The Issue Whether, under Section 381.494-381.499, Florida Statutes, Humana, Inc., d/b/a Kendall Community Hospital, is entitled to a Certificate of Need to construct a 150-bed acute care hospital in the west Kendall area of south Dade County, Florida.
Findings Of Fact HUMANA is an investor-owned, multi-institutional hospital system which owns and operates more than 90 hospitals, most of which are medical/surgical facilities. (DHRS Ex.1, p.10). HUMANA applied for a Certificate of Need from DHRS to construct a 150- bed acute care community hospital in the west Kendall area of south Dade County, Florida. The specific area to be served is bounded on Miller Drive to the north, southwest 177th Avenue to the west, Coral Reef Drive to the south, and Calloway Road to the east. The proposed 150-bed hospital includes 100 medical/surgical beds, 20 pediatric beds, 20 Level II obstetric beds, 10 intensive care/critical beds, and a Level II nursery in conjunction with the obstetric unit. (TR 277). The proposal includes a 24-hour, physician-staffed emergency room and a "dedicated" outpatient surgery department, with separate recovery room. Surgery suites are specifically designed and reserved only for outpatient surgery, thereby facilitating outpatient scheduling and efficient operations. (TR 279). The outpatient surgery unit is intended to reduce the costs of health care by providing a cost-effective alternative modality of health care delivery. (TR 278). Finally, the proposal contemplates a full-body CT Scanner, digital radiography and general state-of-the-art ancillary equipment. (TR 278). If built, it would be the westernmost hospital in south Dade County. It is a "community" hospital, designed to provide hospital care to the rapidly growing population of the west Kendall area, but not serve as a major referral center for patients living elsewhere. (DHRS Ex. 1, pp. 32-34; TR 250, 280). The local health planning agency, then the Health Systems Agency ("HSA") of South Florida, Inc., 1/ reviewed HUMANA's application for a Certificate of Need, along with four other similar applications, and recommended that all five be denied because of asserted inconsistency with the HSA's Health System Plan. ("HSP") 2/ (DHRS Ex. 1, TR 77). The applications were then submitted to DHRS, the single state agency empowered to issue or deny Certificates of Need. 381.493(3)(a) and 381.494(8), Fla.Stat. (Supp. 1982). DHRS reviewed the HSA recommendation, conducted its own evaluation, and then denied all five applications, including HUMANA's. DHRS concluded: None of the five proposed projects are in compliance with the adopted Goals, Criteria, Standards and Policies of the Health Systems Agency of South Florida, as stated in the Health Systems Plan (HSP) and Annual Implementation Plan (AIP). A need to add acute care hospital beds to Dade County does not exist at the present time. The proposed projects would add to excess capacity and underutilization of hospital beds that now exist in Dade County. There are only five hospitals in Dade County that are at the recommended occupancy level of 80 percent based on licensed beds (none of which are located in South Dade), and the number of beds per 1000 population. The primary alternative would be not to construct any of the proposed projects. While all of the proposed projects represent some degree of financial feasibility, none are felt to be cost effective because increased bed capacity would result in costs and revenue higher than those projected for existing "High Cost" hospitals in 1984 as determined by the Hospital Cost Containment Board. (DHRS Ex. 1, p. 404) Thereafter, HUMANA timely instituted Section 120.57(1) proceedings challenging DHRS's denial; HUMANA's standing to do so is uncontested. HUMANA's position, maintained throughout, is that its proposed 150-bed hospital satisfies every legal criterion for the issuance of the applied-for Certificate of Need. Intervenor Baptist Hospital Intervenor BAPTIST HOSPITAL will be substantially affected if HUMANA is granted a Certificate of Need. BAPTIST is a fully licensed and accredited 513- bed, general acute care hospital located within HUMANA's proposed service area, at 8900 North Kendall Drive, Miami, Florida. (STIP-para. 8). If the proposed hospital is built, it would significantly and adversely affect the patient census and revenues of BAPTIST HOSPITAL. (TR 16, VOL 4). In 1982, BAPTIST drew 36.7 percent of its patients from HUMANA's proposed service area. (TR 15, 16, VOL 4). Fifty percent of the residents of the proposed service area (who were admitted to hospitals in Dade County) were admitted to BAPTIST HOSPITAL. (TR-440). It is estimated that BAPTIST would lose 15,047 patient days to the new HUMANA hospital and would experience significant adverse economic impacts. (TR 88-89, VOL 5). The proposed hospital would also adversely impact BAPTIST's ability to hire and retain nursing and technical personnel. BAPTIST has experienced difficulty in hiring and retaining these personnel. (TR 18, 60-73, VOL 4). Historically, the opening of a new hospital has adversely affected the hiring and retention of such personnel in nearby hospitals. (TR 72-73, VOL 4). Here, approximately 84 percent of BAPTIST's nurses live near HUMANA's proposed cite, thus increasing the likelihood that BAPTIST will be adversely affected in this manner. (TR 135, VOL 5). BAPTIST opposes the issuance of a Certificate of Need for HUMANA's proposed hospital, and supports DHRS's initial denial. Intervenor American Hospital Similarly, intervenor AMERICAN HOSPITAL would be significantly affected if the proposed HUMANA hospital is built. AMERICAN is a fully licensed and accredited 513-bed, general acute care hospital located and operated within HUMANA's proposed service area, at 11750 Bird Road, Miami, Florida, (STIP-para 8). AMERICAN currently draws 41 percent of its patients from HUMANA's proposed service area. The proposed hospital will cause AMERICAN to lose an estimated 5,300 patient days. (TR 76, VOL 5). This translates into an approximate loss of $4.1 million in potential revenues, based upon HUMANA's achieving a 75 percent occupancy rate and 41,000 patient days. (TR 75-76, VOL 5). Such a revenue loss may result in higher costs, which in the health care system, are normally translated into higher patient charges. (TR 86, VOL 5) HUMANA's proposed hospital would also aggravate AMERICAN's continuing shortage in nursing personnel. (Currently AMERICAN has approximately 50 full- time registered nurse vacancies.) (TR 134, VOL 5). It is reasonable to expect that HUMANA will hire a significant number of its nurses away from nearby hospitals. Over a six-month period, HUMANA's four existing hospitals in south Florida hired 112 registered nurses, 32.1 percent of whom were hired away from other hospitals in the area. (TR 783). AMERICAN, likewise, opposes the issuance of a Certificate of Need to HUMANA, and supports DHRS's initial denial. II. STATUTORY CRITERIA FOR CERTIFICATES OF NEED Section 381.494(6)(c) and (d), Florida Statutes (Supp. 1982), prescribes standards for evaluating applications for Certificates of Need. Those standards pertinent to HUMANA's application include: The need for the health care facilities and services . . . being proposed in relation to the applicable district plan, annual implementation plan, and state health plan adopted pursuant to Title XV of the Public Health Service Act, except in emergency circumstances which pose a threat to the public health. The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services . . . in the applicant's health service area. 7. The availability of resources, including health manpower, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation; the effects the project will have on clinical needs of health professional training programs in the service area; the extent to which the services will be accessible to schools for health professions in the service area for training purposes if such services are available in a limited number of facilities; the availability of alternative uses of such resources for the provision of other health services; and the extent to which the proposed services will be accessible to all residents of the service area. 11. The probable impact of the proposed project on the costs of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and cost-effectiveness. In considering HUMANA's application, specific consideration must also be given to whether: . . .less costly, more efficient, or more appropriate alternatives to such inpatient services are . . . available and the development of such alternatives has been studied and found not practicable. . . . existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner. . . . alternatives to new construction, for example, modernization or sharing arrangements, have been considered and have been implemented to the maximum extent practicable. . . . patients will experience serious problems in obtaining inpatient care of the type proposed, in the absence of the proposed new service. 381.494(6)(d) Fla.Stat. (Supp. 1982). The controversy here is whether in 1988 (using a five-year planning horizon) there will be a need for HUMANA's proposed 150-bed hospital in the west Kendall area of south Dade County. DHRS, BAPTIST, and AMERICAN say that there will be no need: that existing hospitals serving the area have excess capacity and are underutilized--and that this condition will persist through 1988. HUMANA contends otherwise. As the applicant for a license, the burden of proving entitlement rests squarely upon HUMANA. 3/ The most accurate and reliable method for determining bed-need in this case, the historical demand-based method, requires the following: (1) identify planning area boundaries; (2) from historical population data, project population for the planning area using the five-year horizon for hospital services; (3) calculate a hospital use rate or the rate at which patients in the service area have used hospitals in terms of patient days per thousand; (4) project patient days by multiplying the use rate times the area population, and divide by 365 to yield a projected bed need; (5) compare projected bed-need with the licensed bed capacity of area hospitals and, using an appropriate occupancy standard, determine whether there will be an excess or shortage of hospital beds in the proposed planning area. (TR 55, VOL 5). Selecting a Health Planning Area The first step in determining whether a new hospital will be needed is selection of the appropriate health planning area. In 1982, the now-defunct HSA of South Florida adopted a Regionalization Plan for south Florida dividing HSA IX, a region, into five districts. (AM Ex. 4). Although not specifically mentioning hospitals, this plan implies that hospital bed-need determinations should be made on a district basis. The Kendall area, extending east and west, generally is denominated as "District D," and is, in turn, subdivided into three subdistricts. "D-1" encompasses Coral Gables and South Miami; "D-2" and "D-3" include Weschester, Kendall, Killian, and the west central Dade areas, the boundaries of which are U.S. 1 and the Palmetto Expressway on the east, Coral Reef Drive and Eureka Drive on the south, conservation area on the west, and the East-West Expressway, and Tamiami Trail on the north. (HU Ex. 4). HUMANA chose "D-2" and "D-3" as the appropriate health care planning area for determining need for its proposed hospital. District "D," however, is a more appropriate and reasonable area to use in determining need for the proposed HUMANA hospital. (TR 203, 258; 145-146, VOL 4; 56-57, VOL 5). The entire area of District "D" may be traversed, by car, in approximately 30 minutes, the roads are adequate, and there are numerous hospitals in the district which are easily accessible to its residents. (TR 57-58, 66, 77-78, VOL 5). Hospitals located in one part of District "D" are readily accessible to patients who reside in other areas of the District. HUMANA's bed-need analysis fails to adequately take into account hospitals within "D-1" or which are outside the District but are readily accessible (within 30-minutes driving time) to the majority of residents in "D- 2" and "D-3." (TR 145-146, VOL 4). Existing hospitals which are readily accessible to residents of a proposed service area cannot be reasonably excluded merely because they are located outside a theoretical boundary line. (TR 145- 146, VOL 4). A health planning area should be the area where most of the residents seek health care. (TR 615; 78-79, VOL. 5). Hence, a proposed health planning area should be tested against the actual hospital use of its residents and the accessibility of existing hospitals to those residents. The residents of District "D" travel freely within District "D" in seeking hospital care. South Florida Hospital Association Utilization and Patient Origin Program ("HUPOP") data show that approximately 60 percent of the patients residing in subdistricts "D-2" and "D-3" seek inpatient hospital care elsewhere. (TR 72, VOL 5; 616; AM Ex. 7 p. 19). 4/ There is a corresponding inflow of residents from outside "D- 2" and "D-3" who seek hospital care within "D-2" and "D-3". (TR 72, VOL 5). In comparison, approximately 70 percent of the residents of District "D" seek hospital care within the boundaries of the District and--of all the districts within the region-- District "D" has the highest percentage of residents who seek in-district hospital care. (TR 72-73, 79, VOL 5; AM Ex. 7, p. 19). In actual practice, then, the residents of District "D" heed the District boundaries but largely disregard subdistrict "D-2" and "D-3" boundaries. The residents of "D-2" and "D-3" have ready access to numerous hospitals providing a broad range of medical services. (TR 78, VOL 5). BAPTIST is a large general hospital with tertiary, secondary, and primary care services. With the exceptions of a burn center and a Level III neotology unit, virtually all health care services are provided. BAPTIST, AMERICAN, Coral Reef, South Miami, and Larkin hospitals provide health care services to residents of "D-2" and "D-3," within a 20-minute travel time. (BH Ex. 10, p. 1-13-19; BH Ex. 5 and 7). The few specialized services not available at these hospitals are provided at Jackson Memorial Hospital, within a 30-minute travel time. (BH Ex. 10, p. 1- 13). Accessibility of Existing Acute Care Hospitals Section 381.494(6)(c)(2), Florida Statutes (Supp. 1982), requires examination of the accessibility of existing health care facilities providing similar services to the same health service. The generally accepted standard for determining accessibility, found appropriate here, is whether general hospital beds are available to the service area's population within 30-minutes travel time by automobile, under average traffic conditions and for non- emergency purposes. This standard is used by HSAs and DHRS is used by federal health care planners, and is widely used by professional health care planners. (DHRS Ex. 1; BH Ex. 10, p. 1-10-13; TR 90, 123, 144, 166, 193; 85, 133-134, VOL 4; 58, 77, VOL 5). Applying this standard, seven hospitals are reasonably accessible to residents of HUMANA's proposed service area: AMERICAN, BAPTIST, Coral Reef Hospital, South Miami Hospital, Larkin Hospital, Doctors' Hospital, and Jackson Memorial Hospital. District "D" contains eleven hospitals, with a total of 2,882 licensed beds. (AM 3, p. 41; 4, p. D-3). Moreover, five of these, AMERICAN, BAPTIST, Coral Reef, Larkin, and South Miami, are even closer, within 20-minutes average travel time. (BH 5, p. 11). There is no evidence that the residents of "D-2/D-3", or District "D," as a whole, have any difficulty using or gaining access to these hospitals. Beds are available. The five hospitals closest to HUMANA's proposed service area, AMERICAN, BAPTIST, Coral Reef, South Miami, and Larkin, have a total of 1,825 licensed beds, 326 of which are not in service; of the 1,499 beds in service, 109 are not used. So there are 435 licensed beds, within 20-minutes of "D-2/D-3," not in service or not in use due to lack of demand. (BH Ex.10, p. I- 26, 5, 7, 10, p. I-26-28). Occupancy Standard for Determining Need The generally accepted occupancy standard for hospitals, used in deciding if additional beds are needed, is the 80 percent average annual occupancy rate. This standard is included in the 1981 Florida State Health Plan, is used by DHRS and HSAs, and is widely used by professional health care planners. Its use is appropriate here. (AM 135, VOL 2; TR 90-91; 95-97, 118, 132, 140, 165, 172, 313, 469; 141, VOL 4). In application, it means that additional hospitals should not be built until existing hospitals providing acceptable care to the proposed service area are operating at or above an 80 percent occupancy rate--the level at which hospitals, generally, operate most efficiently. In 1982, none of the eleven hospitals in District "D" met the 80 percent occupancy standard. (DHRS Ex. 1, AM Ex. 3, p. 7). In 1981, the five hospitals closest to HUMANA's proposed site had an average annual occupancy rate of 60.9 percent. (BH Ex. 10, p. I-24). Moreover, this excess is sufficient to meet the future health care needs of residents of "D-2/D-3" and District "D," as a whole. BAPTIST and AMERICAN will not achieve 80 percent occupancy until after 1988; AMERICAN is projected to have an occupancy of only 63.61 percent in 1990. (AM Ex. 3, p. 8; BH Ex. 10, p. 10, I-24). Availability of Resources to Build and Support Proposed Hospital Section 381.494(6)(c)(7) also requires consideration of whether there will be available adequate resources to support a new hospital, including manpower and financial resources. The evidence establishes, without contradiction, that HUMANA has sufficient funds to construct and operate its proposed hospital. The projected cost of the hospital, including equipment, is $29,175,500--70 percent to be funded by debt, the remainder by equity funds. HUMANA has, on hand, approximately $225 million in cash and cash equivalents. (TR 709, HU Ex. 2). The design of the proposed hospital will be based on HUMANA's "prototype" 150-bed facility, developed from years of experience in hospital design construction, and operation. The design is efficient and economical, and will permit a 50-bed expansion without further construction. (TR 714-716, 720, 719, HU Ex. 9). The parties agree that HUMANA has the ability to enlist or employ sufficient physicians and management personnel to staff the proposed hospital. (STIP, para. 3). HUMANA also has the ability to hire and retain an adequate nursing and technical staff. It recruits such personnel, routinely, on a national basis and transfers employees within its hospital system. Moreover, it has a mobile nurse corps, a group of nurses which are available on an as-needed basis, to help staff its south Florida hospitals during peak winter months. Historically, HUMANA has successfully recruited and retained nurses in its south Florida hospitals. (TR 772, 776-777, 781-782, 801-802, VOL 4). Projected Population of Service Area As already mentioned, under the preferred demand-based bed-need methodology, population is projected over a five-year planning horizon, for hospital facilities. This is because an increase in a service area's population will generate a need for more beds. The population of the Kendall area of south Dade County has been growing rapidly, and is expected to continue to do so through 1990. This population is younger than the population of Dade County or HSA IX, as a whole. The population projections for District "D" (the appropriate health planning area for the proposed hospital) by age groups are: District D 1987 1990 Under 15 92,301 96,506 15 to 64 357,567 327,652 65 and over 52,188 55,822 TOTAL (AM 3; TR 59-61, VOL 5; 488 VOL 3) 502,056 529,980 I. Hospital Use Rate Under the demand-based methodology, found acceptable here, once the planning area is designated and the population projected over a five-year planning horizon, a hospital "use rate" is calculated. The "use rate" is the rate at which people use hospitals, expressed in terms of the number of patient days per thousand residents residing in the health service area. This rate can be derived using various factors. Those factors most appropriate for use in this case are "age" and "service-specific" uses. (TR 66 VOL 5; 497-498 VOL 3). "Age-specific" use rates, reflecting historic hospital use rates by age group, are applied to the projected population to determine total patient days. This factor takes into account the fact that people 65 or older utilize hospitals at a rate three to four times that of people under 65. This is particularly significant here since the Kendall area population is younger than the population of Dade County, HSA IX, or the state, as a whole. (TR 58-59, VOL 5; AM 3, p. 12). In 1981, the age-specific use rate for HSA IX reflects a use rate of 1,524.6 patient days per thousand population. (AM 3, p. 63). "Service-specific" use rates are derived from historical use of particular hospital services, such as psychiatry, obstetrics, pediatrics, and medical-surgical. (AM 3, pp. 14-15, 70-72). The 1981 service-specific use rate, covering all services, for HSA IX was 1,524.6 patient days per thousand--a figure equal to the age-specific use rate. (AM 3, p. 14-15, 71). J. Calculation of Future Bed Need for District "D" In 1982, there were 2,882 licensed non-federal beds in District "D." Taking into account an 80 percent occupancy rate, and applying the HSA age- specific use rate to the projected population of District "D" yields a need for only 2,282 beds per day in 1987, and 2,419 beds per day in 1990. Hence, there will be an excess of 600 beds in District "D" in 1987; 554 in 1988; and 463 in 1990. (AM 3, p. 41, 69; TR 63, VOL 5). Similarly, applying the HSA IX service- specific use rate to the projected District "D" population results in a bed excess of 232 beds in 1987 and 87 in 1990. (AM 3, p. 74). Significantly, these projected bed excesses are, if anything, understated. This is because the HSA IX hospital use rate was utilized. Hospital use is greater in HSA IX, with its older population, than in District "D," where the population is younger and less likely to be hospitalized. (TR 61-62, VOL 5). HUMANA, in its analysis, applied age and service-specific use rates to the projected population of "D-2/D-3," concluding that there would be a need for 238 additional beds in 1988. This conclusion, however, is unconvincing since "D-2/D-3" is unduly restrictive and the 235 unused beds of South Miami and Larkin Hospitals, both located in "D-1," are not fully considered. (DHRS 1, p. 370; AM 3, p. 18). (Both hospitals are within a 20-minute average travel time from selected points in "D-2/D-3.") (TR 544, VOL 3; 612, VOL 4). By failing to properly account for empty beds at nearby hospitals, and by unreasonably limiting its planning area, HUMANA overstates the need for additional hospital beds in District "D." Moreover, even assuming the propriety of "D-2/ D-3," HUMANA failed to properly take into account the 260 beds of Coral Reef Hospital, a "D-2" hospital. If Coral Reef Hospital beds are correctly included within "D-2/D-3," HUMANA's projected bed-need decreases from 238 to 129 beds in 1988. (TR 80, VOL 5). Finally, Thomas W. Schultz, HUMANA's health care planning expert, admitted that a figure of 1,038 patient days per thousand patients would be "useful" in establishing bed-need for "D-2/D-3." (TR 501, VOL 3). Applying that use rate, and correctly including Coral Reef Hospital, results in a projected "D-2/D-3" need of 36 additional beds in 1988. (TR 83-84, VOL 5). HUMANA does not propose to construct a 36-bed hospital and such a hospital has not been shown to be feasible.
Recommendation Based on the foregoing, it is RECOMMENDED: That HUMANA's application for a Certificate of Need to construct a hospital in the west Kendall area of Dade County, Florida, be denied. DONE and ENTERED this 25th day of May, 1983, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of May 1983.
The Issue Kindred Hospitals East, LLC (Kindred) filed CON Application 9831 with the Agency for Health Care (AHCA or the "Agency"). The application seeks the establishment of a 60-bed Long Term Care Hospital (an "LTCH") in Volusia County, AHCA Health Care Planning District 4. The Agency preliminarily denied the application. Kindred has challenged the denial. The issue in this case is whether the application should be approved.
Findings Of Fact The Parties Kindred, the operator of 22 LTCHs, is a wholly-owned subsidiary of Kindred Healthcare, Inc. Through its subsidiaries, Kindred Healthcare, Inc., operates 75 LTCHs nationwide, seven of which are in Florida. Of the seven Florida facilities, Kindred operates six. If CON Application 9831 is approved and the proposed facility becomes operational, therefore, Kindred will become the operator of 23 LTCHs, seven of which are in Florida. The Agency is the state agency responsible for administration of the Certificate of Need program. See § 408.031, Fla. Stat., et seq. Kindred North Florida and District 4 Kindred currently operates a 40-bed freestanding LTCH in Clay County ("Kindred North Florida"). Although in Clay County, Kindred North Florida is considered by Kindred to be in the area of Jacksonville or Duval County, a center of population greater than Clay County's. Kindred proposes to build and operate the project subject to CON Application 9831 in Volusia County, approximately 80 miles south of Kindred North Florida. Volusia County is one of seven counties that comprise District 4, a health service planning district established by the Health Facility and Services Development Act. In addition to Volusia, Clay, and Duval Counties, the other counties that make up District 4 are Baker, Nassau, St. Johns, and Flagler. Stipulated Facts The parties have stipulated to the following facts: Kindred's CON application complies with statutory and rule application content, submission, filing fee and review process requirements; and the Agency's review complied with review process requirements. Kindred has the ability to provide a quality LTCH program. Kindred has the necessary resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation. Kindred's project is likely to be financially feasible. Kindred's proposed costs and methods of construction are reasonable. There are no disputes regarding Kindred's proposed provision of services to Medicaid patients and the medically indigent. The statutory criterion relating to nursing home beds is not applicable. Kindred complied with the letter of intent requirements found in AHCA rules. AHCA did not at the time of review, and currently does not, calculate a fixed need pool for LTCH beds. Amended Stipulation, at pp. 4-6. LTCH Services The length of stay in the typical acute care hospital (a "short-term hospital") for most patients is three to five days. Some hospital patients, however, are in need of acute care services on a long-term basis ("LTCH services"), that is, much longer than the average lengths of stay for most patients. Patients in need of LTCH services often have lengths of stay in the hospital that exceed the typical three-to-five day stay in a short-term hospital by 20 to 22 days or more. Some patients who exceed the usual short-term lengths of stay by similar lengths are not appropriate for LTCH services. Their stays are regarded more as custodial in nature. Those in need of LTCH services, whose stays are not custodial, however, are generally better served in an LTCH than in a short- term hospital. Patients appropriate for LTCH services represent a small but discrete sub-set of all inpatients. They are differentiated from other hospital patients in that, by definition, they have multiple co-morbidities that require concurrent treatment. Patients appropriate for LTCH services tend to be elderly, frail, and medically complex and are usually regarded as catastrophically ill. Some LTCH patients, however, are not elderly. These younger LTCH patients are often victims of trauma. Whatever the age of LTCH patients, they are typically medically unstable for their entire hospital stay. Because of their status as medically unstable, complex and seriously ill, they require extensive nursing care and daily physician oversight. Very often their care involves some sort of technologically advanced support such as a ventilator. Case Mix and Patient Acuity A "case mix index" for a hospital is a measure of its average resource consumption. Resource consumption can be viewed as a surrogate measure of complexity and severity of illness. The case mix index of Kindred hospitals is high compared to the entire LTCH industry and, as would be expected, is higher than the average case mix index for short-term hospitals. A way to further refine the variation of patients' acuity within a diagnostic related group (DRG) is through the APRDRG system. Not routinely used in hospitals, it is a tool of health services research. The system assigns not only a DRG but a severity of illness as well on a scale of one (minor severity) to four (extreme severity.) Applying the system to Kindred's database as well as to federal data confirms that the distribution of severe and extremely severe cases is skewed toward LTCH patients. This confirmation is consistent with empirical observation that patients in LTCHs are sicker on average than those in general hospitals. A third measure of patient acuity routinely used in Kindred hospitals is an APACHE score. It was described by Dr. Muldoon in his deposition testimony in the following way: [A]n APACHE score . . . is a combination of physiologic derangement and concurrent illnesses. While not universally applied to the LTAC [sic] population, it is a routine measurement in Kindred Hospitals. Using that indicator, we find that the average Kindred patient has an APACHE III score of about 45, whereas the average critical care patient in all of short-term acute care has a score about two-and-a-half points higher. This further supports the observation that LTACs [sic] in the Kindred portfolio treat a severely ill population only a few points, on the APACHE measure, below that of critical care units across the country. (Kindred Ex. 2, p. 15). The comparisons of acuity levels between LTCHs in general and short-term hospitals or Kindred LTCHs and short-term hospitals, while they show that the Kindred LTCH population is at a higher acuity level than patients in short-term hospitals, do not prove that Kindred LTCH patients are all appropriate for LTCH services. The Agency does not by rule define the level of acuity for admission of a patient to an LTCH. Nor has it done so by order. Information on acuity level of patients in short- term hospitals is not available through the AHCA's health statistics data base. That acuity levels are higher for Kindred's LTCHs than short-term hospitals does not necessarily mean that all patients admitted to Kindred hospitals are appropriate LTCH patients. One of the bases Kindred advances for why LTCH beds are not available in the district, despite low occupancy rates of Specialty Hospital of Jacksonville (Specialty or "Specialty Jacksonville") for the last several years (see paragraph 36, below), is that Specialty lowers utilization of its beds by restricting admission to patients of higher acuity than threshold LTCH acuity. The assertion does not prove that LTCH beds are unavailable in District 4. Rather, it begs a series of questions: does Specialty refuse patients with LTCH-appropriate acuity levels, does Kindred admit some patients whose acuity level would allow them to be served appropriately in an alternative post-acute care setting, or is the answer a combination of both? Districts Without LTCHs: Restricted Choice In those health care planning districts that do not have LTCHs, hospital patients in need of long-term acute care typically have little choice but to stay in the short-term hospital. The short-term hospital is usually dissatisfied with such an arrangement and short-term hospital staff, oriented toward stabilizing and treating the patient on a short-term basis, may lose interest in the patient after the patient exceeds the average length of stay associated with the patient's diagnosis. The patient can opt to transfer to an LTCH a long distance from home or to be treated in a setting that is less than appropriate for their level of acuity such as a skilled nursing unit of a nursing home. Neither option presents much appeal to the patient in need of LTCH services or the patient's family. Transfer to a distant LTCH is difficult and inconvenient for the patient's family. Consequently, such a transfer creates a hardship for the patient in need of family visits. Such a transfer also presents the possibility of one of two less-than-optimal results: the family loses contact with the loved one or family members have to relocate to the area of the LTCH. Re-location frequently entails significant hardship. Opting for a nursing home in the family's locality is not adequate for a patient in need of LTCH services. With the intensive nursing and daily physician oversight LTCH services entail, a skilled nursing unit in a nursing home is not an adequate setting. Its medical services, quite simply, are not of adequate intensity to the true potential LTCH patient. This difference is but one of several between LTCHs and other providers. Differences between LTCHs and Other Providers Short-term hospitals and LTCHs do not have the same purpose. The gap is widening between the two. Over the last 20 years, short-term hospitals have evolved into setting that stabilize patients, diagnose, and develop treatment plans. Most admissions to the medical ward of a short-term hospital are through the emergency room where patients are so acute and so unstable that emergency care is required. In their role as diagnostic centers, short-term hospitals provide imaging and laboratory services and then develop a treatment plan based on the diagnostic work-up performed. Short-term hospitals have moved away from the function of carrying out a treatment plan. This is borne out by lengths of stay in short-term hospitals growing shorter over the last 20 years. Lengths of stay now average three to five days. As a result, short-term hospitals have limited capability to provide a prolonged treatment plan for patients with multiple co-morbidities. In contrast, LTCHs do not hold themselves out to be diagnostic or stabilization centers. LTCH have developed expertise in caring for the small subset of patients that require a prolonged treatment plan. A multi-disciplinary physician-based care plan is provided in LTCHs that is not provided in short-term hospitals or other post-acute settings. If there is no LTCH readily available to provide a hospital-level discharge, then the short-term hospital must either keep the patient or discharge the patient to a setting that is less than appropriate for the patients needs. If the hospital keeps the patient, it is often not staffed to give the patient the amount of therapeutic rehabilitation required. The patient is not stable enough to transfer to a comprehensive medical rehabilitation facility. The patient that qualifies for an LTCH has a very different set of needs from many patients in the intensive care unit and/or medical-surgical (med-surg) beds in a short-term hospital. A very low percentage of all med-surg patients are appropriate for LTCH services. Placing these patients in an LTCH preserves the resources of short-term hospitals and encourages their financial health, which are outcomes driven by Medicare Prospective Payment System (PPS) that provides incentives to discharge patients from short-term hospitals as quickly as possible. Skilled nursing facilities (SNFs) and LTCHs are different both in intent and execution. Stable patients who require minimum medical intervention, whose primary needs are nursing and who are unlikely to become unstable, are appropriate for SNFs. Conversely, LTCHs are appropriate when daily medical intervention is required. Access to diagnostics, laboratory, radiology and pharmacy services make LTCHs better able to respond to changes in conditions and care plans than SNFs. Comprehensive medical rehabilitation hospitals (CMRs) and LTCHs are distinctly different. Geared for patients with primarily neurologic or musculoskeletal orthopedic issues, the CMR care model is based on physical rather than internal medicine that requires a minimum of three hours per day of physical therapy. Internists, therefore, are required to oversee LTCHs rather than other types of medical doctors. While rehabilitation is a concurrent component of an LTCH, patients appropriate for an LTCH bed, because of their medical conditions, cannot tolerate the three hours per day of therapy per patient conducted at a CMR. A CMR may be an appropriate facility after a stay in an LTCH when the patient has improved to the point where typical CMR therapy can be tolerated. Home health care is no substitute for LTCH care needed by patients appropriate for admission to an LTCH. By definition, LTCH patients meet criteria for inpatient hospitalization. Home health care is designed for patients who are stable and have limited medical needs that can be administered by nurses or families that visit or are in the patient's home. In sharp contrast, LTCH patients require many hours a day of nursing, respiratory, and other therapies under the direct care of a physician. On the basis of regulation alone, short-term hospitals can provide LTCH-type care. Generally, however, they do not. Because of Medicare's PPS, short-term hospitals have evolved into centers of stabilization and diagnosis, where care plans are initiated but not carried out fully. With such an orientation, short-term hospital staff often cannot sustain the focus and interest in a patient whose length of stay greatly exceeds the average length of stay for patients with the same diagnosis. Case studies bear out that when patients who are not progressing in a short-term hospital are transferred to LTCHs, where a multi-disciplinary approach replaces the diagnostic focus, the patients improve in both medical and physical well- being. In short, in the health care continuum, LTCH care constitutes a component dedicated to catastrophically ill and medically complex patients in need of acute care services that exceed by a considerable amount the average length of stay of those patients in a short-term hospital. Typically medically unstable for the entire time of stay in the short-term hospital, these patients require extensive nursing care with daily physician oversight usually accompanied by some type of technologically advanced support. Federal Government Recognition of LTCHs The federal government recognizes the distinct place occupied by LTCHs in the continuum of care based on the high level of LTCH patient acuity. The PPS of the federal government treats LTCH care as a discrete form of care. LTCH care therefore has its own system of DRGs and case mix reimbursement that provides Medicare payments at rates different from what PPS provides for other traditional post-acute care providers. Medicare and the PPS System The federal definition of a "long term care hospital" is a hospital whose average length of stay for Medicare patients is greater than 25 days. The 25-day length of stay requirement only applies to Medicare patients, not to non-Medicare, such as commercial patients; some of Kindred's LTCHs have a substantial number of commercial pay patients where the average length of stay is not 25 days. The federal government clearly identifies LTCHs as hospitals, separate from SNFs, CMR hospitals, and short-term hospitals. The very earliest LTCHs were primarily chronic care hospitals, but over the past 20 years the LTCH has evolved into a place where people are cared for who require an extended stay in a hospital, not a SNF or CMR facility, and who will benefit from extra therapeutic care, nursing, and equipment that is more orientated toward therapy than the stabilization and diagnosis of acute conditions provided by short-term hospitals. The basic concept of the Medicare PPS is the classification of patients into DRGs based on the services they need and the expenditures the hospital will make to care for the patient. The federal government analyzes these patients by group and identifies what the average cost is for each kind of patient. The classification of the patient by DRG determines the amount the Medicare program will pay the hospital for caring for that patient. As an example, if a patient comes to a short- term hospital and, based on diagnosis and intensity, is classified in DRG 13, there is a certain payment rate attached to that DRG, and that payment rate will be different from a DRG 14 or 15. The weights determine whether a hospital is paid more or less than the average for a certain type of patient. PPS was designed for Medicare patients, but payers other than Medicare including Medicaid, commercial insurance, and managed care, now also reimburse hospital providers and SNF providers as some function of the PPS. Each sector of the health care industry has a some what different payment system. DRGs were first developed for short-term hospitals, and there are hundreds of DRGs used to determine reimbursement. Not designed to measure acuity and tied to the amount of Medicare reimbursement, DRGs relate to resource utilization. The difference between reimbursement for an LTCH and a short-term hospital has to do with the average rate, which is a figure that varies somewhat from market to market based on labor costs, and the weight which is attached to each of the DRGs. The rate times the weight determines the reimbursement. When a patient is in a short-term hospital much longer than a few days past the average length of stay that the federal government has established for that DRG, financial loss for the hospital mounts. The federal government recognized that problem. It has developed a system using an "outlier" reimbursement, an add-on to the normal DRG payment for a patient who stays for an unusually long time. But, the outlier payment is calculated to recover only 80 percent of what the federal government estimates to be the hospital's true costs. In response to the PPS system, short-term hospitals have to manage their patients very closely. If a patient falls into the outlier category and is going to be hospitalized substantially longer than the average, short-term hospitals can lose a significant amount of money, so short-term hospitals are constantly searching for discharge options for their patients. Every day of utilization that a short-term hospital can save benefits the short-term hospital financially; as a result, hospitals invest significant effort into developing case management, utilization review, and clinical management departments. Effective October 1, 2002, the Centers for Medicare and Medicaid Services (CMS) implemented categories of payment designed specifically for LTCHs, the "LTC-DRG." The LTC-DRG is a sign of the recognition by CMS and the federal government of the differences between short-term hospitals and LTCHs when it comes to patient population, costs of care, resources consumed by the patients and health care delivery. Existing LTCHs in District 4 There are currently two licensed LTCHs operating in District 4: Kindred's Green Cove Springs facility ("Kindred North Florida") in Clay County and Specialty's Jacksonville facility in Duval County. Kindred North Florida is approximately 80 miles (and a 1.5 hour drive) from Daytona Beach where Kindred intends to locate its proposed Volusia County facility. Specialty Jacksonville is within 85 miles of Kindred's proposed facility. The LTCH occupancy and utilization rates for District 4 is below 70 percent. Kindred North Florida is a 40-bed LTCH. Specialty Jacksonville is a 107-bed LTCH. Specialty Jacksonville has an occupancy rate that has been consistently below 60 percent. The most recently available data shows an occupancy rate for Specialty of 56 percent. In recent years, it has been even lower. Kindred North Florida has been operating near or above optimal occupancy. Specialty has not. Beds are available within the district. CON Application Process Kindred submitted CON Application 9831 in the first CON Application Review Cycle of 2005. Kindred was the only applicant for an LTCH CON in District 4 for the batching cycle. The Agency evaluated the application and reported the evaluation in a State Agency Action Report (SAAR) issued on June 1, 2005. The SAAR recommended denial of Kindred's application. A basis for the denial of Kindred's application is summed up in the "Need" section of the SAAR: The applicant intends to focus on the provision of complex LTCH services (many requiring ventilator/pulmonary services) and contends patients remain in less appropriate settings in District 4. It maintains that Volusia County is an appropriate service area for this project due to the travel distance to a current LTCH. Although support letters state that many patients would have benefited from LTCH services, the disposition of these patients is not known and access problems to LTCH services was not shown. The applicant did not demonstrate that area residents are unable to access needed care or that care currently being provided is inappropriate. The applicant's need analysis did not solely consider high acuity patients that are LTCH appropriate that could not be more appropriately treated in lower cost long- term care facilities such as nursing homes and rehabilitation hospitals. As stated earlier, CMS announced that it plans to make changes in its reimbursement to LTCHs this fall with other updates planned for October 1, 2005. The applicant stated opposition when another LTCH proposed to establish a hospital in this area indicating that its Clay County facility would be adversely impacted and that the establishment of a third LTCH in District 4 would be a duplication of services. AHCA Ex. 1, p. 28. On June 1, 2005, AHCA adopted the SAAR's recommendation that Kindred's application be denied. Kindred timely challenged the denial of its application and its petition was referred to DOAH for formal administrative proceedings. Post-stipulation Issues The parties have resolved a number of potential issues by way of the Amended Stipulation. The remaining issues relate to need, access and competition. LTCH Need Methodology and AHCA's Concerns The Agency has not adopted a need methodology for LTCH services. Consequently, it does not publish fixed need pools for LTCHs. In response to a rise in LTCH application over the last several years, the Agency has consistently voiced concerns about identification of the patients that appropriately comprise the LTCH patient population. Because of a lack of specific data from applicants with regard to the composition of LTCH patient populations, AHCA is not convinced that there is not an overlap between the LTCH patient populations and the population of patients served in other healthcare settings. In the absence of data identifying the LTCH patient population, AHCA has reached the conclusion that there are other options available to those patients targeted by the LTCH applicant, depending on such matters as physician preference. In denying Kindred's application, AHCA relied in part on reports issued to Congress annually by the Medicare Payment Advisory Committee (MedPAC), that discuss the placement of Medicare patients in appropriate post-acute settings. The June 2004 MedPAC report (MedPAC Report) states the following about LTCHs: Using qualitative and quantitative methods, we find that LTCHs' role is to provide post- acute care to a small number of medically complex patients. We also find that the supply of LTCHs is a strong predictor of their use and that acute hospitals and skilled nursing facilities are the principal alternatives to LTCHs. We find that, in general, LTCH patients cost Medicare more than similar patients using alternative settings but that if LTCH care is targeted to patients of the highest severity, the cost is comparable. AHCA Ex. 9, p. 121 (emphasis supplied.) The MedPAC Report, therefore, concludes that LTCHs should "be defined by facility and patient criteria that ensure that patients admitted to these facilities are medically complex and have a good chance of improvement." Id. There is some gross administrative data to support the hypothesis that SNFs are a substitute for LTCHs; the data is limited, however, for drawing such a conclusion definitively. This is because of the wide variation of patient conditions that may be represented by a single DRG. Dr. Muldoon explained this in his deposition with the example of DRG-475, which groups patients who were on life support for 96 hours: [P]atients . . . under DRG-475 . . . may be discharged in conditions that vary greatly, ranging from an alert, talking patient, no longer on life support, to a patient who is not on life support making no progress. There is no[] administrative data that describes patients at the time of their discharge and therefore the MedPAC analysis was just unable, from a pure data point of view, to determine why some of those patients went to a higher versus lower level of care. Kindred Ex. 2, pgs. 24-25. While the conclusion that there is overlap is suspect, so is the conclusion that there is no significant overlap. The data is insufficient to conclude that there are only an insignificant number of LTCH patients who are not appropriate for treatment in another post-acute care setting. The data is insufficient to make one judgment or another. The SAAR also concludes, based on a letter from the MedPAC Chairman, that LTCH patients cost Medicare more on average than patients in other settings. This conclusion was also critically analyzed by Dr. Muldoon: [The comment] is based on an analysis that is unable to differentiate patients within a DRG based on their severity at the time of discharge. The limitation on the DRG is that it is designed to describe the patient's need at the time of admission rather than discharge. So there is no way to tell whether someone is in good shape or poor shape at the time of discharge. So lumping them together and then observing how much they cost, depending on their site of care, is a very rough cut. Kindred Ex. 2, pgs. 27-28. In contrast, for patients at the extreme of severity and complexity there is a trend for lower cost of care for patients whose care included long-term acute care. Again, however, that the very sickest patients may be treated at a cost in an LTCH comparable to the cost in the short-term hospital does not demonstrate that there are patients who would be admitted to an LTCH at an acuity level not appropriate for an LTCH. This latter category of patients, if it exists, would be treated less expensively in a short-term hospital or a non-LTCH post-acute care setting. Need Demonstration: the Applicant's Responsibility The Agency analyzes LTCH applications on a district basis1 but it does not provide a specific formula or methodology by rule for determining need for LTCH beds as it does with some other types of beds and health care services. Consequently, AHCA does not publish a fixed need pool for LTCH beds. Nor did AHCA provide Kindred with any policy upon which to determine need for LTCH beds. Florida Administrative Code Rule 59C- 1.008(2)(e) (the "Rule"), therefore, applies to Kindred's application: . . . If an agency need methodology does not exist for the proposed project: The Agency will provide to the applicant, if one exists, any policy upon which to determine need for the proposed beds or service. The applicant is not precluded from using other methodologies to compare and contrast with the agency policy. If not agency policy exist, the applicant will be responsible for demonstrating need through a needs assessment methodology which must include, at a minimum, consideration of the following topics, except when 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. Application of the Rule Population Demographics and Dynamics In assessing an area's population and demographics for the purpose of evaluating LTCH need, special attention is paid to the elderly population. The bulk of LTCH patients are patients over the age of 65 and on Medicare. Elderly patients in need of LTCH services do not heal as quickly as younger patients, are more difficult to wean from a ventilator, and do not improve through rehabilitation as quickly so that they can be discharged from the hospital setting. There are more than 100,000 "seniors," those 65 and over, in Volusia County. Seniors account for more than 20 percent of the county's population; the national average is between 12 and 13 percent. Volusia County was projected to have a senior population of 485,000 out of a total county population of 1.8 million as of January 1, 2005. According to AHCA population data, over the next five years Volusia's elderly population is expected to grow by another 10 percent. Volusia also accounts for a disproportionate share of all of the seniors in District 4. Its senior population is almost 40 percent of the senior population in the district. Availability, Utilization and Quality of Like Services In evaluating the availability, utilization and quality of like services under the rule, Kindred points out that there are a significant number of short-term hospitals in Volusia County and a relatively large senior population but no LTCH in the county. The LTCHs to which Volusia County residents have access are either in Orlando or the two other LTCHs in District 4: Kindred North Florida and Specialty Jacksonville. Access for Volusia County residents or patients in short-term hospitals in Volusia County was described at hearing by Clarence Joseph Wurdock, Director of Market Planning at Kindred Health Care: Both of these distances [to Orlando and the Jacksonville area] are very substantial. Orlando is more than an hour away, drive time, and then the Jacksonville hospitals [Kindred North Florida and Specialty] are 70 to 80 miles away. * * * So as far as access goes, it's not that Volusia County does not have access. The question is whether it's reasonable access for the majority of people who would benefit from the services that we offer. And given the distances involved, it would be very hard to argue that the typical potential long-term hospital patient of Volusia County really has access. Yes, we do get patients at our hospital in Green Cove Springs [Kindred North Florida], a few of them do go to Jacksonville Specialty and some of them go to Orlando, but generally, our understanding is that these patients tend to be the most acute, the patients who really need this type of care so much that they're willing -- they or their families are willing to go great distances for their care. On the other hand, the majority of long-term hospital potential patients, patient who would benefit from our services, who are still spending a fair amount of time in the short-term hospitals, those patients are at that point where they're not willing, they or their families are not willing to go that far, so consequently they're remaining in the short-term hospital. So there's an access problem. Tr. 70-71 (emphasis supplied). Of the two "Jacksonville area" LTCHs, Kindred North Florida has been operating around 90 percent occupancy; Specialty, licensed for 107 beds, according to most recently available data at 56 percent and for some time at various levels all below 60 percent. As Kindred concedes, reasonableness of access is a judgment call. See Kindred's Proposed Recommended Order, p. 20. Contrary to Kindred's present claim of "no reasonable access," Kindred North Florida indicated two years before the hearing that Volusia County patients had access in the District to LTCH services. See paragraphs 69 and 70, below. Relevant data has not changed in the two years between Kindred North Florida's statement and the final hearing in this case. A map in Kindred's CON application identifies the location of five short-term hospitals in Volusia County. The two largest (Halifax Medical Center and Florida Hospital-Ormond) are within two to five miles of Kindred's proposed location. Kindred's CON application contained letters of support from the CEOs of Halifax Community Health Systems and Florida Hospital Deland. Both hospital CEOs strongly support Kindred's application as a source of continued inpatient care for their medically complex patients. There were a number of letters of support in the application from Volusia physicians who have referred patients to Kindred North Florida in the past, and are familiar with Kindred's services and abilities. Medical Trends As to medical trends, as found earlier, LTCHs are recognized as a legitimate part of the health care continuum by the federal government. Medicare's PPS provides reimbursement for LTCHs under their own discrete set of DRGs so that reimbursement rates are different for LTCHs from short-term hospitals. LTCHs supplement acute care following the short-term hospital stay and they are complementary to SNFs and other post- acute care providers. The trend is for LTCHs to be increasingly used to meet the needs of patients in other settings who for a variety of reasons are better served in LTCHs. Market Conditions Market conditions do not favor the application. The occupancy rate overall in the District indicates that beds are available. Of the two "Jacksonville area" LTCHs, Specialty has had an occupancy rate below 60 percent. According to "data over the past few years . . . [it has] been operating at that level for some period of time."2 (Tr. 73). It is reasonable to assume that Volusia County patients in need of LTCH services and their families, no matter how inconvenient or what hardship may be entailed, will seek admission to the existing LTCHs in the District or to Orange County facilities if LTCH services are truly needed and valued. Other changes in the market that have occurred in the last several years also diminish Kindred's case. Besides approval to Kindred-North Florida to add another 20 beds at its facility in Clay County, additional beds can now be added by existing LTCH facilities at will. These include both the Kindred-North Florida facility and the Specialty facility. Kindred's claim of favorable market conditions is undercut, moreover, by recent objections to two other District 4 LTCH applications on the basis that there was no need in District 4, and the implication, if not direct statement, that there is no access problems for Volusia County residents in need of LTCH services. In a letter on Kindred Healthcare letterhead, dated April 12, 2004, Mr. Wurdock wrote: On behalf of Kindred Hospital North Florida, this letter is submitted in opposition to the Certificate of Need application (action number 9752) filed by Select Specialty Hospital - Duval, Inc. to establish a long- term acute care hospital of up to 40 beds at Shands-Jacksonville Medical Center. Kindred Hospital North Florida has consistently provided high quality long-term acute care in District 4 for many years. Approval of an application for an additional long term hospital in District 4 will have a significantly adverse impact on the future of Kindred Hospital North Florida and will result in a wasteful duplication of services in District 4. In January of 2004, the Agency for Health Care Administration (AHCA) granted Kindred Hospital North Florida a Certificate of Need to add 20 beds, increasing our total offering to 80 beds and enhancing our capacity to serve the residents of District 4. Including this bed increase, the long- term acute care occupancy of District 4 is approximately 59 percent. Utilizing existing providers is the most cost- effective option for the district, thus eliminating any duplication of services and minimizing additional start-up costs. The occupancies of existing providers in the district clearly indicate there is not a need for an additional long-term acute care hospital in District 4. AHCA Ex. 4, page 1 (emphasis supplied). Less than six months earlier, Mr. Simpson in a letter dated October 31, 2003, on Kindred Hospital North Florida letterhead, objected to a Volusia County LTCH CON application: On behalf of Kindred Hospital North Florida, I submit this letter in opposition to the Certificate of Need application (action number 9706) filed by SemperCare of Volusia, Inc. to establish a long-term acute care hospital of up to 50 beds at Florida Hospital Oceanside. Kindred Hospital North Florida has been providing high-quality long-term acute care in District 4, including many patients in Volusia Count, for the past nine years. Approval of an application for an additional hospital in District 4 will have a significant adverse impact on the future of Kindred Hospital North Florida and will result in a wasteful duplication of services in District 4. In December 2002, the Agency for Health Care Administration (AHCA) granted Kindred Hospital North Florida with preliminary approval to add 20 beds, increasing our total offering to 80 beds and enhancing our capacity to serve the residents of District 4. Including this bed increase, the long- term acute care occupancy of District 4 would be approximately 59 percent (Kindred Hospital North Florida: 68 percent and Specialty Hospital Jacksonville: 52 percent - Florida Hospital Bed Service Utilization by District, July 2003). Utilizing the existing providers is the most cost effective option for the district, thus eliminating any duplication of services and minimizing additional start-up costs that are ultimately passed on to the consumer. The occupancies of existing providers in the district clearly indicate there is not a need for an additional long-term acute care hospital in District 4. Kindred Hospital North Florida has a strong working relationship with hospitals in Volusia County. In 2002, approximately 26 percent of our patients were referred from hospitals in Volusia County. AHCA Ex. 5 (emphasis supplied). The evidence, as a whole, in this proceeding supports the claims made by Kindred North Florida in the two letters. Data has not changed significantly, moreover, since the letters were written. By way of explanation of its earlier position, Kindred pointed out that at the time of the submission of the letter opposing the establishment of a Volusia County LTCH, neither it nor Kindred North Florida had conducted a detailed need analysis for Volusia County. A need analysis conducted subsequent to the statement of opposition to a Volusia County LTCH is presented in the CON application in this proceeding. It includes Kindred's need methodology. Kindred's Need Methodology The need methodology employed by Kindred is a variation of commonly used and accepted methodologies3 in the LTCH industry for determining need in a proposed service area. In this case the proposed service area is Volusia County. The methodology provides a multi-step process. It begins with the examination of AHCA discharge data for short- term hospitals. Kindred began the process in this case, therefore, with identification of short term hospital patients in Volusia County and limited this population to Florida citizens. The methodology incorporates two assumptions: one, that patients will require five days to transfer from the short term hospital after the geometric mean of the length of stay (GMLOS) for the patient's DRG and that the patient will be in the LTCH for at least 10 days. The result of the assumptions in Kindred's calculation in this case is that the potential pool of Volusia County LTCH patients "had to have exceeded their [GMLOS] by more than two weeks." Tr. 88. Application of the assumptions to AHCA's database, therefore, arrived at a population "that could reasonably be expected to be long-term hospital admissions." Tr. 88. For that population, a population that exceeded the GMLOS by more than two weeks, the Kindred summed up the number of days the population spent in the hospital in excess of the GMLOS plus five days as required by the methodology. This sum equaled potential LTCH days. This grand total of days was divided by the number of days in a year, 365, as called for by the methodology. The calculation for the twelve month period ending in March of 2004 yielded an average daily census of 40.8. The methodology further considered Volusia County patients receiving services at Kindred North Florida. When they were added into the calculation, the average daily census of potential LTCH patients from Volusia County increased to 47.2. The methodology includes the impact of future population growth at an 8.2 percent rate. This yielded an additional average daily census of 3.9 so that the potential average daily census increased to 51.1. As a final step, the methodology assumes operation of a new LTCH at an 85 percent occupancy rate. Application of this assumption yielded a bed need in Volusia County of 60 beds. The methodology assumes that 100 percent of the eligible pool of potential LTCH patients are going to be referred to an LTCH. Kindred concedes that the actual referral rate is likely to be less than 100 percent and certainly so in the beginning. Kindred's application, therefore, provides a ramp up period. Kindred believes furthermore that the less than 100 percent referral rate is offset by patients that do not come from acute care hospitals. Application of the methodology in this case is flawed. It is also not applicable legally to this CON case. The methodology is flawed in this case first because it does not account for beds available elsewhere in the District. Kindred postulated that Specialty's sub-60 percent occupancy rates are due to Specialty's decision to limit utilization of the number of beds far below the licensed capacity for beds. This assertion by Kindred is rejected as unsupported by adequate proof. See endnote 2, below. The methodology, moreover, determines need generated solely by and within Volusia County, one county in District 4, a multi-county district. Consistent with the CON Law, AHCA approaches LTCH need on a district-wide basis. Methodologies for LTCH bed need on a county basis in a multi-county district have been held by AHCA to be invalid to legally establish need for CON purposes. See Select Specialty Hospital-Marion, Inc. vs Agency for Health Care Administration, Case No. 04-0444CON (DOAH October 31, 2005, AHCA December 21, 2005). Competition Kindred concedes that "[h]aving an LTCH in Volusia County would not foster competition in the traditional sense." Kindred's Proposed Recommended Order, p. 33. The Agency did not intend to give considerations of competition much weight in this proceeding.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Agency for Health Care Administration deny CON application No. 9831 filed by Kindred Hospitals East, LLC. DONE AND ENTERED this 20th day of January, 2006, in Tallahassee, Leon County, Florida. S DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of January, 2006.
The Issue The issue for determination is whether Respondent committed the offenses set forth in the Amended Administrative Complaint and, if so, what action should be taken.
Findings Of Fact At all times material hereto, Harmony Health Center was a skilled nursing facility operating at 9820 North Kendall Drive, Miami, Florida, and was licensed under Chapter 400, Florida Statutes. On December 5, 2003, AHCA conducted a survey of Harmony Health Center during which three deficiencies were found, one Class I deficiency and two Class II deficiencies. As a result of the deficiencies being found, AHCA filed an Administrative Complaint against Harmony Health Center. Subsequently, AHCA filed an Amended Administrative Complaint, citing two Class II deficiencies. Count I: Failure To Ensure That A Resident Entering The Facility Without A Pressure Sore Does Not Develop One Resident No. 31 was admitted to Harmony Health Center on May 9, 2003. Her records at Harmony Health Center indicate that she had suffered a stroke, paralyzing her on the left side, and that she had a swallowing problem, abnormally high blood pressure, and a feeding tube. Resident No. 31's records did not indicate that she had a pressure sore upon admission. An initial nursing assessment was performed on Resident No. 31 at the time of admission. Relating to pressure sores, the nursing assessment indicates that a Braden Scale for Predicting Pressure Sore Risk (Braden Scale) was performed. The Braden Scale is scored, with the lowest being 6 and the highest being 23, and has six categories, which are Sensory Perception-- ability to respond meaningfully to pressure-related discomfort; Moisture--degree to which skin is exposed to moisture; Activity- -degree of physical activity; Mobility--ability to change and control body position; Nutrition--usual food intake pattern; and Friction and Shear. As to Friction and Shear, Resident No. 31 received a score of one, which designates a "Problem" and states as follows: "Requires moderate to maximum assistance in moving. Complete lifting without sliding against sheets is impossible. Frequently slides down in bed or chair, requiring frequent repositioning with maximum assistance. Spasticity, contractures, or agitation leads to almost constant friction." Resident No. 31 received a total score of 12 on the Braden Scale. As to scoring, the Braden Scale provides, among other things, that a total score of 18 or below indicates that a resident is considered a risk and that "CAN Daily Skin Checks FFWP008 must be initiated." Recognizing the risk of Resident No. 31 developing pressure sores, Harmony Health Center ordered a heel protector for her right foot to prevent pressure sores. Resident No. 31's wound treatment and progress records for May 11, June 18, and July 1, 2003 do not reflect the presence of a pressure sore. The first mention of any pressure sore in Resident No. 31's medical records was on August 8, 2003, when a family member, not a staff person, observed a wound on Resident No. 31's right inner heel and pointed it out to a member of the nursing staff. The wound was described in the progress notes as a "blister like area." Resident No. 31's medical records refer to this wound as "in-house acquired." Harmony Health Center admits that Resident No. 31 developed a pressure sore while a resident but characterizes the pressure sore as "unavoidable." On August 8, 2003, Resident No. 31's physician ordered a podiatric consult. A progress note on August 12, 2003, indicates that the pressure sore was at Stage II. The podiatrist, Ann Marie Millar, DPM (Dr. Millar),who was at Harmony Health Center at least twice a week, usually performs consults within 24 hours. However, the consult did not occur until October 10, 2003, approximately two months after the consult was ordered. Dr. Millar was not contacted for the consult when the physician ordered the consult. The wound care nurse requested and the treating physician authorized the consult by Dr. Millar. No evidence was presented to explain why approximately two months elapsed before the consult was performed. When the consult was performed on October 10, 2003, the pressure sore had progressed to Stage IV, which is the most serious classification for a pressure sore. On October 15, 2003, Resident No. 31 was sent to the hospital for debridement of the wound to promote healing. The process of debridement involved either the chemical or surgical removal of necrotic (dead) tissue of the wound. In December 2003, the pressure sore was eventually resolved. Resident No. 31's medical records do not show that another pressure sore presented itself. Dr. Millar testified1 that Harmony Health Center did all that it could to prevent the pressure sore. Resident No. 31 had a heel protector and a Geo mat. Dr. Millar also testified that she was certain that the staff turned or rotated Resident No. 31; however, no documented evidence or any other testimony was presented which showed that the staff turned or rotated Resident No. 31 or which showed the actual care provided to Resident No. 31 by Harmony Health Center prior to the discovery of the pressure sore. According Dr. Millar, Resident No. 31's clinical condition causes contractures, which in turn causes more pressure to the affected heel and, unless the patient can be suspended, causes a heel ulcer. As a result, according to Dr. Millar, a heel ulcer, as experienced by Resident No. 31, is unavoidable. Dr. Millar further testified that Harmony Health Center had additional interventions, other than those used by it, to prevent a pressure sore. However, according to Dr. Millar, the other interventions were "not covered," as to being cost-covered, and, therefore, were not ordered or used. A registered nurse of 25 years, Eleanore Kennedy (RN Kennedy), performed the survey of Harmony Health Center for AHCA. RN Kennedy testified that for a family member, and not staff, to observe and report a pressure sore is unusual; and that, with protective equipment and proper turning, no reason existed for Resident No. 31 to develop a pressure sore. Consequently, according to RN Kennedy, Resident No. 31's pressure sore was avoidable. A registered nurse of 16 years, Jennifer Mata (RN Mata) testified, as an expert in nursing home care, on behalf of Harmony Health Center. RN Mata was also Harmony Health Center's director of nursing. RN Mata opined that Resident No. 31's pressure sore was unavoidable because, in essence, a resident in a nursing home with Resident No. 31's clinical condition develops pressure sores. The undersigned finds the testimony of RN Kennedy to be more credible than RN Mata. The evidence is irrefutable that the pressure sore developed after the admission of Resident No. 31 to Harmony Health Center. The evidence presented was insufficient to satisfactorily explain why a staff person had not observed the skin area at Resident No. 31's heel if Resident No. 31 had a heel protector, was being rotated or turned, and was having daily skin checks, as required by the Braden Scale. Furthermore, a lack of documented evidence exists showing that Resident No. 31 was turned or rotated and that her skin was checked daily although the evidence showed that her skin was checked weekly. This lack of sufficient evidence and lack of evidence causes the undersigned to find the testimony of RN Kennedy more credible. Further, RN Kennedy's testimony is found to be more credible than Dr. Millard’s as to whether the pressure sore was avoidable. The evidence was insufficient to satisfactorily explain why approximately two months elapsed before Dr. Millar was called to perform a consult on Resident No. 31. Furthermore, a lack of documented evidence exists to show that Resident No. 31 was turned or rotated and that her skin was checked daily although the evidence shows that her skin was checked weekly. This lack of sufficient evidence and lack of evidence causes the undersigned to find the testimony of RN Kennedy more credible. Hence, a finding is made that Harmony Health Center failed to prevent Resident No. 31's pressure sore and that, therefore, the pressure sore was avoidable. Count II: Failure To Implement Measures To Protect A Resident From Ongoing Falls, Resulting In Actual Harm To The Resident Resident No. 18 was admitted to Harmony Health Center on April 5, 2002. Resident No. 18's nursing assessment upon admission indicated that she had several conditions and needs. She had Alzheimer's Disease and right-side weakness. Her decision- making was severely impaired, with her never or rarely making any decisions. Resident No. 18 was a wanderer, moving with no rational purpose, seemingly oblivious to needs or safety. She required the assistance of two persons in her daily living activities (ADLs)--ambulation, transfer, bed mobility, eating, toileting, personal hygiene, and bathing. Resident No. 18 also used a wheelchair. Upon admission, Harmony Health Center identified Resident No. 18 as being at risk for falls and injury and prepared an Interdisciplinary Resident Care Plan (Care Plan) for her regarding falls. On April 5, 2002, the Care Plan indicated that she was at risk for falls and injury and indicated nine interventions to lessen her risk for falls, which were implemented. The interventions were as follows: (1) access/record full risk factors; (2) report to M.D. incidence of fall; (3) monitor possible causes of fall; (4) bed in low position; (5)items within easy reach; (6) maintain environment clutter-free; (7) call bell within reach; (8) provide PT/OT therapy evaluation and treatment as prescribed; and (9) orient to surroundings as needed. In spite of the interventions, Resident No. 18 fell six times at Harmony Health Center. Falls were documented on the Care Plan for April 15, 2002 (ten days after admission), June 5, 2002, August 28, 2002, May 22, 2003, June 25, 2003, and August 11, 2003. At the time of each fall, the documentation indicates that Resident No. 18 was found on the floor in her room. The Care Plan for Resident No. 18 indicates that another intervention was added on June 5, 2002, after the fall on the same day; on August 28, 2002, after the fall on the same day; on May 22, 2003, after the fall on the same day; on June 26, 2003, after the fall on June 25, 2003; and on August 11, 2003, after the fall on the same day. The intervention on June 5, 2002, was to use one-half side rails, to instruct her to use call light when needed, and to assist with ADLs; on August 28, 2002, was to place in well-supervised area; on May 22, 2003, was to instruct her to use call light when needing help; on June 26, 2003, was to have close supervision; and on August 11, 2003, was to monitor closely and frequently. As to the intervention added on June 5, 2002, the staff at Harmony Health Center was aware that Resident No. 18 would, on her own, get out of bed and go to the bathroom. One- half side rails make it easier for and assist a resident to get out of bed. Consequently, the one-half side rails made it easier for Resident No. 18 to get out of bed, which would contribute to her falling. Based on the evidence presented, this intervention to reduce the risk of falls was unreasonable for Resident No. 18, who was a high risk for falls. As to instructing Resident No. 18 to use the call light when needed, this intervention was essentially contained in the original Care Plan before her falls. As a result, this intervention on June 5, 2002, was not a new or different intervention. Further, Harmony Health Center was aware that Resident No. 18 was cognitively confused and suffered from sundowner's syndrome, which meant that she became more confused at night. An example of Resident No. 18's confusion and sundowner's syndrome occurred during the fall of August 11, 2003, when she was questioned, after the fall, as to where she was going; she responded that she was going to visit her sister. Based on the evidence presented, to instruct Resident No. 18 to use a call light, as an intervention to lessen the risk of falls, was unreasonable. A nursing assessment for Resident No. 18 was performed on July 17, 2003, a little over 15 months after her admission and after five falls. The nursing assessment indicates that, as to bed mobility (moving to and from lying position, turning side to side, and positioning body while in bed), Resident No. 18 required limited assistance, with one person assistance; and that, as to transfer (moving between surfaces to and from the bed, chair, wheelchair, and standing position), she required extensive assistance, with one person assistance. Further, the nursing assessment indicates that, as to cognitive skills for daily decision making (making decisions regarding tasks of daily life), Resident No. 18’s cognitive skills were independent (decisions were consistent and reasonable). The restorative nurse for Harmony Health Center, Adrienne Underwood, LPN, provided a service to Resident No. 18. Nurse Underwood's role was to maintain or increase Resident No. 18's level of care after Resident No. 18 completed rehabilitation. Nurse Underwood testified that Resident No. 18 could ambulate independently but could not recall when Resident No. 18 became independent. No medical records or assessments or Care Plan entered into evidence supports Nurse Underwood's testimony as to Resident No. 18's independence in mobility and/or transfer. Nurse Underwood's testimony, as to Resident No. 18's ability to ambulate independently, is found not to be credible. Regarding the falls on June 26, 2003 and August 11, 2003, for which the interventions of close supervision and to monitor closely and frequently, respectively, were added, Harmony Health Center's expert, RN Mata opined that the two interventions were appropriate. However, RN Mata also testified that Harmony Health Center was already performing these interventions, before the falls. A finding is made that the interventions added on June 26, 2003, and August 11, 2003, were not new or different interventions. Related to close supervision is the intervention on August 28, 2002, which was placing Resident No. 18 in a well- supervised area. As aforementioned, Harmony Health Center was already closely supervising and monitoring Resident No. 18 before the falls. Consequently, a finding is made that this intervention was not a new or different intervention. Restraining Resident No. 18 to lessen her risk of falls was not an option available to Harmony Health Center. She had no physician order for restraints. Without a physician order, Harmony Health Center could not and would not restrain Resident No. 18. No determination, as to the cause of Resident No. 18's falls, was made by either AHCA or Harmony Health Center. AHCA made no determination in its survey. Neither Resident No. 18's records presented into evidence nor testimony presented showed that Harmony Health Center determined the cause of the falls. AHCA did not contact the physician for Resident No. 18 regarding her falls as to whether the interventions were adequate or the cause of the falls. Whether to contact a physician is a judgment call for AHCA's consultants. AHCA's consultant made a judgment call not to contact Resident No. 18's physician. As an intervention, AHCA suggests that Harmony Health Center could have used bed alarms. Harmony Health Center does have bed alarms for some residents. RN Mata testified that bed alarms are used for residents who have a history of falling out of bed, i.e., from the bed to the floor. Furthermore, according to RN Mata, the purpose of bed alarms is to alert the staff to assist a resident before the resident falls. Resident No. 18's records indicate that she was found on the floor in her room. No evidence was presented that Resident No. 18 was found on the floor next to her bed, which would be an indication that she fell moving from the bed to the floor. However, the evidence does show that Resident No. 18 needed assistance to ambulate. An inference is drawn and a finding is made that, based on Resident No. 18's fall history, her cognitive ability, her need for assistance to ambulate, and the failure of prior interventions, a bed alarm would have been a reasonable intervention.2 Regarding Resident No. 18's fall on August 12, 2003, which was at 3:00 a.m., she sustained an injury, i.e., a hematoma to the right frontal area of her head. After the fall on August 12, 2003, Resident No. 18 was a total care resident. According to Harmony Health Center, the interventions were added after Harmony Health Center investigated each fall, the treating physician was contacted, and a team of Harmony Health Center's personnel reviewed each investigation and reached a consensus as to how to address the falls. To Harmony Health Center, the interventions were appropriate and adequate. No evidence was presented to indicate that an investigation of a resident's fall would not produce the cause of the fall. Based on the evidence presented, an inference is drawn and a finding is made that the investigations were inadequate and not thorough and failed to produce sufficient information to assist Harmony Health Center in determining the cause of Resident No. 18's falls. AHCA has no expectation that a facility will prevent all falls. AHCA has no rule or requirement that a new or different intervention must be developed and implemented for every fall by a resident at a nursing home. Based on the evidence presented, a finding is made that all the interventions added in Resident No. 18's Care Plan after her falls, except for the interventions on June 5, 2002, found to be new and different, were not new or different from the interventions developed by Harmony Health Center, before the falls. Based on the evidence presented, a finding is made that the interventions added after Resident No. 18's falls failed to lessen the risk of her falls and were, therefore, inadequate and inappropriate.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order: Finding Ayintove Associates, LLC, d/b/a Harmony Health Center, f/k/a Integrated Health Services at Greenbriar in violation of Counts I and II for two Class II deficiencies. Imposing a fine of $5,000. Upholding the issuance of a conditional license. DONE AND ENTERED this 22nd day of March 2005, in Tallahassee, Leon County, Florida. S ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of March, 2005.
Conclusions THE PARTIES resolved all disputed issues and executed a settlement agreement, which is attached and incorporated by reference. The parties are directed to comply with the terms of the attached settlement agreement. Based on the foregoing, this file is CLOSED. th 4 DONE AND ORDERED this 26"" day of february , 2014, in Tallahassee, Leon County, Florida. Agency for Health Care Administration Filed March 3, 2014 1:00 PM Division of Administrative Hearings A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO A JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. Copies furnished to: Peter A. Lewis, Esquire 3023 N. Shannon Lakes Drive, Suite 101 Tallahassee, Florida 32309 palewis@petelewislaw.com (Via electronic mail) Willis F. Melvin, Jr. Assistant General Counsel Zainab Day, Acting Audit Administrator (Interoffice mail) Finance & Accounting (Interoffice mail) CERTIFICATE OF SERVICE | HEREBY CERTIFY that a true and correct copy of the foregoing has been served on-we the above-named persons by Electronic Mail or interoffice mail as indicated on this theZ7 day of _3 Ce 20L7.. Richard Shoop, AgencyClerk State of Florida Agency for Health Care Administration 2727 Mahan Drive, Building #3 Tallahassee, Florida 32308-5403 (850) 412-3630 i) FLORIDA AGENCY FOR HEALTH CARE ADMINISTRATION BOvEANOR Better Health Care for all Floridians Se RCRETARY DELEGATION OF AUTHORITY To Execute FINAL ORDERS related to cost reports | specifically delegate the authority to execute Final Orders related to cost reports to Justin Senior, Deputy Secretary for Medicaid, or his delegate. This delegation of authority shail be valid from December 16, 2011, until revoked by the Secretary. bef B01 Date Elizabeth Dudek, Secretary Visit AHCA online at 2727 Mahan Drive, MS# AHCA.MyFlorida.com Tallahassee, Florida 32308
