abuse beds, and is the applicant for CON No. 6441 to convert 15 acute care beds to 15 short term adult psychiatric beds. Savannas is an existing 70 bed child/adolescent and adult psychiatric and substance abuse hospital in St. Lucie County, about 40 miles north of Palm Beach, and is the applicant for CON No. 6444, to convert its 20 substance abuse beds to 20 adult short-term psychiatric beds, and to add 10 new adult short-term psychiatric beds. Lake Hospital and Clinic, Inc., d/b/a Lake Hospital of the Palm Beaches ("Lake"), at the time of hearing, was a 98-bed psychiatric and substance abuse hospital, with 46 adult psychiatric beds, 36 child/adolescent psychiatric beds and 16 substance abuse beds, located in Lake Worth, Palm Beach County, between Boca Raton and West Palm Beach. The parties stipulated that Lake had standing to challenge the Boca application. Community Hospital of the Palm Beaches, Inc., d/b/a Humana Hospital Palm Beaches ("Humana") is an existing 250-bed acute care hospital, with 61 adult and 27 child/adolescent psychiatric beds, and is a Baker Act receiving facility, located directly across the street from Glenbeigh in Palm Beach. Florida Residential Treatment Centers, Inc., d/b/a Charter Hospital of West Palm Beach ("Charter") is an existing 60-bed psychiatric hospital with 20 beds for children and 40 beds for adolescents, located approximately 15 minutes travel time from Glenbeigh. Martin H.M.A., Inc., d/b/a SandyPines Hospital ("SandyPines") is an existing 60 bed child and adolescent psychiatric hospital, and a Baker Act receiving facility, located in Martin County, less than one mile north of the Palm Beach County line. By prehearing stipulation, the parties agreed that the statutory review criteria applicable to the CON application of Boca are those listed in Subsections 381.705(1)(a), (b), (d), (f), (i) - (l) and (n). If Rule 10- 5.011(1)(o) is applicable, the parties stipulated that the disputed criteria are those in Subsections 4.g. and 5.g. Background and Applicability of HRS Rules and Florida Statutes Rule 10-5.011(o) and (p), Florida Administrative Code, was in effect at the time HRS published the fixed need pool and received the applications at issue in this proceeding, the September 1990 batching cycle. The rule distinguished between inpatient psychiatric services based on whether the services were provided on a short-term or long-term basis. Similarly, Rule 10- 5.011(q), Florida Administrative Code, distinguished between short-term and long-term hospital inpatient substance abuse services. On August 10, 1990, HRS published a fixed need pool for 19 short-term psychiatric beds in HRS District IX, with notice of the right to seek an administrative hearing to challenge the correctness of the fixed need pool number. See, Vol. 16, No. 32, Florida Administrative Weekly. On August 17, 1990, HRS published a revised fixed need pool for a net need of 67 additional short-term hospital inpatient psychiatric beds in HRS District IX, based on the denial of a certificate of need application, subsequent to the deadline for submission of the August 10th publication. The local health plan formula, which has not been adopted by rule, allocates 62 of the additional 67 beds needed to the Palm Beach County subdistrict. The revised pool publication did not include notice of the right to an administrative hearing to challenge the revised pool number. See, Vol. 16, No. 33, Florida Administrative Weekly. There were no challenges filed to either the original or revised fixed need pool numbers. On December 23, 1990, HRS published new psychiatric and substance abuse rules, subsequently renumbered as Rule 10-5.040 and 10-5.041, Florida Administrative Code. These new rules abolished the distinction between short- term and long-term services, and instead distinguished psychiatric and substance abuse services by the age of the patient. Pursuant to Section 14 of the new psychiatric rule, that rule does not apply to applications pending final agency action on the effective date of the new rule. HRS will, however, license any applicant approved from the September 1990 batching cycle to provide services to adults or children and adolescents, using the categories in the new rule, not based on the distinction between short and long term services which existed at the time the application was filed. Approved providers will receive separate CONs for adult and child/adolescent services. Rule 10-5.008(2)(a), Florida Administrative Code, provides that the fixed need pool shall be published in the Florida Administrative Weekly at least 15 days prior to the letter of intent deadline and . . . shall not be changed or adjusted in the future regardless of any future changes in need methodologies, population estimates, bed inventories, or other factors which would lead to different projections of need, if retroactively applied. Humana, Lake, Charter and SandyPines allege that HRS incorrectly determined need under the old rule, by failing to examine occupancy rates pursuant to that rule. The rule provided, in relevant part, No additional short term inpatient hospital adult psychiatric beds shall normally be approved unless the average annual occupancy rate for all existing adult short term inpatient psychiatric beds in a service district is at or exceeds 75 percent for the preceding 12 month period. No additional beds for adolescents and children under 18 years of age shall normally be approved unless the average annual occupancy rate for all existing adolescent and children short term hospital inpatient psychiatric beds in the Department district is at or exceeds 70 percent for the preceding 12 month period. Hospitals seeking additional short term inpatient psychiatric beds must show evidence that the occupancy standard defined in paragraph six is met and that the number of designated short term psychiatric beds have had an occupancy rate of 75 percent or greater for the preceding year. (Emphasis added.) Rule 10-5.011(o)4(e), Florida Administrative Code. HRS' expert witness, Elizabeth Dudek, testified that the fixed need pool for 67 additional short term inpatient psychiatric beds was calculated pursuant to the formula in Rule 10-5.011(l)(o), Florida Administrative Code. Ms. Dudek also testified that since calculation resulted in a positive number, according to HRS policy, the publication of the fixed need pool indicates that the occupancy prerequisites must have also been met. To the contrary, the State Agency Action Report and the deposition of Lloyd Tribley, the HRS Health Facilities consultant who collected the data to support the publication of the fixed need pool, indicate that he did not determine existing occupancy separately for adults and for children/adolescents, as required by subsection (e) of the old rule. Rather, he determined, pursuant to subsection (f), that overall occupancy rates for licensed short-term psychiatric beds exceeded 75 percent. With the August 10, 1990 publication of the need for 19 additional short-term inpatient psychiatric beds, HRS provided a point of entry to challenge the published need, including the agency's apparent failure to make a determination of existing occupancy rates for separate age categories. No challenge was filed. In the August 17, 1990 publication, HRS failed to provide a point of entry, when it added 48 more beds to the pool as a result of the issuance of a final order denying a prior CON application. The August 10th publication of numeric need, according to HRS' representative should have been based on an analysis of separate and combined occupancy rates. There was no challenge to that publication, therefore the number of beds in the fixed need pool is not at issue in this proceeding. Like and Existing Facilities Humana, Lake and Charter assert that, as a result of the new rule abolishing separate licensure categories for short-term and long-term beds, all psychiatric providers within an applicant's service district are like and existing facilities. These parties also assert that there was not, even under the old rule, any practical difference between these categories of providers, particularly for children/adolescents. In support of this position, the evidence demonstrated that the average lengths of stay in short-term and long- term adolescent psychiatric beds in 1989 were 48.1 days and 53.02 days, respectively. In 1990, the average lengths of stay in short and long-term beds were 41.8 days and 41.9 days, respectively. The parties asserting that the effect of the new rule is to create an additional group of like and existing providers point to HRS' response to the application of Indian River Memorial Hospital in Vero Beach, Florida ("Indian River"). According to the testimony of HRS expert witness Elizabeth Dudek, Indian River was another District 9 applicant in this same batching cycle. Indian River applied for a CON to convert long-term psychiatric beds to short- term psychiatric beds. HRS denied the CON application of Indian River because, under the new rule, which had taken effect before the decisions on the batch were made, Indian River would receive a new license permitting it to treat psychiatric patients regardless of their projected lengths of stay. Glenbeigh asserted that the numeric need for 67 additional short term psychiatric beds cannot be challenged in this proceeding based on the failure of any party timely to challenge the August 10, 1990, publication of need. Similarly, Glenbeigh asserted that the comparison of "like and existing" facilities must be limited to those used in the inventory to compute need. Glenbeigh relied generally on Florida Administrative Code Rule 10-5.011(o), the old rule governing short term hospital inpatient psychiatric services, for the proposition that "like and existing" in Subsection 381.705(1)(b), Florida Statutes, is equivalent to the inventory of licensed and approved beds for short term psychiatric services, which was used in the computation of need. However, the rule also provides, in a list of "other standards and criteria to be considered in determining approval of a certificate of need application for short term hospital inpatient psychiatric beds," the following, Applicants shall indicate the availability of other inpatient psychiatric services in the proposed service area, including the number of beds available in crisis stabilization units, short term residential treatment programs, and other inpatient beds whether licensed as a hospital facility or not. In light of the rule directive that the consideration of like and existing services is not limited to licensed provider hospitals, Glenbeigh's assertion that the statutory review criteria is more restrictive and limited to the licensed and approved beds that were used to compute numeric need is rejected. The like and existing facilities are the hospitals or freestanding facilities which are authorized to provide the same psychiatric services, as the applicants seek to provide as a result of this proceeding. It was established at hearing that the following list of District 9 facilities provide psychiatric services comparable to those which the three remaining applicants seek to provide in these consolidated cases: DISTRICT 9 Hospital PSYCHIATRIC BEDS SUBSTANCE ABUSE BEDS Adult Child and Adult Child and Adolescent Adolescent Lic. App. Lic. App. Lic. App. Lic. App. Bethesda Hospital 20 0 0 0 0 0 0 0 Charter Palm (IRTF) 0 0 60 0 0 0 0 0 Fair Oaks 36 0 49 0 14 0 3 0 Forty Fifth Street 44 0 0 0 0 0 0 0 Glenbeigh Palm Beach 0 0 0 0 30 0 30 0 Humana Palm Beach 61 0 27 15 0 0 0 0 Humana Sebastian 0 0 0 0 16 0 0 0 Indian River Mem. 16 0 38 0 0 0 0 0 J.F. Kennedy Mem. 14 0 0 0 22 0 0 0 Lake Hospital 46 0 36 0 16 0 0 0 Lawnwood Regional 36 Res. Treat. Palm 0 24 0 0 0 0 0 (IRTF) 0 0 40 0 0 0 0 0 Sandy Pines 0 0 60 0 0 0 0 0 Savannas 35 0 15 0 20 0 0 0 St. Mary Hospital 0 40 0 0 0 0 0 0 Wellington Regional 0 0 0 0 16 0 0 0 Vol. 16, No. 52, Florida Administrative Weekly, (December 28, 1990) (Humana Exhibit 26). Need For Additional Beds An analysis of need beyond that of the numeric need, requires an analysis of the availability and accessibility of the like and existing facilties. One reliable indicator of need is the occupancy levels in the like and existing facilities. In addition to providing guidelines for the publication of need, Rule 10-5.011(o)(4)(e) also mandates a consideration of occupancy levels to determine if applicants are or are not required to demonstrate "not normal circumstances" necessitating the issuance of a CON. For all child/adolescent psychiatric programs in District 9, the expert for Lake and Humana calculated total average occupancy rates at 57.6 percent in 1988, 64.2 percent in 1989, and 53.2 percent in 1990. In support of the accuracy of the expert's calculations, the District 9 Annual Report for 1990 (Lake Exhibit 4) shows occupancy at 46.80 percent in general hospitals, 88.22 percent in specialty hospitals then categorized as short term and 38.22 percent in specialty hospitals then categorized as long term. In addition, during this same period of time, average lengths of stay in District 9 child/adolescent beds also declined by approximately 10 percent. Using the guidelines of the old rule, new short term psychiatric beds should not normally be approved when the child/adolescent rate is below 70 percent. In the new rule, child/adolescent beds should not normally be approved if occupancy is below 75 percent. Therefore, under either rule, applicants who will be licensed for child/adolescent beds, must demonstrate not normal circumstances for their CON applications to be approved. The expert for Lake and Humana, also computed the adult occupancy rates for 1988-1990 in District 9 as follows: 1988- 66.5 percent; 1989 - 73.1 percent; 1990 - 68.5 percent. The occupancy rates for adult beds for the 12- month period ending March, 1990 was 70.6 percent and 69.2 percent for the twelve months ending June, 1990. In evaluating the accuracy of the expert's calculations of occupancy rates for adult beds, a comparison can be made to the District 9 Annual Report for 1990 (Lake Exhibit 4). Occupancy rates were 57.75 percent in general hospitals and 79.45 percent in specialty hospitals. This data does not include Indian River Memorial or Lawnwood Regional which were also listed on the December 1990 inventory of licensed adult beds, nor St. Mary's Hospital which was listed as having 40 approved adult beds. The comparison indicates the accuracy of concluding that the highest occupancy level for District 9 adult psychiatric beds during the period 1988 to 1990 was approximately 70 percent. Using the guidelines of the old rule, 75 percent occupancy is required before new adult beds can be approved unless there is a not normal circumstance. Boca's Proposal Boca Raton Community Hospital ("Boca") is a 394-bed not-for-profit acute care hospital, accredited by the Joint Commission for the Accreditation of Hospitals and Health Organizations, which proposes to convert 21 of its medical/surgical to 15 adult psychiatric beds and to delicense an additional 6 acute care beds. Boca's CON would be conditioned on the provision of 10.8 percent total annual patient days to Medicaid patients and a minimum of 5 percent gross revenues generated, or 2 percent total annual patient days to medically indigent patients. Boca has proposed this alternative so that, if it fails to provide direct care to indigents, it may donate the revenues to further the objectives of the state and district mental health councils. Boca Raton Community Hospital Corporation has control and manages the Boca's property, policies and funds. The Boca Raton Community Hospital Foundation raises funds for Boca and has the funds necessary to accomplish the proposed project at a cost of $932,531. Boca's application asserts that a not normal circumstance exists in the need to serve Medicaid patients in the district, and that a need exists to serve geriatric psychiatric patients in an acute care hospital, due to their general medical condition. Medicaid reimbursement for psychiatric care is only available in acute care hospitals. Boca Historically serves in excess of 70 percent Medicare (geriatric) patients. In 1990, 72 percent of Medicaid psychiatric patients residing in Boca's service area sought psychiatric services outside District 9, as compared to the outmigration of 14.7 percent Medicare patients, and 11 percent commercial insurance patients. Boca supported its proposed 10.8 percent Medicaid CON condition, with evidence that 10.8 percent of all psychiatric discharges in its market area were for Medicaid patients. Boca's opponents dispute the claim that a disproportionate outmigration of District 9 Medicaid patients is, in and of itself, a not normal circumstance. Using the travel time standard for inpatient psychiatric services of 45 minutes under average driving conditions, the opponents argue that District 10 facilities should be considered as available alternatives to additional psychiatric beds in District 9. In fact, the parties stipulated that there are no geographic access problems in District 9. In contrast to the opponents position, Subsections 381.705(a), (b)(, (d), (f) and (h), Florida Statutes (1991), indicate that need, available alternatives and accessibility are evaluated within a district, as defined by Subsection 381.702(5). Therefore, using the statutory criteria as indicative of the situation which is normal, the disproportionate outmigration of medicaid patients can be considered a not normal circumstance with a showing of access hardships for this payor group. Boca's opponents also assert general acute care adult beds are adequate. In August 1991, the occupancy rate was 56.9 percent in the 171 licensed adult psychiatric beds in District 9 general acute care hospitals which are eligible for Medicaid reimbursement. Finally, Boca's opponents argue that Boca historically has not, and will not serve Medicaid patients in sufficient number to alter the outmigration. In 1990, Boca reported 671 Medicaid inpatient days from a total of 99,955. That is equivalent to 92 of the 16,170 admissions. Because Boca has a closed medical staff, only the psychiatrists on staff would be able to admit patients to a psychiatric unit. From the testimony and depositions received in evidence, Boca's psychiatrists who discussed their service to Medicaid patients treated less than 12 Medicaid patients a year. One psychiatrist, who had previously treated Medicaid patients at a mental health center, has been in private practice since 1983-84, but was not sure he had treated a Medicaid patient in his private practice and has received a new Medicaid provider number a few weeks prior to hearing. One Boca psychiatrist does not treat Medicaid patients on an inpatient basis. Two other Boca psychiatrists reported seeing 10 and "a couple" of Medicaid patients a year, respectively. The latter of these described the Medicaid billing procedure as cumbersome. Given the unavailability of Medicaid eligible beds in the District and the nature of the practices of its closed staff of psychiatrists, Boca has failed to establish that its CON application will alleviate the outmigration for psychiatric services of District 9 Medicaid patients. This conclusion is not altered by the subsequent closure of Lake's 46 adult psychiatric beds, because Medicaid reimbursement would not have been available at Lake which was not an acute care hospital. In fact, HRS takes the position that there are no not normal circumstances in this case. Wellington's Proposal Wellington, a 120 bed hospital in West Palm Beach, Florida, proposed to convert 15 acute care beds to 15 short term adult psychiatric beds which, if approved, will be licensed as adult psychiatric beds. Wellington's acute care beds are only 28 percent occupied. Wellington is located in the western portion of Palm Beach County, where no other inpatient psychiatric facilities are located. Wellington is a wholly owned subsidiary of Universal Health Services, Inc. ("UHS"), accredited by the Joint Commission for the Accreditation of Hospitals and Health Organizations (JCAHO) and the American Osteopathic Association (AOA), and offers clinical experience for students of the Southeastern College of Osteopathic Medicine (SECOM). Internships and externships for osteopathic students are also provided at Humana's psychiatric pavilion. Wellington proposes to fund the total project cost of $920,000 from funds available to UHS and intends to become a Baker Act receiving facility. Wellington is not a disproportionate share hospital, and projects 1 percent Medicaid service in its payor mix. Wellington proposes to serve adult psychiatric patients in 15 beds, and projects 53.3 percent and 70 percent occupancy in those beds in years one and two, but does not make a third year projection of at least 80 percent occupancy as required by Paragraph 4(d) of Rule 10-5.011(o). Because the average annual adult occupancy rate in the district is less than 75 percent, any applicant proposing to serve adults must demonstrate that a not normal circumstance exists for approval of its CON application. In addition, there appears to be no shortage of psychiatric beds in acute care hospitals in District 9. See Finding of Fact 39, supra. Not Normal Circumstance Wellington has not alleged nor demonstrated that any of the factors related to its current operations, location or proposed services are not normal circumstances in support of its CON application. Absent the showing of a not normal circumstance, Wellington's proposal cannot be approved, pursuant to Paragraph 4(e) and Rule 10-5.011(o), Florida Administrative Code. Savannas Proposal Savannas Hospital Limited partnership d/b/a Savannas Hospital ("Savannas") is a JCAHO accredited 70 bed psychiatric and substance abuse hospital located in Port St. Lucie, St. Lucie County, Florida, approximately 40 miles north of Palm Beach. Savannas, a Baker Act facility, proposes to convert all 20 of its licensed substance abuse beds to psychiatric beds and to add 10 new psychiatric beds, at a total project cost of $1,444,818. Savannas also proposes to commit to providing 7 percent indigent care. While not specifically describing its circumstances as not normal, Savannas does indicate that it is (1) the only applicant in the northern sub- district of District 9, and (2) could readmit to a segregated unit low functioning neurogeriatric patients of the type it previously served. Savannas also indicated that Medicare reimbursement is not available for patients who have substance abuse, rather than psychiatric primary diagnoses. As a freestanding provider, Savannas is not eligible for Medicaid reimbursement. Savannas demonstrates what services it would provide, if its CON is approved, but fails to identify a need for the services by District 9 psychiatric patients. Within the northern sub-district, the only other facility in St. Lucie County, Lawnwood, reported an occupancy rate of 65 percent in 1989. AHCA also argued that the substance abuse beds at Savannas are needed and should not be converted to psychiatric beds. That position is supported by the fact that Savannas substance abuse beds had a higher occupancy level than its psychiatric beds in 1989. Savannas' application and the evidence presented do not support the need for the services proposed by Savannas, nor does Savannas assert that any not normal circumstances exist.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered denying Certificate of Need Number 6438 to Glenbeigh Hospital of Palm Beach, Inc.; Certificate of Need Number 6442 to Boca Raton Community Hospital, Inc.; Certificate of Need Number 6441 to Wellington Regional Medical Center, Inc.; and Certificate of Need Number 6444 to Savannas Hospital Limited Partnership. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 18th day of June 1993. ELEANOR M. HUNTER 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 18th day of June 1993. APPENDIX The following rulings are made on the parties' proposed findings of fact: Humana Adopted in Finding of Fact 1. Subordinate to Finding of Fact 2. 3-6. Issues not addressed. 7-8. Adopted in Findings of Fact 3 and 4. Subordinate to Findings of Fact 44 and 46. Subordinate to Finding of Fact 10. 11-12. Adopted in Findings of Fact 6 and 7. 13-15. Subordinate to Finding of Fact 7. Adopted in Finding of Fact 7. Adopted in Finding of Fact 45. Subordinate to Findings of Fact 27 & 29. Issue not addressed. 20-21. Subordinate to Finding of Fact 25. 22. Issue not addressed. 23-24. Adopted in Findings of Fact 8 and 9. Accepted in relevant part in Finding of Fact 11. Accepted in relevant part in Finding of Fact 10. Subordinate to Finding of Fact 12 and Conclusions of Law 4. Subordinate to Finding of Fact 1. Adopted in Finding of Fact 22. Rejected in Finding of Fact 20. Rejected in Findings of Fact 12 and 18. Adopted in Findings of Fact 15 and 17. Rejected in Finding of Fact 38. Adopted in Findings of Fact 16 and 17. Adopted in Finding of Fact 26. Issue not addressed. Adopted in Finding of Fact 47. 38-47. Issues not addressed. Adopted in Findings of Fact 44 and 47. Issue not addressed. Rejected in Finding of Fact 46. Issue not addressed. 52-54. Adopted in Findings of Fact 46 and 47. 55-57. Issues not addressed. Adopted in Finding of Fact Issue not addressed. Adopted in Finding of Fact 46. Issue not addressed. Accepted in relevant part in Finding of Fact 21. Accepted in relevant part in Finding of Fact 22. Accepted in relevant part in Finding of Fact 21. Subordinate to Finding of Fact 25. Accepted in relevant part in Finding of Fact 25. Subordinate to Finding of Fact 25. Accepted in relevant part in Finding of Fact 25. Accepted in relevant part in Finding of Fact 54 Accepted in relevant part in Findings of Fact 26, 38, 39, 42, 43, 47, 48, 54, 55 and 57. Accepted in relevant part in Finding of Fact 26. Rejected in Findings of Fact 21 and 22. Accepted in relevant part in Finding of Fact 26. 74-75. Accepted in relevant part in Finding of Fact 27. 76-77. Subordinate to Finding of Fact 27. Subordinate to Finding of Fact 30. Subordinate to Findings of Fact 27 and 30. Subordinate to Finding of Fact 28. Subordinate to Finding of Fact 31. Accepted in relevant part in Finding of Fact 82. Subordinate to Finding of Fact 82. Accepted in relevant part in Finding of Fact 37. Accepted in relevant part in Finding of Fact 39. Issue not addressed. Subordinate to Finding of Fact 27 and 30. Accepted in relevant part in Findings of Fact 27, 29 and 30. Subordinate to Findings of Fact 27 and 30. Accepted in relevant part in Finding of Fact 31. Accepted in relevant part in Finding of Fact 42. Issue not addressed. Addressed in Preliminary Statement. Accepted in relevant part in Finding of Fact 1. 95-99. Issues not addressed Accepted in relevant part in Finding of Fact 10. Accepted in relevant part in Finding of Fact 25. 102-114. Issues not addressed Accepted in relevant part in Findings of Fact 27 and 30. Issue not addressed. Subordinate to Finding of Fact 25. Accepted in relevant part in Finding of Fact 37. Issue not addressed. Accepted in relevant part in Finding of Fact 10. 121-122. Issues not addressed. Accepted in relevant part in Findings of Fact 4 and 47. Issue not addressed. Irrlevant. Issue not addressed. Accepted in relevant part in Finding of Fact 10 Accepted in relevant part in Findings of Fact 10, 25, 47 and 48. Subordinate to Finding of Fact 11. Issue not addressed. Accepted in relevant part in Findings of Fact 47, 48 and 49. Accepted in relevant part in Finding of Fact 45. Accepted in relevant part in Finding of Fact 46. Issue not addressed. Accepted in relevant part in Findings of Fact 47 and 48. Issue not addressed. Accepted in relevant part in Findings of Fact 47 and 48. Accepted in relevant part in Finding of Fact 15. Accepted in relevant part in Findings of Fact 47, 48 and 49. Accepted in relevant part in Finding of Fact 11. Lake Adopted in Finding of Fact 1. Subordinate to Finding of Fact 1. 3-4. Adopted in Finding of Fact 3. Adopted in Finding of Fact 4. Adopted in Finding of Fact 5. Adopted in Finding of Fact 7. Adopted in Finding of Fact 8. Adopted in Finding of Fact 9. Adopted in Findings of Fact 6 and 43. 11-12. Issues not addressed. 13-19. Subordinate to Findings of Fact 27-43. 20-21. Issues not addressed. 22. Adopted in Finding of Fact 10. 23. Adopted in Finding of Fact 11. 24. Adopted in Finding of Fact 12. 25-26. Adopted in Finding of Fact 13. 27-28. Adopted in Finding of Fact 1. 29-31. Adopted in Finding of Fact 22. 32. Rejected in relevant part in Finding of Fact 13. 33. Issue not addressed. 34. Accepted in relevant part in Finding of Fact 25. 35. Subordinate to Finding of Fact 25. 36-37. Accepted in relevant part in Finding of Fact 25. 38-39. Subordinate to Finding of Fact 27. 40. Accepted in relevant part in Finding of Fact 25. 41. Accepted in relevant part in Finding of Fact 30. 42-43. Subordinate to Finding of Fact 30. 44. Accepted in relevant part in Finding of Fact 25. 45. Subordinate to Findings of Fact 27 and 30. 46-47. Issues not addressed. 48. Accepted in relevant part in Findings of Fact 27 and 30. 49-52. Issues not addressed. 53. Subordinate to Finding of Fact 42. 54-56. Issues not addressed. 57. Accepted in relevant part in Conclusions of Law 4. 58-59. Accepted in relevant part in Finding of Fact 26 and in Conclusions of Law 4. Accepted in relevant part in Finding of Fact 20. Adopted in Finding of Fact 20. Adopted in Finding of Fact 15. Subordinate to Finding of Fact 1. Subordinate to Finding of Fact 17. 65-66. Adopted in Finding of Fact 17. Adopted in Findings of Fact 18, 27 and 30. Adopted in Finding of Fact 17. Adopted in Findings of Fact 27 and 29. Adopted in Finding of Fact 30. Adopted in Finding of Fact 29. Adopted in Finding of Fact 31. Adopted in Findings of Fact 28 and 31. Adopted in Finding of Fact 38. Adopted in Findings of Fact 27, 39 and 42. Adopted in Finding of Fact 43. Adopted in Finding of Fact 38. Adopted in Finding of Fact 35. Adopted in Findings of Fact 37, 39 and 42. Adopted in Finding of Fact 42. Adopted in Findings of Fact 47, 48, 49, 53 and 57. Adopted in Finding of Fact 47. Adopted in Finding of Fact 1. 84-89. Issues not addressed. Adopted in Findings of Fact 27 and 30. Subordinate to Findings of Fact 27 and 30. 92-97. Issues not addressed. Subordinate to Finding of Fact 41. Subordinate to Finding of Fact 37. 100-102. Issues not addressed. Adopted in Findings of Fact 47 and 48. Adopted in Finding of Fact 26. Adopted in Finding of Fact 25. Subordinate to Finding of Fact 25. Adopted in Finding of Fact 30. Adopted in Finding of Fact 27. Subordinate to Finding of Fact 27. Adopted in Finding of Fact 27. 111-113. Subordinate to Finding of Fact 27. Subordinate to Finding of Fact 30. Adopted in Finding of Fact 29. Issue not addressed. Accepted in relevant part in Findings of Fact 27 and 30. Adopted. Adopted. Accepted in relevant part. Issue not addressed. Accepted in relevant part in Findings of Fact 3 and 32. Subordinate to Finding of Fact 3. Accepted in relevant part in Finding of Fact 41. Adopted in Finding of Fact 42. Subordinate to Finding of Fact 41. Issue not addressed. 128-132. Subordinate to Finding of Fact 32. 133-135. Issues not addressed. Adopted in Findings of Fact 32 and 41. Adopted in Finding of Fact 32. Subordinate to Finding of Fact 32. Issue not addressed. Adopted in Finding of Fact 10. Adopted in Finding of Fact 6. Adopted in Finding of Fact 10. Adopted in Finding of Fact 30. Adopted in Finding of Fact 44. Subordinate to Finding of Fact 45. Subordinate to Finding of Fact 47. Adopted in Finding of Fact 46. Subordinate to Finding of Fact 47. Adopted in Finding of Fact 44. 150-151. Adopted in Finding of Fact 46. 152-156. Issues not addressed. 157-158. Adopted in Finding of Fact 10. 159. Adopted in Findings of Fact 48 and 49. 160. Adopted in Finding of Fact 5. 161. Adopted in Finding of Fact 5. 162. Adopted in Finding of Fact 56. 163. Adopted in Finding of Fact 57. 164. Adopted in Finding of Fact 10. 165. Adopted in Finding of Fact 10. 166. Charter Adopted in Finding of Fact 57. 1. Accepted in relevant part in Finding of Fact 1. 2-3. Adopted. 4-10. Accepted in Preliminary Statement. 11. Adopted in Finding of Fact 1. 12-15. Issues not addressed. 16. Adopted in Finding of Fact 12. 17. Adopted in Finding of Fact 7. 18-19. Issues not addressed. 20. Adopted in Finding of Fact 8. 21-25. Subordinate to Finding of Fact 8. 26-38. Issues not addressed 39-40. Adopted in Finding of Fact 10. Subordinate to Finding of Fact 13. Adopted in Finding of Fact 13. 43-44. Adopted in Finding of Fact 22. Adopted in Finding of Fact 13. Adoped in Conclusion of Law 3. Adopted in Finding of Fact 13. Subordinate to Finding of Fact 25. Adopted in Findings of Fact 25 and 26. Adopted in Finding of Fact 23. Issue not addressed. 52-53. Adopted in Finding of Fact 25. 54-55. Issues not addressed. Adopted in Finding of Fact 26. Adopted in Finding of Fact 24. 58-73. Issues not addressed. Adopted in Finding of Fact 23. Adopted in Finding of Fact 38. Adopted in Finding of Fact 27. Adopted in Findings of Fact 27 and 30. 78-79. Subordinate to Findings of Fact 27 and 30. Subordinate to Finding of Fact 27. Issue not addressed. Adopted in Findings of Fact 27 and 30. Adopted in Finding of Fact 37. Adopted in Finding of Fact 39. Adopted in Finding of Fact 25. 86-94. Issues not addressed. Adopted in Finding of Fact 26. Issue not addressed. Adopted in Finding of Fact 15. Adopted in Findings of Fact 37, 39 and 42. 99-101. Issues not addressed. 102. Adopted in Finding of Fact 1. 103-134. Issues not addressed. 135. Adopted in Finding of Fact 4. 136-140. Issues not addressed. Boca Adopted in Finding of Fact 12. Adopted in Finding of Fact 11. Subordinate to Finding of Fact 11. Adopted in Finding of Fact 1. Adopted in Preliminary Statement. Adopted in Findings of Fact 3 and 32. Adopted in Finding of Fact 33. Subordinate to Finding of Fact 3. Adopted in Finding of Fact 32. 10. Subordinate to Finding of Fact 32. 11. Adopted in Finding of Fact 41. 12. Subordinate to Finding of Fact 32. 13. Adopted in Finding of Fact 32. 14. Adopted. 15-16. Subordinate to Finding of Fact 32. 17. Adopted in Finding of Fact 34. 18. Subordinate to Finding of Fact 32. 19. Issue not addressed. 20-21. Adopted in Finding of Fact 32. 22. Rejected in Finding of Fact 39. 23. Subordinate to Finding of Fact 32. 24. Adopted in Finding of Fact 32. 25. Subordinate to Finding of Fact 32. 26-27. Adopted in Finding of Fact 41. 28-30. Subordinate to Finding of Fact 41. 31. Adopted in Finding of Fact 34. 32. Adopted in Finding of Fact 39. 33. Subordinate to Finding of Fact 34. 34. Adopted in Finding of Fact 39. 35. Adopted in Finding of Fact 34. 36. Rejected in Finding of Fact 39. 37-42. Adopted in Finding of Fact 41. 43-47. Issues not addressed. 48. Subordinate to Finding of Fact 30. 49-50. Issues not addressed. Accepted in relevant part in Findings of Fact 27 and 30. Issue not addressed. 53-54. Rejected in Finding of Fact 30. 55-56. Issues not addressed. 57. Adopted in Finding of Fact 12. 58-59. Issues not addressed. Rejected in Findings of Fact 39 and 42. Adopted in Finding of Fact 12. Issue not addressed. Adopted in Finding of Fact 32. 64-65. Issues not addressed. Adopted in Findings of Fact 32, 35 and 38. Adopted in Finding of Fact 36. Adopted. Issue not addressed. Adopted in Finding of Fact 32. Adopted in Finding of Fact 12. Subordinate to Finding of Fact 32. Issue not addressed. Accepted in relevant part in Finding of Fact 34. Issue not addressed. Issue not addressed. Adopted in Finding of Fact 15. Issue not addressed. Adopted. Adopted in Finding of Fact 32. 81-82. Rejected in Finding of Fact 42. Issue not addressed. Adopted in Finding of Fact 32. Adopted in Finding of Fact 37. Rejected in Findings of Fact 25 and 42. Issue not addressed. Adopted in Finding of Fact 6. 89-97. Issues not addressed. Subordinate to Finding of Fact 25. Rejected in Finding of Fact 42. Issue not addressed. Adopted in Findings of Fact 25 and 26. Adopted in Finding of Fact 6. Sandy Pines 1. Issue not addressed. 2-3. Subordinate to Finding of Fact 1. 4. Issue not addressed. 5. Subordinate to Finding of Fact 9. 6-8. Adopted in Finding of Fact 9. 9-13. Subordinate to Finding of Fact 25. 14. Adopted in Finding of Fact 9. 15. Subordinate to Finding of Fact 9. Adopted in Finding of Fact 25. Adopted in Finding of Fact 27. Adopted in Finding of Fact 25. Adopted in Finding of Fact 27. 20-24. Subordinate to Finding of Fact 27. 25. Subordinate to Finding of Fact 9. 26-29. Issues not addressed. 30. Adopted. 31-33. Issues not addressed. Adopted in Findings of Fact 42, 43, 48, 49 and 54. Issue not addressed. Accepted in relevant part in Findings of Fact 27 and 30. Subordinate to Findings of Fact 28 and 31. Issue not addressed. 39-40. Subordinate to Findings of Fact 27 and 30. 41-42. Issues not addressed. Accepted in relevant part in Finding of Fact 12. Accepted in relevant part in Findings of Fact 12 and 17. Accepted in relevant part in Finding of Fact 17. 46-47. Accepted in relevant part in Finding of Fact 26. 48. Subordinate to Findings of Fact 25 and 26. 49-50. Issues not addressed. Adopted. Adopted. Accepted in relevant part in Finding of Fact 7. Accepted in relevant part in Finding of Fact 42. 55-56. Issues not addressed. 57. Adopted. 58-59. Issues not addressed. Accepted in relevant part in Conclusion of Law 3. Accepted in relevant part in Finding of Fact 26. 62-64. Accepted in relevant part in Finding of Fact 25. Accepted in relevant part in Findings of Fact 27 and 30. Subordinate to Findings of Fact 27 and 30. 67. Accepted in relevant part in Finding of Fact 22. 68-69. Accepted in relevant part in Finding of Fact 21. 70. Accepted in relevant part in Finding of Fact 26. 71. Accepted in relevant part in Finding of Fact 26 and in 72. Conclusion of Law 3. Accepted in relevant part in Findings of Fact 26 and 73. 38. Accepted in relevant part in Findings of Fact 25, 27 and 30. 74-75. Not legible. 76. Subordinate to Finding of Fact 25. 77-80. Subordinate to Finding of Fact 27. 81. Subordinate to Finding of Fact 25. 82-83. Subordinate to Finding of Fact 27. 84-95. Issues not addressed. Wellington 1-2. Adopted in Findings of Fact 4 and 44. Adopted in Finding of Fact 45. Adopted in Finding of Fact 44. Subordinate to Findings of Fact 4 and 44. Adopted in Finding of Fact 44. Adopted in Finding of Fact 45. 8-10. Subordinate to Finding of Fact 45. 11-12. Adopted in Finding of Fact 45. 13-19. Subordinate to Findings of Fact 4 and 44. 20. Adopted in Findings of Fact 4 and 46. 21-22. Adopted in Findings of Fact 4 and 44. Adopted in Finding of Fact 45. Subordinate to Findings of Fact 44 and 46. Subordinate to Findings of Fact 4 and 44. Subordinate to Finding of Fact 46. 27-28. Adopted in Finding of Fact 46. Adopted in Finding of Fact 30. Adopted in Finding of Fact 46. 31-32. Issues not addressed. Subordinate to Finding of Fact 25. Adopted. Issue not addressed. 36-37. Adopted in Finding of Fact 45. 38-42. Issues not addressed. 43. Adopted in Findings of Fact 34, 42 and 47. 44-63. Issues not addressed. 64-65. Subordinate to Finding of Fact 46. 66-67. Issues not addressed. 68. Adopted in Finding of Fact 10. 69-91. Issues not addressed. Accepted in relevant part in Finding of Fact 47. Accepted in relevant part in Finding of Fact 12. 94-103. Issues not addressed. Accepted in relevant part in Findings of Fact 1 and 44. Accepted in relevant part in Finding of Fact 45. 106-111. Issues not addressed 112. Rejected in Findings of Fact 25, 27 and 30. 113-115. Accepted in relevant part in Finding of Fact 45. Savannas Adopted in Finding of Fact 1. Adopted in Findings of Fact 2 and 7. Adopted in Finding of Fact 3. Adopted in Finding of Fact 4. Adopted in Finding of Fact 5. Adopted in Finding of Fact 6. Adopted in Finding of Fact 7. Adopted in Finding of Fact 8. Adopted in Finding of Fact 9. Adopted in Findings of Fact 5 and 50. Subordinate to Finding of Fact 5. Adopted in Finding of Fact 53. Subordinate to Finding of Fact 53. Subordinate to Finding of Fact 56. Subordinate to Findings of Fact 5 and 50. Adopted. Issue not addressed. Adopted in Finding of Fact 56. Issue not addressed. Adopted in Finding of Fact 53. Rejected in Finding of Fact 56. Issue not addressed. Adopted in Finding of Fact 51. Adopted in Finding of Fact 50. Issue not addressed. Adopted in Findings of Fact 5 and 51. Subordinate to Finding of Fact 51. Adopted in Finding of Fact 53. Subordinate to Finding of Fact 1. 30-33. Subordinate to Finding of Fact 12. 34. Adopted in Finding of Fact 12. 35-37. Issues not addressed. Adopted in Finding of Fact 53. Issue not addressed. 40-42. Rejected in Finding of Fact 54. 43. Adopted in Finding of Fact 50. 44-48. Subordinate to Finding of Fact 50. 49-51. Rejected in Findings of Fact 53 and 57. Adopted in Finding of Fact 53. Rejected in Findings of Fact 53 and 57. Adopted. Adopted. 56-57. Subordinate to Finding of Fact 50 Rejected in Findings of Fact 53 and 57. Issue not addressed. 60-61. Rejected in Findings of Fact 53 and 57. 62-63. Issues not addressed. 64. Adopted in Finding of Fact 56. 65-66. Issues not addressed. 67. Rejected in Findings of Fact 53 and 57. 68-70. Issues not addressed. 71. Adopted in Finding of Fact 52. 72-77. Issues not addressed 78. Adopted in Finding of Fact 1. 79-100. Issues not addressed. HRS Adopted in Finding of Fact 1. Adopted in Finding of Fact 11. Adopted in Finding of Fact 13. Adopted in Finding of Fact 12. Accepted in relevant part in Finding of Fact 16 and rejected in part in Finding of Fact 17. Adopted in Finding of Fact 16. Subordinate to Finding of Fact 16. Adopted in Finding of Fact 8. Adopted in Finding of Fact 9. 10-11. Subordinate to Finding of Fact 12. Accepted in relevant part in Finding of Fact 12. Issue not addressed. Accepted in relevant part in Finding of Fact 12. Subordinate to Finding of Fact 12. 16-17. Issues not addressed. Adopted in Finding of Fact 1. Subordinate to Findings of Fact 32, 46 and 52. Adopted in Finding of Fact 20. 21. Subordinate to Finding of Fact 1. 22. Subordinate to Finding of Fact 2. 23-33. Issues not addressed. 34. Adopted in Finding of Fact 3. 35-36. Subordinate to Finding of Fact 3. 37. Accepted in relevant part in Finding of Fact 32. 38. Subordinate to Finding of Fact 32. 39. Rejected in Findings of Fact 40, 41 and 42. 40. Adopted in Finding of Fact 32. 41. Issue not addressed. 42. Adopted in Finding of Fact 42. 43. Adopted in Finding of Fact 32. 44. Issue not addressed. 45-46. Adopted in Finding of Fact 32. 47. Adopted in Finding of Fact 47. 48. Accepted in relevant part in Finding of Fact 44. 49. Issue not addressed. 50. Accepted in relevant part in Finding of Fact 46. 51. Subordinate to Finding of Fact 47. 52. Accepted in relevant part in Finding of Fact 46. 53-54. Accepted in relevant part in Finding of Fact 45. 55. Issue not addressed. 56-57. Subordinate to Finding of Fact 46. 58. Subordinate to Finding of Fact 47. 59-61. Issues not addressed. 62-64. Adopted in Findings of Fact 50 and 51. 65. Subordinate to Finding of Fact 65. 66-68. Issues not addressed. 69. Accepted in relevant part in Finding of Fact 52. 70-71. Issues not addressed. 72. Accepted in relevant part in Finding of Fact 53. 73. Accepted in relevant part in Finding of Fact 53. 74. Adopted in Finding of Fact 56. 75-77. Subordinate to Finding of Fact 56. 78-80. Issues not addressed. 81-82. Subordinate to Finding of Fact 56. 83-89. Issues not addressed. COPIES FURNISHED: Thomas Cooper, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 2727 Mahan Drive Fort Knox Executive Center Tallahassee, Florida 32308 William B. Wiley, Esquire McFARLAIN, STERNSTEIN, WILEY & CASSEDY, P.A. Post Office Box 2174 Tallahassee, Florida 32316-2174 James C. Hauser, Esquire Foley & Lardner Post Office Box 508 Tallahassee, Florida 32302 Michael J. Cherniga, Esquire David C. Ashburn, Esquire Roberts, Baggett, LaFace & Richard Post Office Drawer 1838 Tallahassee, Florida 32301 Robert D. Newell, Jr., Esquire Newell & Stahl, P.A. 817 North Gadsden Street Tallahassee, Florida 32303-6313 Michael J. Glazer, Esquire C. Gary Williams, Esquire Ausley, McMullen, McGehee, Carothers & Proctor Post Office Box 391 Tallahassee, Florida 32302 Robert S. Cohen, Esquire John F. Gilroy, III, Esquire Haben, Culpepper, Dunbar & French, P.A. Post Office Box 10095 Tallahassee, Florida 32302 Charles H. Hood, Jr., Esquire MONACO, SMITH, HOOD, PERKINS, ORFINGER & STOUT 444 Seabreeze Boulevard, #900 Post Office Box 15200 Daytona Beach, Florida 32115 R. S. Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, General Counsel Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
Findings Of Fact The application and project On October 15, 1986, Respondent, Florida Residential Treatment Centers, Inc. (FRTC), filed a timely application with the Respondent, Department of Health and Rehabilitative Services (Department), for a certificate of need to construct a 60-bed specialty hospital to be licensed as an intensive residential treatment program for children and adolescents in Broward County, Florida. On March 11, 1987, the Department proposed to grant FRTC's application, and petitioners, Florida Psychiatric Centers (FPC) and South Broward Hospital District (SBHD), timely petitioned for formal administrative review. FRTC is a wholly-owned subsidiary of Charter Medical Corporation (Charter). Currently, Charter owns, operates or has under construction 85 hospitals within its corporate network. Of these, 13 are general hospitals, and 72 are psychiatric hospitals. Notably, Charter now operates residential treatment programs in Newport News, Virginia, Provo, Utah, and Mobile, Alabama; and, is developing such a program in Memphis, Tennessee. Within the State of Florida, Charter operates psychiatric hospitals in Tampa, Jacksonville, Fort Myers, Miami, and Ocala. In connection with the operation of these facilities, Charter has established satellite counseling centers to screen patients prior to admission and to provide aftercare upon discharge. Of 20 such centers operated by Charter, one is located in Broward County and two are located in Dade County. The facility proposed by FRTC in Broward County (District X) will treat seriously emotionally disturbed children and adolescents under the age of 18. The patients admitted to the facility will have the full range of psychiatric diagnoses, with the probable exception of serious mental retardation and severe autism. FRTC will not treat patients who present themselves with a primary substance abuse diagnosis, nor will it admit patients who are actively dangerous. This distinguishes FRTC from an acute psychiatric hospital where actively dangerous patients requiring immediate medical intervention are often admitted. The anticipated length of stay at FRTC will vary depending upon the patient's responsiveness to treatment, but is reasonably expected to range between 6 months to 2 years, with an average of 1 year. The treatment programs to be offered at FRTC will be based upon a bio- psychosocial treatment model. This model assumes that the biological component of a patient's condition has been stabilized and that psychiatric medication will be administered solely to maintain this stabilized condition. The social component of the model is designed to resolve problems in interpersonal, family and peer relationships through educational groups, psychiatric co-therapeutic groups and family group therapy. The psychological component focuses primarily on developing personal understanding and insight to guide the patient toward self-directed behavior. Among the therapies to be offered at FRTC are individual, family, recreational, group and educational. Group therapy will be designed to resolve interpersonal problems and relationships, and focuses primarily on building trust among group members. Some group therapy sessions will also cover specific issues such as sex education, eating disorders, self-image and social skills. The goal of recreational therapy will be to teach patients to play appropriately, showing them how to give, take and share, and to follow and to lead. Recreational activities will be available both on and off campus. The goal of occupational therapy will be to develop skills used in work. For a child whose work is school, this often involves using special education techniques. For teenagers, occupational therapy also develops work skills, and prepares them for vocational training or employment. Family therapy is crucial because the family is she core of child development. Families will be invited to spend days with their children at FRTC where they will learn behavioral management techniques, and participate in parent education activities and multifamily groups. The school component of the program includes development of an individualized educational plan for each child. School will be conducted 4-5 hours a day. FRTC will utilize the level system as a behavioral management tool This system provides incentives for learning responsibility for one's own behavior and for functioning autonomously. The typical progress of a patient at FRTC will be as follows. First, a team which includes a psychiatrist, social worker, psychologist and teacher will decide, based upon available information, whether admission is appropriate. If admitted, a comprehensive assessment will be conducted within 10 days, a goal- oriented treatment program will be developed for each patient, designed to remedy specific problems. Discharge planning will begin immediately upon admission. A case manager will be involved to assure that the treatment modalities are well-coordinated. Finally, FRTC will provide aftercare upon discharge. Should any FRTC patients experience acute episodes, they will be referred to acute care psychiatric hospitals with which FRTC has entered into transfer agreements. Likewise, patients who require other medical attention will be referred to appropriate physicians Consistency with the district plan and state health plan. While the local health plan does not specifically address the need for intensive residential treatment programs (IRTPs) for children and adolescents, it does contain several policies and priorities that relate to the provision of psychiatric services within the district. Policy 2 contains the following relevant priorities when an applicant proposes to provide a new psychiatric service: ... Each psychiatric inpatient unit shall provide the following services: psychological testing/assessment, psychotherapy, chemotherapy, psychiatric consultation to other hospital departments, family therapy, crisis intervention, activity therapy, social services and structured education for school age patients, and have a minimum patient capacity of 20 and a relationship with the community mental health center. Facilities should be encouraged to provide for a separation of children, adolescents, adults, and geriatric patient' where possible. Greater priority should be given to psychiatric inpatient programs that propose to offer a broad spectrum of continuous care. ... Applicants should be encouraged to propose innovative treatment techniques such as, complementing outpatient and inpatient services or cluster campuses, that are designed to ultimately reduce dependency upon short term psychiatric hospital beds. New facilities should be structurally designed for conducive recovery, provide a least restrictive setting, provide areas for privacy, and offer a wide range of psychiatric therapies. Applicants should be encouraged to offer intermediate and follow-up care to reduce recidivism, encourage specialty services by population and age, engage in research, and offer a full range of complete assessment (biological and psychological). Additionally, the local plan contains the following policies and priorities which warrant consideration in this case: POLICY #3 Services provided by all proposed and existing facilities should be made available to all segments of the resident population regardless of the ability to pay. Priority #1 - Services and facilities should be designed to treat indigent patients to the greatest extend possible, with new project approval based in part on a documented history of provision of services to indigent patients. Priority #2 - Applicants should have documented a willingness to participate in appropriate community planning activities aimed at addressing the problem of financing for the medically indigent. POLICY #4 Providers of health services are expected to the extent possible to insure an improvement of the quality of health services within the district. Priority #1 - Applicants for certificate of need approval should document either their intention or experience in meeting or exceeding the standards promulgated for the provision of services by the appropriate national accreditation organization. Priority #2 - Each applicant for certificate of need approval should have an approved Patient Bill of Rights' `as part of the institution's internal policy. POLICY #5 Specialized inpatient psychiatric treatment services should be available by age, group and service type. For example, programs for dually diagnosed mentally ill substance abusers, the elderly, and children, should be accessible to those population groups. Priority #1 - Applicants should be encouraged to expand or initiate specialized psychiatric treatment services. The FRTC application is consistent with the local health plan. FRTC's program elements and facility design are consistent with those mandated by the local plan for mental health facilities, and its proposal offers a wide range of services, including follow-up care. FRTC intends to provide a minimum of 1.5 percent of its patient day allotment to indigent children and adolescents, and will seek JCAH accreditation and CHAMPUS approval. The state health plan addresses services similar to those being proposed by FRTC, and contains the following pertinent policies and statements: Mental health services are designed to provide diagnosis, treatment and support of individuals suffering from mental illness and substance abuse. Services encompass a wide range of programs which include: diagnosis and evaluation, prevention, outpatient treatment, day treatment, crisis stabilization and counseling, foster and group homes, hospital inpatient diagnosis and treatment, residential treatment, and long term inpatient care. These programs interact with other social and economic services, in addition to traditional medical care, to meet the specific needs of individual clients. STATE POLICIES As the designated mental health authority' for Florida, HRS has the responsibility for guiding the development of a coordinated system of mental health services in cooperation with local community efforts and input. Part of that responsibility is to develop and adopt policies which can be used to guide the development of services such that the needs of Florida residents are served in an appropriate and cost effective manner. Policies relating to the development of mental health services in Florida are contained in Chapter 394 and Chapter 230.2317, F.S. The goal of these services is: '... reduce the occurrence, severity, duration and disabling aspects of mental, emotional, and behavioral disorders.' (Chapter 394, F.S.) '... provide education; mental health treatment; and when needed, residential services for severely emotionally disturbed students.' (Chapter 230.2317, F.S.) Within the statutes, major emphasis has also been placed on patient rights and the use of the least restrictive setting for the provision of treatment. 'It is further the policy of the state that the least restrictive appropriate available treatment be utilized based on the individual needs and best interests of the patient and consistent with optimum improvement of the patient's condition.' (Chapter 394.459(2)(b), F.S.) 'The program goals for each component of the network are'... 'to provide programs and services as close as possible to the child's home in the least restrictive manner consistent with the child's needs.' (Chapter 230.2317(1)(b), F.S.) Additional policies have been developed in support of the concept of a 'least restrictive environment' and address the role of long and short term inpatient care in providing mental health services for severely emotionally disturbed (SED) children. These include: 'State mental hospitals are for those adolescents who are seriously mentally ill and who have not responded to other residential treatment programs and need a more restrictive setting.' (Alcohol, Drug Abuse and Mental Health Program Office, 1982) 'Combined exceptional student and mental health services should be provided in the least restrictive setting possible. This setting is preferably a school or a community building rather than a clinical or hospital environment.' (Office of Children Youth and Families, 1984) 'Alternative, therapeutic living arrangements must be available to SED students in the local areas, when family support is no longer possible, so that they may continue to receive services in the least restrictive way possible.' (Office of Children Youth and Families, 1984) 'SED students should not be placed in residential schools or hospitals because of lack of local treatment resources, either educational or residential.' (Office of Children Youth and Families, 1984). * * * Sufficient funding for the development of residential treatment and community support is necessary if the state is to fulfill its commitment to providing services for long term mentally ill persons. These services provide, in the long run, a more humane and cost effective means of meeting the mental health needs of Florida residents. Community services have been shown to be effective in rapidly returning the majority of individuals to their productive capacity and reducing the need for costly long term, institutional mental health services. There is, therefore, a need to proceed as rapidly as possible with the development of publicly funded services in those districts which are currently experiencing problems resulting from gaps in services. * * * Services for Adolescents and Children An additional issue which has been identified as a result of increased pressures for development of hospital based programs is the need to differentiate between services for adults and those for children and adolescents. Existing policy supports the separation of services for children and adolescents from those of adults and requires the development of a continuum of services for emotionally disturbed children. The actual need for both long and short term inpatient services for children and adolescents is relatively small compared to that of adults but is difficult to quantify. Providers, however, continue to request approval for long and short term adolescent and children services as a means of gaining access to the health care market. Continued development of long and short term inpatient hospital programs for the treatment of adolescents and children is contrary to current treatment practices for these groups and is, therefore, inappropriate without local data to support the need for these services. Such development can contribute to inappropriate placement, unnecessary costs of treatment, and divert scarce resources away from alternative uses. In addition, the following pertinent goals are contained in the state health plan: GOAL 1: ENSURE THE AVAILABILITY OF MENTAL HEALTH AND SUBSTANCE ABUSE SERVICES TO ALL FLORIDA RESIDENTS IN A LEAST RESTRICTIVE SETTING. * * * GOAL 2: PROMOTE THE DEVELOPMENT OF A CONTINUUM OF HIGH QUALITY, COST EFFECTIVE PRIVATE SECTOR MENTAL HEALTH AND SUBSTANCE ABUSE TREATMENT AND PREVENTIVE SERVICES. * * * GOAL 3: DEVELOP A COMPLETE RANGE OF ESSENTIAL PUBLIC MENTAL HEALTH SERVICES IN EACH HRS DISTRICT. * * * OBJECTIVE 3.1.: Develop a range of essential mental health services in each HRS district by 1989. * * * OBJECTIVE 3.2.: Place all clients identified by HRS as inappropriately institutionalized in state hospitals in community treatment settings by July 1, 1989. RECOMMENDED ACTIONS: 3.2a.: Develop a complete range of community support services in each HRS district by July 1, 1989. * * * OBJECTIVE 3.3.: Develop a network of residential treatment settings for Florida's severely emotionally disturbed children by 1990. The FRTC application is consistent with the state health plan which emphasizes the trend toward deinstutionalization, and the importance of education, treatment and residential services for severely emotionally disturbed children and adolescents rather than the traditional approach of institutional placement. Deinstutionalization assures more appropriate placement and treatment of patients, and is less costly from a capital cost and staffing perspective. The FRTC application also promotes treatment within the state, and will assist in reducing out-of-state placements. Need for the proposed facility The Department has not adopted a rule for the review of applications for IRTPs, and has no numeric need methodology to assess their propriety. Rather, because of the paucity of such applications and available data, the Department reviews each application on a case by case basis and, if it is based on reasonable assumptions and is consistent with the criteria specified in Section 381.705, Florida Statutes, approves it. In evaluating the need for an IRTP, the Department does not consider other residential treatment facilities in the district, which are not licensed as IRTP's and which have not received a CON, as like and existing health care services because such facilities are subject to different licensure standards. Under the circumstances, the Department's approach is rational, and it is found that there are no like and existing health care services in the district. While there are no like and existing health care services in the district, there are other facilities which offer services which bear some similarity to those being proposed by FRTC. These facilities include short-term and long-term residential treatment facilities, therapeutic foster homes and therapeutic group homes. These facilities are, however, operating at capacity, have waiting lists, and do not in general offer the breath or term of service proposed by FRTC. There are also short-term and long-term psychiatric hospitals within the district that include within their treatment modalities services similar to those proposed by the applicant. The short-term facilities are not, however, an appropriate substitute for children and adolescents needing long-term intensive residential treatment and neither are the long-term facilities from either a treatment or cost perspective. Notably, there are only 15 long term psychiatric beds in Broward County dedicated to adolescents, and none dedicated to children. In addition to the evident need to fill the gap which exists in the continuum of care available to emotionally disturbed children and adolescents in Broward County, the record also contains other persuasive proof of the reasonableness of FRTC's proposal. This proof, offered through Dr. Ronald Luke, an expert in health planning whose opinions are credited, demonstrated the need for and the reasonableness of FRTC's proposed 60-bed facility. Dr. Luke used two persuasive methodologies which tested the reasonableness of FRTC's 60-bed proposal. The first was a ratio of beds per population methodology similar to the rule methodology the Department uses for short-term psychiatric beds. Under this methodology, approval of FRTC's proposal would result in 25.47 beds per 100,000 population under 18 in District X. This ratio was tested for reasonableness with other available data. Relevant national data demonstrates an average daily census of 16,000 patients in similar beds. This calculates into 24.01 beds per 100,000 at a 90 percent occupancy rate and 25.93 beds per 100,000 at an 85 percent occupancy rate. Additionally, Georgia has a category of beds similar to IRTP beds. The Georgia utilization data demonstrates a pertinent ratio of 27.05 beds per 100,000 population. The second methodology used by Dr. Luke to test the reasonableness of FRTC's proposal, was to assess national utilization data for "overnight care in conjunction with an intensive treatment program." The national census rate in such facility per 100,000 population for persons under 18 was 21.58. Multiplying such rate by the district population under 18, derives an average daily census of 52. Assuming an optimal occupancy rate of 85 percent, which is reasonable, this demonstrates a gross need for 61 IRTP beds in District X. Dr. Luke's conclusions not only demonstrate the reasonableness of FRTC's proposal, but corroborate the need for such beds within the district. This proof, together with an analysis of existing or similar services, existing waiting lists for beds at similar facilities, and the placement by the Department of 28 children from Broward County outside the county in 1986 for long-term residential treatment, demonstrates the need for, and reasonableness of, FRTC's proposal. Quality of care The parties have stipulated that Charter and its hospitals provide quality short and long term psychiatric care. All of Charter's psychiatric hospitals are JCAH accredited, and Charter will seek JCAH accreditation and CHAMPUS approval for the proposed facility. Based on Charter's provision of quality psychiatric care, its experience in providing intensive residential treatment, and the programs proposed for the Broward County facility, it is found that quality intensive residential treatment will be provided at the FRTC facility. The availability of resources, including health manpower, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation. The parties have stipulated that FRTC has available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation. The proof further demonstrates that FRTC will be able to recruit any other administrative, clinical or other personnel needed for its facility. 1/ Accessibility to all residents FRTC projects the following utilization by class of pay: Insurance 66.5 percent, private pay 25 percent, indigent 1.5 percent, and bad debt 7 percent. While this is an insignificant indigent load, FRTC has committed to accept state-funded patients at current state rates. FRTC's projected utilization by class of pay is reasonable. The evident purpose of FRTC's application is to permit its licensure as a hospital under Section 395.002, Florida Statutes, and thereby permit it to be called a "hospital." If a residential treatment facility is licensed as a hospital it has a significant advantage over unlicensed facilities in receiving reimbursement from third party payors. Therefore, accessibility will be increased for those children and adolescents in need of such care whose families have insurance coverage since it is more likely that coverage will be afforded at an IRTP licensed as a "hospital" than otherwise. Design considerations The architectural design for the FRTC facility was adopted from a prototype short-term psychiatric hospital design which Charter has constructed in approximately 50 locations. This design contains the three essential components for psychiatric facilities: administration, support and nursing areas. The floor plan allows easy flow of circulation, and also allows for appropriate nursing control through visual access to activities on the floor. This design is appropriate for the purposes it will serve, and will promote quality residential care. As initially proposed, the facility had a gross square footage of 31,097 square feet. At hearing, an updated floor plan was presented that increased the gross square footage by 900 square feet to 32,045, an insignificant change. In the updated floor plan the recreational component was increased from a multipurpose room to a half-court gymnasium, an additional classroom was added, and the nursing unit was reduced in size to create an assessment unit. The updated floor plan is an enhancement of FRTC's initial proposal, and is a better design for the provision of long-term residential care to children and adolescents than the initial design. While either design is appropriate, acceptance of FRTC's updated floor plan is appropriate where, as here, the changes are not substantial. Financial feasibility As previously noted, the parties have stipulated that FRTC has the available funds for capital and operating expenses, and that the project is financially feasible in the immediate term. At issue is the long-term financial feasibility of the project. FRTC presented two pro forma calculations to demonstrate the financial feasibility of the project. The first pro forma was based on the application initially reviewed by the Department. The second was based on the proposal presented at hearing that included the changes in staffing pattern and construction previously discussed. Both pro formas were, however, based on the assumption than the 60-bed facility would achieve 50 percent occupancy in the first year of operation and 60 percent occupancy in the second year of operation, that the average length of stay would be 365 days, and that the daily patient charge in the first year of operation would be $300 and in the second year of operation would be $321. These are reasonable assumptions, and the proposed charges are reasonable. The projected charges are comparable to charges at other IRTP's in Florida, and are substantially less than those of acute psychiatric hospitals. For example, current daily charges at Charter Hospital of Miami are $481, and FPC anticipates that its average daily charge will be $500. FRTC projects its utilization by class of pay for its first year of operation to be as follows: Insurance (commercial insurance and CHAMPUS) 65.5 percent, private pay 25 percent, indigent 1.5 percent, and bad debt 8 percent. The projection by class of pay for the second year of operation changes slightly based on the assumption that, through experience, the bad debt allowance should decrease. Consequently, for its second year of operation FRTC projects its utilization by class of pay to be as follows: Insurance (commercial insurance and CHAMPUS) 66.5 percent, private pay 25 percent, indigent 1.5 percent, and bad debt 7 percent. These projections of utilization are reasonable. FRTC's pro forma for the application initially reviewed by the Department demonstrates an estimated net income for the first year of operation of $97,000, and for the second year of operation $229,000. The updated pro forma to accommodate the changes in staffing level and construction, demonstrates a $102,000 loss in the first year of operation and a net income in the second year of operation of $244,000. The assumptions upon which FRTC predicated its pro formas were reasonable. Accordingly, the proof demonstrates that the proposed project will be financially feasible in the long-term. Costs and methods of construction The estimated project cost of the FRTC facility, as initially reviewed by the Department, was $4,389,533. The estimated cost of the project, as modified at hearing, was $4,728,000. This increase was nominally attributable to the change in architectural design of the facility which increased the cost of professional services by approximately $7,500 and construction costs by $139,322. Of more significance to the increased cost of the project was the increase in land acquisition costs which raised, because of appreciation factors, from $750,000 to $1,000,000. The parties stipulated to the reasonableness of the majority of the development costs and most of the other items were not actively contested. Petitioners did, however, dispute the reasonableness of FRTC's cost estimate for land acquisition and construction supervision. The proof supports, however the reasonableness of FRTC's estimates. FRTC has committed to construct its facility south of State Road 84 or east of Interstate 95 in Broward County, but has not, as yet, secured a site. It has, however, allocated $1,000,000 for land acquisition, $200,281 for site preparation exclusive of landscaping, and $126,000 for construction contingencies. The parties have stipulated to the reasonableness of the contingency fund, which is designed as a safety factor to cover unknown conditions such as unusually high utility fees and unusual site conditions. Totalling the aforementioned sums, which may be reasonably attributable to land acquisition costs, yields a figure of $1,326,281. Since a minimum of 6 acres is needed for project accomplishment, FRTC's estimate of project costs contemplates a potential cost of $221,047 per acre. In light of the parties' stipulation, and the proof regarding land costs in the area, FRTC's estimate for land acquisition costs is a reasonable planning figure for this project. FRTC budgeted in its estimate of project costs $6,000 for the line item denoted as "construction supervision (Scheduling)." Petitioners contend that construction supervision will far exceed this figure, and accordingly doubt the reliability of FRTC's estimate of project costs. Petitioners' contention is not persuasive. The line item for "Construction supervision (Scheduling)" was simply a fee paid to a consultant to schedule Charter's projects. Actual on site supervision will be provided by the construction contractor selected, Charter's architect and Charter's in-house construction supervision component. These costs are all subsumed in FRTC's estimate of project cost. FRTC's costs and methods of proposed construction, including the costs and methods of energy efficiency and conservation, are reasonable for the facility initially reviewed by the Department and the facility as modified at hearing. The petitioners FPC, a Florida partnership, received a certificate of need on May 9, 1986, to construct a 100-bed short term psychiatric and substance abuse hospital in Broward County. At the time of hearing, the FPC facility was under construction, with an anticipated opening in May 1988. Under the terms of its certificate of need, the FPC facility will consist of 80 short-term psychiatric beds (40 geriatric, 25 adult, and 15 adolescent) and 20 short-term substance abuse beds. Whether any of the substance abuse beds will be dedicated to adolescent care is, at best, speculative. The principals of FPC have opined at various times, depending on the interest they sought to advance, that 0, 5, or 20 of such beds would be dedicated to adolescent care. Their testimony is not, therefore, credible, and I conclude that FPC has failed to demonstrate than any of its substance abuse beds will be dedicated to adolescent care and that none of its treatment programs will include children. As a short term psychiatric hospital, FPC is licensed to provide acute inpatient psychiatric care for a period not exceeding 3 months and an average length of stay of 30 days or less for adults and a stay of 60 days or less for children and adolescents under 18 years. Rule 10-5.011(1)(o), Florida Administrative Code. While its treatment modalities and programs may be similar to those which may be employed by FRTC, FPC does not provide long-term residential treatment for children and adolescents and its services are not similar to those being proposed by FRTC. Notably, FPC conceded that if the patients admitted by FRTC require treatment lasting from 6 months to 2 years, there will be no overlap between the types of patients treated at the two facilities. As previously noted, the proof demonstrates that the length of stay at the FRTC facility was reasonably estimated to be 6 months to 2 years, with an average length of stay of 1 year. Under the circumstances, FPC and FRTC will not compete for the same patients. As importantly, there is no competent proof that FRTC could capture any patient that would have been referred to FPC or that any such capture, if it occurred, would have a substantial impact on FPC. Accordingly, the proof fails to demonstrate that FPC will suffer any injury in fact as a consequence of the proposed facility. SBHD is an independent taxing authority created by the legislature. Pertinent to this case, SBHD owns and operates the following facilities in Broward County: Memorial Hospital of Hollywood, 1011 North 35th Avenue, Hollywood, Florida, and Memorial Hospital Share Program, 801 S.W. Douglas Road, Pembroke Pines, Florida. Memorial Hospital of Hollywood is a general acute care hospital, with 74 beds dedicated to short-term psychiatric care. These beds are divided between three units: two closed units for acute care (42 beds) and one open unit (32 beds). There is no unit specifically dedicated to the treatment of adolescents, and Memorial does not admit any psychiatric patient under the age of 14. When admitted, adolescents are mixed with the adult population. From May 1987 through January 1988, Memorial admitted only 5-10 adolescents (ages 14-18). Their average length of stay was 12-14 days. Memorial Hospital Share Program is a 14-bed inpatient residential treatment program for individuals suffering from chemical dependency. No patient under the age of 18 is admitted to this program, which has an average length of stay of 27 days. SBHD contends that its substantial interests are affected by this proceeding because approval of FRTC's facility would result in the loss of paying psychiatric and residential treatment patients that would erode SBHD's ability to provide services to the indigent, and would, due to a shortage of nursing, recreational therapy and occupational therapists who are skilled and trained in the care of psychiatric patients, affect the quality of care at its facility and increase costs for recruiting and training staff. Due to the paucity of competent proof, SBHD's concerns are not credited, and it has failed to demonstrate that its interests are substantially affected by these proceedings. Succinctly, SBHD offered no proof concerning any staffing problems it was encountering and no proof of any disparity that might exist between wages and benefits it offers its employees and those to be offered at the FRTC facility. In sum, it undertook no study from which it could be reasonably concluded that the FRTC facility would adversely impact its staffing or otherwise increase the cost of recruiting and training staff. Likewise, SBHD undertook no study and offered no credible proof that the FRTC facility would adversely impact it financially. In fact, the FRTC facility will not treat the same patient base that is cared for by SBHD.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that FRTC's application for certificate of need, as updated, be granted, subject to the special condition set forth in conclusions of law number 12. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 7th day of September, 1988. WILLIAM J. KENDRICK 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 7th day of September, 1988.
The Issue Whether CON 8241, Palm Beach Regional's application to convert its 200 bed acute care hospital to a 60 bed long-term care hospital should be granted or denied?
Findings Of Fact The Parties The applicant in this case is The Hospital Corporation of Lake Worth d/b/a Palm Beach Regional Hospital. A subsidiary of Columbia Hospital Corporation, ("Columbia,") Palm Beach Regional is a licensed general acute care hospital with 200 beds located in Palm Beach County, AHCA District 9. Palm Beach Regional's license is issued pursuant to Chapter 395, Florida Statutes, the chapter of the Florida Statutes entitled, "Hospital Licensing and Regulation." The agency is "designated as the single state agency to issue ... or deny certificates of need ... in accordance with the district plans, the statewide health plan, and present and future federal and state statutes." Section 408.034(1), F. S. Integrated is a licensed 120-bed skilled nursing facility, also known as a long-term care facility, located in Palm Beach County, AHCA District 9. Its license is issued pursuant to Chapter 400, Florida Statutes, the statute entitled "Nursing Homes and Related Health Care Facilities." Columbia Hospital Corporation The parent company of petitioner, Columbia has a stock market capitalization of between $15 and $20 billion and enjoys a profitability of over $1 billion per year. It owns approximately 340 hospitals, well over 100 ambulatory surgical centers, and an extensive number of home health agencies. As to be expected of a Fortune 500 company, Columbia generates substantial annual revenues. In 1994, for example, the annual revenues generated by Columbia exceeded $17 billion. Columbia also lays claim to being the largest hospital system in the state. It has five divisions with approximately 60 hospitals in its "Florida Group," the organizational title for its Florida operations. The net revenues of the Columbia Florida Group is approximately $4.5 billion. One of five divisions of Columbia's Florida Group, the South Florida Division is a $1.2 billion operation. The division encompasses Dade, Broward and Palm Beach Counties and consists of 15 hospitals, six surgery centers, and one dozen home health agencies. The South Florida Division, of course, includes Palm Beach Regional. Background to the Application Palm Beach Regional was purchased by Columbia shortly after Columbia had purchased JFK Hospital, a 300-bed tertiary hospital approximately three miles from Palm Beach Regional. In August of 1995, as a business decision, Columbia consolidated the operations of the two facilities. The consolidation resulted in a patient census drop at Palm Beach Regional. Shortly thereafter, with the permission of the agency, Palm Beach Regional ceased operations at its emergency room. The result of the consolidation and limitation of the services offered was that it cost only about $100,000 a month to keep Palm Beach Regional running with its small census. Even with the small census, and the relatively low monthly operational expense, the operational expense was more than $1 million per year. In June of 1996, Palm Beach Regional and the agency entered a stipulation which authorized the hospital to suspend the acute care operations in contemplation of this proceeding. Palm Beach Regional's hospital-based skilled nursing unit has since been transferred. Palm Beach Regional is now closed and empty. The reason Palm Beach Regional had been kept operating at all after the consolidation with JFK was to preserve the opportunity to convert the license as proposed in the application. The Application Certified for accuracy on September 18, 1995, under the signature of its authorized representative, Robert L. Newman, CEO of Columbia/HCA, South Florida Division, the application was submitted to the agency bearing a date of September 20, 1995. The application describes what it seeks in the section titled "Project Summary" as follows: Hospital Corporation of Lake Worth (Palm Beach Regional) proposes in this Certificate of Need Application to convert 60 acute care hospital beds to 60 long-term acute care hospital beds and to delicense 128 existing acute care beds. (At a later date the existing 12 skilled nursing beds will be located to another Columbia/HCA hospital in District IX.) Palm Beach Regional Exhibit No. 1, AHCA Form 1455A, Oct 92, AHCA 4600-0005 Aug 93. The transfer of the 12 skilled nursing beds has already occurred and therefore is not at issue in this proceeding. Nor is the delicensure of the 128 beds really at the heart of the agency's denial and Integrated's opposition. In contrast, what is contested is the conversion of the 60 acute care hospital beds to 60 long- term acute care hospital beds. Such a conversion would make Palm Beach Regional a long-term acute care hospital. Long-term Acute Care Hospitals Referring to a hospital as both "long-term" and "acute," is confusing. The two terms have divergent meanings both in terms of average length of stay and the traits of the illness suffered by the acute and the long-term patient. In the context of hospitals, "long-term" refers to a patient with an average length of stay of greater than 25 days. By comparison, the acute patient's stay is typically much less than 25 days, with the average length of stay being between 5 and 6 days. As is the patient in need of acute care, the typical long-term hospital patient is very ill. The difference in the type of illness suffered by the acute care patient as opposed to the long-term patient, however, lies in other characteristics. Unlike the acute care patient, the long-term patient is not in the urgent, emergent or desperately critical state of patients in the acute care setting. The two terms, "long-term" and "acute" have been used together with reference to the type of hospital to which Palm Beach Regional proposes to convert because of the history of the long- term care hospital’s development. Originally in Florida, long-term hospitals were licensed as acute care hospitals and were referred to, therefore, as "long-term acute," hence the combination of terms with disparate meanings. In the context of a study conducted by the Hospital Cost Containment Board, however, the agency examined the issue of whether long-term hospitals should be subject to CON review as long-term hospitals apart from other acute hospitals. As a result, long-term hospitals came to be reviewed in their own separate category under certificate of need review, subject to the same licensure requirements as a specialty acute care hospital. Because they had been licensed earlier as acute care hospitals, the term "acute" was carried over into the new category. At present, there is a recommendation to refer to long-term acute care hospitals simply as "long-term hospitals" to clear up any confusion caused by the terminology. This recommendation will be followed for the most part in the remainder of this order when reference is made to acute and long-term facilities and acute and long-term care. Long-term Care Hospital-based long-term care is a distinction established in federal Medicare regulations that describes a hospital with patients having an average length of stay of greater than 25 days. The distinction allows an exclusion from the Medicare prospective payment system so that reimbursement is received by the long-term hospital on the basis of cost. The distinction is of great import financially because of the distinction between "cost-based" Medicaid and Medicare reimbursement systems and another payment system used by Medicaid and Medicare: the prospective payment system. Before the prospective payment system was instituted, hospitals generally were well utilized, in fact, “filled to the brim.” The high utilization was due to the "cost-based" reimbursement system which contained a financial incentive for the hospital to keep patients in the hospital. Under the cost-based system, the more a hospital spent, the more reimbursement it would receive from Medicare and Medicaid. The prospective payment system was instituted to save taxpayers the high cost of the cost-based reimbursement system. Under the prospective payment system, the hospital receives a flat fee for Medicare and Medicaid patients depending on the diagnostic category, or diagnostic-related group, ("DRG,") into which falls the illness treated. The flat fee is figured on the basis of average length of stay for that diagnostic category. Under this system, unlike the cost-reimbursed system, the hospital receives the same reimbursement for Medicare and Medicaid patients who stay for less than the average length of stay assigned to the patient's DRG as for those who stay longer. With regard to a patient who stays in the hospital longer than the average length of stay for the patient's DRG, the hospital, in many cases, not only profits less the longer the patient stays but begins to lose money at some point in the stay. If the average length of stay for an appendicitis patient is four days, for example, then the hospital profits more in the case of an appendicitis patient who stays only two days because it has incurred only two days of costs instead of the expected four days of costs. In the case of another appendicitis patient, who stays longer than the average length of stay, the hospital makes less money and reaches the point eventually in some cases where the hospital actually loses money for treating the patient if the patient stays long enough. Medicare provides additional payments for both "day-outliers" and "cost-outliers," but not enough to prevent financial pressure on hospitals to discharge acute patients as soon as possible. The prospective payment system has succeeded in forcing hospitals to operate more efficiently; the average utilization of hospitals has declined dramatically. Today, about half of the hospital beds in Florida on any given day go unused. The system does not have the same effect on long-term hospitals; they are exempt from the prospective payment system. Instead, long-term care hospitals are reimbursed under a cost-based system. A long-term hospital well located geographically is particularly attractive to a large hospital system, such as Columbia. Not only will it likely be a financial success in its own right but it will assist Columbia’s sister acute care hospitals in relieving them of patients too sick to be discharged to a subacute setting yet finished with the acute episode which required the acute care hospital’s service in the first place. Development of Long-term Care Hospitals in Florida The first long-term care hospital was instituted in Florida in the 1980's. Fairly soon thereafter there were three long-term care hospitals in Florida, but then there was a lull in the attempt to establish long-term care hospitals. With the advent of the prospective payment system, however, there eventually came the closing of a number of small hospitals in Florida because of their inability to continue to operate in sound financial condition. At the same time, four or five applications for the conversion of small hospitals to long- term care hospitals were filed with the agency. In the early part of the present decade the agency conducted a study of long-term hospital care. The study took place within a larger study by the Hospital Cost Containment Board. Ultimately, it was recommended that long-term care hospitals be regulated separately from acute care hospitals and that they be subject to separate certificate of need review. The recommendation was made for a number of reasons. First, long-term hospitals were viewed by the agency as very different from acute care hospitals because of the patients' average lengths of stay. Second, long-term care hospitals were found to be expensive for the type of care given in them which was of great concern to the state since cost control is an objective of the certificate of need program. Third, long-term hospitals were found to experience high mortality rates. As the result of the study and recommendation, the agency made the creation or conversion of hospitals into long-term hospitals subject to certificate of need review. Admission Criteria In the study, the agency also found that there are no clear admission criteria for long-term hospitals. To date, neither the Health Care Finance Administration (“HCFA”), nor the Joint Commission on Accreditation of Hospital Organizations ("JCAHO,") or any of its sub-organizations have developed any criteria to define a long-term care hospital. It is not clear, therefore, exactly what type of patients are suitable for care in a long-term hospital. Sub-acute Care The parties are in agreement that sub-acute care is a level of care that is below acute care. Palm Beach Regional claims, however, that the care provided by long-term care hospitals is not subacute but rather falls into a category of care between acute and sub-acute. An understanding of this claim requires some discussion. Unlike other classes of hospitals which are exempt from the prospective payment system, like cancer, children's or psychiatric hospitals, patients in long-term care hospitals do not have a specific type of illness nor are they limited to serving a specific age group. Generally, however, they are patients who have had an acute episode, whose program of care has been identified and who need a longer term of care to recover or to be rehabilitated because of an acute illness or surgical procedure. And, although they are not limited to a specific age group, the experience of long-term care hospitals is that a major part of their patient population is elderly, virtually all of whom are covered by Medicare. In these respects, long-term care hospital patients are not much different from patients in other "subacute" settings: comprehensive rehabilitation hospitals, acute care hospital skilled nursing units, skilled nursing facilities in free-standing nursing homes, and, even, in some cases, home health care, assisted living and outpatient services for the elderly. If there is a difference between the long-term hospital patient and patients in other subacute settings, it is that the long-term hospital patient has more at-risk types of physical problems, is more likely to be medically unstable or is, in fact, medically unstable. But this difference is not strictly observed because of the financial pressure on hospitals to discharge patients from the acute setting into a subacute setting. Medically unstable patients, therefore, are found in subacute settings such as skilled nursing facilities whether hospital-based or in free- standing nursing homes. In contrast to what has become commonplace practice, Dr. Kathleen Griffin, an expert in health care planning with a specialty in long-term acute care and subacute care, testified that it would not be appropriate for a medically unstable patient to be transferred to a skilled nursing bed. In her opinion it would be best for a medically unstable patient about to be discharged from acute care to be admitted instead to a long-term care hospital. Despite the reality that there are no admission criteria for long-term care hospitals, Dr. Griffin maintains that if a hospital discharge planner believes through information gathered from the medical and nursing staffs that the patient "is highly acute and at risk, and there is a long-term care acute hospital available, then that would be the placement of choice." (Tr. 523.) If a long-term care hospital is not available, however, the alternative is to keep the at-risk, medically unstable patient in the acute care hospital rather than discharge the patient into a nursing facility. Dr. Griffin's opinion is shared by the physician practicing in long-term hospitals. Representative of such a physician is Dr. Wendell Williams, presently the Medical Director of a long-term care hospital, Specialty Hospital of Jacksonville. Dr. Williams sees a distinction between long-term acute care and subacute care. Long-term hospital care is acute care without the need for "highly technical diagnostic capabilities," and "high surgical capabilities," but still care in the "medically complex case that requires frequent physician direction [and] high skill level of caregivers." (Petitioner's Ex. No. 16, pg. 13.) In Dr. Williams view, long-term hospital care occupies a level of care between acute and subacute care. The views of Dr. Griffin and Dr. Williams find support in analyses of nursing hours per patient. In a typical nursing home, the number of hours per patient is about 4.5 hours per day, while in a long-term care hospital, the number is around 6.5 hours per patient day. At Specialty Hospital of Jacksonville, the nursing hours per patient day for non-ventilator patients is 6.75 hours, and for ventilator patients is 10 hours. In contrast, Integrated, a nursing home, provided nursing hours per patient day in its "med-surg unit" at 4.34 hours in March of 1996, 4.60 hours in April and 4.52 hours in May although at times Integrated's nursing hours per patient day have reached as high as 6 hours. The opinions of Dr. Griffin and Dr. Williams have not yet been generally accepted. Following the agency's study in the earlier part of the 1990's, the federal government, under the auspices of HCFA, launched a major study that addresses what AHCA viewed as the "whole gamut of what is marketed as subacute care," (Tr. 272). The study included long-term care hospitals, as well as those settings which the parties all agree are clearly in the category of "subacute": hospital-based skilled nursing facilities, free-standing nursing homes, comprehensive rehab hospitals and home health care. The report was issued in November of 1995. It confirmed that there was a great deal of overlap among the settings studied including between the long-term care hospital and other settings unquestionably subacute. Moreover, it confirmed that many of the services are "primarily driven by reimbursement," (Tr. 275), and not by which provides the best or most cost-effective health care for the very ill, elderly patient no longer in need of acute care. In other words, the financial pressure on hospitals to discharge patients from the acute care setting was what accounted for the tremendous growth of subacute services and the move toward more long-term care hospitals rather than what is actually best for the patient or the health care system. The study concluded that there is insufficient data to determine the cost effectiveness of subacute care as defined in the study. As for overlap in the various settings, the extent of overlap was not precisely determined. But just as long-term care hospitals provide ventilator treatment, skilled nursing units specialize in ventilator patients. Nursing home subacute units specialize in wound care, infectious disease programs and IV antibiotic therapy programs, as well, just as would Palm Beach Regional if approved. The HCFA study also confirmed that the cost of care and mortality rates at long-term care hospitals are high, $2,000 per day and 40 percent, respectively. The average cost per discharge at a long-term care facility was between $150,000 and $250,000. Despite the long-term hospital's recognition by the federal government, the presence in Florida for more than eight years, and separate CON regulation for the last several years, it remain unsettled which patients should be treated and cared for in long-term hospitals. While for some, such as Dr. Griffin and Dr. Williams, the question is one which discharge planners, after consultation with nursing and medical staff, ably make, it is not generally accepted that it is clear which patients should be cared for in long-term care hospitals. It is not generally accepted as evidenced by the wont of admission criteria for long-term hospitals. Furthermore, it is not clear whether long-term hospitals represent the best means or the most cost-effective way of treating patients ready for discharge from an acute care setting. Specialty Hospital of Jacksonville: the Model The Palm Beach Regional proposal to convert to a long- term care hospital is modeled after another Columbia long-term care hospital, Specialty Hospital of Jacksonville, the hospital of which Dr. Williams is the medical director. Opened in 1992, Specialty offers four major program areas: ventilator and other respiratory complications, infectious diseases, wound management and complex medical and rehabilitative services. The typical ventilator patient is quite ill; often with other attendant system breakdown such as cardiac or renal failure. The goal is to free the patient from ventilator dependence. If the patient is judged to be a lifetime custodial ventilator patient, the patient would not be appropriate for Specialty. A variety of infections are treated in the infectious disease program. Often the primary antibiotic treatment has failed and there may be other conditions attendant. The typical wound care patient admitted to Specialty has severe wounds that may derive from circulatory problems. Often admission is from a hospital or nursing home. The patient may be diabetic, paraplegic or quadriplegic. The patient may have experienced a surgical intervention which has not healed. Or the patient may have a distressed digestive system which inhibits the body's ability to absorb the proper nutrients to support the healing process. The typical complex medical and rehab patient includes the spinal cord injured patient and the multiple system failure patient. The patients at Specialty are under the management of an attending physician but typically four or five different specialties are involved in each patient's care. Specialty Hospital has experienced approximately five percent Medicaid and one percent charity care. A representative patient at Specialty Hospital has an average length of stay of 23 days. The representative patient in the infectious diseases program would experience an average length of 18, 20 days in the pulmonary program, 29 days in the ventilator program, 36 days in the wound program, 18 days in the physical medicine and rehabilitation program and 26 days in the medicine program. These lengths of stay resemble acute or Medicare certified skilled nursing bed lengths of stay more than the historical 90 day lengths of stay experienced in Florida at long- term care hospitals. A representative patient at Specialty Hospital will experience an average daily charge of $1,122 and an average charge per case of $25,810, the highest averages incurred by the ventilator program at $1,848 per day and $52,781 per case. From a medical standpoint, all of the patients treated at Specialty Hospital could be treated in an acute care hospital. There is one difference between Specialty's patient profile and the one expected at Palm Beach Regional. The approach proposed by the applicant will include patients with greater levels of instability. Whereas Specialty has taken the approach that patients at the intensive care level should be in a general acute care hospital, Palm Beach Regional expects to treat patients in need of services from an intensive care unit. Palm Beach Regional, therefore, has planned for an intensive care unit at the facility should its CON application be approved. Integrated's Existing Programs Sixty of Integrated 120 beds are dedicated to meet the needs of patients requiring subacute care. Although they may differ slightly in intensity of application because of slightly lower acuity levels of the patients, the programs offered in this sixty-bed skilled nursing unit encompass the four programs proposed for Palm Beach Regional's long-term care hospital: ventilator and respiratory complications; infectious disease; wound management; and complex medical and rehabilitation service program. Integrated uses its own method to measure the acuity of its patients. Within this method, two of the levels require active treatment of co-morbidities, multiple diseases which complicate the primary diagnoses. By whatever means acuity is measured, it is reasonable to expect that the average level of acuity would be somewhat higher among patients treated at a Palm Beach Regional long-term care facility. (Although without criteria to measure acuity for admission or to know for sure what patients are actually being treated at long-term hospitals, this is not certain.) Nonetheless, considering both diagnosis and treatment, Integrated's patients at Integrated's two highest levels of acuity, even if not at quite as high an acuity level on average, would be similar to the patients Palm Beach Regional might serve if its application were granted. Patients at a Palm Beach Regional's long-term care facility who would exceed the highest level of acuity of those patients at Integrated are patients appropriate for treatment in an acute care hospital. Ventilator Care at Integrated Ventilator patients are treated in skilled nursing facilities both in hospitals and in free-standing nursing homes like Integrated. Some skilled nursing units even specialize in ventilator care. There is clearly overlap between ventilator services in skilled nursing facilities and long-term care hospitals. The precise extent of the overlap is not clear. While the overlap may not be 100%, it is certainly significant. Twenty of Integrated's 60 subacute beds are capable of assisting ventilator patients. Within this 20 bed unit, Integrated provides oxygen, air, and wall suctioning just like in a hospital setting. Additionally, Integrated can provide respiratory services outside of its specific unit by using portable suction machines and oxygen concentrators. The ventilator patients treated at Integrated are similar to the ventilator patient treated in intensive care units in hospitals. Some of Integrated ventilator patients are in need of acute care. All are hemodynamically stable but some are medically unstable. Nonetheless, there are patients who would be too unstable to allow them to be suitable for admission into Integrated's respiratory unit. Patients who would need to remain in acute care in the hospital would be patients who, for example, were bleeding or having trouble with a post-surgical trach placement. The medical director at Integrated is a pulmonologist. Integrated has a 24-hour respiratory staff. The ventilator program at Integrated meets the description in the application of the proposed ventilator program at Palm Beach Regional. Comparison of the respiratory services offered at Integrated to the services proposed to be offered in Palm Beach Regional's ventilator program reveals significant overlap between the two. Integrated primarily uses a Bear 3 Ventilator. Other equipment used by Integrated includes pulse oximeters and pneumatic blood pressure cuffs to provide hemodynamic monitoring. The respiratory unit is able to obtain an assessment of the patient's arterial blood gases within two hours through an arrangement with a courier service and nearby JFK Hospital. On average the blood work results are received within an hour of the blood being drawn from the patient. An interdisciplinary team of therapists, including respiratory therapists, physical therapists, occupational therapists and speech therapists, work together on the plan of care and recovery of the ventilator patient including weaning the patient from the ventilator. Of those ventilator patients determined to be weanable, 75% are actually weaned from the machines. Ninety-two percent of the tracheotomy patients achieve decannulation. The average length of stay in the respiratory unit for Integrated's ventilator patients is 37 days, an average length of stay that meets that which defines the long-term care hospital patient, that is, in excess of 25 days. Infectious Disease Treatment at Integrated Just as long-term care hospitals, nursing homes offer infectious disease programs employing IV anti-biotic therapies. Integrated provides its patients with multiple antibiotic therapies. Among the IV anti-biotic therapies used at Integrated are cepo, fortaz and vancomycin. Integrated treats patients with pulmonary edema, pleural affusion, pulmonary embolus and pulmonary infarcts and patients with bi-lobar and multi-lobar pneumonia. Patients are treated with intravenous cortico steroids, intravenous bronchodilators, intraveous diuretics and intramuscular antimedics. Wound Care at Integrated Nursing homes offer wound management programs. There is significant overlap between patients treated for wounds at nursing homes and at long-term care hospitals. Limitations in care of the wound patient are similar as well. Just as a patient in need of surgical intervention for wound care, for example, would be discharged to an acute care hospital from a nursing home so would that patient be discharged to an acute care hospital from Specialty Hospital of Jacksonville, the model hospital for Palm Beach Regional's long-term care facility. Integrated offers wound and skin management treatment of the type described by Palm Beach Regional's proposal. Many of Integrated's patients recieve wound care upon admission. For instance, respiratory patients who have tracheotomies receive care for their wounds throughout the day. Integrated treats all levels of decubitous ulcers, including the most severe, Stage III and IV ulcers, as required by law in order to qualify for Medicare Certification. Complex Medical and Rehabilitative Care Integrated offers radiology and other imaging services on campus: mobile chest x-rays, normal x-rays, and video flouroscopy as well as an in-house staff of rehabilitation professionals: physical and registered occupational therapists and registered speech therapists. The rehabilitation programs proposed by Palm Beach Regional and those programs of other long-term care hospitals overlap significantly with those programs already offered at Integrated. The difference between the complex medical and rehabilitative care offered at Integrated and that proposed for Palm Beach Regional lies in the expected acuity of the patients. One would reasonably expect the patients to be slightly higher in acuity at Palm Beach Regional if approved than as are presently at Integrated. Nonetheless, the patients at Integrated are similar to those Palm Beach Regional would care for, in that Integrated treats patients with co-morbidities, including combinations of congestive heart failure, post-open heart surgery, arteriosclerotic heart disease and renal failure. Integrated's Services in General On an average month, Integrated offered 7.28 hours per day of nursing and respiratory, physical and occupational therapy care per day to the patients within its subacute unit. Forty percent of Integrated's subacute nursing hours are provided by registered nurses, 20% by licensed practical nurses, and the remaining 40% by certified nurse aides. A sample of Integrated's admissions noted numerous patients admitted with cardiopulmonary vent and ventilator needs. Integrated also maintains a large number of orthopedic patients in need of complex rehabilitation. Integrated treats patients with congestive heart failures, patients recovering from recent open- heart surgery, patients requiring specialized wound care, patients with post-operative cranial head injuries, and patients requiring tube feedings, IVS, ventilator and tracheostomy care. Integrated offers the equipment that is listed in the application as equipment to be purchased by Palm Beach Regional if approved. Integrated accepts patients who are medically unstable. These include patients admitted to Integrated's cardiopulmonary unit, patients with recent tracheostomies, patients on ventilators, patients with hemodialysis and peritoneal dialysis who have co- morbidities. Palm Beach Regional's application lists diagnoses of patients to be treated through long-term care which it claims are not appropriate for skilled nursing facilities. The application alludes to various types of comprehensive therapies, care and resources available for these patients. Yet, despite the application's claim that care of these patients is not appropriate for the skilled nursing facility, present at Integrated for the benefit of patients with the same diagnoses are very nearly all, if not all, of these therapies, care and resources. These include: IV antibiotic therapy, IV drips, plasma pheresis, management of severe decubitus ulcers, tracheotomy care with hourly suction, treatment with chest tubes and PCA pumps, cardiac monitoring, dialysis and an on-site pharmacy. Moreover, Integrated's roster of consulting physicians credentialed at the facility included the range of specialists listed in Palm Beach Regional's application. Integrated's roster of physician ranges from family practitioners to practitioners specializing in internal medicine, dermatology, neurology, and infectious disease control, to orthopedic specialists, physiatrists and psychiatrists, nearly the "full gamut" of specialties in medicine. Adverse Impact There will be adverse impact on Integrated if Palm Beach Regional's proposal is approved. The impact occurs as the result of a combination of significant overlap of services offered by Integrated and proposed for Palm Beach Regional and the likely loss of admissions to Integrated's subacute unit generated by patients discharged from JFK Hospital. JFK Hospital and Palm Beach Regional are each approximately 2 miles from Integrated. Approximately 85% of Integrated's subacute admissions come from JFK. A good estimate of how many patients JFK refers to Integrated's subacute unit on an annual basis is 460. It is reasonable to assume that many of these patients would be referred to Palm Beach Regional by its sister Columbia Hospital, JFK, if the application were approved. If only two-thirds of these patients were lost to Palm Beach Regional, using a conservative figure for contribution margin of $100 per patient day, the loss to Integrated would be about $1 million in contribution margin per year. Furthermore, if the application is approved, Integrated will also have to either raise salaries to keep qualified staff for ancillary staff or risk losing them because Palm Beach Regional proposes to offer ancillary staff salaries higher than those paid by Integrated. Certificate of Need Criteria The criteria to be used in evaluating the application are found in statutes, and in rules of the agency which implement these statutes. Section 408.035(1)Health Plans Neither the District 9 Treasure Coast Health Plan nor the State Health Plan contain any mention of long-term acute care beds. Both plans were written before there were any CON requirements for this type of bed. (b) Availability, Quality of Care, Efficiency,Appropriateness, Accessibility, Extent of Utilization and Adequacy of Like and Existing Services There is no agency rule regarding need determination for long-term acute care beds. Neither is long-term hospital care defined by agency rule as a referral service, one dependent upon other hospitals to refer patients. The service area for a referral hospital is larger than just one district. Patients are referred from districts 9 and 11 to the long-term care hospitals in District 10. This is certainly not surprising for patients in district 9 since there is no long- term hospital in the district and referrals are the common way for long-term hospitals to gain patients. Patients are referred from Districts 3, 5, 6 and 8 to the long-term care facility in Tampa. With the exception of the long-term care hospital in District 11 where the largest proportion of patients came from within the District 11, all of the long-term hospitals in the state, "had referrals from all over the place." (Tr. 288.) Palm Beach Regional itself proposes to serve patients from Districts 7 and 10. The reality is that long-term care hospitals are primarily referral hospitals. Nonetheless, since there is no agency rule defining long-term care hospitals as referral hospitals and since there is no agency rule defining the service area of a long-term care hospital, District 9 may be the appropriate service area for the health planning purposes of Palm Beach Regional's application. In order for the district to be the appropriate service area, however, the application must demonstrate that there is a need for a certain number of beds based on the data collected from District 9. Since there is no need methodology applicable to long- term care acute beds, Palm Beach Regional developed three different methodologies for the agency's consideration. The agency found the "components," (Tr. 910,) of the methodologies to be reasonable. Indeed, the agency never offered any other need methodology which it claimed was superior to those offered by the agency. Instead the agency criticizes the methodologies for failing to take into consideration the availability of like and existing services and alternative to the proposed services. Patients who will be served in the proposed facility are currently being served in either the short-term acute hospitals or skilled nursing facilities in nursing homes such as Integrated, both of which are less costly alternatives to this proposal. Palm Beach Regional anticipates referrals from other Columbia Hospitals in the districts; however, six of the eight Columbia Hospitals have skilled nursing units which propose to treat the same patients and conditions the applicant proposes to treat. Furthermore, at the time of hearing, five Columbia hospitals in the districts had 56 approved skilled nursing beds not then operational. Included among the 56 were the 12 skilled nursing unit beds transferred from Palm Beach Regional. Palm Beach Regional's presents arguments in favor of improved quality of care to the patient in need of care following stabilization of an acute episode. There is, however, no data to support a conclusion that outcomes are better in long-term care hospitals. As for the applicant’s ability and record to provide quality of care, there is little doubt. The testimony of Dr. Ron Luke as to the high quality of care to be provided by Palm Beach Regional was not challenged. The patients proposed to be served by the applicant are currently being served in hospitals, subacute units at nursing homes or hospitals, or in rehabilitation facilities. Some may even be in home health with high technology equipment. Transferring these patients to a long-term care facility has significant financial implications costly to the health care system. The 60 beds proposed in the application will, in all likelihood, be adequately utilized. In the case of long-term care hospitals, demand follows the supply because of the strong financial incentive to fill the beds. There is nothing to indicate, however, that acute care beds are not an alternative to long-term hospital beds. There are plenty of empty beds in acute care hospitals to be filled by patients who would be treated by the applicant. That these patients proposed to be treated by Palm Beach Regional might receive treatment, if the application is denied, in hospital-based skilled beds or, perhaps inappropriately at times, in nursing home skilled nursing units is not due to lack of alternatives. Rather, it is the product of financial pressure on the acute care hospitals to discharge patients from the acute setting. Effective utilization of at least 85 percent of cost- based services such as long-term services is an important consideration because fixed costs can be spread over more patient days, thereby decreasing the costs per patient day. The average utilization rate in Florida for long-term care beds is 66 percent. The most recent occupancy rate for Specialty Hospital is only 41 percent. The record of long-term care hospitals would indicate that the utilization projections by Palm Beach Regional are unreasonable. But, there was nothing established that indicated the three methodologies used by Dr. Luke were unreasonable in any way. Given that Palm Beach Regional will be able to draw patients from its sister Columbia acute care hospitals, all of whom will be anxious to provide patients to this long-term hospital, and given that long-term hospital care is a kind of care for which demand follows the supply, it is likely that utilization at Palm Beach Regional, if approved, will be strong. Despite the record of other long-term care hospitals, Palm Beach Regional’s utilization projections are reasonable. Need for Research and Educational Facilities There are no plans to provide research or education at this facility. Availability of Manpower, Management Personnel and Funds for Capital and Operating Expenditures The State Agency Action Report shows that the agency believes that there will be adequate levels of staffing available. The adequacy of the staffing levels was confirmed by the administrator of Specialty Hospital of Jacksonville. Palm Beach Regional will be able to adequately staff the hospital at the salary levels proposed in the application. Long-term acute care hospitals treat the very old. Since almost all of these people have Medicare coverage, economic access is not a problem for the individuals the applicant proposes to serve. The applicant has a 1% indigent commitment and a 5% projected Medicaid utilization. Geographic access is also served well by this facility. The facility is located where the population base of the elderly population is in District 9. Financial Feasibility The immediate financial feasibility of Palm Beach Regional is evident from its ability to open and operate for the first two years with a positive cash flow with a financing letter in the amount of $407,000 from Columbia. Palm Beach Regional, in its pro formas and the analysis underlying its pro formas concluded that it would be under the prospective payment system for six months before it could transer to a facility exempt from the prospective payment system. This conclusion is reasonable. Palm Beach Regional has two months to get the necessary certification changed prior to the end of its fiscal year. Palm Beach Regional will be able to institute the necessary six month evaluation, within CON constraints, when it chooses. Furthermore, Palm Beach Regional could change the end of its fiscal year so that the six-month time period could be accommodated. Finally, short-term financial feasibility was demonstrated by the pro forma which properly shows reimbursement levels for patients who were treated in the first six months, and who were discharged after the first six months. Under Medicare regulations, the hospital would be reimbursed on a cost basis for these patients. Palm Beach Regional projected an occupancy level of 85% in the first year of operation and 87% in the second year of operation. Neither Specialty Hospital of Jacksonville, the model for Palm Beach Regional, nor the other long-term care hospitals in Florida have occupancy levels that high. Comparison, however, is not valid. The long-term care hospitals that converted from acute care facilities converted their entire complement of beds which resulted in overbedding. In contrast, Palm Beach Regional seeks to convert only 60 of its 200 beds. The situation of Specialty is very different. It is a converted 105 bed facility which was in bankruptcy when it first started, limiting its ability to attract patients. Within its district, Specialty competes with Vencor of North Florida, a 60 bed facility. Not only does Palm Beach Regional not have any in-district competition, but it will benefit greatly from being a member of the Columbia system. Palm Beach Regional's application demonstrates financial feasibility, both immediate and long-term. Special Needs and Circumstances of HMOs Whether the facility provides an additional level in the continuum of care available to HMO patients is uncertain. It is not generally accepted that the level of care Palm Beach Regional argues it will provide, that is, a level between acute care and subacute care, even exists let alone whether such a level of care is necessary, cost-effective or the best means of treating patients. Needs and Circumstances of Entities Providing Substantial Portion of Services to Individuals Residing Outside the District There are no facilities in the district which provide a substantial portion of its service to individuals residing outside the district. Probable Impact on Costs of Providing Health Services Total property costs for Palm Beach Regional amount to $3.572 million per year, or approximately $250,000 per month. This includes depreciation, interest, insurance and all other property costs. Because Palm Beach Regional would enjoy cost- reimbursement from Medicare instead of being paid on the basis of the prospective payment system, Medicare would pay as much as $190 per patient day for simple property costs and not for patient care, if Palm Beach Regional's utilization projections prove true. Were Palm Beach Regional's utilization projections to turn out to be incorrect and Palm Beach Regional's occupancies were more in the range of other long-term care facilities, (50% the first year and 60% the second), the cost would be "into the $3-400 a day cost range for the cost of [the] ... property allocated per patient day, which would be picked up in their entirety or close to their entirety [by Medicare.]" (Tr. 782.) Either way, the high property costs of Palm Beach Regional would result, should the application be approved, in shifting a huge financial burden to Medicare. The result would be to "wind up costing the Federal government, the Medicare program, multiples of what it now cost[s] ... to treat those same patients in acute care hospitals." (Tr. 792). The Applicant's Past and Proposed Provision of Services to Medicaid and the Medically Indigent Palm Beach Regional projected a 5% Medicaid utilization but its commitment is to indigent care only and that being a mere 1%. The commitment to indigent care (as opposed to the projection for Medicaid care) is meager. Furthermore, Palm Beach Regional has little established pattern accepting patients in these payor classes. Given the savings to Columbia acute care hospitals which would feed patients to Palm Beach Regional, and ultimately, the profit to be enjoyed by the applicant, a commitment of 1% is lacking. That recognized, it must be said that the modesty of the commitment is consistent with the advantage Medicare's cost- reimbursement system provides long-term care hospitals. It is not to be expected that there will be many Medicaid or indigent patients utilizing long-term care hospitals. "The vast majority of the population utilizing the facility will be the elderly, virtually all of whom are covered by Medicare." (Palm Beach Regional's Proposed Recommended Order, p. 23, Tr. 339.) Still, a greater commitment, more along the lines of the commitment provided by St. Petersburg Health Care Management, Inc., with which Palm Beach Regional has drawn comparison, (See Findings of Fact, 123- 128, below,) would lend this criterion to favor the application rather than disfavor it. The Applicant's Past and Proposed Provision of Services Which Promotes a Continuum of Care There is no long-term hospital available in District 9. But whether that means Palm Beach Regional is adding a level to the continuum of care available for patients in the district is uncertain. There is no data to support the conclusion that long- term care hospitals provide a level of care between that of acute and subacute. Despite the earnestness with which Dr. Griffin and Dr. Williams hold their opinions to the contrary, their opinions are simply not yet accepted widely enough at this point to support such a conclusion. That Less Costly, More Efficient, or More Appropriate Alternatives to Such Inpatient Services are not Available Long-term care hospitals have existed for years by Act of Congress. "[W]hile there has been an active discussion of alternatives, so far they have not come up with one which has been moved into rule or legislation." (Tr. 421). Certainly keeping long-term care hospital patients covered by Medicare in acute care hospitals would be a less costly alternative. Whether caring for these patients in one facility or another is more cost-efficient, however, is unknown. At bottom, there is no determinative data on the issue of cost-efficiency. As for more appropriate alternatives, there is a group of long-term care hospital patients for whom it is less appropriate to be in a free-standing skilled nursing unit. But, the size of this group is uncertain. Certainly, from the point of view of care to the patient, it is at least equally appropriate for all long- term care patients to remain in acute care hospitals rather than be discharged to long-term care. Alternatives to New Construction As the result of renovations, the facility requires little capital to convert it to a 60 bed long-term care hospital. The capital outlay of $500,000 is an indication of how little actual construction is necessary to complete the project. Problems in Obtaining the Proposed Inpatient Care in the Absence of the Proposed New Service With the exception of inappropriately premature discharges of patients from the acute care hospital's acute care setting, there are beds available for appropriate care in the absence of approval of the application. There is an abundance of beds in acute care hospitals available to patients who might otherwise be discharged to the long-term care hospital. As for the patient for whom discharge from the acute care setting is appropriate who might be admitted to a long-term care hospital, there are available for inpatient care skilled nursing beds in one type of facility or another. Administrative Due Process Palm Beach Regional contends that it has been treated differently by the agency, without reasonable explanation, from St. Petersburg Health Care Management, Inc., a successful applicant for the conversion of a general acute care hospital to a long-term care hospital in another district. Initially approved by the agency, the "St. Petersburg" application, CON 8213, was not subjected to the scrutiny of a formal administrative hearing at the Division of Administrative Hearings. Nonetheless, in support of its claim of unfair treatment, portions of the St. Petersburg application and omissions response for Certificate of Need number 8213 were introduced into evidence by petitioner as well as the State Agency Action Report. There are similarities between the two applications. For example, both proposed conversion of underutilized facilities to long-term acute care beds, as well as reduction of the hospitals' complements of 200 acute care beds to 60 long-term care beds. But there are differences as well. The St. Petersburg commitment to indigent and Medicaid care is 500% of the commitment by Palm Beach Regional. St. Petersburg's commitment is a combined 5%: 2% to indigent and 3% to Medicaid. In contrast, Palm Beach Regional's commitment is 1%, to indigent care only. Palm Beach Regional stated in its application that "[p]atients classified as Medicaid payers are projected to equal 5.0% of total patient days in 1999, 2000, and 2001." Petitioner's Ex. No. 1, p. 79. As reasonable as this projection may be, it is just that: a projection, nothing more and a projection is a far cry from a commitment. There is another difference between the two applications. While the facilities from which Palm Beach Regional's application received letters of support were limited to Columbia's affiliated facilities, St. Petersburg received letters of support from three disproportionate share providers as well as numerous unaffiliated hospitals and nursing homes in the Pinellas and Pasco County areas. The difference is critical to an understanding of the likelihood that the facility will, in fact, meet its commitment to the historically underserved. As Ms. Elizabeth Dudek, Chief of the Certificate of Need and Budget Review Office at the Agency for Health Care Administration testified, "You have, in the case of having the support of all the disproportionate share providers ... more of an assurance that the historically underserved, the Medicaid and the indigent patients, will be served and get access to the service." (Tr. 902). Such an assurance is omitted unfortunately from Palm Regional’s application.
Recommendation ACCORDINGLY, it is recommended that the application of Palm Beach Regional to establish a long-term acute care hospital by delicensing 128 beds and converting 60 acute care beds to 60 long- term acute care beds be denied.DONE AND ORDERED this 24th day of March, 1997, in Tallahassee, Florida. DAVID MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 COPIES FURNISHED: Eric Tilton, Esquire Filed with the Clerk of the Division of Administrative Hearings this 24th day of March, 1997. Gustafson, Tilton & Henning, P.A. 204 South Monroe Street, Suite 200 Tallahassee, Florida 32301 Lesley Mendelson, Senior Attorney Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox, Building III Tallahassee, Florida 32308-5403 Thomas F. Panza, Esquire Seann M. Frazier, Esquire Panza, Maurer, Maynard & Neel, P.A. 3600 North Federal Highway Fort Lauderdale, Florida 33308 Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox, Building III Tallahassee, Florida 32308-5403 Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Fort Knox, Building III Tallahassee, Florida 32308-5403
The Issue The issues in these cases are whether Certificate of Need (CON) Application No. 10432 filed by East Florida-DMC, Inc. (DMC), to build an 80-bed acute care hospital in Miami-Dade County, Florida, AHCA District 11, or CON Application No. 10433 filed by The Public Health Trust of Miami-Dade County, Florida d/b/a Jackson Hospital West (JW), to build a 100-bed acute care hospital in Miami-Dade County, Florida, AHCA District 11, on balance, satisfy the applicable criteria; and, if so, whether either or both should be approved.
Findings Of Fact Based upon the parties’ stipulations, the demeanor and credibility of the witnesses, other evidence presented at the final hearing, and on the entire record of this proceeding, the following Findings of Fact are made: The Parties The Public Health Trust of Miami-Dade County d/b/a Jackson Hospital West and Jackson Health System (JHS) JHS is a taxpayer-funded health system located in and owned by Miami-Dade County. It is governed by The Public Health Trust of Miami Dade-County, Florida (PHT), a seven-member board. JHS owns and operates three acute care hospitals in Miami-Dade County--Jackson Memorial Hospital (JMH); Jackson North Medical Center (JN); and Jackson South Medical Center (JS)--as well as three specialty hospitals: Holtz Children’s Hospital (Holtz); Jackson Rehabilitation Hospital; and Jackson Behavioral Health Hospital. JHS also owns and operates numerous other non- hospital healthcare facilities within Miami-Dade County. JHS’s applicant in this proceeding is JW which, if approved, will be another acute care hospital in JHS. JHS is an academic teaching institution, and the University of Miami (UM) is JHS’s affiliated medical school. Over 1,000 UM residents staff JMH pursuant to an operating agreement with JHS. JN and JS are not academic medical centers. JHS annually receives sales tax and ad valorem tax revenues from Miami-Dade County in order to help fund its operations. JS and JN are community hospitals operated as part of JHS. JS was acquired in 2001. JS is licensed for 226 beds and is also home to a verified Level II trauma center. The JN facility was acquired by JHS in 2006. The facility is licensed for 382 beds. East Florida (DMC) DMC is an affiliate of HCA Healthcare, Inc. (HCA), the largest provider of acute care hospital services in the world. DMC will operate within HCA’s East Florida Division (EFD), which is comprised of 15 hospitals, 12 surgery centers, two diagnostic imaging centers, four freestanding emergency departments, nine behavioral health facilities, and one regional laboratory, along with other related services. There are three HCA-affiliated hospitals in Miami-Dade County: KRMC; Aventura Hospital and Medical Center (Aventura); and Mercy Hospital, a campus of Plantation General Hospital (Mercy). Kendall Regional (KRMC) KRMC, which is located at the intersection of the Florida Turnpike and Southwest 40th Street in Miami-Dade County, is a 417-bed tertiary provider comprised of 380 acute care beds, 23 inpatient adult psychiatric beds, eight Level II neonatal intensive care unit (NICU) beds, and five Level III NICU beds. It is a Baker Act receiving facility. KRMC is a verified Level I trauma center. It also has a burn program. KRMC is also an academic teaching facility, receiving freestanding institutional accreditation from the Accrediting Council for Graduate Medical Education (ACGME) in 2013. KRMC currently has six residency programs including, among others, surgery, internal medicine, podiatry, anesthesia, and surgical critical care. Its teaching programs are affiliated with the University of South Florida, Nova Southeastern University, and Florida International University. KRMC also participates in scholarly and clinical research. In 2017, KRMC had over 82,000 Emergency Department (ED) visits. It treated over 115,000 total inpatients and outpatients that year. There are 850 physicians on KRMC’s medical staff. It offers a full range of medical surgery services, interventional procedures, obstetrics (OB), pediatric, and neonatal care, among many other service lines. KRMC primarily serves southern and western portions of Miami-Dade County but also receives referrals from the Florida Keys up through Broward County, Palm Beach County, and the Treasure Coast. Its main competitors include, but are not limited to: Baptist Hospital; Baptist West; South Miami Hospital; PGH; Hialeah; CGH; JS, and Palm Springs General Hospital. The Tenet Hospitals PGH, Hialeah, and CGH are wholly-owned subsidiaries of Tenet South Florida. These are all for-profit hospitals. PGH is a 368-bed tertiary facility that opened in the early 1970s. It has 297 licensed acute care beds, 48 adult psychiatric beds, 52 ICU beds, and 15 Level II NICU beds. It is located at the Palmetto Expressway and Northwest 122nd Street in Hialeah, Florida. The hospital employs about 1,700 people and has over 600 physicians on its medical staff. PGH is a tertiary-level facility offering a variety of specialty services, including adult open heart surgery, a comprehensive stroke center, and robotic surgery. It has inpatient mental health beds and serves the community as a Baker Act receiving facility. It also offers OB and Level II NICU services with approximately 1,500 births a year. It has approximately 70,000 ED visits and between 17,000 and 18,000 inpatient admissions per year. In addition to its licensed inpatient beds, PGH operates 31 observation beds. PGH is ACGME accredited and serves a significant teaching function in the community. It has approximately 89 residents and fellows. The hospital provides fellowships in cardiology, critical care and interventional cardiology, and also has rotations in neurology and gastroenterology. Residents from Larkin General Hospital also rotate through PGH. PGH generally serves the communities of Opa Locka, Hialeah, Miami Lakes, Hialeah Gardens, Doral, and Miami Springs. In reality, all of the hospitals in the county are competitors, but more direct competition comes from Palm Springs Hospital, Memorial in Miramar, Mount Sinai, Kendall, and even its sister hospital, Hialeah. Hialeah first opened in 1951 and is a 378-bed acute care facility. It has 356 acute care beds, 12 adult psychiatric beds, and 10 Level II NICU beds. The ED has 25 beds and about 40,000 visits per year. It has approximately 14,000 inpatient admissions and 1,400 babies delivered annually. It offers services including cardiac, stroke, robotic surgery, colorectal surgery, and OB services. The hospital has a Level II NICU with 12 beds. CGH is located in the City of Coral Gables and is near the border between Coral Gables and the City of Miami on Douglas Road. It first opened in 1926. Portions of the original structure are still in use. CGH has 245 licensed beds, over 725 employees, 367 physicians, and over 100 additional allied providers on its medical staff. The hospital has a full-service ED. Its service lines include general surgery, geriatrics, urology, treatment of cardiovascular and pulmonary disease, and others. The hospital has eight operating rooms and offers robotic surgery. The ED has 28 beds divided into the main area and a geriatric emergency room. It had about 25,000 ED visits last year, which is lower than prior years, due in part to the presence of over a dozen nearby urgent care centers. CGH has over 8,500 inpatient admissions per year and is not at capacity. While patient days have grown slightly, the average occupancy is still just a little over 40%, meaning, on average, it has over 140 empty inpatient beds on any given day. The hospital is licensed for 245 beds, but typically there are only 180 beds immediately available for use. Agency for Healthcare Administration (AHCA) AHCA is the state health-planning agency charged with administration of the CON program as set forth in sections 408.31-408.0455, Florida Statutes. The Proposals Doral Medical Center (DMC) DMC proposes to build an 80-bed community hospital situated within the residential district of Doral. The hospital will be located in southwestern Doral in zip code 33126 and will serve the growing population of Doral, along with residential areas to the north and south of Doral. The hospital will be located in the City of Doral’s residential district on Northwest 41st Street between Northwest 109th Avenue to the east, and Northwest 112th Avenue to the west. Doral has seen significant growth in the past 15 years and has been consistently included on the list of the fastest growing cities in Florida. The new facility will have a bed complement of 80 licensed acute care beds, including 72 medical/surgical and eight OB beds. The proposed acute care hospital will be fully accredited by the Joint Commission for the Accreditation of Healthcare Facilities and licensed by the State of Florida. No public funds will be utilized in construction of the hospital and it will contribute to the state, county, and municipal tax base as a proprietary corporation. DMC will offer a full range of non-tertiary services, including emergency services, imaging, surgery, intensive care, cardiac catheterization, and women's services, including an OB unit, and pediatric care. DMC will be a general medical facility that will include a general medical component and a surgery component. Although DMC will operate an OB unit, NICU services will not be offered at DMC. If DMC’s patients need more advanced services, including NICU, the EFD hopes they will receive them from KRMC. The open medical staff will be largely community-based, but University of Miami physicians would be welcome at DMC. Before the hospital is built, KRMC will construct and operate a freestanding emergency department (FSED) at the location that will eventually become the ED of DMC. Construction of the FSED is now underway, and Brandon Haushalter, chief executive officer (CEO) of KRMC, estimated that it will open in March or April of 2019. Jackson West JHS proposes to build a community hospital to be known as “Jackson West” near the eastern edge of Doral. The proposed 100-bed general acute care hospital would have medical surgical and obstetrical beds and offer basic acute care services. JHS is a public health system owned by Miami-Dade County. All of JHS’s assets, as well as its debts, belong to the county. JHS is a not-for-profit entity, and therefore does not pay taxes, though it receives hundreds of millions of dollars from property taxes and sales taxes in Miami-Dade County. JHS’s main campus is a large health campus located near the Midtown Miami area in between Allapattah (to the north) and Little Havana (to the south). In addition to JMH, the campus includes Holtz Children’s Hospital, a behavioral health hospital, an inpatient rehabilitation hospital, and several specialty clinics. Bascom-Palmer Eye Institute, a Veterans Administration hospital, and University of Miami Hospital are also located adjacent to Jackson West’s main campus. JMH is a 1,500-bed hospital with a wide array of programs and services, including tertiary and quaternary care, and a Level I trauma program, the Ryder Trauma Center. JMH receives patients from throughout Miami-Dade County, elsewhere in Florida, and internationally. JMH is a teaching hospital and has a large number of residents, as well as professors from the University of Miami, on staff. UM and JMH have had a relationship for many years, and in addition to research and teaching, UM provides physician staffing to JMH. JN is a 342-bed community hospital located in between Miami Gardens and North Miami Beach, just off of I-95 and the Turnpike. JS is a 252-bed community hospital located in the Palmetto Bay area just south of Kendall. It has stroke certification and interventional cardiology, and was recently approved for a trauma program, which began in May 2016. Both JN and JS were existing hospitals that were acquired by JHS. JHS has never built a hospital from the ground up. In 2014, JHS leadership directed its internal planning team to review the healthcare needs of county residents. JHS’s analysis identified a need for outpatient services in western Miami-Dade, the only remaining quadrant of the county in which JHS did not have a hospital or healthcare program at the time. As part of its due diligence, JHS then consulted healthcare firm Kurt Salmon & Associates (KSA) to independently evaluate the data. KSA’s investigation validated a need in the west county for adult and pediatric outpatient services, including need for an FSED. This prompted JHS to explore opportunities for expansion of outpatient services where needed: in the western corridor of Miami-Dade. This was also the genesis of JHS’s long-range plan to first build an FSED in the Doral area, to be followed ultimately by the addition of a general acute care hospital at the site. The JW site is a 27-acre parcel of land located just west of the Palmetto Expressway and north of 25th Street. The site is in an industrial area only a short distance from the western end of the runways at Miami International Airport. The site is located in zip code 33122, which is very sparsely populated. JW proposed a primary service area (PSA) consisting of zip codes 33126, 33144, 33166, 33172/33122, 33174, 33178, and 33182, and a secondary service area (SSA) of zip codes 33155, 33165, 33175, and 33184. JW intends to serve general, acute care non-tertiary patients and OB patients. Detailed below, trends in the JW service area do not demonstrate need for its proposed hospital. The location of the JW site will not contribute to the viability of the proposed hospital. According to 2010 census data, only 328 people live within a one-mile radius of the JW site. Since 2000, only 32 total people have moved into that same area around the JW site--an average of three per year. There are virtually no residences within a one-mile radius of the JW site. From 2000 to 2010, the population within a two- mile radius of the JW site decreased by a rate of 9.4%. The JW health planner projects JW’s home zip code of 33122 will have a total population of only eight (8) people in 2022. From 2012 to 2014, the use rate in the JW service area for non-tertiary patients decreased by 3.9%. That decline continued at a steeper pace of 4.2% from 2014 to 2017. This was largely due to the 65+ age cohort, the demographic of patients that utilize inpatient services the most. The 65+ age cohort is growing at a slower pace in the JW service area than in Miami- Dade or Florida as a whole. Non-tertiary discharges in the JW service area are declining at a greater pace than that of Miami- Dade County--negative 4.2% compared to negative 1.9%. The rate of projected population growth in the JW PSA is decreasing. The projected rate of growth for the JW service area is lower than that of Miami-Dade County and Florida as a whole. The OB patient base JW intends to rely on is projected to remain flat. The inpatient discharges for all ages in the JW service area have declined from 2014 to 2017. For ages 0-17, discharges in the JW service area declined 21.4% during that time period. The discharges for ages 18-44 declined by 4.8%, and the discharges for ages 45-64 declined by 8.9%. The discharges for the important 65+ age cohort declined by 0.1%. Specifically, the discharges for ages 65-74 declined by 6.5%, and the discharges for ages 75-84 declined by 3.3%. The discharges for ages 85+ are the only age cohort that has not declined from 2012 to 2017. Overall, the non-tertiary discharges per 1,000 population (i.e., use rate) for all ages in the JW service area declined from 2012 to 2014 by 6%, and from 2014 to 2017 by 7.8%. Despite these declines in discharges in the JW service area, the health planners who crafted the JW projections used a constant use rate for the 0-17, 18-44, and 45-64 age cohorts. The JW health planners used a declining use rate for the 65+ age cohort. These use rates were applied uniformly across all zip codes, despite wide variance in actual use rates in each zip code. Applying the zip code specific use rates in conjunction with the other assumptions used by the JW health planner demonstrates that the JW projections are unreasonable. For instance, JW’s reliance on a uniform use rate over-projects the number of discharges in JW PSA zip code 33178 by nearly 1,000 patients. This occurs because the population is only growing at a 2% rate in the zip code, but JW’s reliance on service area-wide projections cause the discharges to grow at an extraordinary rate of 8.9% per year. Applying actual use rates across all zip codes causes a drastic change in the JW PSA and SSA definition. Section 408.037(2) requires a CON applicant to identify its PSA and SSA by listing zip codes in which it will receive discharges in descending order, beginning with the zip code with the highest amount of discharges, then proceeding in diminishing order to the zip code with the lowest amount of discharges. The zip codes, which comprise 75% of discharges, constitute the PSA; and the remaining zip codes, which consist of the remaining 25% of discharges, makes up the SSA. However, JW did not project its utilization in this manner. In its application, JW did not define its service area, PSA, and SSA zip codes in descending order by number or percentage of discharges. When this correct adjustment is made, its PSA consists of zip codes 33126, 33172, 33178, 33174, 33144, and 33165; and its SSA consists of zip codes 33175, 33166, 33155, 33182, and 33184. Zip codes 33166 and 33182 were in the original JW PSA, and zip code 33165 was in the original JW SSA. As such, JW’s home zip code should actually be in its SSA. JW health planners call this illogical, but it demonstrates that the JW site is located within a zip code that has almost no population of potential patients. JHS is developing an FSED and outpatient/ambulatory facilities on the JW site regardless of whether its CON application for a hospital is approved. Construction has begun on the JW site, and JHS is actually building a “shelled in” structure intended to house a future hospital, notwithstanding lack of CON approval for the hospital. There is no contingency plan for use of the shelled-in hospital space if CON approval is not obtained. JHS executives unequivocally stated that they intend to continue pursuing CON approval for the JW hospital, even if the proposed DMC hospital is approved. Indeed, JHS has filed third and fourth CON applications for its proposed JW hospital. The budget for the JW campus is $252 million. Sixty to $70 million is being funded from a bond issuance approved by voters in Miami-Dade County. Notably, the bond referendum approved by voters made no mention of a new hospital. The remaining $180 to $190 million is being funded by JHS, which has chosen to only keep 50 days cash-on-hand, and put any surplus toward capital projects. This is well below the number of days cash-on-hand ws advisable for a system like JHS. The specific programs and services to be offered at JW have not been finalized, but it is clear that JW will be a small community hospital that will not offer anything unique or different from any of the existing hospitals in the area, nor will it operate NICU beds. Patients presenting to JW in need of specialized or tertiary services will need to be transferred to another hospital with the capability of serving them, most likely JMH. The Applicants’ Arguments Doral Medical Center (DMC) DMC’s arguments in support of its proposed hospital may be summarized as follows: Geographic features surrounding Doral create transportation access barriers for the residents of the area; Doral is a densely-populated community that is growing quickly and lacks a readily accessible hospital; KRMC, which is the provider of choice for Doral residents, is a growing tertiary facility that cannot sufficiently expand to meet its future demands. DMC will serve much of the same patient population currently served by KRMC and help decompress KRMC’s acute care load so KRMC can focus on its tertiary service lines; From a geographic standpoint, the Doral community and its patients are isolated from much of Miami-Dade County to the north, west, and east, and the nearest hospitals. East Florida-DMC is a subsidiary of HCA and would be a part of the HCA EFD. Michael Joseph is the president of the EFD, which includes 15 hospitals and other facilities from Miami north through the Treasure Coast. Mr. Joseph authorized the filing of the DMC CON application, which proposes an 80-bed basic acute care hospital that includes 72 medical surgical and eight OB beds. As noted, there will be neither unique services at DMC nor any tertiary services, such as a NICU. HCA anticipates that DMC patients needing tertiary services would be referred and treated at KRMC. The proposed hospital would be built on 41st Street, between Northwest 109th Avenue and Northwest 112th Avenue. This site is located on the western edge of Doral, just east of the Everglades. When the consultants were retained to write the first DMC CON application, HCA had already made the decision to go forward with the project. Mr. Joseph described Miami-Dade County as one of the most competitive markets in the country for hospital services. There is robust competition in the Miami-Dade market from the standpoints of payors, physicians, and the many hospitals located in the county, including Jackson, HCA, Tenet, Baptist and others. HCA is not proposing this project because any of the existing hospitals in the area do not provide good quality care. HCA is currently building an FSED on the DMC site that will open regardless of whether the DMC hospital is approved. Mr. Joseph acknowledged that there is a trend toward outpatient rather than inpatient care. Inpatient occupancy of acute care hospitals in Miami-Dade County has been declining in recent years. Managed care has added further pressure on reducing inpatient admissions. Surgical advances have also resulted in fewer inpatient admissions. Surgeries that formerly required an inpatient stay are now often done on an outpatient basis. Mr. Joseph agreed that 30 minutes is a reasonable travel time to access an acute care hospital. The home zip code for the proposed DMC hospital is 33178. KRMC’s market share for that zip code is 20%. Individuals in that zip code are currently accessing a wide variety of hospitals. PGH is only 6.7 miles away and has the fourth highest market share in that zip code. HCA’s healthcare planning expert, Dan Sullivan, acknowledged that, if approved, DMC would likely have an adverse financial impact on KRMC and other area hospitals. Several witnesses testified that the travel time from the DMC site to KRMC is about 10 minutes, and that an ambulance could do it in as little as five minutes. As to the argument that the residents of Doral face geographic access barriers, the evidence did not indicate that there is anything unique about Doral from a traffic standpoint compared to other parts of Miami-Dade County. People come in and out of Doral on a daily basis in significant numbers for work and other reasons via various access points. Witnesses agreed that 25 to 30 minutes is a reasonable drive time for non-tertiary acute care services, and the evidence showed that residents of Doral, and the DMC service area, are well within 30 minutes of multiple hospitals providing more intensive services than are proposed by DMC. Indeed, many residents of DMC’s service area are closer to other hospitals than to the DMC site. None of the DMC witnesses were able to identify any patient in Doral who had been unable to access acute care services, or had suffered a bad outcome because of travel from Doral to an area hospital. The evidence did not establish that there currently exists either geographic or financial access barriers within the service area proposed to be served by DMC. Jackson West As in its Batch One application, JW advances six arguments as to why its proposed hospital should be approved. They are: It will serve a significant amount of indigent and Medicaid patients. JHS already serves residents of the proposed service area, which JW characterizes as “fragmented,” in that residents go to a number of different hospitals to receive services. Development of the freestanding ED and ambulatory center is under way. JW would provide an additional opportunity to partner with UM and FIU. There is physician and community support for the project. JW will add to the financial viability of JHS and its ability to continue its mission. JW presented very little analysis of the types of factors typically considered in evaluating need for a new hospital. JW did not discuss existing providers and their programs and services, the utilization of existing hospitals, and whether they have excess capacity, or other important considerations. Instead, JW advanced the six arguments noted above, for approval of its proposed hospital, none of which truly relate to the issue of need. First, JW states that its proposed hospital will serve a significant level of Medicaid and indigent patients. While it is true that JHS serves a significant amount of Medicaid and indigent patients, there are a number of reasons why this is not a basis to approve its proposed hospital. As an initial matter, JW treads a fine line in touting its service to Medicaid and indigent patients, while also targeting Doral for its better payer mix and financial benefit to JHS. JHS also receives an enormous amount of tax dollars to provide care to indigent and underserved patients. While other hospitals in Miami-Dade County provide care to such patients, they do not receive taxpayer dollars, as does JHS, although they pay taxes, unlike JHS. Also, Medicaid is a good payer for JHS. With its substantial supplement, JHS actually makes money from Medicaid patients, and it costs the system more for a Medicaid patient to be treated at a JHS hospital than elsewhere. More significantly, there is not a large Medicaid or indigent population in Doral, nor evidence of financial access issues in Doral. Second, JW argues that its CON application should be approved because JHS already serves patients from the Doral area, which JW characterizes as “fragmented” because area residents go to several different hospitals for care. This so- called “fragmentation” is not unique to Doral, and is not unusual in a densely-populated urban market with several existing hospitals. The same phenomenon occurs in other areas of Miami-Dade County, some of which actually have a hospital in the localized area. The fact that Doral residents are accessing several different hospitals demonstrates that there are a number of existing providers that are accessible to them. As discussed in greater detail below, residents of the Doral area have choices in every direction (other than to the west, which is the Everglades). JHS itself already serves patients from the Doral area. If anything, this tells us that patients from Doral currently have access to the JHS hospitals. Third, JW argues that its CON application should be approved because development of the JW campus is under way. This is irrelevant to the determination of need, and is simply a statement of JHS’s intent to build an FSED and outpatient facilities on a piece of land that was acquired for that purpose, regardless of CON approval. Fourth, JW argues for approval of its proposed hospital because it would provide an additional opportunity to partner with UM and Florida International University (FIU). However, the statutory criteria no longer addresses research and teaching concerns, and JHS’s relationship with UM or FIU has no bearing on whether there is a need for a new hospital in the Doral area. Moreover, JW did not present any evidence of how it would partner with UM or FIU at JW, and there does not seem to be any set plans in this regard. Fifth, JW claims that there is physician and community support for its proposed hospital, but it is very common for CON applicants to obtain letters in support for applications. Indeed, the DMC application was also accompanied by letters of support. Sixth and finally, JW argues that its proposed hospital will add to the financial viability of HSA and allow it to continue its mission. However, JW provided no analysis of the projected financial performance of its proposed hospital to substantiate this. The only financial analysis in the record is from KSA, a consulting firm that JHS hired to analyze the programs and services to be developed at JW. The KSA analysis posits that the JW FSED project will lose millions of dollars and not achieve break-even unless there is an inpatient hospital co-located there so that JW can take advantage of the more lucrative hospital-based billing and reimbursement. The sixth “need” argument relates to the issue of JHS’s historical financial struggles, which bear discussion. Only a handful of years ago, the entire JHS was in dire financial trouble, so much so that selling all or parts of it was considered. Days cash-on-hand was in the single digits, and JHS fell out of compliance with bond covenants. JHS’s financial difficulties prompted the appointment of an outside monitor to oversee JHS’s finances. Price Waterhouse served in that role, and made several recommendations for JHS to improve its revenue cycle, make accounting adjustments, and improve its staffing and efficiency. As a result of these recommendations, JHS went through a large reduction in force, and began to more closely screen the income and residency of its patients. As a result of these measures, overall financial performance has since improved. Despite its improved financial position, JHS still consistently loses money on operations, including a $362,000,915 loss as of June 30, 2018. JHS clearly depends upon the hundreds of millions of non-operating tax-based revenues it receives annually. JHS’s CEO expressed concerns over decreases in the system’s non-operating revenue sources, and claimed that JHS needs to find ways to increase its operating revenue to offset this. JW is being proposed as part of this strategy. However, JHS’s chief financial officer testified that “the non-operating revenues are a fairly stable source of income.” In fact, JHS’s tax revenues have gone up in the last few years. JHS sees the more affluent Doral area as a source of better paying patients that will enhance the profitability of its new hospital. Beyond this aspiration however, there is no meaningful analysis of the anticipated financial performance of its proposed hospital. This is a glaring omission given that a significant impetus for spending millions of public dollars on a new hospital is to improve JHS’s overall financial position. The KSA analysis referenced above determined that changes to the Hospital Outpatient Prospective Payment System rule would result in the JW campus losing hundreds of millions of dollars and never reaching “break even,” absent an inpatient hospital on the campus for “hospital based” billing and reimbursement. Though a financial benefit to the system, the increased reimbursement JHS would receive by having an inpatient hospital on the JW campus would be a financial burden on the healthcare delivery system since it would cost more for the same patient to receive the same outpatient services in a hospital- based facility. Reports by KSA also state that a strategic purpose of JW is to attract patients that would otherwise go to nearby facilities like PGH and Hialeah, and to capture tertiary or higher complexity cases which would then be sent to JMH. JW’s witnesses and healthcare planning experts fully expect this to happen. In 2015, and again in 2017, JHS conducted a “Community Health Needs Assessment,” which is required by law to be performed by public safety net hospitals. The assessments were conducted by gathering responses to various questions from a wide array of community leaders and stakeholders, including the CEOs of JHS’s hospitals, about the healthcare needs of the community. The final Community Health Needs Assessment documents are lengthy and cover a variety of health-related topics, but most notable for this case is that: (1) nowhere in either the 2015 or 2017 assessment is the development of a new hospital recommended; and (2) expansion into western Miami-Dade County scored by far the lowest on a list of priorities for JHS. In its application and at hearing, JW took the position that JW can enter the Doral area market without impacting existing providers to any meaningful extent. While JW acknowledges that its proposed hospital would impact the Tenet Hospitals, it argues that the impact is not significant. The evidence established that the financial impact to the Tenet Hospitals (calculated based upon lost contribution margin) would total roughly $3 million for lost inpatients, and $5.2 million including lost outpatients. While these losses will not put the Tenet Hospitals in financial peril, they are nonetheless significant and material. The Existing Healthcare Delivery System Miami-Dade County is home to 18 freestanding acute care hospitals, comprising a total of 7,585 licensed and approved acute care beds. With an average annual occupancy of 53.8% in calendar year 2017, there were, on average, approximately 3,500 unoccupied acute care beds in the county on any given day. While the countywide occupancy rate fluctuates from year to year, it has been on a downward trend in the past several years. As pointed out by several witnesses, the lack of a hospital in Doral is not itself an indication of need. In addition, population growth, and the demands of the population for inpatient hospital beds, cannot be considered in a vacuum. Sound healthcare planning requires an analysis of existing area hospitals, including the services they offer and their respective locations; how area residents travel to existing hospitals and any barriers to access; the utilization of existing hospitals and amount of capacity they have; and other factors which may be relevant in a given case. The population of Doral currently is only about 59,000 people. It is not as densely populated as many areas of Miami-Dade County, has a number of golf course communities, and is generally a more affluent area with a higher average household income than much of Miami-Dade County. As set forth in JW’s CON application, the better payer mix in Doral was a significant factor behind its decision to file its CON application. Although there is not a hospital within the Doral city limits, there are a number of healthcare providers in Doral and several hospitals nearby. PGH and Palm Springs Hospital are just north of Doral. KRMC is just south of Doral. Hialeah is northeast of Doral. CGH, Westchester General, and NCH are southeast of Doral. JMH and all of its facilities are east of Doral. And there are others within reasonable distance. KRMC is only six miles due south of the proposed DMC site, and PGH is just eight miles north of the DMC site. As to the JW site, PGH is 6.9 miles distant, CGH is 8.6 miles distant, and Hialeah is 7.4 miles distant. Residents of the Doral area have many choices in hospitals with a wide array of services, and they are accessing them. The parties to this case, as well as other existing hospitals, all have a share of the Doral area market. JW calls this “fragmentation” of the market and casts it in a negative light, but the evidence showed this to be a normal phenomenon in an urban area like Miami, with several hospitals in healthy competition with each other. Among the experts testifying at the hearing, it was undisputed that inpatient acute care hospital use rates are on the decline. There are different reasons for this, but it was uniformly recognized that decreasing use rates for inpatient services, and a shift toward outpatient services, are ongoing trends in the market. Recognizing the need for outpatient services in the Doral area, both JW and DMC (or, more accurately, their related entities) have proposed outpatient facilities and services to be located in Doral. Kendall Regional Medical Center KRMC is currently the dominant hospital provider in the Doral area. Regarding his motivation for filing the DMC application, Mr. Joseph readily admitted “it’s as much about protecting what I already currently provide, number one.” KRMC treats Medicaid and indigent patients. KRMC has never turned away a patient because it did not have a contract with a Medicaid-managed care company. The CEO agreed that there is no access problem for Medicaid or charity patients justifying a new hospital. It was argued that KRMC is crowded, and the DMC hospital would help “decompress” KRMC, but the evidence showed that KRMC has a number of licensed beds that are not being used for inpatients. In addition, its ED has never gone on diversion, and no patient has ever been turned away due to the lack of a bed. Moreover, the census at KRMC has been declining. It had 25,324 inpatient admissions in 2015, 24,649 admissions in 2016, and 23,301 in 2017. The most recent data available at the time of hearing reflected that KRMC has been running at a little less than 75% occupancy, before its planned bed additions. KRMC is between an eight to 10 minute drive from Doral, and currently has the largest market share within the applicants’ defined service areas. KRMC is readily available and accessible to the residents of Doral. KRMC currently has a $90 million dollar expansion project under way. It involves adding beds and two new floors to the West Tower--a new fifth floor which will add 24 ICU beds and 24 step-down beds, and a new sixth floor which will house the relocated pediatric unit and 12 new medical-surgical beds. KRMC is also adding a new nine-story, 765 parking space garage and other ancillary space. This expansion will reduce the occupancy rate of KRMC’s inpatient units, and in particular its ICUs. These bed additions, in conjunction with increasing emphasis on outpatient services and the resultant declining inpatient admissions, will alleviate any historical capacity constraints KRMC may have had. There are also a number of ways KRMC could be further expanded in the future if needed. The West Tower is designed so it could accommodate a seventh floor, and the East Tower is also designed so that an additional floor could also be added to it. In addition, KRMC recently completed construction of a new OR area that is built on pillars. The new construction includes a third floor of shelled-in space that could house an additional 12 acute care beds. Moreover, this new OR tower was designed to go up an additional two to three floors beyond the existing shelled-in third floor. It is clear that KRMC has implemented reasonable strategies for addressing any bed capacity issues it may have experienced in the past. Decompression of KRMC is not a reason to approve DMC. Palmetto General Hospital Evidence regarding PGH was provided by its CEO Ana Mederos. Ms. Mederos is a registered nurse and has lived in Miami-Dade County for many years. She has a master of business education from Nova University and has worked in several different hospitals in the county. Specifically, she was the chief operating officer (COO) at Cedars Medical Center, the CEO at North Shore Medical Center, the CEO at Hialeah Hospital, and has been the CEO at PGH since August of 2006. Ms. Mederos is one of the few witnesses that actually lives in Doral. She travels in and out of the area on a daily basis. Her average commute is only about 15 minutes, and she has multiple convenient options in and out of Doral. PGH is located just off the Palmetto Expressway at 68th Street. It opened in the early 1970s and has 368 licensed beds, including 52 ICU beds. The hospital employs about 1,800 people and has over 600 physicians on its medical staff. PGH’s occupancy has declined from 79.8% in 2015 to 64% in 2016, and even further to 56.7% in 2017. There are many reasons for this decline, including pressure from managed care organizations, the continued increase in the use of outpatient procedures, improvements in technology, and increased competition in the Miami-Dade County market. Ms. Mederos expects that inpatient demand will continue to decline into the foreseeable future. PGH recently activated 31 observation beds to help improve throughput and better accommodate the increasing number of observation patients. PGH offers high-quality care and uses various metrics and indicators to measure and monitor what is going on in the hospital. The hospital has also been recognized with numerous awards. Through its parent, Tenet, PGH has contracts with just about every insurance and managed care company that serves the community. The hospital treats Medicaid and indigent patients. PGH’s Medicaid rate of $3,580 per patient is significantly lower than the rate paid to JMH. PGH has an office dedicated to helping patients get qualified for Medicaid or other financial resources, which not only helps the hospital get paid for its services, it also assists patients and families to make sure that they have benefits on an ongoing basis. Roughly 9-10% of PGH’s patients annually are completely unfunded. PGH only transfers patients if there is a need for a service not provided at the hospital, or upon the patient’s request. PGH does not transfer patients just because they cannot pay. PGH pays physicians to take calls in the ED which also obligates those physicians to provide care to patients that are seen at the hospital. PGH is a for-profit hospital that pays income taxes and property taxes, and does not receive any taxpayer subsidies like those received by JHS. Ms. Mederos reviewed the applications of JW and DMC, and articulated a number of reasons why, in her opinion, neither application should be approved. She sees no delays in providing care to anyone in the area, as there are hospitals serving Doral in every direction. There are a multitude of FSEDs available and additional FSEDs are being built in Doral by both applicants. There is another FSED being built close to PGH by Mount Sinai Medical Center. NCH has also opened an FSED that has negatively affected the volume of pediatric patients seen at PGH. There are also multiple urgent care centers. It was Ms. Mederos’ firm belief that persons living in Doral have reasonable geographic access to both inpatient and outpatient medical services. Ms. Mederos’ testimony in this regard is credited. There are no programs or services being proposed by either applicant that are not already available in the area. Ms. Mederos also noted that there is currently no problem with access to OB services in the area. However, she has a particular concern in that both applicants propose to offer OB services, but neither is proposing to offer NICU services. The evidence showed that most all of the hospitals that provide OB services to the Doral area offer at least Level II and some Level III NICU services. Thus, in terms of OB care, both proposed hospitals would be a step below what has developed as the standard of care for OB patients in the county. Ms. Mederos acknowledged that PGH does not have a huge market share in the zip codes that the applicants are proposing to serve, but that does not mean that the impact from either would not be real and significant. If a hospital is built by either applicant, it will need physicians, with some specialists in short supply. There are tremendous shortages in certain medical fields, such as orthopedics and neurology. In addition, there will be additional competition for nurses and other staff, which will increase the cost of healthcare. The loss of $1.3 to $2 million in contribution margin, as projected by Tenet’s healthcare planner, is a negative impact on PGH as hospital margins become thinner, and those numbers do not include costs like those needed to recruit and retain staff. PGH is again experiencing a nursing shortage, and losing nurses, incurring the higher cost for contract labor, paying overtime, and essentially not having the staff to provide the required services is a serious potential adverse impact from either proposed new hospital. JHS also tends to provide more lucrative benefits than PGH, and a nearby JW hospital is a threat in that regard. As a final note, Ms. Mederos stated that her conviction that there is no need for either proposed hospital in Doral is even more resolute than when she testified in the Batch One Case. With continued declines in admissions, length of stay and patient days, the development of more services for the residents of Doral, the shortages of doctors and nurses, the ever increasing role of managed care that depresses the demand for inpatient hospital services and other factors, she persuasively explained why no new hospitals are needed in the Doral area. Coral Gables Hospital (CGH) Maria Cristina Jimenez testified on behalf of CGH, where she has worked in a variety of different capacities since 1985. She was promoted to CEO in March 2017. She has lived in Miami her entire life. Ms. Jimenez has been involved in initiatives to make her hospital more efficient. She is supportive of efforts to reduce inpatient hospitalizations and length of stay, as this is what is best for patients. Overall, the hospital length of stay is dropping, which adds to the decreasing demand for inpatient services. CGH is accredited by the Joint Commission, has received multiple awards, and provides high-quality care to its patients. It also has contracts with a broad array of managed care companies as do the other Tenet hospitals. CGH treats Medicaid patients, and its total Medicaid rate is less than $3,500 per inpatient. The hospital has a program similar to PGH to help patients get qualified for Medicaid and other resources. CGH also provides services to indigent patients, and self-pay/charity is about 6% of the hospital’s total admissions. The hospital does not transfer patients just because they are indigent. Physicians are compensated to provide care in the emergency room and are expected to continue with that care if the patients are admitted to the hospital, even if they do not have financial resources. CGH also pays income and property taxes, but does not receive any taxpayer support. CGH generally serves the Little Havana, Flagami, Miami, and Coral Gables communities, and its service area overlaps with those of the applicants. In order to better serve its patients and to help it compete in the highly competitive Miami-Dade County marketplace, CGH is developing a freestanding ED at the corner of Bird Road and Southwest 87th Avenue, which is scheduled to open in January 2020. This will provide another resource for patients in the proposed service areas. Ms. Jimenez had reviewed the CON applications at issue in this case. She does not believe that either hospital should be approved because it will drain resources from CGH, not only from a financial standpoint, but also physician and nurse staffing. CGH experiences physician shortages. Urologists are in short supply, as are gastrointestinal physicians that perform certain procedures. Hematology, oncology, and endocrinology are also specialty areas with shortages. The addition of another hospital will exacerbate those shortages at CGH. While CGH does not have a large market share in the proposed PSA of either applicant, anticipated impact from approval of either is real and substantial. A contribution margin loss of $1.2 to $2.2 million per year, as projected by Tenet’s healthcare planner, would be significant. The drain on resources, including staff and physicians, is also of significant concern. Hialeah Hospital Dr. Jorge Perez testified on behalf of Hialeah. Dr. Perez is a pathologist and medical director of laboratory at the hospital. More significantly, Dr. Perez has been on the hospital’s staff since 2001 and has served in multiple leadership roles, including chair of the Performance Improvement Council, chief of staff; and since 2015, chair of the Hialeah Hospital Governing Board. Hialeah offers obstetrics services and a Level II NICU with 12 beds. Approximately 1,400 babies a year are born there. Hialeah’s occupancy has been essentially flat for the past three years, at below 40%, and it clearly has ample excess capacity. On an average day, over 200 of Hialeah’s beds are unoccupied. Like other hospitals in the county, Hialeah has a number of competitors. The growth of managed care has affected the demand for inpatient beds and services at Hialeah. Hialeah treats Medicaid and indigent patients. Approximately 15% of Hialeah’s admissions are unfunded. As with its sister Tenet hospitals, Hialeah is a for- profit hospital that pays taxes and does not receive tax dollars for providing care to the indigent. Dr. Perez succinctly and persuasively identified a variety of reasons why no new hospital is needed in Doral. First and foremost, there is plenty of capacity at the existing hospitals in the area, including Hialeah. Second, both inpatient admissions and length of stay continue trending downward. Care continues to shift toward outpatient services, thereby reducing the demand for inpatient care. According to Dr. Perez, if a new hospital is approved in Doral it will bring with it adverse impacts on existing hospitals, including Hialeah. A new hospital in Doral will attract patients, some of which would have otherwise gone to Hialeah. Moreover, Doral has more insured patients, meaning the patients that would be lost would be good payors. There would also be a significant risk of loss of staff to a new hospital. Dr. Perez’s testimony in this regard is credible. Statutory and Rule Review Criteria In 2008, the Florida Legislature streamlined the review criteria applicable for evaluating new hospital applications. Mem’l Healthcare Grp. v. AHCA, Case No. 12- 0429CON, RO at 32 (Fla. DOAH Dec. 7, 2012). The criteria specifically eliminated included quality of care, availability of resources, financial feasibility, and the costs and methods of proposed construction. Lee Mem’l Health System v. AHCA, Case No. 13-2508CON, RO at 135 (Fla. DOAH Mar. 28, 2014). The remaining criteria applicable to new hospital projects are set forth at section 408.035(1), Florida Statutes. Section 408.035(1)(a): The need for the healthcare facilities and health services being proposed. Generally, CON applicants are responsible for demonstrating need for new acute care hospitals, typically in the context of a numeric need methodology adopted by AHCA. However, AHCA has not promulgated a numeric need methodology to calculate need for new hospital facilities. Florida Administrative Code Rule 59C-1.008(2)(e) provides that if no agency need methodology exists, the applicant is 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 and 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. Both applicants propose to build small community hospitals providing basic acute care and OB services in the Doral area of western Miami-Dade County. Both applicants point to the increasing population and the lack of an acute care hospital in Doral as evidence of need for a hospital. The DMC application focuses largely on geographic access concerns, while the JW application is premised upon six arguments as to why JHS contends its proposed JW hospital should be approved. The lack of a hospital in Doral is not itself an indication of need.3/ In addition, population growth, and the demands of the population for inpatient hospital beds, cannot be considered in a vacuum. Sound healthcare planning requires an analysis of existing area hospitals, including the services they offer and their respective locations; how area residents travel to existing hospitals, and any barriers to access; the utilization of existing hospitals and amount of capacity they have; and other factors which may be relevant in a given case. Doral is in the west/northwest part of Miami-Dade County, in between the Miami International Airport (to the east) and the Everglades (to the west). It is surrounded by major roadways, with US Highway 27/Okeechobee Road running diagonally to the north, US Highway 836/Dolphin Expressway running along its southern edge, US Highway 826/Palmetto Expressway running north-south to the east, and the Florida Turnpike running north- south along the western edge of Doral. To the west of the Turnpike is the Everglades, where there is minimal population and very limited development possible in the future. The City of Doral itself has an area of about 15 square miles, and is only two or three times the size of the Miami International Airport, which sits just east of Doral. Much of Doral is commercial and industrial, with the largest concentration of residential areas being in the northwest part of the city. While there is unquestionably residential growth in Doral, the population of Doral is currently only about 59,000 people. Doral is not as densely populated as many areas of Miami-Dade County, has a number of golf course communities, and is generally a more affluent area with a higher average household income than much of Miami-Dade County. JW proposes to locate its hospital on the eastern side of Doral, just west of Miami International Airport, while the DMC site is on the western side of Doral, just east of the Everglades. JW’s site is located in an industrial area with few residents, while the DMC site is located in an area where future growth is likely to be limited. Both sites have downsides for development of a hospital, with both applicants spending considerable time at hearing pointing out the flaws of each other’s chosen location. Both applicants define their service areas to include the City of Doral, but also areas outside of Doral. Notably, the entire DMC service area is contained within KRMC’s existing service area, with the exception of one small area. While the population of Doral itself is only 59,000 people, there are more concentrated populations in areas outside of Doral (except to the west). However, the people in these areas are closer to existing hospitals like PGH, Hialeah, KRMC, and others. For the population inside Doral, there are several major roadways in and out of Doral, and area residents can access several existing hospitals with plenty of capacity within a 20-minute drive time, many closer than that. It was undisputed that inpatient acute care hospital use rates continue to decline. There are different reasons for this, but it was uniformly recognized that decreasing inpatient use rates, and a shift toward outpatient services, are ongoing trends in the market. These trends existed at the time of the Batch One Case. As observed by Tenet’s healthcare planner at hearing: “The occupancy is lower today than it was two years ago, the use rates are lower, and the actual utilization is lower.” Both applicants failed to establish a compelling case of need. While there is growth in the Doral area, it remains a relatively small population, and there was no evidence of community needs being unmet. Sound healthcare planning, and the statutory criteria, require consideration of existing hospitals, their availability, accessibility, and extent of utilization. These considerations weigh heavily against approval of either CON application, even more so than in the prior case. Section 408.035(1)(b): The availability, accessibility, and extent of utilization of existing healthcare facilities and health services in the service district of the applicant; and Section 408.035(1)(e): The extent to which the proposed services will enhance access to healthcare for residents of the service district. As stated above, there are several existing hospitals in close proximity to Doral. Thus, the question is whether they are accessible and have capacity to serve the needs of patients from the Doral area. The evidence overwhelmingly answers these questions in the affirmative. Geographic access was a focal point of the DMC application, which argued that there are various barriers to access in and around Doral, such as a canal that runs parallel to US Highway 27/Okeechobee Road, train tracks and a rail yard, industrial plants, and the airport. While the presence of these things is undeniable, as is the fact that there is traffic in Miami, based upon the evidence presented, they do not present the barriers that DMC alleges. Rather, the evidence was undisputed that numerous hospitals are accessible within 20 minutes of the proposed hospital sites, and some within 10 to 15 minutes. All of Doral is within 30 minutes of multiple hospitals. These are reasonable travel times and are not indicative of a geographic access problem, regardless of any alleged “barriers.” In addition, existing hospitals clearly have the capacity to serve the Doral community, and they are doing so. Without question, there is excess capacity in the Miami-Dade County market. With approximately 7,500 hospital beds in the county running at an average occupancy just over 50%, there are around 3,500 beds available at any given time. Focusing on the hospitals closest to Doral (those accessible within 20 minutes), there are hundreds of beds that are available and accessible from the proposed service areas of the applicants. KRMC is particularly noteworthy because of its proximity to, and market share in, the Doral area. The most recent utilization and occupancy data for KRMC indicate that it has, on average, 100 vacant beds. This is more than the entire 80-bed hospital proposed in the DMC application (for a service area that is already served and subsumed by KRMC). Moreover, KRMC is expanding, and will soon have even more capacity at its location less than a 10-minute drive from the DMC site. From a programmatic standpoint, neither applicant is proposing any programs or services that are not already available at numerous existing hospitals, and, in fact, both would offer fewer programs and services than other area hospitals. As such, patients in need of tertiary or specialized services will still have to travel to other hospitals like PGH, KRMC, or JMH. Alternatively, if they present to a small hospital in Doral in need of specialized services, they will then have to be transferred to an appropriate hospital that can treat them. The same would be true for babies born at either DMC or JW in need of a NICU. Similarly, there are bypass protocols for EMS to take cardiac, stroke, and trauma patients to the closest hospital equipped to treat them, even if it means bypassing other hospitals not so equipped, like JW and DMC. Less acute patients can be transported to the closest ED. And since both applicants are building FSEDs in Doral, there will be ample access to emergency services for residents of Doral. This criterion does not weigh in favor of approval of either hospital. To the contrary, the evidence overwhelmingly established that existing hospitals are available and accessible to Doral area residents. Section 408.035(1)(e), (g) and (i): The extent to which the proposed services will enhance access to healthcare, the extent to which the proposal will foster competition that promotes quality and cost-effectiveness, and the applicant’s past and proposed provision of healthcare services to Medicaid patients and the medically indigent. It goes without saying that any new hospital is going to enhance access to the people closest to its location; but as explained above, there is no evidence of an access problem, or any pressing need for enhanced access to acute care hospital services. Rather, the evidence showed that Doral area residents are within very reasonable travel times to existing hospitals, most of which have far more extensive programs and services than either applicant is proposing to offer. Indeed, the proposed DMC service area is contained within KRMC’s existing service area, and KRMC is only 10 minutes from the DMC site. Neither applicant would enhance access to tertiary or specialized services, and patients in need of those services will still have to travel to other hospitals, or worse, be transferred after presenting to a Doral hospital with more limited programs and services. Although it was not shown to be an issue, access to emergency services is going to be enhanced by the FSEDs being built by both applicants. Thus, to the extent that a new hospital would enhance access, it would be only for non-emergent patients in need of basic, non-tertiary level care. Existing hospitals are available and easily accessible to these patients. In addition, healthy competition exists between several existing providers serving the Doral area market. That healthy competition would be substantially eroded by approval of the DMC application, as HCA would likely capture a dominant share of the market. While approval of the JW application might not create a dominant market share for one provider, it would certainly not promote cost-effectiveness given the fact that it costs the system more for the same patient to receive services at a JHS hospital than other facilities. Indeed, approval of JW’s application would mean that the JW campus will have the more expensive hospital-based billing rates. Florida Medicaid diagnosis related group (DRG) payment comparisons among hospitals are relevant because both DMC and JW propose that at least 22% of their patients will be Medicaid patients. Data from the 2017-18 DRG calculator provided by the Medicaid program office was used to compare JHS to the three Tenet hospitals, KRMC, and Aventura Hospital, another EFD hospital in Miami-Dade County. The data shows that JHS receives the highest Medicaid rate enhancement per discharge for the same Medicaid patients ($2,820.06) among these six hospitals in the county. KRMC receives a modest enhancement of $147.27. Comparison of Medicaid Managed Care Reimbursement over the period of fiscal years 2014-2016 show that JHS receives substantially more Medicaid reimbursement per adjusted patient day than any of the hospitals in this proceeding, with the other hospitals receiving between one-third and one-half of JHS reimbursement. In contrast, among all of these hospitals, KRMC had the lowest rate for each of the three years covered by the data, which means KRMC (and by extension DMC) would cost the Medicaid program substantially less money for care of Medicaid patients. Under the new prospective payment system instituted by the State of Florida for Medicaid reimbursement of acute care hospital providers, for service between July 1, 2018, and March 31, 2019, JHS is the beneficiary of an automatic rate enhancement of more than $8 million. In contrast, KRMC’s rate enhancement is only between $16,000 and $17,000. Thus, it will cost the Medicaid program substantially more to treat a patient using the same services at JW than at DMC. Furthermore, rather than enhance the financial viability of the JHS system, the evidence indicates that the JW proposal will be a financial drain on the JHS system. Finally, JHS’s past and proposed provision of care to Medicaid and indigent patients is noteworthy, but not a reason to approve its proposed hospital. JW is proposing this hospital to penetrate a more affluent market, not an indigent or underserved area, and it proposes to provide Medicaid and indigent care at a level that is consistent with the existing hospitals. JHS also receives the highest Low Income Pool (LIP) payments per charity care of any system in the state, and is one of only a handful of hospital systems that made money after receipt of the LIP payments. HCA-affiliated hospitals, by comparison, incur the second greatest cost in the state for charity care taking LIP payments into consideration. Analysis of standardized net revenues per adjusted admission (NRAA) among Miami-Dade County acute care hospitals, a group of 16 hospitals, shows JHS to be either the second or the third highest hospital in terms of NRAA. KRMC, in contrast, part of the EFD/HCA hospitals, is about 3% below the average of the 16 hospitals for NRAA. DMC’s analysis of standardized NRAA using data from 2014, 2015, and 2016, among acute care hospitals receiving local government tax revenues, shows JHS receives more net revenue than any of the other hospitals in this grouping. Using data from FY 2014 to FY 2016, DMC compared hospital costs among the four existing providers that are parties to this proceeding and JMH as a representative of JHS. Standardizing for case mix, fiscal year end, and location, an analysis of costs per adjusted admission shows that the hospitals other than JMH have an average cost of between a half and a third of JMH’s average cost. The same type of analysis of costs among a peer group of eight statutory teaching hospitals shows JHS’s costs to be the highest. It should also be noted that if JW were to fail or experience significant losses from operations, the taxpayers of Miami-Dade County will be at risk. In contrast, if DMC were to fail financially, EFD/HCA will shoulder the losses. When the two applications are evaluated in the context of the above criteria, the greater weight of the evidence does not mitigate in favor of approval of either. However, should AHCA decide to approve one of the applicants in its final order, preference should be given to DMC because of its lower costs per admission for all categories of payors, and in particular, the lower cost to the Florida Medicaid Program. In addition, the risk of financial failure would fall upon EFD/HCA, rather than the taxpayers of Miami-Dade County. Rule 59C-1.008(2)(e): Need considerations. Many of the considerations enumerated in rule 59C- 1.008(2)(e) overlap with the statutory criteria, but there are certain notable trends and market conditions that warrant mention. Specifically, while the population of Doral is growing, it remains relatively small, and does not itself justify a new hospital. And while there are some more densely populated areas outside of the city of Doral, they are much closer to existing hospitals having robust services and excess capacity. Doral is a more affluent area, and there was no evidence of any financial or cultural access issues supporting approval of either CON application. The availability, utilization, and quality of existing hospitals are clearly not issues, as there are several existing hospitals with plenty of capacity accessible to Doral area residents. In terms of medical treatment trends, it was undisputed that use rates for inpatient hospital services continue trending downward, and that trend is expected to continue. Concomitantly, there is a marked shift toward outpatient services in Miami-Dade County and elsewhere. Finally, both applicants are proposing to provide OB services without a NICU, which is below the standard in the market. While not required for the provision of obstetrics, NICU backup is clearly the most desirable and best practice. For the foregoing reasons, the considerations in rule 59C-1.008(2)(e) do not weigh in favor of approval of either hospital.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Healthcare Administration enter a final order denying East Florida-DMC, Inc.’s CON Application No. 10432 and denying The Public Health Trust of Miami-Dade County, Florida, d/b/a Jackson Hospital West’s CON Application No. 10433. DONE AND ENTERED this 30th day of April, 2019, in Tallahassee, Leon County, Florida. S W. DAVID WATKINS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of April, 2019.
