The Issue The issue is whether Hialeah Hospital, Inc. may be licensed for a 21-bed psychiatric unit, without first obtaining a certificate of need, on the basis that it provided psychiatric services before a certificate of need was statutorily required.
Findings Of Fact Background of the Controversy The Parties The Department of Health and Rehabilitative Services (the Department) is responsible for determining whether health care projects are subject to review under the Health Facility and Services Development Act, Sections 381.701- 381.715, Florida Statutes. It also licenses hospitals under Chapter 395, Florida Statutes. The Department's Office of Community Medical Facilities renders decisions about requests for grandfather status which would exempt a psychiatric service offered at hospital from certificate of need review. The Department's Office of Licensure and Certification issues licenses but does not grant grandfather exemptions. A hospital will not receive separate licensure for psychiatric beds unless a certificate of need has been obtained for those beds, or the beds are in a psychiatric unit which had been organized before certificate of need review was required. See Section 381.704(2), Florida Statutes (1987). A hospital can provide inpatient psychiatric services to a patient in one of three ways: a) as a patient housed among the general hospital population, b) as a patient housed in a special unit organized within the hospital and staffed by doctors, nurses and other personnel especially to serve patients with psychiatric diagnoses, or c) in a hospital organized as a psychiatric specialty hospital. Serving patients through methods b and c requires special certificate of need approval and licensure. Most community hospitals place psychiatric patients among the general patient population; few hospitals create a distinct psychiatric unit; fewer hospitals still specialize as psychiatric hospitals. Hialeah Hospital, Inc. is a 411-bed general hospital in Hialeah, Florida. It does not currently hold a certificate of need for licensure of a distinct psychiatric unit. As a result, its reimbursement for psychiatric services from the Federal government for Medicare patients is limited. The Health Care Finance Administration (HCFA) generally reimburses hospitals for services based upon flat rates which are paid according to categories known as diagnostic related groups. Hialeah Hospital now receives reimbursement for services it renders to psychiatric patients on this basis. If it is entitled to a grandfather exemption from certificate of need review, and its distinct psychiatric unit is separately licensed by the Department, Hialeah Hospital will receive cost-based reimbursement for services to psychiatric patients, which will result in higher income to the hospital. Approval of the grandfathering request will not result in a) any capital expenditure by the hospital, b) the addition of staff, or c) a change in the type of services currently offered at the hospital. Just before July 1, 1983, the hospital had an average daily census of 16-17 psychiatric patients. If the psychiatric services the hospital has offered do not qualify for grandfathering, Hialeah Hospital may apply for a certificate of need for a distinct psychiatric unit. Even without a psychiatric certificate of need, Hialeah is still entitled to continue to serve patients with psychiatric diagnoses among its general population, and to receive the lower diagnostic related group reimbursement for those services from HCFA. Palmetto General Hospital is a licensed general hospital with 312 acute care beds and 48 separately licensed psychiatric short-term beds operated as a distinct psychiatric unit. It is located near Hialeah Hospital, and both hospitals serve the same geographic area. The primary markets of both hospitals overlap. They compete for patients, including psychiatric patients. Agency Action Under Review From 1973 to 1979 the license issued to Hialeah Hospital by the Department bore a designation for 21 psychiatric beds, based on information submitted in the hospital's licensure application. The hospital then dropped the psychiatric bed count from its licensure applications. This change probably was caused by a problem generated by an announcement from the Northwest Dade Community Health Center, Inc., the receiving facility for psychiatric emergencies in northwestern Dade County, which includes Hialeah. That center had written to the Hialeah Police Department, informing the police that when the center was not open, it had a crisis worker at the Hialeah Hospital emergency room, and that persons needing involuntary psychiatric hospitalization should be taken to the Hialeah Hospital emergency room. The only other hospital in Hialeah treating psychiatric patients was Palmetto General Hospital, which did not accept, as a general rule, patients who could not pay for care. The Hialeah Police Department thereafter began dropping psychiatric patients at Hialeah Hospital, much to the distress of the Hialeah Hospital emergency room staff. The Hospital thereafter dropped the designation of any of its beds as psychiatric beds on its annual licensure applications. It still received psychiatric patients from Jackson Memorial Hospital when that hospital reached its capacity for psychiatric patients. On its 1980 licensure application Hialeah Hospital collapsed all of its medical, surgical and psychiatric beds into a single figure. This was consistent with its practice of serving medical, surgical and psychiatric patients throughout the hospital. Hialeah Hospital filed similar licensure applications in 1981, 1982, 1983. In 1984 there was a dispute over the total number of beds to be licensed, which was resolved in early 1985. In 1985, after a change in the licensing statute which is discussed below, the Department informed Hialeah Hospital that its application for licensure was incomplete and could not be processed until Hialeah explained its basis for seeking separate licensure for 20 short-term psychiatric beds. In its response, Hialeah's Vice President stated: [W]e felt it was appropriate to indicate that Hialeah Hospital did accept psychiatric admissions. These patients have been randomly placed in the institution, many times based on other primary or secondary diagnoses. The application indicates bed usage, not that it is currently a discrete unit. Hialeah Hospital does currently have a Letter of Intent [on file] for establishment of a discrete med/psych unit. Hialeah Ex. 24a On August 1, 1985, the Department's Office of Licensure and Certification informed Hialeah Hospital by certified mail that the application for licensure of 20 short-term psychiatric beds was denied for failure to have obtained a certificate of need for them or to have obtained an exemption from review [both could only come from the Department's Office of Community Medical Facilities]. The hospital was provided a clear point of entry to challenge this determination through a proceeding under Chapter 120, Florida Statutes, but Hialeah filed no petition for review of that decision. Instead, Hialeah pursued the certificate of need application which it had filed in April, 1985 for separately licensed psychiatric beds. There was no reason to challenge the August 1, 1985, denial because the factual bases alleged by the Department were true--the hospital had no certificate of need for psychiatric beds and had not yet asked the Department's Office of Community Health Facilities to decide whether Hialeah qualified for grandfathered beds. On October 21 and 23, 1986, Hialeah Hospital wrote to the Office of Community Health Facilities seeking a determination that it was entitled to have 21 pyschiatric beds grandfathered on its license. In certificate of need application 4025 Hialeah Hospital sought the establishment of a distinct 69 bed psychiatric unit at Hialeah, with separately licensed beds. The application went to hearing and was denied on its merits on February 17, 1987, in DOAH Case 85-3998. In his recommended order, the Hearing Officer discussed the issue of whether Hialeah Hospital was exempt from certificate of need review because it already had a psychiatric unit. He found that the issue was not appropriately raised in the proceeding before him, which was Hialeah Hospital's own application for a certificate of need to establish a psychiatric unit. He therefore found he lacked jurisdiction to consider the grandfathering issue. Hialeah Hospital v. HRS, 9 FALR 2363, 2397, paragraph 5 (HRS 1987). The Department adopted that ruling in its May 1, 1987, final order. Id. at 2365. A letter dated December 5, 1986, from the Office of Community Medical Facilities denied Hialeah's request to grandfather 21 short-term psychiatric beds on its license and thereby exempt them from certificate of need review, as requested in Hialeah's letters of October 21 and 23, 1986. The Department denied the grandfathering request for four reasons: When the Department conducted a physical plant survey on June 1, 1980, there were no psychiatric beds in operation at the hospital; The hospital bed count verification form returned to the Department on January 31, 1984 by the Director of Planning for Hialeah, Gene Samnuels, indicated that the hospital had no psychiatric beds; An inventory of psychiatric beds had been published by the Department in the Florida Administrative Weekly on February 17, 1984 which showed that Hialeah Hospital had no psychiatric beds, and Hialeah never contested that inventory; The Department had not received evidence demonstrating that psychiatric services were provided "in a separately set up and staffed unit between 1980 and 1985." This letter again gave Hialeah a point of entry to challenge the Department's decision to deny licensure of psychiatric beds and it was the genesis of Hialeah's petition initiating this case. It is significant that the Department's Office of Community Health Facilities gave Hialeah a clear point of entry to challenge the December 5, 1986, grandfathering denial with full knowledge that the Department's Office of Licensure and Certification had denied a request from Hialeah Hospital on August 1, 1985, to endorse psychiatric beds on Hialeah's 1985 license. The Departmental personnel knew that those two denials involved different issues. Once the Office of Licensure and Certification told the hospital it had to produce either a certificate of need or a grandfathering approval to have psychiatric beds endorsed on its license, the hospital had to turn to the Office of Community Health Facilities to get a ruling on its grandfathering claim. The letter of December 5, 1986, was the first ruling on the merits of Hialeah Hospital's claim that it was entitled to have 21 beds grandfathered. History of the Department's Specialty Bed Recognition Psychiatric Beds in Florida Hospitals Before July 1, 1983 Before April 1, 1983 no state statute or Department rule required that psychiatric beds in a hospital be located in physically distinct units. Psychiatric patients could be located throughout a hospital. They were not required to be placed in rooms having distinguishing characteristics, or to use group therapy rooms, dining rooms, or other rooms exclusively dedicated to use by psychiatric patients. There were, of course, hospitals that had distinct psychiatric units, and some entire hospitals which were specifically licensed as psychiatric hospitals. After 1983, a hospital had to obtain a certificate of need to organize what had previously been diffuse psychiatric services into a distinct unit dedicated to serving patients with psychiatric diagnoses. Today no special certificate of need is required to serve psychiatric patients in the general hospital population, but without separate licensure the hospital receives Medicare reimbursement from the federal government for psychiatric patients at the level established by the diagnostic related groups, not cost based reimbursement. Before July 1, 1983 annual hospital licensure application forms asked hospitals to identify their number of psychiatric beds as an item of information. The hospital licenses issued, however, were based on the hospital's total number of general medical-surgical beds, a category which included psychiatric beds. The 1983 Amendments to the Florida Statutes and the Department's Rules on Specialty Beds In April of 1983, the Department adopted a rule which established a separate need methodology for short-term psychiatric beds, Rule 10-5.11(1)(o), Florida Administrative Code. Thereafter, the Legislature amended the statutes governing the hospital licensing, Section 395.003, Florida Statutes (1983) by adding a new subsection (4) which read: The Department shall issue a license which specifies the number of hospital beds on the face of the license. The number of beds for the rehabilitation or psychiatric service category for which the Department has adopted by rule a specialty bed need methodology under s. 381.494 shall be specified on the face of the hospital license. All beds which are not covered by any specialty bed need methodology shall be specified as general beds. Section 4, Chapter 83-244, Laws of Florida (underlined language was added). In the same Act, the Legislature amended the planning law to require hospitals to apply for certificates of need to change their number of psychiatric and rehabilitation beds. Section 2, Chapter 83-244, Laws of Florida, codified as Section 381.494(1)(g), Florida Statutes (1983). The Department's rules defined short-term psychiatric services as: [A] category of services which provide a 24- hour a day therapeutic milieu for persons suffering from mental health problems which are so severe and acute that they need intensive, full-time care. Acute psychiatric inpatient care is defined as a service not exceeding three months and averaging a length of stay of 30 days or less for adults and a stay of 60 days or less for children and adolescents under 18 years. Rule 10- 5.11(25)(a), Florida Administrative Code (1983), effective April 7, 1983. A minimum size for any new psychiatric unit was prescribed in Rule 10- 5.11(25)(d)7., which states: In order to assure specialized staff and services at a reasonable cost, short-term inpatient psychiatric hospital based services should have at least 15 designated beds. Applicants proposing to build a new but separate psychiatric acute care facility and intending to apply for a specialty hospital license should have a minimum of 50 beds. After the effective date of the rule, April 7, 1983, no hospital could organize its psychiatric services into a distinct psychiatric unit using specialized staff unless the unit would have at least 15 beds. This did not mean that a hospital which already had organized a distinct psychiatric unit using specialized staff had to have at least 15 beds in its unit to continue operation. Whatever the number of beds, whether fewer or greater than 15, that number had to appear on the face of the hospital's license. Section 395.003(4), Florida Statutes (1983). To change that number, the hospital had to go through the certificate of need process. Section 381.494(1)(g) Florida Statutes (1983). Those hospitals whose pre-existing units were endorsed on their licenses can be said to have had those units "grandfathered". There is no specific statutory exemption from certificate of need review for pre-existing units, but such treatment is implicit in the regulatory scheme. The Department's Grandfather Review Process To know which hospitals were entitled to continue to operate discrete psychiatric units without obtaining a certificate of need, the Department's Office of Community Medical Facilities had to identify hospitals which had separate psychiatric units before the July 1, 1983, effective date of Section 395.003(4), Florida Statutes (1983). An inventory of beds in the existing psychiatric units also was necessary to process new certificate of need applications. The Department's rule methodology authorized additional beds in psychiatric units based upon a projected need of 15 beds per 10,000 population. Rule 10-5.11(25)(d)1., Florida Administrative Code (1983). The Legislature approved the psychiatric service categories which the Department had already adopted by rule when it enacted Section 4 of Chapter 83- 244, Laws of Florida. The Legislature thereby validated a process the Department had initiated in 1976 with its Task Force on Institutional Needs. That group had developed methodologies to be used throughout the state to determine the need for different types of medical services, because local health systems agencies were reviewing CON applications based upon idiosyncratic methodologies. To develop review criteria for psychiatric services, the Task Force had to both define psychiatric services and determine how it should measure them. In doing so, the Department looked for assistance to publications of entities such as the American Hospital Association and the Joint Commission on Accreditation of Hospitals. According to the American Hospital Association, psychiatric services are services delivered in beds set up and staffed in units specifically designated for psychiatric services. In the Task Force report, a psychiatric bed was defined as: A bed in a clinical care unit located in a short-term, acute care hospital or psychiatric hospital which is not used to provide long-term institutional care and which is suitably equipped and staffed to provide evaluation, diagnosis, and treatment of persons with emotional disturbances. An inpatient care unit or clinical care unit is a group of inpatient beds and related facilities and assigned personnel in which care is provided to a defined and limited class of patients according to their particular care needs. HRS Exhibit 14 at 92 and 1-5. The definition of a psychiatric bed in the Report of the Department Task Force on Institutional Needs is compatible with the requirements of the Florida Hospital Cost Containment Board in its Florida Hospital Uniform Reporting Manual. Reports made by hospitals to the Hospital Cost Containment Board include information about services provided in separately organized, staffed and equipped hospital units. The information provided to the Board assisted the Department in determining which Florida hospitals already were providing psychiatric services in separately organized, staffed and equipped hospital units before separate licensure became necessary. The Department surveyed hospitals to determine the number of existing beds in distinct psychiatric units. It also looked to old certificates of need which referenced psychiatric services at hospitals, reports hospitals had made to the Florida Hospital Cost Containment Board, to past licensure applications the Department had received from hospitals, and to the Department's 1980 physical plant survey. These sources of information were, however, imperfect, for the reasons which follow: 1. Certificates of Need Issued 22. Before July 1, 1983, certificates of need were required for the initiation of new services which involved capital expenditures above a certain threshold dollar amount. Hospitals which had a long-standing psychiatric units would have had no occasion to request a certificate of need for psychiatric services. Review of certificates issued would not turn up a hospital with a mature psychiatric service. 2. Hospital Cost Containment Board Information 23. The reports from hospitals during the early years of the Hospital Cost Containment Board are not entirely reliable, because the hospitals did not yet have uniform accounting systems in place, despite the Board's attempt to establish uniform accounting methods through its reporting system manual. Hospitals commonly made errors in their reports. If the reports were prepared correctly, they would identify hospitals with discrete psychiatric units. Hialeah's HCCB Reports for 1981, 1982 and 1983 indicated that the hospital had no active psychiatric staff, no psychiatric beds and no psychiatric services. 3. Departmental Survey Letters 24. In Spring, 1983, the Department tried to verify the existing inventory of beds for specialty services such as psychiatric services, comprehensive medical rehabilitation services and substance abuse services. There is no record, however, that this survey letter was sent to Hialeah Hospital. In late 1983 or early 1984, the Department again attempted to establish inventories for psychiatric beds and rehabilitation beds. It distributed a cover letter and a form entitled "Hospital Bed Count Verification", which asked hospitals to confirm the Department's preliminary count of the hospital's "number of licensed beds". Hialeah's planner returned the form verifying that Hialeah Hospital was licensed for 411 "acute general" beds and that it had no short or long term psychiatric beds. The answer was correct, for that is the figure which appeared on Hialeah's license at that time. The Department did not ask the hospitals for an average daily census of short-term psychiatric patients. The cover letter for the survey form told hospital administrators that the Department was seeking to verify its preliminary bed count for services for which a special bed need methodology had been established, viz., long and short term psychiatric beds, substance abuse beds and comprehensive medical rehabilitation beds. The cover letter drew attention to the Department's intention to use the data collected from the responses to the form as a beginning inventory for short-term psychiatric beds. The cover letter also cautioned hospitals that when completing the form, they should "keep in mind the service definitions". Copies of the definitions were attached to the form. The appropriate inference to be drawn from the answer given by Hialeah Hospital to the survey form was that in January, 1984, the hospital had no beds organized into a short term psychiatric unit. This is consistent with the later letter from the hospital's vice president quoted in Finding of Fact 6, above. The Department published on February 17, 1984, its base inventory of psychiatric and rehabilitation beds in the Florida Administrative Weekly. The publication stated that "any hospital wishing to change the number of beds dedicated to one of the specific bed types listed will first be required to obtain a certificate of need." 10 Florida Administrative Weekly at 493. Hialeah was shown as having no psychiatric beds. Id. at 498. The notice did not specifically inform the hospitals of the right to petition for a formal hearing to challenge the inventory figures published. 4. Licensure Files 25. Although, the Department's licensure application form listed "psychiatric" as a possible hospital bed utilization category before 1983, these categories were set up for informational purposes only. No definitions were given to hospitals describing how beds should be allocated among the categories available on the form, making those figures unreliable. Before 1980 Hialeah Hospital had listed psychiatric beds on its licensure applications, see Finding of Fact 5, above. Since 1980 it listed no psychiatric beds. 5. Physical Plant Survey The Department performed a physical plant survey in 1980 to determine the total number of beds in service at each hospital. That survey did not attempt to make distinctions between different types of services listed on the survey form. The Department's architect who performed the survey did not attempt to evaluate the quality or intensity of the psychiatric services provided at any hospital. Each of the types of information the Department examined to determine the existing inventory of short-term psychiatric beds in 1983 had weaknesses, and no single source is dispositive. It is difficult to credit the assertion that Hialeah Hospital had a distinct psychiatric unit before July, 1983 which was not reflected in any of these sources of information. The use of multiple sources of information served as a cross-check on information from each source. It is understandable that Hialeah would not have applied for a certificate of need to operate a separate psychiatric unit. Before 1983, no such application was needed if the establishment of the unit entailed an expenditure of money below a threshold amount. All of its reports to the Hospital Cost Containment Board, however, indicate that there was no separate psychiatric service at the hospital and that the hospital had no active psychiatric staff. With respect to the Department's survey letters, while the 1984 survey form itself did not specifically inform hospital administrators that their responses would be used to establish a base inventory of psychiatric beds, the cover letter did make that clear. This should have put the hospital's planner, who filled out the form, on notice that if Hialeah had a discrete, short-term psychiatric service the number of beds in that unit should be listed. What is perhaps the most significant point is that the hospital reported no psychiatric beds on its licensure application at all from 1980 to 1985. Medical doctors in general practice can and do treat psychiatric patients, in addition to doctors who specialize in psychiatry. No doubt patients commonly were admitted to the hospital who had primary diagnoses of psychiatric illnesses. The hospital's licensure filings, however, since 1979 fail to record any psychiatric beds. This is important evidence that the hospital did not regard itself as having any distinct unit organized to provide psychiatric care. The Hospital's 1985 correspondence from the Hospital's vice president to the Department, quoted in Finding of Fact 6 confirms this. The failure to list any psychiatric beds at Hialeah on the Department's 1980 physical plant survey is not significant, since determining the number of psychiatric beds was not the focus of that survey. It is true that the Department never conducted site visits at all hospitals to determine whether they had a) distinct psychiatric units, b) psychiatric medical directors, c) written psychiatric admission and treatment policies, or d) psychiatric policy and procedures manuals. The efforts the Department did make to establish the beginning inventory of psychiatric beds were reasonable, however Hialeah Hospital's Licensure History and Efforts to Obtain Grandfather Status The entries on Hialeah's applications for annual licensure from the Department are cataloged above, and need not be repeated. During the years 1980-84, after it ceased listing psychiatric beds on its licensure application, psychiatric services were still being provided to patients throughout the hospital. In 1984, the hospital engaged in correspondence with the Department over the appropriate number of licensed beds for the hospital as a whole. Ultimately the hospital and the Department agreed that 411 beds should be licensed. In its 1985 licensure application, Hialeah then requested that 20 short-term psychiatric beds be listed on the license. The Office of Licensure and Certification questioned this. Ultimately, the Office of Licensure and Certification refused to endorse those 20 psychiatric beds on the license because there was no certificate of need on file for them, nor any statement from the Office of Community Medical Facilities granting the hospital an exemption from that licensure requirement. Hialeah Hospital did not challenge that decision in a proceeding under Chapter 120, Florida Statutes. The discussions between the hospital and the Department's Office of Community Medical Facilities continued, and by late October, 1986, Hialeah requested the Department to approve 21 short-term psychiatric beds at the facility, and sent the Department backup material which it believed justified a grandfather determination. After review, the Department denied the grandfather request by letter dated December 5, 1986. The Department's Action Regarding Other Grandfathering Requests Hialeah's is not the first request the Department received for grandfathering beds. After June of 1983, when the Legislature required CON approval for hospitals to change their number of psychiatric or rehabilitation beds, a number of institutions made similar requests. 1. Comprehensive Medical Rehabilitation Beds The rule on comprehensive medical rehabilitation beds was developed by the Department at the same time as the rule on psychiatric beds. The Department used a similar process to determine the existing inventory of both types of beds. The Department determined that preexisting comprehensive medical rehabilitation units at Parkway General Hospital, Naples Community Hospital, Orlando Regional Medical Center, Holy Cross Hospital, and University Community Hospital entitled those facilities to grandfathering of their comprehensive medical rehabilitation services. The Department has also determined that a preexisting distinct psychiatric unit at Palmetto General Hospital entitled that institution to grandfather status for its psychiatric beds. Parkway General Parkway General Hospital did not specify rehabilitation beds on its licensure applications for the years 1980 through 1984. The Department denied Parkway's request for endorsement of 12 comprehensive medical rehabilitation beds on its 1985 license because Parkway had not obtained a certificate of need for them or an exemption from review. The Department thereafter determined that Parkway had been providing comprehensive medical rehabilitation services before June, 1983 in a physically distinct and separately staffed unit consisting of 12 beds. It then endorsed 12 beds on Parkway's license, even though the rule which became effective in July, 1983 would require a minimum unit size of 20 beds for any hospital organizing a new comprehensive medical rehabilitation unit. See Rule 10-5.011(24), Florida Administrative Code. Naples Community Hospital The Department granted Naples Community Hospital a grandfather exemption for its rehabilitation beds in February, 1987. In had not listed the rehabilitation beds on its license application for the years 1983-1985, had not returned the Department's bed count verification form, nor did it challenge the bed count which the Department published in the Florida Administrative Weekly. The hospital had applied for and received a certificate of need in January of 1981 to establish a 22-bed rehabilitation unit and that unit began operation in late 1982. The Department ultimately determined that the hospital had provided rehabilitation services in a physically distinct unit and the services were organized and delivered in a manner consistent with applicable regulatory standards. It granted a grandfather request in February, 1987. Orlando Regional Medical Center A grandfather exemption for 16 rehabilitation beds was granted to Orlando Medical Center in 1986. The 16-bed brain injury unit had been authorized by the Department through certificate of need number 2114 before the Department had adopted its rule governing comprehensive medical rehabilitation beds in 1983. The services were provided in a physically distinct unit. The Department determined the 20-bed minimum size for a new unit did not apply to a unit which qualified for grandfathering. Holy Cross Hospital The Department granted a grandfather exemption for comprehensive medical rehabilitation beds to Holy Cross Hospital after a proceeding was filed with the Division of Administrative Hearings to require the Department to recognize the existence of a 20-bed comprehensive medical rehabilitation center. The Department determined by a site visit that Holy Cross had established a separate unit, probably in 1974, long before the Department's comprehensive medical rehabilitation unit rule became effective in July, 1983. The unit had its own policy manual, quality assurance reports, patient screening criteria, and minutes of multidisciplinary team staff conferences. The hospital had neglected to report the unit in its filings with the Hospital Cost Containment Board but the hospital contended that it never treated the unit as a separate unit for accounting purposes, and had not understood the need to report the unit as a distinct one under Hospital Cost Containment Board reporting guidelines. The hospital corrected its reporting oversight. The grandfathering is consistent with the hospital's actual establishment of the unit long before the Department's rules went into effect. University Community Hospital A dispute over whether to grandfather a comprehensive medical rehabilitation unit which went through a Chapter 120 administrative hearing and entry of a final order involved University Community Hospital (UCH). The Department initially determined that the nine comprehensive medical rehabilitation beds at UCH had been in existence before July, 1983 and were exempt from certificate of need review. That decision was challenged in a formal administrative proceeding by a competing hospital, Tampa General. The competitor was successful, for both the Hearing Officer in the recommended order and the Department in the final order determined that University Community Hospital's 9 bed rehabilitation unit was not entitled to be grandfathered. University Community Hospital v. Department of Health and Rehabilitative Services, 11 FALR 1150 (HRS Feb. 14, 1989). In determining that grandfathering was inappropriate, the Department found that the hospital had not prepared separate policies and procedures for its rehabilitation unit before the rule on comprehensive medical rehabilitation beds became effective, and that the unit did not have a physical therapy room on the same floor as the patients. The beds supposedly dedicated to rehabilitative care were mixed with non- rehabilitative beds, so that a semiprivate room might have one bed used for rehabilitative care and another for an unrelated type of care. This conflicted with the requirement that the rehabilitation unit be physically distinct, with all patients and support services located on the same area or floor, rather than scattered throughout the hospital. The Department also determined that many hospitals offer physical therapy, occupational therapy, or speech therapy, but that to qualify as a comprehensive medical rehabilitation center, these services had to be coordinated in a multidisciplinary approach to the patient's needs, which had not been the case at University Community Hospital. The common strand running through the grandfathering decisions on comprehensive medical rehabilitation beds is that grandfathering is appropriate when a hospital demonstrates that before the comprehensive medical rehabilitation rule became effective in July, 1983, it had a separate unit which met the standards and criteria for a comprehensive medical rehabilitation unit (other than the minimum size for new units). Psychiatric Beds Tampa General Hospital Only two cases involve a decision on whether psychiatric services at a hospital qualify for grandfathering. Tampa General Hospital, which was owned by the Hillsborough County Hospital Authority, operated 93 psychiatric beds in 1981, 71 at Hillsborough County Hospital and 22 at Tampa General Hospital. A certificate of need granted in 1981 authorized the expenditure of $127,310,000 for the consolidation of both hospitals and an overall reduction of 14 psychiatric beds after the hospitals were integrated. When the Hillsborough County Hospital Authority obtained its certificate of need, it was not necessary to differentiate between general acute care beds and psychiatric beds for licensure purposes. Increased demand for acute care beds led Tampa General to close its psychiatric unit and make those 22 beds available for ordinary acute care. After the 1983 statutory and rule changes regarding the separate licensure of psychiatric beds, the Hillsborough County Hospital Authority told the Department that Tampa General had no psychiatric beds in operation. On its 1985 licensure application, the Hillsborough County Hospital Authority applied for licensure for 22 psychiatric beds at Tampa General and 77 at Hillsborough Hospital. The Department denied the request for the psychiatric beds at Tampa General. The Final Order entered in Hillsborough County Hospital Authority v. HRS, 8 FALR 1409 (Feb. 16, 1986), determined that there had been a discontinuation in the use of psychiatric beds at Tampa General, and that to allow Tampa General to add psychiatric beds after the statutory and rule changes in 1983 would frustrate the certificate of need process and would be detrimental to good health care planning. Palmetto General Hospital Palmetto General Hospital participated in an administrative hearing in 1975 regarding the disapproval of its proposed expansion, which included the dedication of one floor and 48 beds as a psychiatric unit. The Hearing Officer found that there was a need for psychiatric beds in the community and recommended that the Secretary of the Department issue a certificate of need "for that portion of the applicant's proposed capital expenditures relating to the addition of a 48 bed psychiatric unit". Palmetto General Exhibit 32, at 12, paragraph 2. The order of the Hearing Officer was affirmed by the District Court of Appeal in Palmetto General Hospital, Inc. v. Department of HRS, 333 So.2d 531 (Fla. 1st DCA 1976). The approval of the 48 psychiatric beds is clear only from a review of the Hearing Officer's order. Certificate of Need 292X was issued for the 48 psychiatric beds. Palmetto General exhibit 45. Palmetto received Medicare certification for its psychiatric inpatient unit, and listed 48 short-term psychiatric beds on its licensure applications each year from 1979 to 1983. It failed to show its psychiatric beds on the bed count verification survey form sent by the Department. Palmetto General's chief financial officer told the Department on June 10, 1983 that Palmetto General did not have psychiatric beds in a separately organized and staffed unit. This resulted in the issuance of a license which showed no psychiatric beds. The Department itself wrote to the administrator of Palmetto to learn why the 48 short-term psychiatric beds had not been listed on Palmetto's application for licensure in 1985. Palmetto wrote back and acknowledged that it did have 48 short-term psychiatric beds. A license showing those 48 beds was then issued. Thereafter, staff from the HRS Office of Comprehensive Health Planning took the position that the 48 short-term psychiatric beds should not have been listed on the license, and the Department's Office of Licensure and Certification requested that the 1985 license containing the endorsement for those 48 psychiatric beds be returned to the Department for cancellation. Palmetto then sought an administrative hearing on the attempted cancellation of the license. Palmetto and the Department entered into a Final Order dated March 9, 1986 which agreed that Palmetto met all the requirements for the designation of 48 short-term psychiatric beds on its license. Palmetto, had, in fact, operated a 48 bed psychiatric unit on its third floor since 1981, but moved that unit to the sixth floor in 1985. It was dedicated exclusively to psychiatric patients and there were specific policy and procedure manuals developed and used in dealing with psychiatric patients since 1981. The history of Palmetto's licensure is certainly one replete with contradictions. It is inexplicable that the chief financial officer of the hospital would have told the Department in 1983 that it had no separately organized and staffed psychiatric unit when, in fact, it had such a unit. It was also unclear why it would have shown no psychiatric beds on the bed count verification form returned in late December or early January, 1984, or why its April, 1983, and its 1985/1986 license application forms listed no psychiatric beds. Nonetheless, it had obtained a certificate of need for a psychiatric unit after administrative litigation and an appeal to the District Court of Appeal. The unit was opened and remained continuously in existence. It had appropriate policies and procedures in place for a distinct psychiatric unit as the 1983 statutory and rule amendments required for separate licensure of psychiatric beds. History of Psychiatric Bed Services at Hialeah Hospital Since at least 1958, Hialeah Hospital has had psychiatrists on its medical staff, and the number of psychiatric physicians on staff has increased. Thirteen psychiatrists had admitting privileges at the hospital by 1983; there are now 23 psychiatrists with privileges. As is true with most community hospitals, physicians specializing in psychiatry would admit patients to the general population at Hialeah Hospital if they needed intensive psychotherapy or medication which needed to be monitored by nurses. Patients who were homicidal, suicidal or intensely psychotic were not admitted to Hialeah Hospital. Those patients need a more intensive psychiatric environment, either in a locked psychiatric unit or in a psychiatric specialty hospital. The persons physicians placed at Hialeah through 1983 did not need the intensive services of a discrete psychiatric unit. Hialeah Hospital indicated on its licensure application to the Department that it had 21 psychiatric beds throughout the 1970's, but ceased this listing in the 1980's as set forth in Finding of Fact 5 above. The nature of the services available at the hospital had remained constant. Under the psychiatric diagnosis coding system published in the Diagnostic Statistical Manual III, (which is commonly used by psychiatrists) Hialeah Hospital had an average daily census of 25 patients with primary or secondary psychiatric diagnoses in 1980, and 18 in 1981. Only about 25 percent of those patients had a primary psychiatric discharge diagnosis. The additional patients had secondary psychiatric diagnoses. Hialeah must rely on these secondary diagnoses to argue that its average daily census for psychiatric patients approached 21 beds. It was not until 1985 that Hialeah consolidated its psychiatric services to a medical/psychiatric unit. That unit serves patients with medical and psychiatric diagnosis as well as patients with solely psychiatric diagnoses. Before 1983, there was no medical director of psychiatry at Hialeah Hospital, and no separate policies and procedures for the admission of patients to a psychiatric unit, nor any staff dedicated to the care of psychiatric patients. To be sure, the hospital was in a position to provide quality psychiatric care to patients whose needs were psychotherapy, monitored medication, or individual counseling by psychiatric physicians and nurses. This reflects the reality that not all patients who need to be placed in the hospital for psychiatric care require the services of a separate medical/psychiatric unit. Patients with more acute psychiatric illness do need interdisciplinary approaches to their care. These interdisciplinary approaches are more expensive than serving psychiatric patients in the general hospital population. This is why the Federal government provides higher, cost-based reimbursement to the hospitals with specialty psychiatric licenses. Hialeah has not proven that the psychiatric services it was providing before 1983 were significantly different from those provided in typical community hospitals which did not have distinct psychiatric units. Hialeah's long-standing relationship with the Northwest Community Mental Health Center is not especially significant. Certainly, the Center was aware that Hialeah was a potential source of psychiatric care. Baker Act patients who needed hospitalization were taken there between 1980 and 1983. There was a flow of patients back and forth between the Center and the hospital's inpatient population, and discharge plans by Hialeah's social workers included referrals back to the Mental Health Center for follow-up and outpatient care. Similarly, the Dade-Monroe Mental Health Board knew that Hialeah was a potential provider of inpatient psychiatric services. The predecessor to the current local health council, the health systems agency of South Florida, recorded that there were psychiatric admissions at Hialeah Hospital in the early 1980's, and the health systems agency recommended a conversion of existing beds to psychiatric services because of a need for additional psychiatric services in the area. None of this, however, means that Hialeah had operated a distinct psychiatric unit before 1983 which entitles it to grandfather status.
Recommendation It is recommended that the application of Hialeah Hospital for grandfather status for 21 short-term psychiatric beds, and the inclusion of those short-term psychiatric beds on its license and on the Department's bed inventory be denied. DONE AND ENTERED this 6th day of October, 1989, in Tallahassee, Leon County, Florida. WILLIAM R. DORSEY Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of October, 1989.
Findings Of Fact The parties present at the hearing stipulated to the following facts which are hereby entered as findings of fact: All letters of intent submitted by the applicants involved herein with the exception of FCC were timely filed on or before December 15, 1984 and the relating applications by these applicants were timely filed on or before January 15, 1985. As a result, these applications addressed a January, 1988 bed need planning horizon. All applications, as mentioned above, were deemed complete by DHRS and were reviewed under a January, 1988 bed need planning horizon. All applications as cited above, were preliminarily denied by DHRS based on a lack of need and notice of these denials were timely published in the Florida Administrative Weekly. All unsuccessful applicants herein thereafter timely filed petitions for formal administrative hearing to contest the denial of their applications. The application filed by FCC for CON number 2738, filed by the applicant in July, 1983, and addressing a July, 1986 bed need was initially denied by DHRS in November, 1983. FCC thereafter timely filed a petition for formal, administrative hearing contesting the denial of this application and on January 10, 1985, DHRS and FCC entered into a stipulated settlement in which DHRS agreed to grant CON Number 2738 to FCC. This CON was issued to FCC on January 19, 1985, for 91 community nursing home beds and on March 15, 1985, a Final Order was entered by DHRS confirming the grant off CON Number 2738 to FCC. FCC's original application under CON Number 2738 was for a 120 bed community nursing home to be located in Indian River County, Florida. DHRS's initial denial of FCC's application was based on a lack of bed need at the time. When DHRS entered into the stipulation with FCC reversing its position and granting a CON to FCC for 91 community nursing home beds, it did so on the basis of bed need figures utilizing statistics relating to the subsequent January, 1988 bed need planning horizon even though FCC's application did not pertain to that planning horizon. In fact the beds taken and awarded to FCC came from the fixed pool of beds that, under the DHRS rule in effect at the time, was reserved for applicants in the January, 1985 batching cycle with a planning horizon of January, 1988. Rule 10-5.11(21)(b), F.A.C., sets out the bed need rule methodology for determining projected need for new or additional community nursing home beds. Pursuant to this rule, need is projected three years into the future. The methodology provided in this rule is clear and reasonable. If this methodology is followed precisely as set forth in the rule and utilizing the DHRS statistics available to personnel in the health care professions, such as its semi-annual nursing home census report as well as the Florida population estimates and projections by DHRS district and county, a net bed need of 116 additional beds in Indian River County is established for the period January, 1988. This figure does not, however, include an award of 91 beds to FCC under CON Number 2738 by DHRS under the terms of its settlement and those 91 beds are included within the 116. The expert testifying for the applicants herein concluded that the award of the 91 beds to FCC outside its planning horizon was erroneous and improper and based on no calculation of bed need appropriate to the applicant's original July, 1986 planning horizon and it was so found. In this case, DHRS, by awarding beds to FCC from a subsequent planning horizon is implementing a bed need policy which establishes a "planning horizon" three years from the date the Petitioners' applications were filed but updating all available data to that existing as of the date of the final hearing. This would include July, 1986 population data, current licensed beds, current approved beds, and the latest occupancy rate. The procedure followed by DHRS here is, however, a DHRS policy interpretation rather than a literal interpretation of the rule and the DHRS expert was unable to establish or in any way justify DHRS' policy of updating all data to the date of hearing in contravention of the terms of its own rule. If the unjustified and unsubstantiated DHRS policy were accepted and utilized here, calculations would reflect a surplus of 70 nursing home beds in Indian River County for the January, 1988 planning horizon as opposed to the more reasonable and rational bed need of 116.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED THAT Certificate of Need Number 2733, previously issued to Florida Convalescent Centers be rescinded and that the 91 beds relating thereto be returned to the January, 1988 planning horizon fixed pool. It is further recommended that the Secretary, Department of Health and Rehabilitative Services remand the case to the Division of Administrative Hearings for the conduct of a comparative hearing to evaluate the pending applicants within that batching cycle. RECOMMENDED this 28th day of January, 1987, at Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of January, 1987. APPENDIX The following constitutes my specific ruling pursuant to Section 120.57(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties in this case. Rulings on Proposed Findings of Fact Submitted by National Health Corporation, FMSC and Forum 1. Incorporated in Finding of Fact 4 except for the actual calculations outlined in the formulas which are incomplete. 2 & 3 Incorporated in Finding of Fact 5. 4-6 Incorporated in Finding of Fact 5. 7-13 Incorporated in Finding of Fact 6. 14 Not a Finding of Fact. Rulings on Proposed Findings of Fact Submitted by Health Care and Retirement Corporation Incorporated in Finding of Fact 4 except for the citation of the rule which is incomplete. Accepted. Accepted. Accepted and incorporated. 5-9 Accepted. 10 & 11 Accepted. 12 Rejected as not the best analysis. Rulings on Proposed Findings of Fact Submitted by Beverly Enterprises 1-3 Accepted. 4-6 Incorporated into Findings of Fact. 7 & 8 Accepted. Rejected as legal argument and not a Finding of Fact. & 11 Accepted. Rejected as legal argument and not a Finding of Fact. Cumulative to other findings. Rejected as legal argument and not a Finding of Fact. Incorporated in Finding of Fact. 16-20 Legal Argument not a Finding of Fact. 21-22 Cumulative to other evidence of record. Rulings on Proposed Findings of Fact Submitted by DHRS 1-3 Accepted. 4-8 Rejected as not supported by the weight of the evidence. 9 Accepted as to the calculation including the 91 beds available to FCC. Rejected as to the propriety of the award and the reason. Copies Furnished: William Page, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Robert D. Newell, Jr., Esquire 200 South Monroe Street Tallahassee, Florida 32301 Kenneth A. Hoffman, Esquire Alfred W. Clark, Esquire 325 North Calhoun Street Tallahassee, Florida 32301 Stephen K. Boone, Esquire Post Office Box 1596 Venice, Florida 34284 R. Terry Rigsby, Esquire Post Office Box 10555 Tallahassee, Florida 32302 John Rodriguez, Esquire, Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
The Issue The parties have stipulated that these cases are properly before the Division of Administrative Hearings for de novo review of the Petitioners' applications for a certificate of need and that this action is controlled by the provisions of Chapters 120 and 381, Florida Statutes, and Chapters 10-5 and 28- 5, F.A.C. The parties have further stipulated that portions of Section 481.494(6)(c), Florida Statutes (1984 Suppl.), and its counterparts under Section 10-5.11, F.A.C., have either been met or are not applicable. The portions of Section 381.494(6)(c), Florida Statutes (1984 Suppl.), which the parties have stipulated have been met or do not apply and the parties' summary of the content of those subsections are as follows: (3) both applicants have the ability to manage and operate facilities such as those applied for; (6) need in the services district for special equipment and services not reasonably and economically accessible in adjoining areas; (7) need for research and training programs; (8) health and management manpower and personnel only. The remaining parts of (8) remain in issue; (10) special needs and circumstances of health maintenance organizations; (11) needs and circumstances of those entities which provide a special portion of their services or resources, or both, to individuals not residing in the service district. The parties stipulated that the remaining portions of Section 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.), remain in issue. Based upon the stipulations of the parties, the following issues require resolution: Is there a need for a 100-bed acute care hospital in Orange County, Florida? Do the Petitioners' proposals meet the criteria of Sections 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.), which have not been stipulated to as having been met or as not being applicable? If a need exists for only one proposal and both Petitioners meet the appropriate criteria, which of the Petitioners should be granted a certificate of need? Should a certificate of need for a computerized axial tomography scanner (hereinafter referred to as a "CAT Scanner") be issued to AMI? Does Florida Hospital and/or OGH have the requisite standing to take part as parties in these proceedings?
Findings Of Fact AMI is a publicly traded for-profit Delaware corporation which owned, managed or operated 103 hospitals in the United States and 29 hospitals outside the United States as of January, 1985. AMI also owns, manages or operates a number of other health care facilities, i.e., psychiatric care facilities and freestanding outpatient surgery centers. AMI also owns a number of subsidiary corporations which provide a variety of technologies and services in support of its hospitals. In Florida, AMI owns 100 percent or a majority interest of 9 hospitals. In its proposed findings of fact AMI has indicated that it "operates" these 9 hospitals. The record supports this finding, although the record also supports a finding that the 9 hospitals are separate legal entities. AMI initially filed a letter of intent to file a certificate of need application with the Department for a 175-bed hospital in Orange County, Florida, for review in the August 15, 1983, batching cycle. The letter of intent was rejected because it had not been timely submitted to the local health council. On October 12, 1983, AMI filed a second letter of intent with the Department in which it informed the Department that AMI "or a to-be-formed wholly-owned subsidiary of AMI intends to file a Certificate of Need application for a 175-bed hospital to be located along Highway 50 in the vicinity of the University of Central Florida in Orange County, Florida." On October 19, 1983, seven days after the letter of intent was filed, Articles of Incorporation were filed for University Community Hospital of Orlando, Inc. (hereinafter referred to as "UCH, Inc."). UCH, Inc., is a for-profit Florida corporation. It currently owns no assets. AMI's application, which was reviewed in the November 15, 1983, batching cycle, was denied by the Department. AMI subsequently reduced the number of beds it had requested in its application from 175 to 100 beds. No change in the application with regard to the services to be provided has been made by AMI. Based upon its amended application AMI has proposed to construct and operate a 100-bed "full-service" acute care hospital to be located in Orange County, Florida. The proposed 100 beds will consist of 84 medical/surgical beds, 8 obstetric beds and 8 ICU/CCU beds. The proposed hospital will include a separate outpatient unit, an on-site stationary CAT Scanner, a 24-hour a day emergency room and birthing rooms and will provide therapeutic and diagnostic inpatient services, and community outreach and wellness programs. Tertiary care services will not be provided at the proposed hospital but AMI intends to contract with existing providers of tertiary care services to provide those services to its patients. AMI has projected that the total cost of its proposal will be $19,698,831.00. This figure includes $566,700.00 for architectural and engineering fees, $6,268,747.00 for equipment, $1,025,000.00 for the acquisition of land, $10,095,000.00 for construction, $250,000.00 for start-up costs and $1,285,385.00 for capitalized interest. The proposed AMI facility will include separate entrances for outpatient surgery and the emergency room. The facility has been designed to take into account the trend in health care to provide outpatient and ambulatory services. Two of the four proposed operating rooms in the facility will be used primarily for outpatient surgery. The 8 birthing rooms to be included in the facility are designed in recognition of the trend in health care to provide a room in which the family can participate in the birthing process. A delivery room will also be provided. Finally, classroom space will be provided in the facility for allied health services training and continuing education. Winter Park. Winter Park Memorial Hospital Association, Inc., is a not for-profit Florida corporation. It operates Winter Park, a 301 bed hospital in Winter Park, Orange County, Florida. The hospital provides a full range of medical services including a full-body CAT Scanner. Winter Park Memorial Hospital Association, Inc., qualifies for exemption from federal income tax under Section 501(a) of the Internal Revenue Code of 1954, as amended (hereinafter referred to as the "Code"), because it is an organization designated in Section 501(c)(3) of the Code. On October 31, 1983, Winter Park filed its letter of intent to file an application for a certificate of need with the Department in the same batching cycle as AMI. In its application Winter Park proposed to build a 100-bed acute care hospital in Orange County, Florida. The proposed 100 beds will consist of 84 medical/surgical beds, 8 obstetric beds and 8 ICU/CCU beds. The proposal does not include a CAT Scanner. Winter Park has projected that the total cost of its proposed facility will be $16,015,000.00. This amount includes $75,000.00 for project development, $50,000.00 for financing, $685,000.00 for professional services, $10,395,900.00 for construction, $4,457,700.00 for equipment and $351,400.00 for other related cost. Florida Hospital Florida Hospital is a not-for-project hospital owned by Adventist Health Systems Sunbelt, a division of the Adventist Church. Florida Hospital presently consists of 3 campuses: the main campus in Orlando and satellite campuses in Altamonte Springs, Seminole County, Florida and Apopka, Orange County, Florida. In the 75 years since the hospital was begun it has grown from a 20 bed hospital to its present size of 959 beds. Florida Hospital is a tertiary acute care hospital providing a full range of services including ambulatory surgery, a stationary full-body CAT Scanner, general inpatient medical and surgical services, obstetrics, pediatrics, psychiatric services, substance abuse treatment, open heart surgery, oncology and other services. Florida Hospital is involved in a number of teaching programs and internship programs. It is a teaching hospital with a number of positions dedicated to teaching, including a director of education. Florida Hospital would be substantially affected if a certificate of need is granted to either Petitioner. Florida Hospital has standing to intervene. OGH OGH is a not-for-profit 171-bed hospital located in Orlando, Orange County, Florida. It was founded in 1941 and has operated as a not-for-profit facility since 1945. OGH is licensed by the State of Florida as an acute care general hospital. The services provided by OGH include obstetrics, outpatient services, general inpatient medical and surgical services, pediatrics, a mobile CAT Scanner and other services. OGH would be substantially affected if a certificate of need is issued to either Petitioner. OGH has standing to intervene. THE NEED FOR ACUTE CARE HOSPITAL BEDS. Section 10-5.11(23), F.A.C. Pursuant to Section 381.494(6)(c), Florida Statutes (1984 Suppl.), the Department is responsible for determining whether health care facilities and services are needed in the State of Florida. To fulfill its responsibility with regard to acute care hospital beds, the Department has promulgated Section 10 5.11(23), F.A.C. Section 10-5.11(23)(b), F.A.C., provides the following Department goal: The Department will consider applications for acute care hospital beds in context with all applicable statutory and rule criteria. The Department will not normally approve applications for new or additional acute care hospital beds in any departmental service district if approval of an application would cause the number of beds in that district to exceed the number of beds calculated to be needed according to the methodology included in paragraphs (f),(g) and (h) below. A favorable Certificate of Need determination may be made when the criteria, other than bed need, as provided for in Section 381.494(6)(c), Florida Statutes, demonstrate need. An unfavorable Certificate of Need determination may be made when a calculated bed need exists but other criteria specified in Section 381.494(6)(c), Florida Statutes, are not met. Based upon this Department goal, the need for acute care hospital beds is first determined by service district based upon the methodology included in Section 10-5.11(23)(f)-(h), F.A.C. (Hereinafter referred to as the "Formula"). For purposes of the Formula, acute care beds include general medical and surgical, intensive care, pediatric and obstetrical beds. Section 10 5.11(23)(c), F.A.C. The Petitioners are proposing to build a hospital with general medical and surgical, intensive care and obstetrical beds. Therefore, the Formula must be applied to determine if there is a need for their proposed hospitals. Under the Formula, acute care bed need is to be determined five years in the future: 1990 in these cases. Generally, acute care bed need is determined under the Formula based upon two age cohort population projections, statewide service-specific discharge rates, statewide service-specific lengths of stay, statewide service-specific occupancy standards and patient flow adjustments. See Section 10-5.11(23)(f), F.A.C. The bed need for the service district determined in accordance with Section 10-5.11(23)(f), F.A.C., is adjusted based upon the service district's historical use rate and projected occupancy rate. Section 10-5.11(23)(g), F.A.C. The historical use rate to be used under the Formula is for the three most recent years and is based upon utilization of hospitals located in the service district. After applying the adjustment of Section 10-5.11(23)(g), F.A.C., one final adjustment is required to complete the determination of acute care bed need under the Formula. Section 10-5.11(23)(h), F.A.C. provides for an adjustment to reflect peak demand in the service district. Based upon the evidence presented at the final hearing of these cases, application of the Formula results in a net acute care bed need of 89 beds or 146 beds, or an excess of 464 beds. These projections are all for the Department's District 7, which consists of Orange, Seminole, Osceola and Brevard Counties, The Petitioners are proposing to build new hospitals in Orange County. The Formula projection of a net acute care bed need in District 7 of 89 beds is an outdated Department application of the Formula. The 146 net acute care bed need projection for District 7 is the Department's most current application of the Formula, dated March 12, 1985. The Department's most recent application of the Formula is not based upon a proper application of the adjustment for the District 7 projected occupancy rate and historical use rate under Section 10-5.11(23)(g), F.A.C. In making this adjustment, the Department relied upon utilization data in determining the District 7 historical use rate from 1981, 1982 and 1983. Section 10-5.11(23)(g), F.A.C., requires that the historical use rate be based upon the most recent three years available. In these cases 1982, 1983 and 1984 utilization data was available to the Department. The fact that incorrect utilization data was used in determining the District 7 historical use rate was confirmed by Mr. Eugene Nelson, the Director of the Office of Community Medical Facilities of the Department, Mr. Steve Windham, the Executive Director of the Local Health Council of East Central Florida, Inc., and Mr. Lawrence W. Margolis, an expert health planner. Mr. Nelson also indicated that if 1982, 1983 and 1984 utilization data had been used by the Department in applying the Formula a more "contemporary picture of what's actually happening" would have be given. Mr. Margolis did apply the Formula using the most current utilization data to calculate the historical use rate of District 7. Based upon the data used by the Department in its most recent projection of acute care bed need for District 7, but substituting the current utilization data of 1982, 1983 and 1984, an application of the Formula results in a projected total acute care bed need in 1989 for District 7 of 4,416 beds. There are currently 4,880 licensed and approved beds in District 7. Therefore, a proper application of the Formula based upon the most current data indicates that District 7 will have an excess of 464 acute care beds in 1989. A finding that District 7 will have an excess of acute care beds in 1989 is supported by the trend toward reduced utilization of hospitals in District 7. This reduction in hospital utilization, which began in 1982, has been evidenced by reductions in occupancy rates, average lengths of stay and admissions. This trend is likely to continue for an additional two to four years. The trend is sufficient to cause an excess in acute care beds despite increases in population. To add another 100 acute care hospital beds to Orange County would further reduce utilization. The reduced utilization of hospitals could become worse when new hospital beds are opened by Florida Hospital (210 beds) and Holmes Regional Medical Center in Brevard County (81 beds). The opening of these beds could create a further excess of beds in District 7. There are a number of factors which have contributed to the decline in the use of hospitals: (1) there has been an increase in the use of health maintenance organizations and preferred provider organizations; (2) the introduction of Diagnostic Related Groups, a method of reimbursement now being used by Medicare; and (3) there has been an increase in the use of outpatient medical services. Health maintenance organizations in Orange County alone could decrease patient days in hospitals from 800 days per 1,000 population to 350 days per 1,000 population. Because of the introduction of Diagnostic Related Groups by Medicare, hospitals are trying to discharge patients as quickly as possible. Finally, there are 8 to 10 freestanding ambulatory surgery centers approved for Orange County which are, or will be, providing outpatient medical services. All of these factors have reduced hospital utilization in District 7. The current trend of reduced utilization of hospitals was recognized by Mr. Mark Richardson, AMI's expert in health planning. Mr. Richardson therefore recommended that AMI reduce its application for a certificate of need to construct and operate a hospital in Orange County from 175 acute care beds to 100 beds, which AMI did. Based upon the foregoing, it is concluded that District 7 will have an excess of at least 464 acute care beds in 1989 according to a proper application of the Formula of Section 10 5.11(23), F.A.C. Although insufficient evidence was presented at the final hearing to forecast the exact acute care bed need for District 7 under the Formula for 1990, it does not appear that there will be any need for acute care beds in District 7 in 1990 in light of the fact that the trend toward decreased utilization of hospitals will probably continue for 2 to 4 more years. In fact, the evidence supports the conclusion that District 7 will continue to have an excess of beds in 1990. AMI has proposed findings of fact to the effect that there has been too much concern with "over-bedding" based upon computations such as those provided in the Formula. AMI further proposed findings of fact to the effect that a more rational approach to health planning "should be assuming adequate supply as opposed to considering a negative approach." These proposed findings of fact are rejected. The Department's rules and in particular, the Formula, are the law and will be followed in these cases. Whether "over-bedding" is over emphasized, the Formula clearly indicates that District 7 will be greatly overbedding in 1990. In addition to requiring an application of the Formula to determine acute care bed need for each Department service district, Section 10-5.11(23), F.A.C., requires that local health councils adopt acute care service subdistricts as an element of their local health plans. Section 10-5.11(23)(d), F.A.C. District 7 has been divided along county lines into four subdistricts: Orange, Seminole, Osceola and Brevard Counties. Section 10-17.008, F.A.C. Prior to this proceeding AMI challenged the validity of Section 10- 17.008, F.A.C., the rule establishing subdistricts along county lines in District 7. The rule was upheld as valid in American Medical International, Inc. v. Department of Health and Rehabilitative Services, DOAH Case No. 83- 3092R, September 28, 1984. Therefore, Orange, Seminole, Brevard and Osceola Counties constitute the only recognized subdistricts in District 7 for purposes of allocating acute care bed need in District 7. Section 10-5.11(23)(e), F.A.C., further provides that the district acute care bed need as determined by application of the Formula is to be allocated to each subdistrict established pursuant to Section 10-5.11(23)(d), F.A.C. This allocation of acute care bed need to the subdistricts is to be made consistent with Section 381.494(7)(b), Florida Statutes (1984 Suppl.), which provides that the local health council is to develop a district health plan and submit it to the Department. Elements of the district health plan necessary in the Department's review of certificate of need applications are required to be adopted by the Department as a part of its rules. Section 381.494(7)(b), Florida Statutes (1984 Suppl.). The Local Health Council of East Central Florida, Incorporated (hereinafter referred to as the "Council"), has developed a district health plan which includes the methodology it employs to allocate the District 7 acute care bed need to the subdistricts of District 7. That plan has also been submitted to the Department. The Department, however, has not adopted the district health plan for District 7 in its rules. This does not mean, however, that evidence pertaining to the Council's method of allocation is not relevant to, or should be ignored for purposes of, this proceeding. Based upon the evidence presented at the final hearing, Orange County has an excess of acute care beds. This is true even if it is assumed that the Department's determination under the Formula that there is a need for 89 or 146 acute care beds in District 7 is correct. According to Mr. Windham, application of the Council's subdistrict allocation methodology to the Department's determination under the Formula that there is a need in District 7 for 89 acute care beds indicates that Orange County ",4 will have an excess of 81 acute care beds and that Seminole County will have an excess of 36 acute care beds. Mr. Windham's application of the Council's methodology for allocating bed need to the subdistricts of District 7 was based upon the Department's application of the Formula without the benefit of the more current utilization data. Therefore, if the most current data had been used, the projected excess beds for Orange County would be even greater. In light of the foregoing, it is clear that the Petitioners have failed to prove that there is any need under Section 10-5.11(23), F.A.C., for additional acute care beds in District 7 or in Orange or Seminole Counties. In fact, under Section 10- 5.11(23), F.A.C., there is a significant excess of acute care beds projected for Orange and Seminole Counties and District 7 as a whole. Winter Park has conceded this conclusion. AMI has in essence argued that any evidence as to the application of the Formula based upon the most current utilization data should be ignored because the Department has not yet officially applied the Formula based upon such data. Mr. Margolis, an expert in health planning, was clearly capable of applying the Formula based upon the most current information. His conclusions were also supported by Mr. Nelson's and Mr. Windham's testimony. AMI has in essence also argued that any evidence as to how acute care bed need in District 7 under the Formula should be allocated to the properly designated subdistricts should be ignored because the Council's methods of allocation have not been adopted as part of the Department's rules. Mr. Windham's unrebutted testimony, however, supports a finding that the Council's method of allocating the District 7 acute care bed need to the subdistricts is a reasonable method for health planning purposes. The determination that there is no need for additional acute care beds in Orange County does not necessarily preclude the issuance of a certificate of need for a new hospital to either or both of the Petitioners. Section 10- 5.11(23)(b), F.A.C., provides that the Department will "not normally" approve an application if such an approval would result in acute care beds in excess of those needed as determined under the Formula. The rule goes on to provide that an application may be approved "when the criteria, other than bed need, as provided in Section 381.494(6)(c), Florida Statutes, demonstrate need." Bed Need Based upon the Petitioner's Alternative to the Formula. AMI has suggested in its proposed recommended order that there is a need for 146 acute care beds in District 7 based upon an application of the Formula. That finding of fact has been rejected, supra, because it was based upon the use of outdated utilization data. The Petitioner also failed to prove that there is a need for beds in Orange County based upon an application of the Formula. Winter Park's position throughout this proceeding and AMI's alternative position has been essentially that the population of east Orange County where the Petitioners propose to locate their facilities and parts of Seminole County do not have adequate accessibility to acute care hospital beds. In determining whether an application for a certificate of need should be issued for acute care hospital beds, Section 381.484(6)(c)2, Florida Statutes (1984 Suppl.), provides that the accessibility . . of like and existing health care services and hospitals in the service district of the applicant" should be considered. The Petitioners have attempted to prove that like and existing health care services are not accessible in portions of Orange and Seminole Counties and therefore there is a need for their proposed hospitals. The Petitioners' Medical Service Areas. AMI has identified and proposed to serve portions of Orange and Seminole Counties which purportedly have an access problem which it has designated as a "medical service area." AMI projects that the majority of its patients will be attracted from its medical service area (hereinafter referred to as an MSA) AMI's MSA consists of most of east Orange County and southeastern Seminole County. Generally, the MSA boundary runs south along most of the western shore of Lake Jessup in Seminole County, to and along Tuscawilla Road (Seminole and Orange County), to and along Highway 436 in Orange County, south to the Bee Line Expressway, east along the Bee Line Expressway to Highway 15, south along Highway 15 to the Orange-Osceola County line, east and then north along the Orange County line to the Seminole County line and along the Seminole County line north and then west to Lake Jessup. Winter Park has also identified and proposed to serve a MSA very similar to, although a little smaller than, AMI's MSA. The difference in size amounts to only a difference of 1000 less population in Winter Park's MSA. The portion of east Orange County included in the MSAs represents a distinct geopolitical and economic base. Each of the Petitioners and Florida Hospital presented testimony by experts in the field of demographics. Frederick A. Raffa, Ph.D., for AMI, William J. Serow, Ph.D, for Winter Park and Stanley Smith, Ph.D., for Florida Hospital. Based upon their testimony, it is clear that the MSAs have experienced a great deal of population and economic growth since 1970 and that this growth will probably continue through 1990. During the period 1980 to 1985, the rate of population growth for Orange and Seminole Counties was 16 percent (23 percent for Seminole County alone). The rate of growth in Winter Park's MSA during this same period was 32 percent. For the period 1985 through 1990 the projected rate of growth for Orange County is 12 percent. The projected rate of growth from 1985 through 1990 for Winter Park's MSA is 23.3 percent. These figures indicate that the rate of growth for Orange County and the MSAs is slowing down. The figures also show that the MSA rate of growth is twice that of Orange and Seminole Counties. Looking at only the rate of growth of an area can be misleading. For example, a 50 percent rate of growth may not be as significant when applied to a population base of 10 as when applied to a larger population base. In terms of actual growth, the evidence proves that Orange County's population growth in terms of additional people is greater than the population growth of the MSAs. The evidence also establishes that population growth in the MSAs is projected to be greater for young adults and women of child bearing age (15 to 44 years of age), that there will be larger families and a greater number of children under 18 years of age in the MSAs than in Orange County as a whole and that the projected population of the MSAs will be newer to the area and generally more mobile than Orange County as a whole. Florida Hospital has suggested that "logic" leads to the conclusion that some of these projected trends will cause a decrease in utilization. No evidence was presented at the hearing to support such a finding of fact. The evidence clearly establishes that population growth in the MSAs will be concentrated between the western boundary of the MSAs at Highway 436 and Alafaya Trail (Highway 419), which is located in the western portion of the MSAs, during the next five years. In fact, more than half of the projected growth of east Orange County will occur in a one and a half mile corridor between Highway 436 and Goldenrod. It will be 5 to 10 years before population growth will begin to expand into any area east of Highway 419. Accessibility under Section 10-5.11(23)(i), F.A.C. The Department has promulgated Section 10-5.11(23)(i)1 and 2, F.A.C., for purposes of determining accessibility: Acute care hospital beds should be available and accessible within an automobile travel time of 30 minutes under average travel conditions to at least 90 percent of the population in an urban area subdistrict. Acute care hospital beds should be available and accessible within a maximum automobile travel time of 45 minutes under average travel conditions to at least 90 percent of the population residing in a rural area subdistrict. The terms "urban area" and "rural area" are defined in Section 10- 5.11(23)(a)4 and 5, F.A.C., as follows: Urban Area. Urban area means a county designated as all or part of a Standard Metropolitan Statistical Area, as determined by the United States Bureau of the Census, and having 50,000 or more persons residing in one or more incorporated areas. Rural Area. Rural area means a county not designated as all or part of a Standard Metropolitan Statistical Area, as determined by the United States Bureau of the Census, or a county so designated but having fewer than 50,000 persons residing in one or more incorporated areas. Orange County meets the definition of an "urban area." It has been designated as part of a Standard Metropolitan Statistical Area and has 50,000 or more persons residing in one or more incorporated areas. Orange County is not also a "rural area" as defined above as suggested by OGH although it does have some incorporated areas with less than 50,000 persons. AMI has suggested in its proposed recommended order that Section 10- 5.11(23)(i), F.A.C., is to be used only by local health councils in determining subdistrict allocations of acute care bed need and where a subdistrict allocation reveals a surplus of beds in a subdistrict. Although Section 10 5.11(23)(i), F.A.C., is to be used in the manner suggested by AMI, Section 10- 5.11(23)(i), F.A.C., is not clearly limited to such use. This section of the rule is titled "Geographic Accessibility Considerations." Its provisions are applicable in determining whether a geographic accessibility problem exists in District 7 or in the subdistricts of District 7. AMI, Winter Park and Florida Hospital presented testimony of expert traffic engineers: Mr. William A. Tipton for AMI, Mr. R. Sans Lassiter, P.E., for Winter Park and Mr. Sven Kansman for Florida Hospital. All three of these gentlemen based their travel studies on travel times to and from certain control points. The travel times were then averaged. Florida Hospital has suggested in its proposed recommended order that this method of determining travel times to and from control points and Mr. Tipton's testimony that "you probably wouldn't get as far in a given time going outbound [east" is significant because travel times from the MSAs west into Orlando, where the majority of the existing hospitals are presently located, would be shorter. This conclusion is reasonable. Therefore, travel times for the population of the MSAs to existing Orange County hospitals would be less than indicated by the traffic engineers. Also, the 30 minute contour lines on the traffic engineers' exhibits would extend farther into the MSAs. The studies performed by all three traffic engineers were performed in the same general manner as to the speed of the test vehicles. Test vehicle drivers were instructed to drive at average speed employing the "average car method," the "floating car technique" or the "moving car method." All three methods are essentially the same. The test runs were conducted in November and February by AMI'S expert, in the fall by Winter Park's expert and during the last two weeks of January by Florida Hospital's expert. January to March is the most congested time of the year in Orange County. Only two of the traffic engineers testified that their tests were conducted under "average travel conditions" as required by Section 10- 5.11(23)(i), F.A.C.: Winter Park's and Florida Hospital's traffic engineers. These traffic engineers properly conducted their tests during off-peak and peak hours. Mr. Tipton, AMI's traffic engineer, conducted his tests only during the peak hours of 4:00 p.m. to 6:00 p.m. and only on week days (Monday to Thursday). According to Mr. Tipton, average travel conditions "doesn't mean anything" to a traffic engineer. Average travel conditions does mean something under the rule and to the other two traffic engineers. Mr. Tipton also indicated that the peak hours he conducted his tests during would not show "average travel conditions." Mr. Tipton also admitted that he averaged what amounted to the "worst case scenario" because it represented "real world conditions." Mr. Tipton's "real world conditions," however, is not the test of Section 10-5.11(23)(i)1, F.A.C. Mr. Tipton's tests have been given little weight because of his failure to take into account average travel conditions. None of the exhibits prepared by the three traffic engineers and accepted in evidence (AMI'S composite exhibit 8, Winter Park's exhibit 11 and Florida Hospital's exhibit 10) are totally consistent with the requirements of Section 10-5.11(23)(i), F.A.C. AMI's composite exhibit 8 includes 30 minute contour lines representing Mr. Tipton's 30 minute drive times from only three hospitals in Orange County and one hospital in Seminole County and only shows the travel times to the east of those hospitals. Winter Park's exhibit 11 shows the 30 minute contour lines for seven hospitals in Orange County and two hospitals in Seminole County and generally only showns the travel times to the east. Florida Hospital's exhibit 10 shows the location of eight hospitals in Orange County, three in Seminole County and three in Brevard County but only shows the total 30 minute contour line for Florida Hospital's Orlando campus. The test under Section 10-5.11(23)(i)1, F.A.C., is whether existing acute care hospital beds are available and accessible within 30 minutes by automobile by 90 percent of the subdistrict's population. In order for AMI and Winter Park to prove that acute care hospital beds are not available and accessible within 30 minutes in Orange County, they needed to prove that more than 10 percent of the population of Orange County cannot access on existing acute care hospital bed within 30 minutes by automobile. In order to prove this crucial fact it is necessary to show the travel time based upon average travel conditions of the entire population of Orange County to all existing acute care hospitals. AMI and Winter Park have failed to do so. The evidence fails to show that more than 10 percent of Orange County's population is more than 30 minutes by automobile from existing Orange County hospitals. The evidence does not support a conclusion that there is an accessibility problem under Section 10-5.11(23)(i), F.A.C. Only 1 percent of the population of Orange County residing in the MSAs is located more than 30 minutes by automobile from existing hospitals in Orange and Seminole Counties. This is based upon the 1985 population and the projected 1990 population. In 1985 there are 4,232 people residing in the MSAs more than 30 minutes from existing Orange and Seminole County hospitals. By 1990, there will only be 5,276 people projected to live more than 30 minutes from existing hospitals. These figures are maximum numbers. As indicated, supra, the evidence with regard to population growth in the MSAs proves that the projected population growth will be concentrated in the western portion of the MSAs--the portion of the MSAs closest to where existing hospitals are located. Most of the projected population growth through 1990 in the MSAs will clearly be within 30 minutes of existing hospitals. The projected 1990 population of 5,276 people who will reside more than 30 minutes from an existing Orange County or Seminole County hospital is well below 10 percent of Orange County's total projected population of 596,713. Additionally, the people in the MSAs who reside more than 30 minutes from existing Orange and Seminole County hospitals are probably within 30 minutes of Jess Parrish Hospital in Titusville, Brevard County, Florida. There are no natural obstacles in Orange County which impede or prevent access to existing health care facilities. Well over 90 percent of Orange County's population can access a hospital within 30 minutes driving time. OGH has proposed findings of fact pertaining to the availability of motor vehicle and air ambulance services in Orange County. The accessibility test of Section 10-5.11 (23)(i), F.A.C., requires a consideration of automobile travel times under "average travel conditions," not emergency services. Therefore, these proposed findings of fact and OGH's proposed findings of fact as to the requirements of obtaining a trauma level designation are unnecessary. The evidence also clearly establishes that there are acute care hospital beds available in Orange County. The average occupancy rates in District 7, Orange County and Seminole County for 1982, 1983 and 1984 were as follows: 1982 1983 1984 District 7 71.8% 70.34% 61.71% Orange County 69.5% 68.68% 60.80% Seminole County 76.0% 74.20% 59.39% Florida Hospital and OGH have experienced similar declines in utilization similar to those evidenced by these figures. Florida Hospital's utilization rate dropped from 86.3 percent in 1982 to 78.6 percent in 1984 and OGH's rate dropped from 88.5 percent in 1982 to 44.4 percent in 1984. There are currently 4,880 licensed and approved acute care hospital beds in District 7. Based upon the 1984 utilization rate for District 7, over 1,800 acute care beds were empty on an average day in District 7 during 1984; In Orange County, approximately 1,000 acute care beds were empty on average during 1984. As indicated, supra, the decreasing acute care bed utilization rate is expected to continue for 2 to 4 years. Therefore, there are acute care hospital beds available in Orange County at existing hospitals and there will be in 1990. Additionally, new acute care hospital beds have been approved for Orange County and Seminole County which are not yet open: 134 acute care beds to be opened by Florida Hospital at its Orlando campus and 76 acute care beds to be opened by Florida Hospital at its Altamonte Springs campus. Also 81 new beds will be opened in Brevard County. These additional beds will further increase the number of available acute care hospital beds in Orange and Seminole Counties and in District 7. Based upon the foregoing and the fact that there is a large number of unoccupied acute care beds available on average in Orange County, there is no geographic accessibility problem in Orange County or Seminole County under Section 10-5.11(23)(i), F.A.C. Other Accessibility Considerations. Despite the evidence with regard to geographic accessibility under Section 10-5.11(23)(i), F.A.C., the Petitioners have argued that accessibility to acute care beds is a problem in the MSAs. Mr. Willard Wisler, Winter Park's administrator, although agreeing that "planning studies" indicated no need for additional acute care beds in Orange County, stated: But our posture has been that they have been misallocated, and that the east Orange County [sic) is a greatly underserved area on the basis of the number of hospital beds that are available to the people that live there. The evidence does establish that the majority of the hospitals in Orange County are located in the center of the County, in the City of Orlando, where the majority of the population is located and that there is only one hospital currently located in the MSAs. Currently, 6 percent of Orange County's acute care hospital beds are located in the MSAs at OGH while 19 percent of Orange County's population is located in the MSAs. The Petitioners have characterized this geographic distribution of acute care beds and population as a "maldistribution" of acute care beds. The disparity between the precentage of population and acute care beds in the MSAs will increase in the future because the projected rate of growth in the MSAs is greater than that of Orange County. It is projected that by 1990 22 percent of the Orange County population will be located in the MSAs. The centralization of acute care beds in Orange County, according to Mr. Van Talbert, Winter Park's expert health planner, constitutes irresponsible health planning: "It tends to perpetuate the old patterns of centralization, and I think that is inconsistent with contemporary thought in American society." Mr. Talbert also testified that the MSAs and particularly east Orange County, are greatly underserved based upon the number of hospital beds conveniently available to the people who live there. Even if Mr. Talbert's conclusions are correct and even if there is a "maldistribution" of acute care beds as defined by the Petitioners, this does not mean there is an accessibility problem in the MSAs sufficient to conclude that additional acute care beds are needed in District 7, Orange County or the MSAs. The fact that 22 percent of the population of Orange County may reside in the MSAs by 1990 with only 6 percent of the County's acute care beds is not the test. Even if it is true that "contemporary planning may indicate that centralization of acute care beds is poor planning," the pertinent statutes and rules only require a determination of whether acute care beds are available and accessible. The evidence in these cases clearly indicates that the population of the MSAs can access available acute care hospital beds in District 7. All the Petitioners have shown is that some residents of the MSAs "will be forced to make inconvenient drives to downtown hospitals," as stated in Winter Park's proposed recommended order. Likewise, AMI's proposed finding of fact that ",the realities of the situation reveal that the residents of the MSA and their physicians perceive serious access problems due to excessive travel distance, traffic congestion, the lack of convenience for patients who have to go to hospitals for tests, and the lack of convenience for families and friends having to make several trips a day to see a person in a hospital" does not prove there is an access problem. The perception of patients and physicians as to the inconvenience in accessing acute care beds does not prove there is an access problem sufficient to warrant a new hospital. In conjunction with the Petitioners' position with regard to "maldistribution" of acute care beds, the Petitioners have proposed findings of fact to the effect that previous Department responses to shifts in population growth away from where hospitals are located have been to authorize new hospitals. New hospitals in Altamonte Springs and Longwood in Seminole County, and in southwest Orange County (Sand Lake) have been cited as examples. Although Mr. Talbert's testimony supports these proposed findings of fact to some extent, there is insufficient evidence to conclude why those hospitals were authorized by the Department. If the evidence showed that additional acute care beds were needed in Seminole and Orange Counties when those hospitals were approved it would be consistent with the Department's rules to locate the additional acute care beds where population growth had occurred. In these cases, if there was an established need for an additional acute care hospital in Orange County, the evidence would probably justify placing it in east Orange County. The facts, however, do not indicate any need for additional acute care beds in Orange County. Other MSA Considerations. It is not essential to identify a MSA for purposes of considering an application for a new acute care hospital as suggested by AMI. As discussed, infra, the designation of a MSA by an applicant may be helpful for some purposes, but not to determine whether there is a need for a new hospital. AMI has proposed a finding of fact that Orlando Regional Medical Center and Florida Hospital's Orlando campus, both of which are located in Orlando, are tertiary care facilities providing services of higher complexity for patients; they therefore attract a substantial number of referral patients in need of more extensive, complex services which are not available from primary care hospitals. The existence of these tertiary facilities has justified the allocation of more acute care beds to Orange and Seminole Counties in the past. Although these facts were proved at the hearing, the overriding fact remains clear that there is no need for additional acute care beds in Orange County. AMI attempted to prove through Mr. Mark Richardson an expert in health planning, that there is a need for acute care beds in AMI's MSA based upon the characteristics of the MSA. Mr. Richardson testified that his projections were not based or contingent on the Formula of Section 10-5.11(23), F.A.C., and acknowledged the decline in utilization of acute care hospital beds in Orange County. Mr. Richardson did state that the Department's projection of a net acute care bed need of 89 beds under the Formula supported his projections. The projection of a need for 89 beds was clearly based upon outdated data. Use of current utilization data indicates an excess of 464 acute care beds. Therefore, if application of the Formula resulting in a bed need of 89 beds supports Mr. Richardson's projections, an application of the Formula which results in an excess of 464 acute care beds must indicate that Mr. Richardson's projections are suspect. Mr. Richardson's projections were clearly based primarily on the characteristics of AMI's MSA. Because of the narrow scope of Mr. Richardson's analysis, the trend in Orange County and District 7 as to reduced occupancy rates did not affect his projections. In particular, Mr. Richardson used an 80 percent occupancy rate for all beds except obstetric beds, for which he used a 75 percent rate. These occupancy rates are excessive when compared to the occupancy rates for District 7, and Orange and Seminole Counties. Additionally, Mr. Richardson failed to consider the effect of unopened acute care beds in Orange County on occupancy rates. On average, there are over 1,800 unoccupied acute care beds in District 7 and 1,000 unoccupied beds in Orange County. This does not include 134 acute care beds to be opened at Florida Hospital's Orlando campus, 76 acute care beds to be opened at Florida Hospital's Altamonte Springs campus or 81 acute care beds to be opened at Holmes Regional Medical Center in Brevard County. When opened, these additional acute care beds will further decrease occupancy rates in Orange County and District 7. Even if Mr. Richardson's projections were totally accurate, such a finding would not be relevant to the question of whether there is a need for additional acute care beds in Orange County. That is the crucial question in these cases. Mr. Richardson and AMI have attempted to justify Mr. Richardson's projections by suggesting that the Department does not consider itself precluded from assessing the need for acute case beds on an area within a subdistrict based upon Mr. Nelson's testimony. Mr. Nelson's testimony clearly does not support the use of a MSA to determine if there is a need for additional acute care beds in Orange County. Mr. Nelson, when asked whether an applicant could determine bed need based upon the character of a part of Orange County replied: There's nothing to preclude an Applicant from doing that, from carving out what I would call an Applicant's service area, running their own calculations of bed need, and doing whatever they feel they want to do in that regard. And we're not ,precluded from looking at it, either. But our position is that that has no official basis in determinations of bed need. We do look at those subdistricts but not to determine bed need. We look at them to get a better understanding of an application, because we get a sense, from looking at the unique service areas, what they' re trying to accomplish. That would be number one. Number two, and from having worked on the private side, I know one of the reasons why this is done, this is an attempt to define a market share or market area and a percent of all the considerations of what the existing hospitals that are already in the area have in the way of markets and market shares, and so on. So on the second hand, looking at the subdistricts is very important, from the standpoint of helping us to assess the financial feasibility of these proposals, which is another criterion, of course, altogether, specifically in the longer term. Because, you know, you have to know who is getting patients from where in order to be able to fully understand that. And I think the third way in which these subdistricts, these Applicants -- pardon the expression, subdistricts, that's not what these things are -- the Applicant's medical services areas are useful is in those cases where we may have a need helping us to decide where, within, let's say a subdistrict that need should be met. For example, let's suppose in this case, we were showning a need of sufficient magnitude to approve a hospital. But instead of having two applications within a few miles of each other, we had one for east Orange County, and one in west Orange County, and portions of other counties, each of which had carved out their own service area, then it would be very important for us, in that case, to look at these things very carefully, to consider them to help us determine which location was preferable. But in terms of calculating bed need from the Department's perspective, we don't put any stock in those whatsoever from that perspective. ,Emphasis added. Based upon the above testimony, it is clear that MSAs may be looked at if an applicant uses one in order to provide a better understanding of the applicant's proposal, to assess financial feasibility and, where there is an established need for acute care beds, to decide where in the subdistrict the need is the greatest. MSAs are clearly not relied upon to determine the initial question of whether there is a need for acute care beds. To determine acute care bed need based upon a MSA without considering `the' entire subdistrict of Orange County is not appropriate. The Department, as the statute and rules require, determines need at the district level and allocates the district bed need to the subdistricts. In fact, the Department has ruled that it is improper to divide a district into subdistricts smaller than those designated by a local health council for purposes of determining need as pointed out by Winter Park in its proposed recommended order. Southeastern Palm Beach County Hospital District v. Department of Health and Rehabilitative Services, 5 F.A.L.R. 1091A (1983). For purposes of determining whether there is a need for additional acute care hospital beds in Orange County, Mr. Richardson's testimony is of very little value. STATUTORY CRITERIA. Section 10-5.11(23)(b), F.A.C., provides that a certificate of need may be issued when the criteria, other than bed need, as provided in Section 38l.494(6)(c), Florida Statutes (1984 Suppl.), demonstrate need. The Petitioners have attempted to prove that there is an accessibility problem in Orange County which demonstrates acute care bed need under Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.). The facts do not support such a conclusion as discussed, supra. This section of the Recommended Order contains findings of fact with regard to the other criteria contained in Section 381.494(6)(c) and (d) Florida Statutes (1984 Suppl.). Consistency with the State and Local Health Plan: Section 381.494(6(c)1, Florida Statutes. The applications of the Petitioners are only partly consistent with the State Health Plan and the Council's Local Health Plan. The Council's Local Health Plan establishes the following occupancy levels for acute care beds which should be met before new acute care beds are approved: TYPE OF BEDS OCCUPANCY LEVEL Medical - Surgical 80% Obstetrical 75% As already discussed, occupancy levels for acute care beds in District 7, and in Orange and Seminole Counties were below 70 percent in 1984. The declining utilization of acute care beds will continue for the next 2 to 4 years and therefore it does not appear that the occupancy level goals in the Local Health Plan will be met by either applicant. These occupancy level goals are intended to be used as checks on the bed need methodologies. The importance of existing occupancy levels in determining whether to add additional acute care beds to a district is recognized in Section 10-5.11(23)(g), F.A.C. The Petitioners have projected that they will achieve an occupancy rate of 45-50 percent after one year of operation. South Seminole Community Hospital, which was opened in May of 1984 in Longwood, Seminole County, Florida, achieved only a 27 percent occupancy rate after 8 months of operation. In light of the fact that South Seminole Community Hospital is located in Longwood, it is doubtful the Petitioners will achieve their projected occupancy rate. The Petitioners have projected that their proposed hospitals will achieve an 80 percent occupancy rate, which is an optimal occupancy rate. Their projections, based upon the findings of fact as to acute care bed need in Orange County and current occupancy levels, are highly unlikely to be reached. Especially in light of the fact that the average occupancy rate in Orange County was only 60.80 percent in 1984. The proposals are also inconsistent with the Local Health Plan goal that a proposal be consistent with the state's acute care bed need methodology. Based upon an application of the Formula, using current data, District 7 and Orange County will have an excess of acute care beds in 1990. Winter Park's proposal is consistent with several other portions of the Local Health Plan. Winter Park's facility will have an active outpatient program, its beds can be available within 24 hours and it will meet several priorities under the Local Health Plan such as being accredited and licensed, and being willing to serve indigents and other patients without regard to payment source. AMI's proposal also meets some of these goals. The Local Health Plan also contains a provision to the effect that "needed" beds should be approved at existing hospitals unless the addition of a new hospital would substantially improve access by at least 15 minutes for 25,000 or more residents. Winter Park has suggested a finding of fact that this provision has been met. If there was a need for additional acute care beds in Orange County such a finding would be appropriate. There is, however, clearly no need for additional acute care beds in Orange County. This portion of the Local Health Plan therefore does not apply. Finally, the Local Health Plan provides that applicants should be able to document community and provider support for their proposals. Community support for the proposals has been demonstrated. Provider support, however, has not been demonstrated. In fact, there is opposition from some providers to the proposed new hospitals, i.e., Florida Hospital and OGH. The proposals are also partially consistent with the State's health plan. The evidence does not clearly establish, however, that the proposals are totally consistent with the goals of the State health plan. Mr. Talbert did testify that Winter Park's proposal is consistent with the goals of the State health plan. It was not clear, however, whether all of the goals were met. Also, Mr. Talbert's testimony was inconsistent with other evidence in this proceeding in some respects. For example, Mr. Talbert testified that one goal of the State health plan is to provide adequate access to acute care resources. The evidence clearly shows that adequate access is already available in Orange County. To the extent it can be inferred that Mr. Talbert's testimony also applies to AMI's proposal, the same problems exist. The evidence does not support a finding that AMI's proposal is totally consistent with the State health plan. Based upon the foregoing, it does not appear that either proposal is totally consistent with the Local Health Plan or the State health plan. The Availability, Quality of Care, Efficiency, Appropriateness, Accessibility, Extent of Utilization and Adequacy of Like and Existing Health Care Services in the Service District; Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.). Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.), requires that the availability, quality of care, efficiency, appropriateness, extent of utilization and adequacy of like and existing health care services in the service district be considered. The service district for this purpose is District 7. The designation of subdistricts in District 7 is specifically for purposes of allocating district bed need to the subdistricts. The parties, to the extent they addressed this criterion, presented evidence primarily for Orange County only, however. The availability, accessibility and extent of utilization of like and existing acute care hospitals in Orange County has been discussed and findings of fact with regard thereto have been made, supra. To summarize, like and existing services in Orange County are available and accessible and are underutilized. The Petitioners have not shown that like an existing services in District 7 do not provide quality of care or that they are not efficient, appropriate or adequate. Winter Park has argued that like and existing services are not accessible. The evidence does not support such a finding of fact. AMI has argued that there are no like and existing services accessible in the MSAs. That is not the test. The determination to made under Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.), is whether there are like and existing services in the service district. The service district in these cases is all of District 7, not the MSAs. There are currently seven acute care hospitals in Orange County: Florida Hospital, OGH, Orlando Regional Medical Center, Brookwood Hospital, Humana Lucerne, Winter Park Hospital and West Orange Memorial Hospital. Additionally, Orlando Regional Medical Center - Sand Lake is expected to be opened before 1990. These district. The evidence does not support a finding that some or all of these facilities or others in District 7 are not available, providing quality of care, efficient, appropriate, accessible, over utilized or adequate. AMI and OGH spent an inordinate amount of time and effort presenting evidence on the issue of whether OGH is a like and existing service. The evidence supports a finding that OGH is a like and existing service. Even if OGH was not a like and existing service, such a conclusion would only be relevant if it were concluded that like and existing services must exist within the boundaries of the MSAs or that OGH was the only accessible acute care hospital to the residents of the MSAs. As stated, supra, the pertinent area is not the MSA but District 7 and there are clearly other acute care hospitals in District 7 and some of those hospitals are accessible. If Orange County alone is the appropriate service area for purposes of applying this criterion, the evidence clearly proves that the Petitioners do not meet the criterion. The evidence proves that there are available, quality, appropriate, efficient and adequate like and existing health care services in Orange County and District 7. The Ability of the Applicants to Provide Quality of Care; Section 381.494(6)(c)3. Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion has been meet. 113.. The Availability and Adequacy of Other Health Care Facilities and Services in the Service District which may Serve as Alternatives: Section 381.494(6)(c)4, Florida Statutes (1984 Suppl.). There are clearly other health care facilities in Orange County providing like and existing services. The evidence does not, however, establish that there are other health care facilities and services in Orange County which are alternatives to a 100 bed acute care hospital. Transferring beds from existing facilities has been suggested as an alternative to the proposed new hospitals. This suggested "alternative" could be achieved as easily by approving a new hospital and closing some existing beds. The cost would be essentially the some. Transferring beds is not an alternative. Use of existing beds which are not being occupied is not a viable alternative either, as suggested by OGH in its proposed findings of fact. Probable Economies and Improvements in Service that may be Derived from Operation of Joint, Cooperative or Shared Health Care Resources; Section 381.494(6)(c)5, Florida Statutes (1984 Suppl.). AMI's proposed facility may eventually share some services with Brookwood Community Hospital in the area of administrative management. Brookwood Community Hospital (hereinafter referred to as "Brookwood") is a 157 bed general acute care hospital owned and operated by a limited partnership. The general partner and owner of 82.5 percent of the partnership is Brookwood Medical Center of Orlando, Inc., which in turn is owned by AMI. AMI presented its proposal assuming that there would not be any shared services with Brookwood. Through AMI, UCH, Inc., can receive price discounts for its purchases, typically 15 percent to 20 percent lower than the lowest price available in the market generally. UCH, Inc., will also be able to participate in Brookwood's preferred provider organization agreement. This could result in enhanced utilization of UCH, Inc., which could result in decreased health care costs. Winter Park will share some resources with its new hospital. The resources to be shared include Winter Park's incinerator, CAT Scanner, cardiac catheterization ion laboratory, and certain personnel. Centralized accounting, centralized purchasing and some centralized management would also be employed. Both proposals will have joint, cooperative or shared health care resources which would result in probable economics and improvements in service. The Need in the Service District of the Applicant for Special Equipment and Services not Reasonably and Economically Accessible in Adjoining Areas; Section 381.494(6)(c)6, Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion does not apply. The Need for Research and Educational Facilities: Section 81.494(6)(c) 7, Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion does not apply. The Availability of Resources; the Effects on Clinical Needs of Health Professional Training Programs in the Service District: Accessibility to Schools for Health Professionals: the Availability of Alternative Uses of Resources: Extent Accessible to All Residents; Section 381.494(6)(c)8, Florida Statutes (1984 Suppl.). The parties have stipulated that Section 81.494(6)(c)8, Florida Statutes (1984 Suppl.), has been met to the extent it deals with "health and management manpower and personnel only." The other factors to be considered under this criterion were not stipulated to. The first factor to be considered is the availability of resources, including physicians and funds for capital and operating expenditures. The availability of funds will be discussed, infra. As to the availability of physicians, the weight of the evidence supports a finding that physicians are available to staff either of the proposed facilities. AMI proposed a finding of fact that ", unlike WPMH, AMI demonstrated that the major medical specialty areas will be represented by various physicians who will joint the UCH medical staff." AMI did demonstrate that various medical specialty physicians would be willing to work at UCH, Inc. It is also true that Winter Park did not demonstrate that all of the medical specialty physicians would be willing to work at its proposed facility. Despite these facts, several physicians testified that they would use Winter Park's proposed facility if it were approved instead of UCH, Inc., and Mr. Willard Wisler's unrebutted testimony establishes that Winter Park would have no difficulty staffing its proposed hospital. Both Petitioners have established that physician resources are available for project accomplishment and operation. The second and third factors to be considered are the effect the projects will have on clinical needs of health professional training programs in Orange County and, if available in a limited number of facilities, the extent to which services will be available to schools for health professionals in Orange County. The weight of the evidence does not establish that professional training programs are available in a limited number of facilities. In fact the evidence establishes that the University of Central Florida (hereinafter referred to as "UCF"), which is located in east Orange County, has fifty-two affiliation agreements with hospitals and other medical facilities. These affiliation agreements include agreements involving clinical training of radiology technicians at Florida Hospital and, in Brevard County, at Halifax Hospital. Approximately 32 radiology students are currently involved in hospital training programs. AMI presented evidence proving the existence of a proposed "affiliation agreement" between its proposed hospital and UCF. AMI and UCF have in fact entered into an Agreement of Intent. The Agreement of intent essentially provides, in relevant part, that AMI's proposed hospital, if approved, would provide clinical training to UCF radiology technician students. Approximately three to six UCF students per semester would receive training at the new hospital. The program with UCF will clearly have a positive effect on "clinical needs of health professional training programs" in Orange County. The agreement also provides for certain other benefits to UCF in the form of certain gifts. Those benefits, however, are not relevant in considering whether a certificate of need should be issued to AMI. The portion of Section 381.494(6)(c)8, Florida Statutes (1984 Suppl.), at issue in this proceeding requires only that the effect on "clinical needs of health professional training programs" be considered. AMI's gifts will not meet the "clinical needs" of health professional training programs. AMI's proposed findings of fact with regard to its gifts to UCF are unnecessary. Florida Hospital and Winter Park have proposed several findings of fact concerning AMI's motive in entering into the agreement with UCF. Those proposed findings are not supported by the evidence and are not relevant. Florida Hospital also has proposed findings of fact concerning whether a tertiary hospital would be a better facility for training, the effect of patient mix on training, the lack of any study by UCF to assess the benefits of the agreement and the fact that AMI's proposed facility will not be a teaching hospital or have full-time teachers. Those proposed findings are unnecessary. The fact is, the clinical training to be provided by AMI's facility will be a benefit to the clinical needs of health professional training programs in District 7. Because of the substantial amount of gifts to be made to UCF, which will be paid for by patients of AMI's facility, the costs of AMI's clinical program will be substantial. Winter Park is currently involved in meeting clinical needs of health professional training programs at a number of educational institutions, including UCF. Winter Park's involvement includes radiology and several other programs. Although no agreements have been entered into, programs to meet such clinical needs will be provided at Winter Park's new facility. Because Winter Park has not committed to make any gifts to educational institutions, the costs of its programs will probably be less than AMI's program. The fourth factor to be considered is the availability of alternative uses of resources for the' provision of other health services. The evidence presented at the hearing does not establish that there are not alternative uses of resources. The petitioners failed to present evidence sufficient to conclude that there are not alternative uses for available resources. Finally, the extent to which the proposed services will be accessible to all residents of the service district is to be considered. Both Petitioners are willing to accept all patients regardless of age, sex, race, color or national origin, and medically underserved groups. The Petitioners have met most, but not all, of the requirements of this criterion. Immediate and Long-Term Financial Feasibility; Section 1.494(6)(c)9. Florida Statutes (1984 Suppl.). Immediate Financial Feasibility. AMI's proposed facility will be financed by a 50 percent equity contribution from AMI to UCF, Inc., and 50 percent debt financing from AMI at a maximum interest rate of 12 percent amortized over 30 years. AMI has sufficient lines of credit to cover the amount needed for debt financing. AMI also has sufficient cash and unrestricted liquid assets (almost $300,000,000.00 by the end of its 1984 fiscal year) and generates enough capital ($300,000,000.00 to $400,000,000.00 a year) to fund its equity contribution and the debt. AMI also has sufficient funds to provide working capital needs of UCF, Inc. Exactly how Winter Park's proposed facility will be financed is less clear. Both of the Petitioners have suggested that the other has not proved that it has "committed" itself to funding their respective proposals. Although the evidence does raise questions as to whether AMI or Winter Park has finally committed the total funds necessary to complete their proposals, the weight of the evidence supports a finding that both Petitioners are committed to funding their proposals. More importantly, the test is whether the Petitioners have available financing sources. University Community Hospital, et ala v. Department of Health and Rehabilitative Services, 5 F.A.L.R. 1346-A, 1360-A (1983). AMI clearly proved that its Executive Committee had approved its proposal. One of its witnesses, however, testified that the approval of capital expenditures of over $1,000,000.00 took approval of the full AMI Board of Directors. Winter Park clearly proved that its Board of Trustees had approved only $4,000,000.00 of the costs of its facility. Despite these facts, the evidence establishes that, although final approval of all the funds necessary to fund the proposals may not have been given, the funds necessary to insure the immediate, financial feasibility of both proposals are available. Where the funds will come from in Winter Park's case and the total amount of funds needed by Winter Park is far from being crystal clear. Winter Park failed to take into account several expenses it will incur, including sewer capacity reserve fees (approximately $160,500.00), telephone lease costs ($20,000.00) and possibly some interest expenses. There may also be an underestimate of the cost of debt financing, depending upon whether tax-exempt loans are available to Winter Park. The costs of sewer capacity reserve and the telephone lease can probably be covered by the contingency funds projected by Winter Park. AMI's proposed findings of fact with regard to equipment costs underestimates are rejected as unsupported by the weight of all of the evidence. Even with the understatement of project costs, the evidence supports a conclusion that Winter Park's proposal is immediately financial feasible. Winter Park currently has set aside "over $7,000,000.00" which can be applied to fund its proposal. (Although Winter Park has certain planned or ongoing capital improvements, the evidence does not prove that these improvements will be funded out of the funds set aside for the proposed new hospital, as suggested by AMI)'. Winter Park also has lines of credit with Barnett Bank and Sun Bank of $5,000,000.00 each. Neither line of credit has been used in the past. The Sun Bank line of credit was recently renewed and is available for one year. The Barnett Bank line of credit is also good for only one year. Both lines of credit have been renewed in the past. These lines of credit will have to be renewed before construction of Winter Park's facility begins. Winter Park presented no evidence as to whether the lines of credit would be renewed by either bank, however. Therefore, the record does not contain evidence as to whether the lines of credit will be available. Winter Park is also the sole beneficiary of the Winter Park Memorial Hospital Association Foundation, a not-for-profit foundation set upon to receive donations for the support of Winter Park. The Foundation "would make funds available to it [Winter Parka when needed." (Although testimony concerning Winter Park's alleged ability to "request" funds from the Foundation was struck, the quoted testimony was not objected to). The Foundation currently has $2,000,000.00 which could be provided to Winter Park. Finally, Winter Park has a commitment from Barnett Bank for a loan of $9,181,648.00. The loan has been committed whether interest on the loan is tax- free or taxable to Barnett Banks. Whether the loan is tax-free will affect the immediate and long- term financial feasibility of the proposal. If the loan is not tax-free, additional interest expense will be incurred; instead of being financed at a 7.696 interest rate, Winter Park will be charged approximately 11.5 percent interest if the loan is not tax- free. If the loan is tax-free, Winter Park may have failed to take into account costs associated with obtaining tax-free financing, i.e., underwriter's fees. AMI has proposed a number of findings of fact concerning additional costs associated with whether the Barnett Bank loan is tax-free. Those findings of fact are not relevant, however, in determining immediate financial `feasibility of Winter Park's proposal. The evidence establishes that the funds available to Winter Park are sufficient to cover Winter Park's projected costs and the costs it failed to include in its proposal (including the $1,20 0,000.00 of working capital which will be needed by the and of 1988). Both proposals are financially feasible in the short-term. Long Term Financial Feasibility. The Petitioners have failed to prove that their proposals are financially feasible in the long run. The projections of the Petitioners with regard to expected gross revenue depends upon whether their utilization projections are correct. Based upon the conclusion that there is no need for the proprosed facilities it is unrealistic to expect the facilities to be financially feasible. AMI's projections as to gross revenue depend on Mr. Richardson's need analysis for AMI's MSA. As discussed, supra, Mr. Richardson's projections were based upon unrealistic occupancy rates. Winter Park's projected utilization is based upon Winter Park's historical experience with its MSA for 1983. Mr. Talbert's and Mr. John Winfrey's reliance on this data in light of the trend toward reduced utilization of hospitals in Orange County is misplaced. Determining utilization of Winter Park's proposed hospital in future years based on utilization of an existing hospital in light of the trend toward reduced utilization of hospitals is very suspect. The fact that east Orange County is expected to grow in terms of population does not eliminate the concern with regard to utilization. Orange County has been growing since 1980 and before. Despite that growth, hospital utilization has declined. As to the projected expenses of the proposed hospitals which effect the financial feasibility of the proposals, it appears that AMI's projections are reasonable. A number of questions concerning Winter Park's expenses were raised, however, by the evidence. The evidence supports a finding that Winter Park has failed to take into account some expenses which will affect the long term financial feasibility of its proposal. Expenses not taken into account include phone lease expenses ($15,000.00 to $20,000.00), indigent care assessments ($58,000.00 in the second year of operation) and start-up costs ($22,680.00 a year). The evidence, however, also supports a finding that Winter Park's estimate of medicare contractual allowances was $318,900.00 too high and that depreciation expense was $130,000.00 too high. These overstatements of expenses are more than sufficient to cover the understatements of expenses discussed in this paragraph. The primary problem with Winter Park's estimate of expenses is that Winter Park has projected interest expense at a tax- exempt rate of 7.6 percent. The evidence does not prove that Winter Park can, however, obtain tax-exempt financing. Winter Park only presented evidence that Barnett Bank is willing to loan funds on a tax-exempt or taxable basis. Winter Park must, however, obtain approval of its proposed tax-exempt financing from the Orange County Health Facilities Authority. See Chapter 154, Florida Statutes (1983). No evidence that such approval could be obtained was presented at the hearing. Winter has therefore failed to prove that its estimated interest expenses can be achieved. The evidence also shows that if Winter Park cannot obtain tax-exempt financing, it will have to borrow funds at an 11.5 percent interest rate. This rate of interest can be obtained, but the additional interest expense would result in a net loss for the second year of operation. Based upon the foregoing, Winter Park has failed to prove that its proposal is financially feasible in the long-term. Winter Park has proposed findings of fact to the effect that it could charge a higher rate for its services to cover understated expenses. No evidence was presented, however, that proves that Winter Park would be willing or committed to a higher charge for its services. AMI's proposed findings of fact with regard to expenses for utilities, food and drugs, other operating expenses, incinerator costs and equipment costs are rejected. AMI's proposed findings of fact with regard to the goal of Winter Park to achieve an optimum profit margin of 5 percent to 7 percent are rejected because that goal does not apply to the proposed facility. The projected profit margin of the proposed facility is only seven-tenths of one percent. AMI's proposed findings of fact as to the years projections were made for (two years instead of five), the manner of making those projections (no balance sheet, no cash flow statements and no quarterly breakdowns) and the lack of a feasibility study are not necessary. AMI's remaining proposed findings of facts concerning "soft spots" in Winter Park's projections are also rejected. Special Needs and Circumstances of Health Maintenance Organizations; Section 381.494(6)(c)10, Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion does not apply. Needs and Circumstances of Entities which Provide Services or Resources to Individuals not Residing in the Service District or Adjacent Service Districts; Section 381.494(6)(c)11, Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion does not apply. Probable Impact of the Proposal on the Costs of Providing Health Services; Section 381.494(6)(c)12, Florida Statutes (1984 Suppl.). The weight of the evidence clearly supports a conclusion that if either of the proposed hospitals is approved, the probable impact on the costs of providing health services would be negative. The only real question raised by the evidence is the degree of the negative impact. It has already been found that there will be an excess of beds in Orange County in 1990 and that utilization rates are decreasing and will continue to do so. To add 100 acute care beds to an already over-bedded subdistrict can only further add to the number of excessive beds. Patients who would occupy 100 new acute care beds would have access to other hospitals in Orange County if a new hospital is not approved. If it is assumed that patients could be attracted to a new hospital in the MSA's it necessarily follows that those patients will not use an existing, already underutilized, hospital in Orange County, Seminole County or the rest of District 7. Additionally, the evidence clearly shows that some patients who currently use existing Orange and Seminole County hospitals would be attracted to a new hospital in the MSAs. AMI has suggested that such a loss of patients would be "minimal." Minimal or not, the loss of any number of patients would result in a loss of patient days and revenue to existing hospitals which are on average already underutilized. If patients are lost by existing hospitals, the ability to serve indigents could be adversely affected. The projected population growth for the MSA's does not solve the problem either. Orange County has been experiencing population growth during the 1980's, as well as prior to 1980. Despite this population growth, utilization rates have been decreasing. Even Mr. Richardson, AMI's expert health planner, admitted there would be an impact on existing hospitals. Mr. Richardson indicated that there would a "1.5 percent occupancy impact on the system" by 1990 based upon Mr. Margolis' analysis. Mr. Richardson indicated that such an impact would be "minimal." Whether a 1.5 percent impact is minimal is not the issue. The issue is what effect such an impact would have. The weight of the evidence clearly supports the finding that the impact would be negative and the citizens of Orange County would suffer the consequences of that "minimal" impact. Florida Hospital's expert health planner, Mr. Margolis, was the most credible witness with regard to this criterion. His testimony proves that Florida Hospital and OGH could lose 5,400 to 6,000 patient days if a new 100 acute care hospital is approved. How much the dollar loss would be as a result of such a decrease in patient days is not clear. There was testimony that OGH could lose $1,000,000.00 to $3,500,000.00 in gross revenue. AMI has again suggested that the loss in patient days and revenue to OGH would be minimal and that OGH's testimony as to the amount of loss was misleading. Mr. Patrick Deegan, who testified as an expert in finance for OGH, did fail to take into account any reduction in expenses which might be associated with a loss in revenue and also failed to take into account increases in revenue as a result of growth. Although these factors could influence the amount of projected losses in revenue, the fact remains that a new acute care hospital could and probably would have a negative impact on OGH. AMI has also suggested that OGH could and should reduce its staff. This suggestion is based upon a comparison of OGH's staffing patterns and UCH Inc's proposed staffing. The record does not support AMI's proposed findings of fact. The record does not prove that UCH, Inc's, proposed staff will be at a more appropriate staffing level. Nor does the record establish that a reduction in staff at OGH would be detrimental, as suggested by OGH. As to Florida Hospital, AMI also suggests that any impact to its campuses would be minimal, if any. It is true that there probably would be no impact on Florida Hospital's Apopka campus. Florida Hospital's Orlando campus, however, gets 20 percent of its admission from the MSAs and its Altamonte Springs campus gets 3 percent of its admissions from the MSAs, as AMI points out in its proposed findings of fact. If any of those patients utilize a new hospital in the MSAs, Florida Hospital will lose patients and will be adversely affected. AMI suggested several findings of fact with regard to the financial well-being of Florida Hospital, the addition of beds at its Altamonte Springs and Orlando campuses and its motives in intervening in these cases. These proposed facts do not support a finding that Florida Hospital would not be negatively affected by the opening of a new 100 acute care bed hospital in Orange County. Finally, Winter Park has proposed findings of fact to the effect that a new Winter Park hospital in the MSAs will foster competition and thereby lower costs in Orange County for hospital services. The record does not support these proposed findings of fact in light of the excess of beds in District 7 and the underutilization of existing beds. Based upon the foregoing, Section 381.494(6)(c)12, Florida Statutes (1984 Suppl.), has not been met by the Petitioners' proposals. Costs and Methods of Construction; Section 381.494(6)(c)13, Florida Statutes (1984 Suppl.). The Petitioners only partially proved that Section 381.494(6)(c)13, Florida Statutes (1984 Suppl.), will be met. This section requires proof as to the costs and methods of construction, including methods of energy provision and the availability of alternative, less costly or more effective methods of construction. The Petitioners only proved that the costs of construction would be reasonable. AMI's proposed facility will have 99,000 square feet. The total cost of construction will be $10,095,000.00 including $650,000.00 for site preparation, $8,161,000.00 for labor, materials, overhead and profit, $406,000.00 for contingencies and $878,000.00 for inflation. Architectural and engineering fees will cost an additional $566,700.00. AMI's costs of construction do not include the $236,800.00 cost of reserving sewage capacity or the costs of obtaining appropriate rezoning of its property. These costs will add to the total cost of construction and the total cost of the proposal. AMI's contingency funds are sufficient to cover these amounts. AMI's additional findings of fact concerning construction costs are cumulative or unnecessary for purposes of determining if this criterion has been met. Winter Parks's proposed facility will have 98,763 square feet. Total cost of construction projected by Winter Park is $10,415,000.00, consisting of $375,000.00 for site preparation, $9,000,000.00 for labor, materials, overhead and profit, $468,700.00 for contingencies and $552,200.00 for inflation. Winter Park's projections do not include the costs of reserving sewage capacity which will add approximately $150,000.00 in costs. This additional amount can be covered by the contingency amount. Although the evidence was contradictory, Winter Park did not inadvertently leave out the cost of an incinerator--there will be no incinerator at the new hospital. Although the Petitioners presented testimony to the effect that their projected costs of construction are reasonable, no consideration was given to whether the proposed facilities would be developments of regional impact (hereinafter referred to as "DRI") under Chapter 380, Florida Statutes (1983), and the costs associated with such a determination. The evidence supports conclusion that there will be some costs associated with the determination of whether the proposals are DRIs. The additional cost, however, does not appear to be significant. The Petitioners have failed to prove that the methods of construction are reasonable. They have also failed to prove that the provision of energy will be reasonable or that there are not alternative, less costly, or more efficient methods of construction available. Section 381.494(6)(d). Florida Statutes (1984 Suppl.). In addition to considering the criteria of Section 381.494(6)(c), Florida Statutes (1984 Suppl.), Section 381.494(6)(d), Florida Statutes (1984 Suppl.), requires findings of fact in cases of capital expenditure proposals for new health services to inpatients as follows: That less costly, more efficient, or more appropriate alternatives to such inpatient services are not available and the development of such alternatives has been studied and found not practicable. The existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner. In the case of new construction, that alternatives to new construction, for example, modernization or sharing arrangements, have been considered and have been implemented to the maximum extent practicable. That patients will experience serious problems in obtaining inpatient care of the type proposed, in the absence of the proposed new service. In the case of a proposal for the addition of beds for the provision of skilled nursing or intermediate care services, that the addition will be consistent with the plans of other agencies of the state responsible for the provision and financing of long-term care, including home health services. The facts concerning the first three items quoted are favorable to the Petitioners. The last one does not apply. The fourth item has not been proved to be true in this case. Summary. In summary, the evidence proves that an application of the criteria of Section 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.), does not demonstrate the need for either of the proposed facilities. The Petitioners have only proved that they can provide quality of care, that there are not alternatives to their proposals, that they will have shared resources, that personnel are available, that they have the capital to create the facilities, that they will improve the clinical needs of health professional training programs, and that their proposals are `financially feasible in the short-run. The Petitioners, however, have failed to prove any need for the facilities. Their proposals are not consistent with the local health plan or the State health plan. There are sufficient, underutilized existing hospitals to meet any need for hospital care and they will be adversely affected by the proposed facilities. The proposed facilities are not financially feasible in the long run. THE NEED FOR A CAT SCANNER AMI is also seeking a certificate of need for a CAT Scanner in this proceeding. The determination of whether such a certificate of need should be issued is governed by Section 10-5.11(13), F.A.C. In order to qualify for CAT Scanner, AMI must first obtain approval of its proposed hospital. Because it has been concluded that a certificate of need for a new hospital should not be granted, AMI should not be granted a certificate of need for a CAT Scanner; it will not qualify under Section 10- 5.11(13), F.A.C. In an abundance of caution, the following findings of fact are made as to whether a certificate of need for a CAT Scanner should be issued if AMI's application for a certificate of need for an acute care hospital is approved by the Department. Section 10-5.11(13)(b), F.A.C., provides that a favorable determination will not be given to applicants failing to meet the standards and criteria of Section 10-5.11(13)(b)1-10, F.A.C. The evidence clearly establishes that AMI's CAT Scanner application meets the standards of Sections 10- 5.11(13)(b) 1-3 and 7-9, F.A.C. Section 10-5.11(13)(b)4, F.A.C., does not apply. Section 10-5.11(13)(b)5, F.A.C., requires that an applicant document that there is a need for at least 1,800 scans to be accomplished in the first year of operation and at least 2,400 scans per year thereafter. Mr. Richardson testified that this standard is intended to apply to existing providers and that for a new hospital the need should apply to a five year horizon (1990 in this case). Mr. Richardson indicated that in 1990, this standard can be met. The language of Section 10-5.11(13(b)5, is clear; there must be a need documented for the first year of operation and each year thereafter. In this case, the first year of operation will be 1987. AMI has not documented that there is a need for 1800 scans in 1987 or 2,400 scans per year thereafter. Section 10-5.11(13)(b)6, F.A.C., requires that the applicant document that the number of scans per existing scanner exceeded 2,400 during the "preceding 12 months." The evidence establishes that during the 12 months preceding the hearing all of the fixed CAT Scanners located at hospitals except two were being used for more than 2,400 scans. Again, Mr. Richardson indicated that this standard should be applied to the 12 months preceding 1990. That is not what the rule specifies. The standard applies to the 12 months preceding the hearing. The two units that have not been used for 2,400 scans just started operation, however. Because the rule requires that in the first year of operation only 1,800 scans need to be performed, those units should not be considered in determining if AMI meets this standard. Therefore, AMI meets the requirements of Section 10-5.11(13)(b)6, F.A.C. The last standard, Section 10-5.11(13)(b)10, F.A.C., provides that extenuating circumstances pertaining to health care quality or access problems, improved cost benefit consideration or research needs may be considered. The facts do not support a finding that there are extenuating circumstances in this case. The facts do prove that any hospital such as the AMI proposed hospital should have access to a CAT Scanner. This need, however, can be met by a mobile CAT Scanner or by transferring patients to a facility with a CAT Scanner, although the latter alternative is less desirable. The evidence clearly proves that there is not access problem with regard to obtaining the services of a CAT Scanner. AMI has not met the requirements of Section 10-5.11(13)(b), F.A.C. Taking into account the factors to be considered under Section 10-5.11(13)(a)1- 8, F.A.C., also supports a finding that a certificate of need for a CAT Scanner should not be issued to AMI even if there is a need for its proposed hospital.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the certificate of need applications for a 100-bed acute care hospital and CAT Scanner filed by AMI, case number 84-1819, be denied. It is further DONE and ENTERED this 26th day of July, 1985, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of July, 1985. COPIES FURNISHED: Fred Baggett, Esquire Michael J. Cherniga, Esquire ROBERTS, BAGGETT, LaFACE & RICHARD 101 East College Avenue Post Office Drawer 1838 Tallahassee, Florida 32302 Michael Von Eckhardt, Esquire American Medical International, Inc. 414 Camden Drive Beverly Hills, California 90210 Kenneth F. Hoffman, Esquire OERTEL & HOFFMAN, P.A. Suite C 2700 Blair Stone Road Tallahassee, Florida 32301 J. P. "Rusty" Carolan, III, Esquire WINDERWEEDLE, HAINES, WARD & WOODMAN, P.A. P.O. Box 880 Winter Park, Florida 32790-0880 Harden King, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32301 E. G. "Dan" Boone, Esquire Stephen K. Boone, Esquire E.G. BOONE, P.A. P.O. Box 1596 Venice, Florida 34284 Steven R. Bechtel, Esquire Brain D. Stokes, Esquire MATEER & HARBERT, P.A. 100 East Robinson Street P.O. Box 2854 Orlando, Florida 32802 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301 LIST OF WITNESSES AMI NAME EXPERTISE Jim Palmer Phillip L. Coppage Hospital administration including staffing. Thomas C. Wohlford Patient group and insurance programs in the health care industry. J.D. Garland Health care facilities, including hospital construction management and budgeting and cost estimating. Manuel Viamonte, M.D. Radiology. Dick Chadbourne Manpower staffing requirements for health care facilities. Jan Stirrat Health care facility equipment planning and equipment cost budgeting. Preston Thompson Physician relations and recruiting. Joseph Akerman, M.D. Peter Hiribarnc, M.D. Louis Trefonas, Ph.D. Need, development and operation of sponsored research projects at UCF. Thomas S. Mendenhall, Ph.D. Need, development and operation of health education and affiliation programs. Alan Denner, M.D. Louis C. Murray, M.D. Joseph Sandberg, M.D. Myles Douglas, M.D. Robert D. Fennell Corporate health facilities planning, processing, implementation and development. Manuel J. Coto, M.D. Jerold J. Faden, M.D. Zivko Z. Gajk, M.D. Don Steigman Hospital operations and administration. William A. Tipton Traffic and transportation. Neal B. Hiler Civil engineering and property site analysis. Trevor Colbourn Ben E. Whisenant Frederick A. Raffa, Ph.D. Demographics and socioeconomic forecasting. Nilo Regis, M.D. Richard Pajot Mark Richardson Health planning. Richard Altman Hospital management engineering. Walter Wozniak Armond Balsano Health care facility financial feasibility and analysis and third- party reimbursements. Rick Knapp Health care facility financial feasibility and analysis, third- party reimbursement and rate-setting for health care facilities. Richard Anderson Edward E. Weller Real estate appraisal. John Winfrey Health care accounting and financial feasibility analysis. Van Talbert Health care planning. Margo Kelly Financial management, analysis and feasibility. WINTER PARK NAME EXPERTISE Katherine J. Brown Florida Hospital Cost Containment Board procedures; hospital costs and charges, data gathering and review; and hospital costs and charges comparisons. Karl Schramm, Ph.D. Hospital cost and charges and comparisons thereof and health care financing, including the impact upon the health care consumer. Willard Wisler Hospital administration including staffing and operating hospitals. John H. Roger Construction design and costs, including site preparation, and analysis thereof, in central Florida; including health care facilities construction. R. Sans Lassiter Traffic engineering, travel times and access in central Florida. Richard Anderson Sarah Mobley Equipment and cost of equipment. William J. Serow, Ph.D. Demographics. Van Talbert Health care planning. John Winfrey Health care accounting and financial feasibility analysis. Robert C. Liden Investment banking, including tax-exempt financing of health care facilities. Lewis A. Siefert Hospital accounting and Medicare Reimbursement. FLORIDA HOSPITAL NAME EXPERTISE Steven Windham Health planning. W. Eugene Nelson Health planning, CON administration and transportation planning. Ronald J. Skantz Radiology training and management. Sven Kansman Traffic engineering and travel time studies. John Crissey Stan Smith, Ph.D. Demographics. Gabriel Mayer, M.D. Physician. Larry Margolis Health care planning, hospital administration, facility planning, HMO's and PPO's. Scott Allen Miller Health care accounting and financial feasibility. OGH NAME EXPERTISE Patrick J. Carson, D.O. Medical emergencies and operation of an emergency room. Tracey Watson Michael Sherry B. Jean Martell Walter J. Wozniak Lawrence Kramer, O.D. Family practice. Patrick Deegan Accounting, hospital finance and budgeting. Andrea Walsh DEPARTMENT NAME EXPERTISE W. Eugene Nelson Health planning, CON administration and transportation planning. PUBLIC WITNESSES Mike Baumann Bob Mandell Luddy Goetz Martin Goodman Yvonne Opfell Martin Lebnick
The Issue The ultimate issue is whether the application of Petitioner, University Medical Park, for a certificate of need to construct a 130-bed acute care hospital in northern Hillsborough County, Florida should be approved. The factual issues are whether a need exists for the proposed facility under the Department's need rule and, if not, are there any special circumstances which would demonstrate the reasonableness and appropriateness of the application notwithstanding lack of need. The petitioner, while not agreeing with the methodology, conceded that under the DHRS rule as applied there is no need because there is an excess of acute care beds projected for 1989, the applicable planning horizon. The only real factual issue is whether there are any special circumstances which warrant issuance of a CON. The parties filed post-hearing findings of fact and conclusions of law by March 18, 1985, which were read and considered. Many of those proposals are incorporated in the following findings. As indicated some were irrelevant, however, those not included on pertinent issues were rejected because the more credible evidence precluded the proposed finding. Having heard the testimony and carefully considered the Proposed Findings of Fact, there is no evidence which would demonstrate the reasonableness and appropriateness of the application. It is recommended that the application be denied.
Findings Of Fact General Petitioner is a limited partnership composed almost entirely of physicians, including obstetricians/gynecologists (OB/GYN) and specialists providing ancillary care, who practice in the metropolitan Tampa area. (Tr. Vol. 1, pp. 103-104). Petitioner's managing general partner is Dr. Robert Withers, a doctor specializing in OB/GYN who has practiced in Hillsborough County for over thirty years. (Tr. Vol. 1, pp. 24- 26, 28-29.) Dr. Withers was a prime moving force in the founding, planning and development of University Community Hospital and Women's Hospital. (Tr. Vo1. 1, pp. 26-28, 73; Vol. 4, pp. 547-548.) Petitioner seeks to construct in DHRS District VI a specialty "women's" hospital providing obstetrical and gynecological services at the corner of 30th Street and Fletcher Avenue in northern Hillsborough County and having 130 acute care beds. 1/ (Tr. Vol. 1, pp. 34, 74-75, Vol. 5, pp. 678-679, Northside Ex.-1, pp. 1-2, Ex.-4A.) The proposed hospital is to have 60 obstetrical, 66 gynecological and 4 intensive care beds. (Tr. Vol. 8, P. 1297, Northside Ex.-1 Table 17, Ex.-B.) DHRS District VI is composed of Hardy, Highlands, Hillsborough, Manatee and Polk counties. Each county is designated a subdistrict by the Local Health Council of District VI. Pasco County, immediately north of Hillsborough, is located in DHRS District V and is divided into two subdistricts, east Pasco and west Pasco. If built, Northside would be located in the immediate vicinity of University Community Hospital (UCH) in Tampa, Hillsborough County, Florida. Less than 5 percent of the total surgical procedures at UCH are gynecologically related, and little or no nonsurgical gynecological procedures arc performed there. (Tr. Vol. 4, p. 550.) There is no obstetrical practice at UCH, although it has the capacity to handle obstetric emergencies. The primary existing providers of obstetrical services to the metropolitan Tampa area are Tampa General Hospital (TGH) and Women's Hospital (Women's). (Tr. Vol. 1, p. 79, Northside Ex.-4, Tr. Vol. 7, pp. 1074-1075.) TGH is a large public hospital located on Davis Islands near downtown Tampa. (Tr. Vol. 1, pp. 47-48, Vol. 8, pp. 1356, 1358.) TGH currently has a 35 bed obstetrical unit, but is currently expanding to 70 beds as part of a major renovation and expansion program scheduled for completion in late 1985. (Tr. Vol. 7, pp. 1049, 1095, Vol. 8, pp. 1367-1368, Vol. 10, P. 1674, Northside Ex.- 2, P. 3.) In recent years, the overwhelming majority of Tampa General's admissions in obstetrics at TGH have been indigent patients. (Tr. Vol. 1, P. 61, Vol. 8, pp. 1375- 1379; Vol. 9, P. 1451; TGH Ex.-3.) Tampa General's internal records reflect that it had approximately 2,100 patient days of gynecological care compared with over 38,000 patient days in combined obstetrical care during a recent eleven month period. (TGH Ex.-3..) Women's is a 192 bed "specialty" hospital located in the west central portion of the City of Tampa near Tampa Stadium. (Tr. Vol. 1, pp. 63-64, 66-67; Vol. 10 P. 1564; Northside Ex.-4.) Women's Hospital serves primarily private-pay female patients. (Vol. 1, pp. 79, 88-89; Vol. 6, pp. 892-893.) Humana Brandon Hospital, which has a 16 bed obstetrics unit, and South Florida Baptist Hospital in Plant City, which has 12 obstetric beds, served eastern Hillsborough County. (Tr. Vol. 7, P. 1075; Northside Ex.-2, P. 3; Northside Ex.-4 and Tr. Vol. 1, P. 79; Northside Ex.-4.) There are two hospitals in eastern Pasco County, which is in DHRS District V. Humana Hospital, Pasco and East Pasco Medical Center, each of which has a six bed obstetric unit. Both hospitals are currently located in Dade City, but the East Pasco Medical Center will soon move to Zephyrhills and expand its obstetrics unit to nine beds. (Tr. Vol. 1, pp. 108- 109; Tr. Vol. 7, P. 1075; Vol. 8, pp. 1278-1281; Northside Ex.-4.) There are no hospitals in central Pasco County, DHRS District V. Residents of that area currently travel south to greater Tampa, or, to a lesser extent, go to Dade City for their medical services. (Tr. Vol. 2, pp. 266-267, 271-272; Vol. 7, p. 1038.) Bed Need There are currently 6,564 existing and CON approved acute care beds in DHRS District VI, compared with an overall bed need of 5,718 acute care beds. An excess of 846 beds exist in District VI in 1989, the year which is the planning horizon use by DHRS in determining bed need applicable to this application. (Tr. Vol. 7, pp. 1046-1047, 1163, 1165-66; DHRS Ex.-1.) There is a net need for five acute care beds in DHRS District V according to the Department's methodology. (Tr. Yolk. 7, pp. 1066, 1165; DHRS Ex.-1.) The figures for District VI include Carrollwood Community Hospital which is an osteopathic facility which does not provide obstetrical services. (Tr. Vol. 1, P. 158; Vol. 7, p. 1138; Vol. 8, P. 1291.) However, these osteopathic beds are considered as meeting the total bed need when computing a11 opathic bed need. DHRS has not formally adopted the subdistrict designations of allocations as part of its rules. (Tr. Vol. 7, pp. 1017-1017, 1019; Vol. 8, pp. 1176, 1187.) Consideration of the adoption of subdistricts by the Local Health Council is irrelevant to this application. 2/ Areas of Consideration in Addition to Bed Need Availability Availability is deemed the number of beds available. As set forth above, there is an excess of beds. (Nelson, Tr. Vol. VII, P. 1192.) Tampa General Hospital and Humana Women's Hospital offer all of the OB related services which UMP proposes to offer in its application. These and a number of other hospitals to include UCH, offer all of the GYN related services proposed by Northside. University Community Hospital is located 300 yards away from the proposed site of Northside. UCH is fully equipped to perform virtually any kind of GYN/OB procedure. Humana and UCH take indigent patients only on an emergency basis, as would the proposed facility. GYN/OB services are accessible to all residents of Hillsborough County regardless of their ability to pay for such services at TGH. (Williams, Tr. Vol. IX, P. 1469; Baehr, Tr. Vol. X, P. 1596; Splitstone, Tr. Vol. IV, P. 582; Hyatt, TGH Exhibit 19, P. 21.) Utilization Utilization is impacted by the number of available beds and the number of days patients stay in the hospital. According to the most recent Local Health Council hospital utilization statistics, the acute care occupancy rate for 14 acute care hospitals in Hillsborough County for the most recent six months was 65 percent. This occupancy rate is based on licensed beds and does not include CON approved beds which are not yet on line. This occupancy rate is substantially below the optimal occupancies determined by DHRS in the Rule. (DHRS Exhibit 4; Contis, Tr. Vol. VII, P. 1069.) Utilization of obstetric beds is higher than general acute care beds; however, the rules do not differentiate between general and obstetric beds. 3/ Five Hillsborough County hospitals, Humana Women's, St. Joseph's, Tampa General, Humana Brandon, and South Florida Baptist, offer obstetric services. The most recent Local Health Council utilization reports indicate that overall OB occupancy for these facilities was 82 percent for the past 6 months. However, these computations do not include the 35 C0N-approved beds which will soon be available at Tampa General Hospital. (DHRS Exhibit 4). There will be a substantial excess of acute care beds to include OB beds in Hillsborough County for the foreseeable future. (Baehr, Tr.w Vol. X, pp. 1568, 1594, 1597.) The substantial excess of beds projected will result in lower utilization. In addition to excess beds, utilization is lowered by shorter hospital stays by patients. The nationwide average length of stay has been reduced by almost two days for Medicare patients and one day for all other patients due to a variety of contributing circumstances. (Nelson, Tr. Vol. VII, P. 1192; Contis, Tr. Vol. VII, P. 1102; Baehr, Tr. Vol. X, pp. 1583-84; etc.) This dramatic decline in length of hospital stay is the result of many influences, the most prominent among which are: (1) a change in Medicare reimbursement to a system which rewards prompt discharges of patients and penalizes overutilization ("DGRs"), (2) the adaptation by private payers (insurance companies, etc.) of Medicare type reimbursement, (3) the growing availability and acceptance of alternatives to hospitalization such as ambulatory surgical centers, labor/delivery/recovery suites, etc. and (4) the growing popularity of health care insurance/delivery mechanisms such as health maintenance organizations ("HMOs"), preferred provider organizations ("PPOs"), and similar entities which offer direct or indirect financial incentives for avoiding or reducing hospital utilization. The trend toward declining hospital utilization will continue. (Nelson, Tr. Vol. VII, pp. 1192-98; Baehr, Tr. Vol. X, pp. 1584-86; etc.) There has been a significant and progressive decrease in hospital stays for obstetrics over the last five years. During this time, a typical average length of stay has been reduced from three days to two and, in some instances, one day. In addition, there is a growing trend towards facilities (such as LDRs) which provide obstetrics on virtually an outpatient basis. (Williams, Tr. Vol. IX, P. 1456; Hyatt, Tr. Vol. IV, P. 644.) The average length of stay for GYN procedures is also decreasing. In addition, high percentage of GYN procedures are now being performed on an outpatient, as opposed to inpatient, basis. (Hyatt, Tr. Vol. IV, P. 644, etc.) The reduction in hospital stays and excess of acute care beds will lower utilization of acute care hospitals, including their OB components, enough to offset the projected population growth in Hillsborough County. The hospitals in District VI will not achieve the optimal occupancy rates for acute care beds or OB beds in particular by 1989. The 130 additional beds proposed by UMP would lower utilization further. (Paragraphs 7, 14, and 18 above; DHRS Exhibit 1, Humana Exhibit 1.) Geographic Accessibility Ninety percent of the population of Hillsborough County is within 30 minutes of an acute care hospital offering, at least, OB emergency services. TGH 20, overlay 6, shows that essentially all persons living in Hillsborough County are within 30 minutes normal driving time not only to an existing, acute care hospital, but a hospital offering OB services. Petitioner's service area is alleged to include central Pasco County. Although Pasco County is in District V, to the extent the proposed facility might serve central Pasco County, from a planning standpoint it is preferable to have that population in central Paso served by expansion of facilities closer to them. Hospitals in Tampa will become increasingly less accessible with increases in traffic volume over the years. The proposed location of the UMP hospital is across the street from an existing acute care hospital, University Community Hospital ("UCH"). (Splitstone, Tr. Vol. IV, P. 542.) Geographic accessibility is the same to the proposed UMP hospital and UCH. (Smith, Tr. Vol. III, P. 350; Wentzel, Tr. Vol. IV, p. 486; Peters, Tr. Vol. IX, P. 1532.) UCH provides gynecological services but does not provide obstetrical services. However, UCH is capable of delivering babies in emergencies. (Splitstone, Tr. Vol. IV, p. 563.) The gynecological services and OB capabilities at UCH are located at essentially the same location as Northside's proposed site. Geographic accessibility of OB/GYN services is not enhanced by UMP's proposed 66 medical-surgical beds. The accessibility of acute care beds, which under the rule are all that is considered, is essentially the same for UCH as for the proposed facility. As to geographic accessibility, the residents of Hillsborough and Pasco Counties now have reasonable access to acute care services, including OB services. The UMP project would not increase accessibility to these services by any significant decrease. C. Economic Accessibility Petitioner offered no competent, credible evidence that it would expand services to underserved portions of the community. Demographer Smith did not study income levels or socioeconomic data for the UMP service area. (Smith, TR. Vol. III, pp. 388, 389.) However, Mr. Margolis testified that 24 percent of Tampa General's OB patients, at least 90 percent of who are indigents, came from the UMP service area. (Margolis, Tr. Vol. X, P. 1695.) The patients proposed to be served at the Northside Hospital are not different than those already served in the community. (Withers, Tr. Vol. II, P. 344.) As a result, Northside Hospital would not increase the number of underserved patients. Availability of Health Care Alternative An increasing number of GYN procedures are being performed by hospitals on an outpatient basis and in freestanding ambulatory-surgical centers. An ambulatory-surgical center is already in operation at a location which is near the proposed UMP site. In fact, Dr. Hyatt, a UMP general partner, currently performs GYN procedures at that surgical center. (Withers, Tr. Vol. I, P. 150; Hyatt, Tr. Vol. IV, pp. 644, 646. Ambulatory surgical centers, birthing centers and similar alternative delivery systems offer alternatives to the proposed facility. Existing hospitals are moving to supply such alternatives which, with the excess beds and lower utilization, arc more than adequate to preclude the need for the UMP proposal. (Nelson, Tr. Vol. VII, P. 1204, 1205, 1206; Williams, Tr. Vol. IX, pp. 1453, 1469; Contis, Tr. Vol. VII, pp. 1154; Contis, Tr. Vol. VII, pp. 1151, 1154.) Need for Special Equipment & Services DHRS does not consider obstetrics or gynecology to be "special services" for purposes of Section 381.494(6)(c)6, Florida Statutes. In addition, the services proposed by UMP are already available in Hillsborough and Pasco Counties. (Nelson, Tr. Vol. VII, pp. 1162, 1210.) Need for Research & Educational Facilities USF currently uses Tampa General as a training facility for its OB residents. TCH offered evidence that the new OB facilities being constructed at Tampa General were designed with assistance from USF and were funded by the Florida Legislature, in part, as an educational facility. (Powers, Tr. Vol. IX, P. 1391; Williams, Tr. Vol. IX, pp. 1453-1455.) The educational objectives of USF for OB residents at Tampa General are undermined by a disproportionately high indigent load. Residents need a cross section of patients. The UMP project will further detract from a well rounded OB residency program at Tampa General by causing Tampa General's OB Patient mix to remain unbalanced. (Williams, Tr. Vol. IX, P. 1458; Margolis, Tr. Vol. X, P. 1695.) UMP offered no evidence of arrangements to further medical research or educational needs in the community. (Nelson, Tr. Vol. VII, P. 1213. UMP's proposed facility will not contribute to research and education in District VI. Availability of Resources Management UMP will not manage its hospital. It has not secured a management contract nor entered into any type of arrangement to insure that its proposed facility will be managed by knowledgeable and competent personnel. (Withers, Tr. Vol. I, p. 142.) However, there is no alleged or demonstrated shortage of management personnel available. Availability of Funds For Capital and Operating Expenditures The matter of capital funding was a "de novo issue," i.e., evidence was presented which was in addition to different from its application. In its application, Northside stated that its project will be funded through 100 percent debt. Its principal general partner, Dr. Withers, states that this "figure is not correct." However, neither Dr. Withers nor any other Northside witness ever identified the percentage of the project, if any, which is to be funded through equity contributions except the property upon which it would be located. (UMP Exhibit 1, p. 26; Withers, Tr. Vol. I, P. 134.) The UMP application contained a letter from Landmark Bank of Tampa which indicates an interest on the part of that institution in providing funding to Northside in the event that its application is approved. This one and one half year year old letter falls short of a binding commitment on the part of Landmark Bank to lend UMP the necessary funds to complete and operate its project and is stale. Dr. Withers admitted that Northside had no firm commitment as of the date of the hearing to finance its facility, or any commitment to provide 1196 financing as stated in its application. (UMP Exhibit I/Exhibit Dr. Withers, Tr. Vol. I, P. 138.) Contribution to Education No evidence was introduced to support the assertion in the application of teaching research interaction between UMP and USF. USF presented evidence that no such interaction would occur. (Tr. Vol. IX, P. 1329.) The duplication of services and competition for patients and staff created by UMP's facility would adversely impact the health professional training programs of USF, the state's primary representative of health professional training programs in District VI. (Tr. Vol. IX, pp. 1314-19; 1322-24; 1331-1336.) Financial Feasibility The pro forma statement of income and expenses for the first two years of operation (1987 and 1988) contained in the UMP application projects a small operating loss during the first year and a substantial profit by the end of the second year. These pro formas are predicated on the assumption that the facility will achieve a utilization rate of 61 percent in Year 1 and 78 percent in its second year. To achieve these projected utilization levels, Northside would have to capture a market share of 75-80 percent of all OB patient days and over 75% of all GYN patient days generated by females in its service area. (UMP, Exhibit 1; Withers, Tr. Vol. I, P. 145, Dacus; Tr. Vol. V, P. 750-755.) These projected market shares and resulting utilization levels are very optimistic. It is unlikely that Northside could achieve these market shares simply by making its services available to the public. More reasonable utilization assumptions for purposes of projecting financial feasibility would be 40-50 percent during the first year and 65 percent in the second year. (Margolis, Tr. Vol. X, P. 1700; Baehr, Tr. Vol. X, pp. 1578, 1579, 1601.) UMP omitted the cost of the land on which its facility is to be constructed from its total project cost and thus understates the income necessary to sustain its project. Dr. Withers stated the purchase price of this land was approximately $1.5 million and it has a current market value in excess of $5 million. (Withers, Tr. Vol. I, pp. 139, 140.) Dr. Withers admitted that the purchase price of the land would be included in formulating patient charges. As a matter of DHRS interpretation, the cost of land should be included as part of the capital cost of the project even if donated or leased and, as such, should be added into the pro formas. UMP's financial expert, Barbara Turner, testified that she would normally include land costs in determining financial feasibility of a project, otherwise total project costs would be understated (Withers, Tr. Vol. I, P. 141; Nelson, Tr. Vol. VII, pp. 1215, 1216; Turner, Tr. Vol. X, P. 1714.) In addition, the pro formas failed to include any amount for management expenses associated with the new facility. Dr. Withers admitted UMP does not intend to manage Northside and he anticipates that the management fee would be considerably higher than the $75,000 in administrator salaries included in the application. (Withers, Tr. Vol. I, pp. 143, 144.) Barbara Turner, UMP's financial expert, conceded that the reasonableness of the percent UMP pro formas is predicated on the reasonableness of its projected market share and concomitant utilization assumptions. These projections are rejected as being inconsistent with evidence presented by more credible witnesses. The UMP project, as stated in its application or as presented at hearing, is not financially feasible on the assumption Petitioner projected. VIII. Impact on Existing Facilities Approval of the UMP application would result in a harmful impact on the costs of providing OB/GYN services at existing facilities. The new facility would be utilized by patients who would otherwise utilize existing facilities, hospitals would be serving fewer patients than they are now. This would necessarily increase capital and operating costs on a per patient basis which, in turn, would necessitate increases in patient charges. (Nelson, Tr. Vol. VII, pp. 1217-1219; Baehr, Tr. Vol. X, P. 1587.) Existing facilities are operating below optimal occupancy levels. See DHRS Exhibit 4. The Northside project would have an adverse financial impact on Humana, Tampa General Hospital, and other facilities regardless of whether Northside actually makes a profit. See next subheading below. The Northside project would draw away a substantial number of potential private-pay patients from TGH. Residents of the proposed Northside service area constitute approximately 24 percent of the total number of OB patients served by TGH. The Northside project poses a threat to TGH's plans to increase its non- indigent OB patient mix which is the key to its plans to provide a quality, competitive OB service to the residents of Hillsborough County. (Nelson, Tr. Vol. VIII, P. 1225; Margolis, Tr. Vol. X, P. 1695.) Impact Upon Costs and Competition Competition via a new entrant in a health care market can be good or bad in terms of both the costs and the quality of care rendered, depending on the existing availability of competition in that market at the time. Competition has a positive effect when the market is not being adequately or efficiently served. In a situation where adequate and efficient service exists, competition can have an adverse impact on costs and on quality because a new facility is simply adding expense to the system without a concomitant benefit. (Baehr, Tr. Vol. X, p. 1650.) Competition among hospitals in Hillsborough County is now "intense and accelerating." (Splitstone, Tr. Vol. IV, p. 558.) Tampa General is at a competitive disadvantage because of its indigent case load and its inability to offer equity interests to physicians in its hospital. (Blair, Tr. Vol. VI, pp. 945, 947-948); Powers, Tr. Vol. IX, P. 1405.) Tampa General Hospital is intensifying its marketing effort, a physician office building under construction now at Tampa General is an illustration of Tampa General's effort to compete for private physicians and patients. (Powers, Tr. Vol. IX, pp. 1405-1406.) The whole thrust of Tampa General's construction program is to increase its ability to compete for physicians. (Nelson, Tr. Vol. VII, P. 1224; Powers, Tr. Vol. IX, p. 1442.) The Tampa General construction will create new competition for physicians and patients. (Contis, Tr. Vol. VII, p. 1099.) Patients go to hospitals where their doctors practice, therefore, hospitals generally compete for physicians. (Splitstone, Tr. Vol. IV, P. 563; Blair, Tr. Vol. VI, pp. 898, 928.) Because many of the UMP partners are obstetricians who plan to use Northside exclusively, approval of the Northside project would lessen competition. (Popp, TGH Exhibit 18, P. 11.) It is feasible for Tampa General to attract more private pay OB patients. (Williams, Tr. Vol. IX, pp. 1460- 1461.) At its recently opened rehabilitation center, Tampa General has attracted more private pay patients. (Powers, Tr. Vol. IX, pp. 1393-1396.) USF OB residents at Tampa General are planning to practice at Tampa General. (Williams, Tr. Vol. IX, pp. 1460-1461.) The state-of-the-art labor, delivery, recovery room to be used at Tampa General will be an attractive alternative to OB patients. (Williams, Tr. Vol. IX, pp. 1460- 1461); Popp, TGH Exhibit 18, p.26) IX. Capital Expenditure Proposals The proposed Northside hospital will not offer any service not now available in Tampa. (Hyatt, TGH Exhibit 19, p. 21).
Recommendation Petitioner having failed to prove the need for additional acute care beds to include OB beds or some special circumstance which would warrant approval of the proposed project, it is recommended that its application for a CON be DENIED. DONE and ORDERED this 25th day of June, 1985, in Tallahassee, Florida STEPHEN F. DEAN 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 June, 1985.
Findings Of Fact By application dated September 28, 1988 respondent/applicant, Southwest Florida Regional Medical Center, Inc. (SFRMC), filed an application with respondent, Department of Health and Rehabilitative Services (HRS), seeking the issuance of a certificate of need (CON) authorizing the expenditure of approximately $19.98 million to construct a new three story clinical and ancillary services building at its facility located in Fort Myers, Florida. After the application was filed, and certain additional information was provided by SFRMC, HRS issued proposed agency action in the form of a letter on January 13, 1989 advising that it intended to issue SFRMC a CON. On February 3, 1989, HRS published in the Florida Administrative Weekly a notice of its intent to grant the CON. After learning of this action, petitioner, Lee Memorial Hospital (Lee), filed a petition for formal administrative hearing seeking to contest the proposed agency action. That prompted this proceeding. The state agency action report, which is a part of this record, reflects that the applicant proposes to: ... add 4 additional operating rooms to the existing 11; 16 new cardiac surgery recovery beds to the existing 16; and 8 new CCU beds to the existing 8 (by conversion of med/surg beds) in a new three story building that will be a replacement/expansion to the existing facility. The requested project will not constitute an increase in the licensed beds of the applicant's facility. The proposal does not request approval of any new services or change in the total number of beds that are licensed for the applicant's facility, but it does include redesignation of 8 existing medical/surgical beds to add to the 8 additional CCU beds requested. New space for Central Supply Services, as well (as) new and additional administrative, staff support areas, land public areas have been planned. (Emphasis added) These changes were sought by SFRMC to meet "(t)he need and demand for Cardiac services (that have) increased dramatically over the last seven years due to the community's growth, technological advancements and changing clinical practices." According to the allegations in the petition, Lee operates a health care facility in Fort Myers, Florida, which is in the same health planning district as SFRMC. The petition goes on to aver that Lee provides a wide range of medical services and programs, including cardiac surgery and recovery, cardiac catheterization laboratories, CCU, and non-invasive diagnostic cardiology services as proposed in SFRMC's application. The petition alleges further that, due to the sheer size of the project and the "substantial change" in services that will occur, Lee is entitled to a hearing. Based upon these considerations, Lee alleges that its open heart surgery program will be substantially affected if the CON is issued. HRS has authorized Lee to operate an open heart surgery program. However, by stipulation dated March 28, 1988 in DOAH Case No. 87-4755, it has agreed not to begin this program until at least April 1, 1990. If approved, SFRMC's building addition would not be completed until May 1, 1990, or one month after Lee's program begins. The application reflects that SFRMC will increase its total square footage by 25%, operating room capacity by 57%, and SICU capacity by 64%. In all, the project will add approximately 68,000 square feet to the facility complex. In addition, operating expenses associated with the project will total in excess of $28 million per year. Finally, utilization of existing facilities will be enhanced by the new addition.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Southwest Florida Regional Medical Center's motion to dismiss the petition of Lee Memorial Hospital be GRANTED and that Lee's petition for formal administrative hearing be dismissed with prejudice. DONE AND ORDERED this 27th day of April, 1989, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of April, 1989.
Findings Of Fact Petitioners' application for a certificate of need to construct a 60- bed skilled nursing home was recommended for approval by the Health Planning Council, the health systems agency (HSA) for the five counties of Martin, Palm Beach, Volusia, Okeechobee and St. Lucie, but was denied by the Department of Health and Rehabilitative Services (HRS), Office of Community Medical Facilities. The latter agency has the ultimate responsibility for granting certificates of need. In recommending the granting of a certificate of need, HSA considered available beds in existing facilities in lieu of licensed beds, found 89.6 percent occupancy of available beds equal to or greater than 90 percent occupancy of licensed beds prescribed by the State Plan for Hospitals and Related Medical Facilities (Exhibit 2), used its own population forecasts rather than State population forecasts, and failed to consider certificates of need approval recently granted to five nursing homes in Palm Beach County, some of which were already under construction. HSA, at the time of this application had Palm Beach County divided into four regions (which has now been expanded to five) and the proposed facility is located in region three. At the time of the application there were three existing nursing homes in region three and two additional facilities had been granted certificates of need in this region. HSA normally uses licensed beds to determine the percentage of occupancy, but for reasons not explained at this hearing, HSA used available beds to determine the percentage of occupancy. Using available beds HSA found the three nursing homes in region three of Palm Beach County to have an 89.6 percent rate of occupancy. Had licensed beds been used, the percentage of occupancy would have been 83. The Office of Community Medical Facilities, in determining the need for additional medical facilities, has divided the State into 60 health care service areas and Palm Beach County is one of those areas. No evidence was submitted to indicate that the service areas so established are not reasonable. At the time of Petitioners' application, there were 1981 licensed nursing home beds in Palm Beach County; and applications had been approved, or recommended for approval and subsequently approved, for an additional 460 beds in Palm Beach County. The projected need in the State Plan for 1977 (Exhibit 2) for nursing home beds for Palm Beach County by 1982 is 2038. Accordingly, at the time of this hearing, nursing homes in Palm Beach County had received approval for 2441 beds which is 403 more nursing home beds than the forecast need for the year 1982. In determining the need for medical and health provider facilities, the usage rate of existing facilities is first determined from actual usage of the facilities. The Projected Average Daily Census is then determined by multiplying the use rate by the forecast population and dividing by 365 days per year. From this figure the bed need is determined by dividing the Projected Average Daily Census by .85 and adding 10. In this manner, HRS determined in the 1977 State Plan for Construction of Hospitals and Related Medical Facilities that Palm Beach County would have a need for 2038 nursing home beds in 1982. At the time Petitioners' application was recommended for approval by HSA, additional certificates of need had been granted for an additional 160 nursing home beds in region three of Palm Beach County. These facilities are designated as Life Care Centers because they are attached to condominiums from which their primary source of patients is expected to come. However, these facilities are essentially nursing homes and provide the same services as nursing homes. Had these authorized additional beds been included in computing the percentage of occupancy of nursing homes in region three the rate would have been approximately 60 percent, assuming no population change when these facilities become operational.
The Issue Whether the application of Petitioner Naples Community Hospital, Inc. for a Certificate of Need to add a total of 35 beds to Naples Community Hospital and North Collier Community Hospital should be approved based on peak seasonal demand for acute care beds in the relevant subdistrict.
Findings Of Fact Naples Community Hospital, Inc., ("NCH") holds the license for and operates Naples Community Hospital ("Naples"), a 331 bed not-for-profit acute care hospital, and North Collier Community Hospital ("North Collier"), a 50 bed acute care hospital. NCH also operates a 22 bed comprehensive rehabilitation facility and a 23 bed psychiatric facility. NCH is owned by Community Health Care, Inc., "(CHC"). Both Naples and North Collier are located within Agency for Health Care Administration ("ACHA") district 8 and are the only hospitals within subdistrict 2 of the district. Naples is located in central Collier County. North Collier is (as the name implies) located in northern Collier County approximately 2-3 miles from the county line. NCH's primary service area is Collier County from which approximately 85-90 percent of its patients come, with a secondary service area extending north into Lee County. Neither Naples nor North Collier are teaching hospitals as defined by Section 407.002(27), Florida Statutes (1991). NCH is not proposing a joint venture in this CON application. NCH has a record of providing health care services to Medicaid patients and the medically indigent. NCH proposes to provide health care services to Medicaid patients and the medically indigent. Neither Naples nor North Collier are currently designated by the Office of Medicaid as disproportionate share providers. NCH has the funds for capital and initial operating expenditures for the project. NCH has sufficient financial resources to construct and equip the proposed project. The costs and methods of the proposed construction are reasonable. The Agency for Health Care Administration ("AHCA") is the state agency charged with responsibility for administering the Certificate of Need program. Southwest Florida Regional Medical Center ("Southwest") is a 400 bed for-profit acute care hospital located in Fort Myers, Lee County. Lee County is adjacent to and north of Collier County. Southwest is owned by Columbia Hospital Corporation ("Columbia"), which also owns Gulf Coast Hospital in Fort Myers, and two additional hospitals in AHCA District 8. Southwest's primary service area is Lee County. Although Southwest asserts that it would be negatively impacted by the addition of acute care beds at NCH, the greater weight of the credible evidence fails to support the assertion. The primary market services areas of NCH and Southwest are essentially distinct. However, the facilities are located in such proximity as to indicate that secondary service areas overlap and that, at least during peak winter season periods, approval of the NCH application could potentially impact Southwest's operations. Southwest has standing to participate in this proceeding. Southwest offered evidence to establish that it would be substantially affected by approval of the NCH application. The NCH length-of-stay identified in the Southwest documents is inaccurate and under-reports actual length-of-stay statistics. The documentation also includes demographic information from a zip code (33912) which contributes an insignificant portion of NCH patients, and relies on only two years of data in support of the assertion that utilization in the NCH service area is declining. Southwest's chief operating officer testified that he considers Gulf Coast Hospital, another Columbia-owned facility, to offer more competition to Southwest that does NCH. Further, a physician must have admitting privileges at a hospital before she can admit patients to the facility. Of the physicians holding admitting privileges at Southwest, only two, both cardiologists, also have admitting privileges at NCH. Contrary to Southwest, NCH does not have an open heart surgery program. Accordingly, at least as to physician-admitted patients, approval of the NCH application would likely have little impact. On August 26, 1991, NCH submitted to AHCA a letter of intent indicating that NCH would file a Certificate of Need ("CON") application in the September 26, 1991 batching cycle for the addition of 35 acute care beds to the Naples and North Collier facilities. The letter of intent did not specify how the additional beds would be divided between the two facilities. The determination of the number of beds for which NCH would apply was solely based on the fact that the applicant had 35 observation beds which could be readily converted to acute care beds. The observation beds NCH proposes to convert are equipped identically to the acute care beds at NCH and are currently staffed. The costs involved in such conversion are minimal and relatively insignificant. Included with the letter of intent was a certified corporate resolution which states that on July 24, 1991, the NCH Board of Trustees authorized the filing of an application for the additional beds, authorized NCH to incur related expenses, stated that NCH would accomplish the proposed project within time and budget allowances set forth in the application, and that NCH would license and operate the facility. By certification executed August 7, 1991, the NCH secretary certified that the resolution was enacted at the July 24, 1991 board meeting and that the resolution did not contravene the NCH articles of incorporation or bylaws. Article X, Sections 10.1 and 10.1.3 of the NCH bylaws provides that no CON application shall be legally effective without the written approval of CHC. On September 26, 1991, NCH filed an application for CON No. 6797 proposing to add 31 acute care beds to Naples and 4 acute care beds to North Collier. The CON application included a copy of the NCH board resolution and certification which had been previously submitted with the letter of intent as well as the appropriate filing fee. NCH published appropriate public notice of the application's filing. As of the date of the CON application's filing, CHC had not issued written approval of the CON application prior to the action of the NCH Board of Directors and the filing of the letter of intent or the application. On October 2, 1992, four days prior to the administrative hearing in this case, the board of CHC ratified the actions of NCH as to the application for CON at issue in this case. The CHC board has previously ratified actions of the NCH in such fashion. There is uncontroverted testimony that the CHC board was aware of the NCH application and that no reservation was expressed by any CHC board member regarding the CON application. Although NCH's filing of the CON application without appropriate authorization from its parent company appears to be in violation of the NCH bylaws, such does not violate the rules of the AHCA. There is no evidence that the AHCA requested written authorization from the CHC board. After review of the application, the AHCA identified certain deficiencies in the application and notified NCH, which apparently rectified the deficiencies. The AHCA deemed the application complete on November 8, 1991. As required by statute, NCH included a list of capital projects as part of the CON application. The list of capital projects attached to the application was incomplete. The capital projects list failed to identify approximate expenditures of $370,000 to construct a patio enclosure, $750,000 to install an interim sprinkler system, $110,000 to construct emergency room triage space, and $125,000 to complete electrical system renovations. At hearing, witnesses for NCH attempted to clarify the omissions from the capital projects list. The witnesses claimed that such omitted projects were actually included within projects which were identified on the list. When identifying the listed projects within which the omitted projects were supposedly included, the witnesses testified inconsistently. For example, one witness testified that the patio project was included in the emergency room expansion project listed in the application. Another witness claimed that the patio enclosure was included in an equipment purchase category. Based on the testimony, it is more likely that the patio enclosure was neither a part of an emergency room expansion nor equipment purchase, but was a separate construction project which was omitted from the CON application. Similarly inconsistent explanations were offered for the other projects which were omitted from the capital projects list. The testimony was not credible. The capital projects omitted from the list do not affect the ability of NCH to implement the CON sought in this proceeding. The parties stipulated to the fact the NCH has sufficient financial resources to construct and equip the proposed project. As part of the CON application, NCH was required to submit a pro forma income statement for the time period during which the bed additions would take place. The application failed to include a pro forma statement for the appropriate time period. Based on the stipulation of the parties that the costs and methods of the proposed construction are reasonable, and that NCH has adequate resources to fund the project, the failure to include the relevant pro forma is immaterial. Pursuant to applicable methodology, the AHCA calculates numeric acute care bed need projections for each subdistrict's specific planning period. Accordingly, the AHCA calculated the need for additional acute care beds in district 8, subdistrict 2 for the July, 1996 planning horizon. The results of the calculation are published by the agency. The unchallenged, published fixed need pool for the planning horizon at issue in this proceeding indicated that there was no numeric need for additional acute care beds in district 8, subdistrict 2, Collier County, Florida, pursuant to the numeric need methodology under Rule 59C-1.038 Florida Administrative Code. The CON application filed by NCH is based on the peak seasonal demand experienced by hospitals in the area during the winter months, due to part-time residents. NCH asserts that the utilization of acute care beds during the winter months (January through April) results in occupancy levels in excess of 75 percent and justifies the addition of acute care beds, notwithstanding the numerical need determination. Approval of the CON application is not justified by the facts in this case. The AHCA's acute care bed need methodology accounts for high seasonal demand in certain subdistricts in a manner which provides that facilities have bed space adequate to accommodate peak demand. The calculation which requires that the average annual occupancy level exceed 75 percent reflects AHCA consideration of occupancy levels which rise and fall with seasonal population shifts. The applicant has not challenged the methodology employed by the AHCA in projecting need. Peak seasonal acute care bed demand may justify approval of a CON application seeking additional beds if the lack of available beds poses a credible threat of potentially negative impact on patient outcomes. The peak seasonal demand experienced by NCH has not adversely affected patient care and there is insufficient evidence to establish that, at this time, such peak demand poses a credible threat of potential negative impact on patient outcomes in the foreseeable future. There is no dispute regarding the existing quality of care at Naples, North Collier, Southwest or any other acute care hospital in district 8. The parties stipulated that NCH has the ability to provide quality of care and a record of providing quality of care. In this case, the applicant is seeking to convert existing beds from a classification of "observation" to "acute care". The observation beds NCH proposes to convert are equipped identically to the acute care beds at NCH. Approval of the CON application would result in no net increase in the number of licensed beds. NCH offered anecdotal evidence suggesting that delays in transferring patients from the Naples emergency room to acute care beds (a "logjam") was caused by peak seasonal occupancy rates. There was no evidence offered as to the situation at the North Collier emergency room. The anecdotal evidence is insufficient to establish that "logjams" (if they occur at all) are related to an inadequate number of beds identified as "acute care" at NCH facilities. There are other factors which can result in delays in moving patients from emergency rooms to acute care beds, including facility discharge patterns, delays in obtaining medical test results and staffing practices. NCH asserted at hearing that physicians who refer patients to NCH facilities will not refer such patients to other facilities. The evidence fails to establish that such physician practice is reasonable or provides justification for approval of CON applications under "not normal" circumstances and further fails to establish that conditions at NCH are such as to result in physicians attempting to locate other facilities in which to admit patients. The rule governing approval of acute care beds provides that, prior to such approval, the annual occupancy rate for acute care beds in the subdistrict or for the specific provider, must exceed 75 percent. This requirement has not been met. Applicable statutes require that, in considering applications for CON's, the AHCA consider accessibility of existing providers. The AHCA- established standard provides that acute care bed accessibility requirements are met when at least 90 percent of the residents in an urban subdistrict are within a 30 minute automobile trip to such facilities. At least 90 percent of Naples residents are presently within a 30 minute travel time to NCH acute care beds. The number of acute care beds in the subdistrict substantially exceed the demand for such beds. Additional beds would result in inefficient utilization of existing beds, would further increase the current oversupply of beds, would delay the time at which need for additional beds may be determined and, as such, would prevent competing facilities from applying for and receiving approval for such beds. The financial feasibility projections set forth in the CON application rely on assumptions as to need and utilization projections which are not supported by the greater weight of the evidence and are not credited. Accordingly, the evidence fails to establish that the addition of 35 acute care beds to NCH facilities is financially feasible in the long term or that the income projections set forth in the CON application are reasonable. As to projections related to staffing requirements and costs, the beds are existing and are currently staffed on a daily, shift-by-shift basis, based on patient census and acuity of illness. There is reason to believe that the staffing patterns will remain fairly constant and accordingly the projections, based on historical data, are reasonable. Generally stated, where there is no numeric or "not normal" need for the proposed addition of 35 acute care beds in the relevant subdistrict, it could be predicted that the addition of acute care beds would exacerbate the oversupply of available beds and could cause a slight reduction in the occupancy levels experienced by other providers. In this case, the market service areas are sufficiently distinct as to suggest that such would not necessarily be the result. However, based on the lack of need justifying approval of the CON application under any existing circumstances, it is unnecessary to address in detail the impact on existing providers. The state and district health plans identify a number of preferences which should be considered in determining whether a CON application should be approved. The plans suggest that such preferences are to be considered when competing CON applications are reviewed. In this case there is no competing application and the applicability of the preferences is unclear. However, in any event, application of the preferences to this proposal fail to support approval of the application.
Recommendation RECOMMENDED that a Final Order be entered DENYING the application of Naples Community Hospital, Inc., for Certificate of Need 6797. DONE and RECOMMENDED this 19th day of March, 1993 in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM 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 19th day of March, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-1510 To comply with the requirements of Section 120.59(2), Florida Statutes, the following constitute rulings on proposed findings of facts submitted by the parties. Petitioner The Petitioner's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 3-4, 6-8, 16-20, 29-36, 38, 41, 44, 47, 49-61, 80, 88, 95-96, 100, 104, 108, 117-119, 122-125, 127, 134-138. Rejected as unnecessary. 15. Rejected as irrelevant. Peak seasonal demand is accounted for by the numeric need determination methodology. There is no credible evidence which supports a calculation of three years of four month winter occupancy to reach a 12 month average occupancy rate. 21-27, 37, 42-43, 62-64, 66, 97, 99, 101-103, 105-107, 109, 120-121, 126. Rejected as not supported by the greater weight of credible and persuasive evidence. 28. Rejected as not supported by the greater weight of credible and persuasive evidence and contrary to the stipulation filed by the parties. Rejected as not supported by greater weight of credible and persuasive evidence which fails to establish that the transfer of patients from emergency room to acute care beds is delayed due to numerical availability of beds. Rejected as not supported by greater weight of credible and persuasive evidence which fails to establish that the alleged lack of acute care beds is based on insufficient number of total beds as opposed to other factors which affect bed availability. Rejected as immaterial and contrary to the greater weight of the evidence Rejected as immaterial and contrary to the greater weight of the evidence which fails to establish reasonableness of considering only a four month period under "not normal" circumstances where the period and the peak seasonal demand are included within the averages utilized to project bed need. 86. Rejected as cumulative. 114. Rejected as unsupported hearsay. Respondent/Intervenor The Respondent and Intervenor filed a joint proposed recommended order. The proposed order's findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 6, 45, 51, 53, 59-67, 69-70, 94-113. Rejected as unnecessary. 16. Rejected as to use of term "false", conclusion of law. 58. Rejected as not clearly supported by credible evidence. 71-93, 114-124. Rejected as cumulative. COPIES FURNISHED: Douglas M. Cook, Director Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, Esquire Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 W. David Watkins, Esquire Oertel, Hoffman, Fernandez, & Cole Post Office Box 6507 Tallahassee, Florida 32314-6507 Edward G. Labrador, Esquire Thomas Cooper, Esquire Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308 John D.C. Newton, II, Esquire Aurell, Radey, Hinkle, Thomas & Beranek Monroe Park Tower, Suite 1000 101 North Monroe Street Post Office Drawer 11307 Tallahassee, Florida 32302
Findings Of Fact The Parties FRTC is a wholly-owned subsidiary of Charter Medical Corporation (Charter) which proposes to construct and operate a freestanding, 60 bed, 24- hour-a-day, Intensive Residential Treatment Program for children between the ages of 6 and 18 in Palm Beach County within HRS District IX, pursuant to Rule 10-28.152(8), F.A.C. and Chapter 395, F.S. Although FRTC represents it will construct its proposed facility with or without CON licensure, which it is entitled to do, given the peculiarities of this type of health care entity, it is clear that a prime motivator in FRTC's CON application is that with CON licensure, FRTC potentially will have greater access to insurance reimbursement because it may then call itself a "hospital." FRTC will seek JCAH accreditation. HRS is the state agency with the authority and responsibility to consider CON applications, pursuant to Chapter 10-5.011, F.A.C. and Sections 381.701-381.715, F.S. (1987). HRS preliminarily approved FRTC's application, and supported it through formal hearing and post-hearing proposals. RTCPB is an existing 40 bed residential treatment center for adolescents between the ages of 12 and 18, located in Palm Beach County, on the campus of Lake Hospital of the Palm Beaches. It provides services similar or identical to those services proposed to be offered by FRTC. It is JCAH accredited through an extension of Lake Hospital's accreditation and is close to JCAH accreditation in its own right. RTCPB is a subsidiary of Psychiatric Hospitals, Inc. (PIA) . PIA operates two residential treatment centers in Florida. RTCPB is not CON licensed as an IRTP, under Chapters 381 and 395, F.S., but is licensed as a child care facility under Chapter 395, F.S., as a provider of services to HRS under Chapters 10M-9 and 10E-10, F.A.C. RTCPB accepts substance abusers in residency. RTCPB has also applied for CON licensure as an IRTP in a batching cycle subsequent to the present one. That application has been preliminarily denied by HRS and RTCPB is awaiting a Section 120.57(1), F.S., formal administrative hearing thereon. RTCPB now estimates its current patients' average length of stay (ALOS) as 106 days but projects a 315 day (10 1/2 months) ALOS in its subsequent CON application. RTCPB is charging $185 per day or HRS patients and $255 with $23-26 ancillaries [sic] per day for private pay patients. Like FRTC, it uses a "levels" system of behavior modification and patient control. Humana is a 250 bed JCAH accredited hospital located in Palm Beach County, Florida. Of Humana's 250 beds, 162 are traditional acute care beds and 88 are psychiatric beds. The 88 psychiatric beds are administratively divided into different units, one of which is a 27 bed adolescent psychiatric unit; this unit opened January 20, 1987, and has an average length of stay of nine months. Humana's existing CONs are for short-term adult psychiatric beds and do not authorize an adolescent unit with an average length of stay of over 30 days. Ninety days is the demarcation, by rule, between short- and long-term psychiatric beds. Humana recently applied for a CON for more psychiatric beds and also applied for an IRTP CON in a subsequent batch to the present one. Humana's present 27 bed adolescent psychiatric unit provides grossly similar services to those proposed to be offered by FRTC, but its emphasis is more medical-psychiatric than emotional-behavioral. Like FRTC, Humana does not accept in residency adolescents with a primary diagnosis of substance abuse. Like FRTC and RTCPB, Humana uses a "levels" system. Eighty percent of Humana's patient mix are commercial pay, and the unit is running at a 15 to 20 percent profit margin. Humana usually charges $325 per day on their adolescent unit plus ancillaries [sic] amounting to 10 percent of the patient's bill, but HRS contract patients pay only $225 per day. Humana has lost a number of adolescent unit referrals to RTCPB since RTCPB opened June 1, 1987, but the unit continues to be almost fully occupied. Humana's main referral asset, as well as the source of the confusion of referring entities, appears to be the reputation of its director, Dr. Kelly. Dr. Kelly previously directed a program at Lake Hospital which was identical to the program that he now directs at Humana. Lake Hospital currently has RTCPB operating under its auspices, but not Dr. Kelly. Nature of the FRTC Program FRTC's proposed program is designed to serve those persons in the designated age group who have psychiatric diagnoses of a severity requiring a long-term approach in a multidisciplinary structured living setting to facilitate recovery. It will not, however, treat adolescents with an active diagnosis of chemical dependency or substance abuse. It also only commits to 1.5 percent indigent care. The proposed FRTC program differs from an acute care setting in significant quantitative and qualitative ways, the most visible of which is that acute care psychiatric settings (either long- or short-term) are geared toward dealing with patients actively dangerous to property, themselves, or others, but patients whom it is reasonably assumed will respond primarily to physiologically-oriented physicians and registered nurses administering daily medication, treatment, and monitoring, as opposed to a long-term living arrangement emphasizing behaviorally-oriented group interaction as an alternative to parental care at home. FRTC will, however, accept patients with psychiatric diagnoses of effective disorders, depression, schizophrenia and impulse disorders and those who may be potentially harmful to themselves, others, or property for whom no other less intensive or less restrictive form of treatment would be predictably helpful. FRTC would fall on the continuum of care below an acute psychiatric facility such as Humana. Assessment of such a target group on a patient by patient basis is obviously subject to a wide variation of interpretation by qualified health care professionals, but FRTC anticipates both verifying referral diagnoses and assuring quality of care by insuring that each new patient is seen by a psychiatrist within 24 hours of admission, and by having each case reviewed by an independent utilization review committee. FRTC also plans to complete appropriate patient assessments and develop and update individual, integrated treatment programs. FRTC will provide, where appropriate, for continuity of care from previous acute care institutions through the FRTC program and out into more normal individual or family living arrangements. Parents will have to consent to their child's placement at FRTC. FRTC's program proposes an average length of stay of 365 days (one year) with a range of six months to two years. Based upon all the credible record evidence as a whole, including, but not limited to, the protestants' respective ALOS, this is a reasonable forecast despite contrary evidence as to Charter's experience at its "template" Virginia institution, Charter Colonial. FRTC's program components will include individual therapy, recreational therapy, occupational therapy, and general education. The general education component in FRTC's proposed program is more general and more open than that offered in acute care settings, such as Humana. FRTC's overall program will utilize a "levels" system of behavioral management based upon patients earning privileges, which levels system has a good patient rehabilitation and functional administrative track record in many different kinds of psychiatric health care facilities, including Humana and RTCPB. FRTC intends that each patient's program will be individualized according to age and program component directed to his/her diagnosis and each patient will receive individual, resident group, and family therapies. As to assessment, types of therapy, continuity of care, and general education provisions, FRTC's proposal is grossly consistent with that of its "template." To the extent there is evidence of inconsistencies between the two programs in the record, the FRTC proposal represents either improvements over, or refinements of, its template program which have been developed as Charter/FRTC has learned more about what actually "works" for the IRTP form of health care, or it represents changes to accommodate Florida's perception of what less restrictive but still intensive residential treatment should be, or it anticipates local community needs. Quality of Care The applicant's parent corporation is an experienced provider of many types of accredited psychiatric facilities. The type of quality assurance program proposed and the staff mix provide reasonable quality care assurances. Design, Construction, and Personnel Refinements to FRTC's original schematic take into consideration the influence that physical structure has on an Intensive Residential Treatment Program. Those refinements include modification of a multipurpose room into a half-court gymnasium, addition of a classroom, addition of a mechanical room, modification of the nursing station to decrease the amount of space, and the deletion of one seclusion room and addition of a four to six bed assessment unit. The modifications resulted in the addition of approximately 1,000 square feet to the original design. A minimum of four to six acres would be necessary to accommodate the modified design which totals approximately 32,000 square feet. Public areas, such as administration and support services, dining room, and housekeeping areas, are to the front; private areas, such as the nursing units, are to the back. The facility's middle area houses gym, classrooms, and occupational therapy areas. The location encourages residential community involvement. Each of three, 20-bed units is made up of a group of two consultation rooms, a galley, a laundry, a day room and core living space located directly across from the nursing station for maximum observation and efficiency. Each unit comprises a separate wing. Six handicapped accessible patient beds are contemplated; the building will be handicapped-accessible. The staffing projections have increased and the pattern has been minimally altered in the updates. The updated pro forma also modified the initial financial projections so as to increase salary expense and employee benefits based on this change in staffing. An increase in the total project cost impacted on depreciation, and interest expense changed with time. All these changes are reasonable and insubstantial. FRTC's design is adequate for providing a suitable environment for intensive residential treatment for children and adolescents even though it is not identical to Charter's "template" for residential treatment and even though Charter's extensive experience with acute care facilities has focused these changes in its residential treatment concepts. The parties stipulated to the adequacy of FRTC's proposed equipment list and costs. Total construction cost was demonstrated to be reasonably estimated at $2,078,000. The square footage costs of $64.86 per square foot represet an increase from the square footage costs contained in the original CON application. The original budget was updated based upon a three percent inflation factor and the addition of the approximately 1,000 square feet. The additional space is not a significant construction change. The total project costs of $4,728,000 are reasonable. The testimony of HRS Deputy Assistant Secretary for Regulation and Health Facilities, John Griffin, who testified by deposition, (RTCPB's Exhibit 8, pp. 21-22) revealed no firm policy on what the agency, within its expertise, views as substantial and impermissible amendments to a CON application; HRS did not move at hearing to remand for further review; and the undersigned concludes that the changes in facility design, costs, and staffing do not represent significant changes which would be excludable as evidence and that they do represent permissible minor modifications and refinements of the original FRTC application. Site Availability No party contended that FRTC's application was a "site specific" application, that a residential treatment program is otherwise required to be "site specific," or that an IRTP CON is governed by a "site specific" rule or by "site specific" statutory criteria. Therefore, it was only necessary for FRTC in this noncomparative proceeding to establish that several suitable sites were available within the required geographic parameters at the financial amount allotted in FRTC's projections. FRTC did establish financially and geographically available and suitable sites through the testimony of Robert H. Ellzey, a qualified expert in commercial real estate values. The Non-Rule Need Policy There are no hospital licensed Intensive Residential Treatment Programs in Palm Beach County or in District IX. IRTPs are in a separate licensure category by law from psychiatric beds, acute care beds, and rehabilitation beds. There is a separate need methodology for long-term psychiatric beds and there are no CON licensed long-term psychiatric programs for children and adolescents in District IX, unless one considers Humana which is treating adolescents well beyond 30 or 90 days residency. HRS has no promulgated rule predicting need for IRTPs seeking specialty hospital licensure under Chapter 395, F.S. Subsequent to advice of its counsel that a CON must be obtained as a condition of IRTP licensure pursuant to Chapter 395, F.S., HRS elected to evaluate all IRTP CON applications in the context of the statutory criteria of Chapter 381, F.S., and in the context of HRS' non-rule policy establishing a rebuttable presumption of need for one "reasonably sized" IRTP in each HRS planning district. The May 5, 1988 Final Order in Florida Psychiatric Centers v. HRS, et al., DOAH Case No. 88- 0008R, held this non-rule policy invalid as a rule due to HRS' failure to promulgate it pursuant to Section 120.54, F.S., but that order also held the policy not to be invalid as contrary to Chapter 381, F.S. That Final Order intervened between the close of final hearing in the instant case and entry of the instant Recommended Order, however, it does not alter the need for the agency to explicate and demonstrate the reasonableness of its non-rule policy on a case by case basis. HRS was unable to do so in the formal hearing in the instant case. Notwithstanding the oral testimony of Robert May and Elizabeth Dudek, and the deposition testimony of John Griffin, it appears that the non- rule policy is not based upon generally recognized health planning considerations, but solely on the agency's statutory interpretation of recent amendments to Chapter 395 and some vague perception, after internal agency discussions, that the policy is consistent with certain promulgated need rules and with certain other non-rule policies for other types of health care entities, which other non-rule policies were never fully enunciated or proved up in this formal hearing. The HRS non-rule policy was also not affirmatively demonstrated to be rational because it does not take into account the reasonableness of a proposed facility's average length of stay, referral sources, geographic access, or other factors common to duly promulgated CON rules. Numerical Need and Conformity to Applicable Health Plans FRTC sought to support HRS' non-rule policy on numerical need for, and definition of, a "reasonably sized" IRTP through the testimony of Dr. Ronald Luke, who was qualified as an expert in health planning, development of need methodologies, health economies, survey research, and development of mental health programs. In the absence of a finding of a rational non-rule policy on numerical need, Dr. Luke's evidence forms the cornerstone of FRTC's demonstration of numerical need. Through the report and testimony of Dr. Luke, and despite contrary expert health planning testimony, FRTC established the numerical need for, and reasonableness of, its 60 licensed IRTP beds in District IX with projected 60 percent occupancy in the first year and 50 percent in the second year of operation using two bed need methodologies. Dr. Luke ultimately relied on a utilization methodology based upon 1991 population projections. Dr. Luke used a census rate per 100,000 population of 21.58. This is appropriately and reasonably derived from national data for residential treatment patients aged 0-17, regardless of the fact that the types of residential treatment considered by the NIMH data base employed by Dr. Luke greatly vary in concept and despite HRS having not yet clearly defined the nature of the programs and services it expects to be offered by a Florida specialty hospital licensed IRTP. Therefrom, Dr. Luke derived an average daily census of 52 in 1991. That figure yields a bed sizing of between 58 and 61 beds, depending on whether an 85 percent or 90 percent occupancy factor is plugged in. Either 58 or 61 beds is within the range of ratios calculated by Dr. Luke's other methodology for currently licensed Florida IRTPs in other districts. Assuming a target occupancy rate of 85 percent and an ALOS of one year, Dr. Luke considered the gross District IX IRTP bed need to be 60. In the absence of any like program to assess occupancy for and in the presence of similar programs such as Humana operating at nearly full occupancy now and RTCPB forecasting its occupancy at 88 percent in 1990 if it were IRTP-licensed, it is found that 60 beds are justified. Since there are no IRTP beds licensed as specialty hospitals in the current district bed inventory, no adjustment of this figure must be made to account for existing licensed IRTP beds. Simply stated, this is a CON application for an IRTP, nothing more and nothing less, and the subtrahend to be subtracted from gross district bed need is zero when there is a zero specialty hospital licensed IRTP bed inventory. Luke's calculated gross need of 60 bed is also his net need and is accepted. Fifty beds is generally the minimum size HRS will approve to be feasible for any free standing facility to be eonomically efficient and to be able to benefit from economies of scale. This 50 bed concept is within the wide range of bed ratios that HRS implicitly has found reasonable in, previously- licensed IRTP CON approvals. Conformity With Applicable Health Plans Section 38l.705(1)(a), F.S., requires HRS to consider CON applications against criteria contained in the applicable State and District Health Plans. In this regard, neither the applicable State Health Plan nor the applicable District IX Local Health Plan make any reference to a need for intensive residential treatment facilities. The District IX Health Plan addresses the need for psychiatric and substance abuse services to be available to all individuals in District IX. FRTC's project addresses this goal only in part. The District Health Plan states that priority should be given to CON applicants who make a commitment to providing indigent care. FRTC proposes only 1.5 percent indigent care which works out to only 1/2 of the ALOS of one patient at the proposed facility and is hardly optimum, but in a noncomparative hearing, it stands alone as advancing the given accessibility goal within the plan. Objective 1.3 of the State Health Plan provides: Through 1987, additional long-term inpatient psychiatric beds should not normally be approved unless the average annual occupancy for all existing and approved long-term hospital psychiatric beds in the HRS District is at least 80 percent. FRTC's project is neutral as to this goal. The District Plan also contains a goal for a complete range of health care services for the population of the district. FRTC advances this goal. The State Health Plan further provides: Goal 10: DEVELOP A COMPLETE RANGE OF ESSENTIAL PUBLIC MENTAL HEALTH SERVICES IN EACH HRS DISTRICT OBJECTIVE 10.1: Develop a range of essential mental health services in each HRS district by 1989. OBJECTIVE 10.3: Develop a network of residential treatment settings for Florida's severely emotionally disturbed children by 1990. RECOMMENDED ACTION: 1.03A: Develop residential placements within Florida for all SED children currently receiving ing treatment in out-of-state facilities by 1990. The FRTC project advances these goals in part. To the extent SED patients placed outside the state for residential treatment services are HRS patients whom FRTC as yet has not contracted to treat, the FRTC project does not advance this goal. However, increased insurance reimbursement will advance accessibility for those SED children and adolescents in need of this type of care whose families have insurance coverage. The State Plan also emphasizes a goal for a continuum of care. The FRTC plan advances this goal. Financial Feasibility William S. Love, Senior Director of Hospital Operations for Charter, was accepted as an expert in health care finance. Mr. Love prepared the pro forma financial statement contained in the original CON application and the update of the pro forma in response to HRS' completeness questions. Mr. Love also had input into the updated financial information which increased salary and benefit expense. (See FOF No. 11). The revised pro forma utilized an assumption of gross patient revenues of $300 per day and a 365 day ALOS, both of which are reasonable and both of which support the rest of FRTC's assumptions (See FOF No. 9). Routine revenues are based on the types of routine services patients normally receive on a daily basis. Ancillary revenues are support revenues such as pharmacy charges, X-rays, lab charges, and other charges not generally utilized on a routine basis. The only charges to patients at the proposed FRTC facility are the routine and ancillary charges. The assumptions with regard to contractual adjustments are that there will be no Medicare utilization since the facility is projected for children and adolescents and no Medicaid since freestanding facilities in Florida are not eligible for Medicaid. Two percent of gross patient revenues are estimated to be contractual adjustments which relate to HMOs and PPOs. FRTC addresses indigent care by 1.5 percent of gross revenues which will be dedicated to Charter Care which is free care. The assumptions with regard to bad debt are that 8 percent of gross revenue will be the allowance for bad debt. An assumption of 20 percent of salaries was used for employee benefits which include the FICA tax, health insurance, dental insurance, retirement plans, and other benefits. Supplies and expenses were calculated as a function of patient day with a $90 per day estimate. Included in supplies and expenses are supplies utilized in the delivery of health care services as well as medical professional fees such as the half-time medical director and purchased services such as laundry, linen, speech and hearing services, utilities, telephone, malpractice insurance, repairs and maintenance. The depreciation assumptions are that the building would be depreciated over 40 years, fixed equipment over 20 years and major movable equipment over 10 years. Pre-opening expenses for the first 45 days of operation have been capitalized over 60 months with low amortization costs over 15 years. There is no income tax assumed in the first year but the assumption in subsequent years is that the tax rate will be 38 percent. The failure to assume a hospital tax is inconsequential. The assumptions for the second fiscal year are basically the same. Although staffing remained the same, the FTEs per occupied bed increased, and a 7 percent inflation factor was added. The project will be financially feasible even though the facility is pessimistically projecting a loss of $102,000 for the first year because a facility can suffer a loss in its first year of operation and remain financially feasible. The facility projects a $286,000 profit in its second year of operation. With regard to utilization by class of pay, FRTC has assumed that the insurance category represents 65.5 percent of total revenues projected and includes such things as commercial insurance, Blue Cross and any third party carrier other than Medicare and Medicaid. Assumptions with regard to the private pay are that 25 percent of the total revenues will be generated by private pay patients and would include the self pay portions of an insurance payor's bill, such as deductible and co-insurance. Bad debt was assumed to be 8 percent, and Charter Care or free care, 1.5 percent. FRTC's projected utilization by class of pay is reasonable and is supported by the protestants' current experience with commercial insurance utilization and reimbursement and the predicted recoveries if RTCPB were IRTP-licensed. In the second year of operation, the assumptions with regard to utilization by class of pay demonstrated an increase in the insurance category from 65.5 to 66.5 percent with everything else remaining the same except for a decrease in bad debt to 7 percent. The assumption with regard to a decrease in bad debt is based upon the establishment of referral patterns from acute psychiatric facilities, outpatient programs, mental health therapists, and miscellaneous programs. The assumption is that 65 percent of the patients would be covered by insurance, not that 65 percent of each bill would be paid by insurance. Charter's experience has been that a good portion of the deductible and co-insurance payments are collectible. FRTC did not assume payment from any governmental contracts or HRS reimbursement. FRTC's projected self pay percentages assumption reasonably contemplates the percentage of households in the district which can afford its projections for self pay. For purposes of evaluating the financial feasibility of this proposal, a management fee was not included because in looking at the financial feasibility of a facility the expenses of a corporate home office are incurred whether or not the facility is built. It was not appropriate to allocate a management fee to the hospital because it showed a loss in its first year of operation and a profit in its second. When the facility becomes profitable, FRTC anticipates passing the profit through to the corporation to help reduce the corporate overhead. If a management fee had been allocated to this facility, allocations would have had to have been made to the other Charter facilities to show where their management expense had decreased and their profitability increased. It would have been inappropriate to take these fixed expenses and allocate a portion of them to the proposed FRTC facility. In addition to the fact that the failure to include a management fee in the pro forma should not affect the feasibility of the project, Charter has good cause not to apply a $44 per patient day management fee in its IRTP. FRTC's categories of payor class are generally reasonable based in part on the results of a survey performed in Florida. FRTC's assumptions and calculations are reasonable, based upon the testimony of William S. Love and Dr. Ronald Luke, notwithstanding the testimony of Dan Sullivan, Donald Wilson, and Christopher Knepper, also qualified as experts. Specifically, it is found that Dr. Luke's assessment that the designation of a facility as a licensed specialty hospital has a beneficial effect on its ability to obtain insurance reimbursement for services, that reimbursement impacts to increase ALOS, and that the breakdown of sources of payment that FRTC has used is reasonable, is a credible assessment, supported elsewhere in the record. It is also found that Mr. Knepper's assessment for bad debt is inadequately supported and inconsistent with other evidence, and therefore not credible. Mr. Sullivan's testimony is not persuasive. Staffing and Recruitment Dr. Brett, a Charter regional director for hospital operations, was accepted as an expert in staffing psychiatric facilities including residential treatment centers. His distinctions between the acute care and residential types of facilities are corroborated and explained by other witnesses and evidence. Mr. Joyner was accepted as Charter's expert recruiter. Although the depth of Mr. Joyner's hands-on involvement in active recruitment is not extensive, the Charter network of manpower referrals and "head hunting" will obviously support this project. Upon the combined testimony of Dr. Brett, Mr. Joyner, and Paul Bodner, Charter's senior director of physician relations, there is sufficient evidence that FRTC can recruit a suitable staffing pattern to ensure quality of care (see FOF Nos. 9 and 10) in its proposed program, even if it has to hire from out of state and pay somewhat higher salaries due to some qualified manpower shortages in certain categories in Palm Beach County. In making this finding, the undersigned has considered the testimony of Donald Wilson concerning certain institution-specific recruiting problems of his principal, RTCPB, and the "step down" status of residential treatment as testified by Mary Certo, of Humana. Impact on Costs and Competition The FRTC project can reasonably be expected to attract patients with insurance coverage who would otherwise go to existing facilities for care, however, in light of the relatively consistent occupancy rates at Humana and RTCPB despite both their geographical proximity and the unique confusion of referrals arising over the relocation of Dr. Kelly, this impact is not altogether clear. Dr. Kelly's reputation will not be impacted by granting of a CON to FRTC. It is also not possible upon the basis of the record created in this hearing to factor out reimbursement differences inherent in Humana's current CON classification and RTCPB's circumstance as an unlicensed intensive residential treatment center. In any case, the negative impact upon Humana must be measured against the health planning goals expressed by several witnesses that it is desirable to substitute more suitable, less restrictive facilities for institutionalization of the severely emotionally disturbed child and adolescent whenever possible and that it is also desirable to encourage residential treatment upon a continuum of care basis after acute psychiatric care. The FRTC project will obviously increase the accessibility to this type of treatment for young people who have the appropriate insurance coverage. These goals are in conformity with the applicable health plans. The FRTC project can reasonably be expected to initially increase some costs of health services throughout the district because it will inflate some salary costs due to competition, but the negative impact will probably be short term.
Recommendation Upon a balanced consideration of all relevant criteria it is RECOMMENDED that HRS enter a Final Order approving FRTC's CON application for an IRTP, as updated, for licensure as a specialty hospital. DONE and ORDERED this 28th day of June, 1988, in Tallahassee, Florida. ELLA JANE P. DAVIS 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 28th day of June, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 87-2037 & 87-2050 The following constitute specific rulings pursuant to Section 120.59(2), F.S., with regard to the parties' respective Proposed Findings of Fact. Proposed Findings of Fact (PFOF) of FRTC: Covered in "issue" and FOF 1. Covered in FOF 1 and 2. 3-7. Except as subordinate or unnecessary, accepted in "procedural and evidentiary matters" and FOF 11. 8. Accepted in FOF 12. 9-12. Except as subordinate, unnecessary, or cumulative, accepted in FOF 7-9. 13. Accepted in FOF 10. 14-17. Accepted in part and rejected in part in FOF 7-11, 30. Although portions of the underlying data referred to in proposal 16 and by Mr. Joyner in his testimony was excluded from evidence, he was qualified as a recruitment expert and for the reasons set forth in FOF 30, his opinion is accepted. 18-19. Accepted in FOF 21. Accepted in FOF 22, 26, 29. Accepted in FOF 23. Accepted in FOF 24. Accepted in FOF 25 and 29. Accepted in FOF 26 and 29. Except as subordinate or unnecessary, covered in FOF 27. Except as mere argument or statement of position, accepted in FOF 26-27, and 29. 27-29. Accepted in part and rejected in part as unnecessary and cumulative to the facts as found; in part rejected as mere argument or recital of testimony, not distinguishing opinion from fact. To the degree adopted or accepted upon the record as a whole, see FOF 26-29. 30-31. Accepted in FOF 28. 32-40. Accepted in part and rejected in part as unnecessary and cumulative to the facts as found; in part rejected as mere argument or recital of testimony, not distinguishing opinion from fact. To the degree adopted or accepted upon the record as a whole, see FOF 9, 11, 21, 26-29. 41-44. Accepted in part and rejected in part as unnecessary and cumulative to the facts as found in FOF 29-32. 45-47. Rejected, as recital or summation of testimony and as part of preliminary agency review not relevant to this de novo proceeding. 48. Covered in FOF 7, 18-20, 22, and 26. 49-52. dejected as set out in "organic law and legislative background," "procedural and evidentiary matters," FOF 13-15. See also COL. 53. Accepted in FOF 16. 54-58. Rejected in part and accepted in part as set out in FOF 14-15. Rejected where not supported in full by the record as a whole, where subordinate, unnecessary or cumulative to the facts as found and where mere recital of testimony. 59. Accepted in principle and modified to conform to the record in FOF 18-20, 31. 60-61. Accepted in part and rejected in part as stated in "procedural and evidentiary matters" and in FOF 14-16 and the COL. Accepted in FOF 15 and COL. Accepted in FOF 18-20, 31. 64-68. Rejected as unnecessary to the facts as found in FOF 1, 7, 13-15 and 29, also in part as not supported by the record as a whole, and as primarily legal argument and recitation of testimony. Accepted in FOF 3-4 and 30. Accepted in part and rejected in part in FOF 3-4, 7, 26, and 29. 71-74. Except as subordinate or unnecessary, accepted in FOF 5-9 and 30-32. HRS' Proposed Findings of Fact (PFOF): 1-3. Accepted in "organic law and legislative background." 4. (Two paragraphs) Accepted FOF 3-4. Accepted in "issue" and FOF 3-4. Accepted, FOF 29-32. Rejected as unnecessary. Accepted, FOF 1. 10-18 & 20. Except as subordinate or unnecessary, accepted in FOF 5, 6, 15, 26, 31. 19. Rejected as irrelevant. 21-28. Accepted in part as modified to conform to the record as a whole in FOF 6-9, 30-31. The irrelevant, unnecessary or subordinate material has also been rejected. 29-31. Accepted in FOF 4, 9, 21, 26, 29-31. 32-35. Accepted in FOF 7-9. 36-41. Accepted in FOF 7-9 as modified to conform to the record as a whole, to eliminate subordinate and irrelevant matters and to comport with the rulings on the insubstantiality of updates to the CON application, in "procedural and evidentiary matters" and FOF 11. 42-45. Accepted as modified to conform to the record as a whole, to eliminate subordinate and irrelevant matters and to comport with the rulings on the insubstantiality of updates to the CON application in "procedural and evidentiary matters" and FOF 9-11, 21, 23, 30 and 32. Accepted in FOF 22, 26, 29. Accepted in FOF 7, 20, 22, 26. 49-52. Accepted in FOF 3, 4, 21-29. Assuming, based on the transcript reference, that this proposal refers to FRTC's pro forma, this proposal is accepted but unnecessary for the reasons set forth in rulings on HRS' PFOF 36-45. See FOF 11 and 21-29. Accepted in FOF 13-15. 55-58. Rejected as unnecessary. 59. Accepted but not dispositive of any material issue at bar. See FOF 13-15. 60-62. Accepted in part and rejected in part in FOF 13-14, as mere recital of testimony and statements of position. 63. Accepted in FOF 29. 64-65. Accepted in FOF 5-9. Accepted in FOF 7-9. Accepted that HRS made this assumption but it fails to explicate the non-rule policy. See FOF 13-14. Accepted in FOF 16. Rejected as a statement of position or COL. Peripherally, see COL. Accepted in FOF 13-14 but not dispositive of any material issue at bar. Rejected in FOF 13-14. 72-74. Rejected as preliminary agency action, irrelevant to this de novo proceeding. 75-76. Accepted in FOF 17-20. This is a subordinate definition and not a FOF. See FOF 30-31 and COL. Rejected in part and accepted in part in FOF 17-20, 31. Accepted in FOF 10. Accepted in FOF 13-15. Accepted as stated in the "procedural and evidentiary matters," FOF 13-15 and in the COL. 82-85. Covered in FOF 3-6, 13-15. 86. Rejected as preliminary agency action, irrelevant to this de novo proceeding. 87-88. Rejected as subordinate or unnecessary. 89. Accepted in FOF 29. 90-96. Accepted as modified to conform to the record evidence as a whole and FOF 15-16 and to reject subordinate and unnecessary material. Accepted without any connotations of the word "therefore" in FOF 4, 7-9, 21 and 29. Rejected as unnecessary and cumulative. Accepted in "organic and legislative background" and FOF 13-15. Rejected as not established upon the record as a whole; unnecessary. Rejected as a statement of position only. Joint Proposed Findings of Fact of RTCPB and Humana 1-2 Accepted in FOF 1. 3-4. Accepted in FOF 2. 5-6. Accepted in "issue" and FOF 3-4. 7. Accepted in "issue" and FOF 5-6. 8-13. Accepted in part and rejected in part as set out under "procedural and evidentiary matters," FOF 3-6, 13-15, and the COL. 14-18. Except as subordinate or unnecessary, accepted in FOF 1, 7-9, 11, 21-29. 19-27. Rejected as irrelevant preliminary action to this de novo proceeding. 28-36. Rejected in part and accepted in part upon the compelling competent, substantial evidence in the record as a whole as set forth in FOF 13-14. Also as to 33 see FOF 15. 37-52. Accepted in part and rejected in part in FOF 13-16 upon the greater weight of the credible evidence of record as a whole. Irrelevant, unnecessary and subordinate material has been rejected, as has mere argument of counsel. Accepted in FOF 17. Rejected in FOF 20, 31. Accepted as modified in FOF 20, 31. Excepting the mere rhetoric, accepted in FOF 18, 31. Accepted as modified in FOF 7, 18-20, 26, 31. 58-59. Accepted in part and rejected in part in FOF 17-20, 26, Rejected as subordinate. Rejected as recital of testimony and argument 62-63. Rejected as unnecessary. 64-67. Accepted in FOF 3-4, 6-9. The first sentence is rejected as cumulative to the facts as found in FOF 3-4, 6-9. The second sentence is rejected as not supported by the greater weight of the evidence as a whole. Rejected in FOF 4, 21. Accepted in FOF 4 and 21, 29. Rejected as unnecessary Accepted in FOF 26. Rejected in FOF 15-20, 31. Rejected as unnecessary in a noncomparitive hearing. 75-87. Except as irrelevant, unnecessary, or subordinate, accepted in FOF 5-9, 30, 31. Rejected in part as unnecessary and in part as not comporting with the greater weight of the evidence in FOF 7-10 and 30. Accepted in FOF 1, 5-9. 90-92. Accepted in FOF 5-9. Rejected in FOF 5-6. Rejected as subordinate. 95-98. Accepted in FOF 5-9. 99-102. Rejected as unnecessary. 103. Except as subordinate or unnecessary, accepted in FOF 5-9. 104-118. Except as unnecessary, subordinate, or cumulative to the facts as found, these proposals are covered in FOF 5-9, 30-31. Except as Subordinate, covered in FOF 6 and 31. Accepted in part in FOF 5-9, 21-29, otherwise rejected as misleading. Except as subordinate, accepted in FOF 6. Rejected as unnecessary. Accepted in FOF 21. Accepted in FOF 21-29. Rejected in part and accepted in part in FOF 21-29. Rejected as subordinate and unnecessary in part and not supported by the greater weight of the credible evidence in 21-29. 127-128. These proposals primarily recite testimony by Mr. Grono, an administrator of a psychiatric hospital for very severely disturbed persons (Grant Center). This evidence by itself is not persuasive in light of Dr. Luke's study and other admissions of the parties referenced in FOF 21-29. Upon the greater weight of contrary evidence, it is rejected. 129. Rejected as subordinate except partly accepted in FOF 29. 130-133. Rejected upon the greater weight of the evidence in FOF 9, 11 and 21-29. 134, 139. Rejected as legal argument without citation. 135-138. Rejected in FOF 21-29. 140-144. Rejected as stated as not supported by the greater weight of the credible evidence and as partly mere legal argument. See FOF 9, 21-29. 145. The first sentence is rejected upon the reference to PFOF 140-144 for the same reasons given above and the remainder is rejected as subordinate. 146. Rejected in FOF 21-29. 147. Rejected as mere legal argument without citation. 148-149. Rejected in FOF 21-29, particularly 27 upon the greater weight of the credible evidence. The mere legal argument is also rejected. 150-157. Rejected as set out in FOF 28 upon the greater weight of the credible evidence. Uncited argument and statements of position have likewise bean rejected. 158, 160. Rejected as mere argument without citation. 159. Rejected as subordinate and not dispositive of any material issue at bar in FOF 23. 161. Rejected as mere argument. 162-167. Rejected as not supported by the greater weight of the credible evidence in FOF 30-32. Also 167 is rejected as mere argument without citation. 168. Accepted in part and rejected in part in FOF 30-32. 169. Accepted but subordinate. 170. Rejected as unnecessary and cumulative to the facts as found in FOF 31. 171-180. Covered in FOF 30-32. 181-185. Rejected as contrary to the evidence in part and in part unnecessary and cumulative to the ruling in "procedural and evidentiary matters" and FOF 7, 10-11, 21, 23, 30-32. 186-188. Rejected in FOF 7, 10 and 30 upon the greater weight of the credible evidence. 189. Rejected as unnecessary 190. Rejected in FOF 30. 191-392. Accepted but not dispositive of any material issue at bar. See FOF 30-32. 193. Rejected in FOF 30-32. 194-195. Except as subordinate or unnecessary, rejected in the several references to future establishment of referral networks. See FOF 21, 27. 196-197 & 199. Rejected as unnecessary 198. Rejected as irrelevant in part and immaterial in part upon the rulings in "procedural and evidentiary matters" and FOF 11. 200. Rejected as unnecessary 201-202. Accepted in FOF 7, 20, 26-27 and 31, but cumulative. 203. Covered in the COL. Rejected in FOF 21-22. 204. Rejected as mere argument without citation. COPIES FURNISHED: Michael J. Glazer, Esquire AUSLEY, McMULLEN, McGEHEE, CAROTHERS & PROCTOR 227 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302 John T. Brennan, Jr., Esquire BONNER & O'CONNEL 900 17th Street, N.W. Washington, D.C. 20006 James C. Hauser, Esquire Joy Heath Thomas, Esquire MESSER, VICKERS, CAPARELLO, FRENCH & MADSEN 215 South Monroe Street Post Office Box 1876 Tallahassee, Florida 32302 Fred W Baggett, Esquire Stephen A. Ecenia, Esquire ROBERTS, BAGGETT, LaFACE & RICHARD 101 East College Avenue Tallahassee, Florida 32301 Lesley Mendelson, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Sam Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
Findings Of Fact On April 1, 1986, a letter of intent was filed on behalf of Anthony J. Estevez to apply for a CON in the March 16, 1986, batching cycle for a 120-bed long-term psychiatric hospital in Dade County, Florida, HRS Service District XI. A long-term psychiatric hospital is defined in Rule 10-5.011(p), Florida Administrative Code, as a "category of services which provides hospital based inpatient services averaging a length of stay of 90 days." Subsequently, DHRS notified Mr. Estevez that his letter of intent was effective March 17, 1986; the application was to be filed by April 15, 1986; the application was to be completed by June 29, 1986; and the date for final department action was August 28, 1986. On April 15, 1986, Mr. Estevez filed his CON application with DHRS (designated action #4854). Anthony J. Estevez' name appeared along with Health Care Advisors Corporation on the line of the application which requested "legal name of project sponsor." Mr. Francis A. Gomez, Mr. Estevez' authorized representative, had the responsibility for the preparation and submission of the application. Mr. Estevez signed the CON application as the project sponsor. HCAC Psychiatric Hospital of Dade County was meant to be the name of the proposed facility. HCAC is an acronym for Health Care Advisors Corporation, Inc. HCAC was incorporated as of April 14, 1987, but the name had been reserved prior to that time. HCAC was initially intended to be a health care management corporation owned by Mr. Estevez. However, it is now anticipated that Flowers Management Corporation (Flowers) will manage the project under the HCAC corporate umbrella. Mr. Estevez owns 100 percent of the stock of HCAC and is also its sole director and sole shareholder. Mr. Estevez considered HCAC and himself to be one and the same for the purpose of the CON application. HCAC initially proposed to construct in Dade County, Florida, a freestanding 120-bed long-term psychiatric hospital. HCAC proposed to divide those beds into three groups: (1) 75 beds for adults; (2) 30 beds for geriatrics; and (3) 15 beds for adolescents. On May 15, 1986, DHRS requested additional information from HCAC regarding its CON application. On June 19, 1986, and June 23, 1986, HCAC in two separate filings provided DHRS with responses to its request for additional information which DHRS believed was omitted from the original application. The application was deemed complete effective June 29, 1986. On August 20, 1986, Francis Gomez, Paul McCall, a health care consultant employed by HCAC at that time, and HCAC's attorney, met with Islara Soto of DHRS regarding the CON application. At this meeting, HCAC advised DHRS of its intent to orient the facility programmatically to meet the needs of the Hispanic population of Dade and Monroe Counties. By letter dated August 29, 1986, DHRS notified Mr. Francis Gomez of its decision to deny CON application 4584. HCAC requested a formal administrative hearing to contest the denial. At the formal hearing, HCAC indicated a desire to abandon its proposal to provide 15 beds dedicated to serve adolescent patients and sought to introduce evidence relating to a down-sized 105-bed long-term psychiatric hospital serving only adult and geriatric patients. Charter renewed its prehearing motion to exclude any evidence concerning a 105-bed facility. (Approximately three or four weeks prior to the administrative hearing, HCAC had decided to go forward with a proposal for the 105-bed facility.) The undersigned ruled that HCAC would be allowed to present evidence concerning a down-sized 105-bed facility to the extent that such evidence related to a separate and identifiable portion of the original application. HCAC's Proposal The proposed building site for the facility, although not finally selected, is intended to be within the Northwest Dade Center cachement area which is in the northwest corner of Dade County. The ownership of the proposed facility will be by Mr. Estevez and/or his family or wife. The proposed area to be serviced by the facility is Dade and Monroe Counties (HRS Service District XI). HCAC proposes to offer at its facility a psychiatric inpatient unit, patient support services, diagnostic/treatment services, ambulatory care, administrative services, environmental/maintenance, educational and training services, and materials management. The HCAC facility will be managed by Flowers Management Corporation (Flowers), of which Mr. Estevez is a majority shareholder. Flowers was created approximately three and a half years ago for the purpose of providing management in the psychiatric field. Humana Hospital, a hospital chain, has selected Flowers to manage four of its facilities and is also considering Flowers for an additional two facilities. Those facilities are currently providing short-term psychiatric and substance abuse services. Nelson Rodney will be responsible for the design and implementation of the treatment programs in the HCAC facility. Rodney is employed as Regional Vice President of Flowers and is responsible for the management of the Florida hospitals affiliated with Flowers, including a chemical dependency unit at Humana-Biscayne Hospital and a psychiatric unit at Humana West Palm Beach Hospital. The HCAC facility is intended to provide specialty long-term psychiatric services for chronically mentally disturbed individuals requiring a 90-day or greater average length of stay. Many of the patients would be a danger to themselves and others and will require a very restrictive setting -- a locked facility. The programs proposed to be offered involve a range of inpatient diagnostic services, including an intensive diagnostic work-up done prior to admission for all patients. Each patient will have an individualized treatment plan updated every two weeks. The treatment program will include specialized therapy, such as art, music, milieu therapy and special education. There would also be specialized inpatient and outpatient treatment programs for family members and significant others. Discharge planning from the day of admission to assure continuity of care would be another aspect of the program. The proposed HCAC facility would offer a community-like atmosphere. It would provide both open and locked units. Flower's therapeutic model encourages patient participation in daily activities and in the many decisions of what is occurring at the hospital. One component of the project will be an initial screening process by a multi-disciplinary team who will employ a predetermined set of admissions criteria to assist in appropriate levels of care determination. The multi- disciplinary team would consist of a psychiatrist, psychologist, sometimes a neurologist, social worker, a family social assessment person, the patient, and others. The team will attempt to identify and admit only those patients who will have an expected length of stay greater than 90 days. The HCAC facility would provide seminars and workshops to practitioners in the community as well as its own staff. In-service training will also be offered. HCAC proposes to be flexible in the design of its treatment programs and allow new treatments to be utilized. A variety of therapies will be available to provide individualized treatment plans in order to optimize the chance of successful outcome in the patient's treatment. Currently, Flowers affords an in-house program of evaluation. Peer review serves this function in order to assess quality of care rendered to patients in the facility. The HCAC facility proposes to have an Hispanic emphasis. More than 50 percent of the staff will be bilingual. Upper management will consist of individuals who have an acute understanding of Hispanic culture and treatment implications of that culture. The facility will be more flexible in family visitation than is done in many facilities which is an important aspect of the Hispanic culture. The facility as managed by Flowers would have the required "patient's bill of rights" and will also seek JACH accreditation, although these items were not discussed in the application. The HCAC facility would offer each patient an attending psychiatrist who will be part of the multi-disciplinary team that will determine the individualized plan for each patient. Sufficient health manpower including management resources are available to HCAC to operate the project. Additionally, the facility will provide internships, field placements and semester rotations. PROJECT AND CONSTRUCTION COSTS HCAC's CON application, admitted into evidence as Petitioner's Exhibit 4, contains 26 tables concerning various aspects of the 120-bed project as well as Exhibit III.D.1., an operating pro forma. In response to a request for omissions by DHRS, HCAC submitted, among other things, a revised Table 7, revised Table 8, and a revised operating pro forma for the 120-bed project. The items making up HCAC's omission responses were admitted into evidence as Petitioner's Exhibit 5. In conjunction with its desire to complete a 105-bed facility only, HCAC submitted various new tables and a new operating pro forma (forecasted income statement), which were admitted into evidence as Petitioner's Exhibit 6. Table 1 - Source of Funds The estimated total project cost of the 120-bed facility would be $6,469,500. The estimated project cost of the 105-bed facility would be $5,696,940. The financing of the project is contemplated to be done through NCNB bank which has expressed its willingness to finance the project. It is reasonable to assume that HCAC would and could obtain the necessary financing for the proposed facility. Table 2 - Total Debt Table 2 for both the 120-bed project and the 105-bed project shows that 100 percent of the project costs would be financed by debt at an interest rate of 13 percent. The 13 percent interest rate was projected in 1986 and is higher than current rates. It is reasonable to assume that 100 percent of the costs can be financed at 13 percent for either the 120-bed or 105-bed project. Table 3 - New Purchase Equipment HCAC initially projected that $750,000 would be needed to equip the proposed 120-bed facility. The projected expenditure for the 105-bed facility is $500,000. The projected costs of $750,000 and $500,000 for the equipment needed for the 120-bed and 105-bed facility, respectively, are unreasonably low. For example, of the $500,000 projected for equipment costs for the 105-bed project, $80,000 is for mini-vans, $15,000 is for the security system, $40,000 is for a computerized medical records system, and $40,000 for a computerized on-line nurse care program. This would leave $325,000 for all other necessary equipment. Pharmacy, laboratory services and x-ray equipment would be on contract. The remaining $325,000 would be insufficient to equip the kitchen (which would require $80,000), furnish patient rooms (approximately $150,000) and equip the remainder of the 105-bed facility which would reasonably require housekeeping equipment, exam room equipment, chart racks for the nurses station, seclusion room beds, office furniture and equipment, laundry equipment, lockers or shelving, refrigerators, ice makers, day room furniture and lounge furniture. A more reasonable projection for equipment costs would be in the neighborhood of $850,000 to $900,000. Table 7 - Utilization by Class of Pay Tables 7 and 8 of the original application which dealt with utilization by class of pay and effect on patient charges, were revised by HCAC in their responses to DHRS' Omissions Request. Table 7 reflects estimations of the net revenues which HCAC expects to capture from specific payor mixes, namely, contract/indigent, Medicare and insurance/private pay. There is no Medicaid reimbursement available for psychiatric care rendered in a freestanding psychiatric facility. The proposed payor mix for the 120-bed facility is, in patient days, as follows: Year 1 -- Contract/Indigent 8.64 percent (1989) Medicare 26.10 percent Insurance and Private Pay 65.26 percent Year 2 -- Contract/Indigent 8.48 percent (1990) Medicare 26.15 percent Insurance and Private Pay 65.37 percent The proposed payor mix for the 105-bed facility is, in patient days, as follows: Years 1 and 2 - Medicare 3.3 percent Insurance and Private Pay 90.7 percent Indigent 6.0 percent The change in payor mix was not attributed to down-sizing of the facility, but rather was the result of HCAC's additional research and understanding of what the payor mix would most likely be. The change in payor mix does not represent a substantial change to the original application taken as a whole. Francis Gomez, who prepared the Table 7 and was designated as an expert for HCAC in the area of health care facilities management and financial and marketing operations, conceded that HCAC's Table 7 for the 120-bed facility is not reasonable. The Table 7 for the 105-bed facility is also not reasonable. HCAC's contractual allowances are not reasonable. HCAC projects 3.3 percent for Medicare and nothing for HMOs or PPOs. It is unreasonable for HCAC's proposal to make no provision for HMO and PPO type arrangements in view of its projection of 90.7 percent insurance and private pay. Because the proposed patient mix for the 105-bed project is adults and geriatrics, 20 to 25 percent would be a more reasonable Medicare projection. HCAC's projected 90.7 percent insurance and private patient days is unreasonably high in view of the project's intended emphasis of serving the Hispanic population in HRS Service District XI. In 1980, 27.8 percent of the Hispanics in Dade County had incomes less than 150 percent of the poverty level. The 1987 United States Hispanic market study establishes that 20 percent of the Hispanic adults who are heads of households are either retired, students or unemployed. These groups of individuals would not reasonably fit into the insurance and private pay category in most cases. Thus, the 90.7 percent figure for insurance and private pay would have to be reduced significantly. Table 8 - Effects on Patient Charges HCAC's revised Table 8 for the 120-bed facility lists net revenues rather than gross charges for the specific services listed. In year one (1989), the table lists the following projected charges/rates: daily room charge - $214.61; average daily ancillary charge - $25.00; contract/indigent - $125.00; and Medicare - $229.61. In year two (1990), the table lists the following projected charges: daily room charge - $223.19; average daily ancillary charge - $26.00; contract/indigent - $130.00; and Medicare - $238.79. The Table 8 for the 105-bed facility reflects an all-inclusive gross charge of $300 per day in both years (1989 and 1990) for the daily room charge, Medicaid and Medicare. The $300 per day figure would include ancillary charges but not physician fees. The projected patient charges fall within the range of charges currently in effect at psychiatric hospitals in Dade and Monroe Counties and are reasonable for both the 120-bed facility and the 105-bed project. Table 10 - Projected Utilization The financial feasibility of any proposed hospital is largely tied to the ability of the hospital to generate an adequate level of utilization. Absent an adequate level of utilization, a facility will not generate sufficient revenues to meet expenses. Table 10 for both the 120-bed facility and the 105- bed facility sets forth the projected utilization of the proposed facility, by month and year, in patient days, for the first two years of anticipated operation. Table 10 for the 120-bed facility projects the facility will exceed 80 percent occupancy for two of the last three months of the second year and be at 80 percent occupancy at the end of that year. Eighty percent occupancy of 120 beds yields an average daily census of about 96 patients. Table 10 for the 105- bed facility projects that the facility will arrive at 92 percent occupancy at the end of the first year of operation and remain at 95 percent throughout the second year. Ninety-five percent occupancy of the 105-bed facility equals an average daily census of about 99 or 100 patients. The Table 10 "fill-up" rates for both the 120-bed and 105-bed facilities are unreasonable and not practical to be achieved. There is presently an emphasis on providing psychiatric care in less restrictive settings, a trend favoring reduced lengths of stay and a trend in third-party payors to provide reimbursement for a shorter number of days. In addition, nationwide statistics show that only 4 percent of the patients admitted to psychiatric facilities require treatment longer than 90 days. Table 11 - Manpower Requirements For the 120-bed facility, HCAC projected in the Table 11 a staffing ratio of one full-time equivalent (FTE) per occupied bed of 1.625 for the first year of operation and 1.43 for the second year. For the 105-bed facility, HCAC projected in the Table 11 1.91 FTE per occupied bed ratio for the first year and 1.45 for the second year. The actual average of FTEs available for both facilities would be 1.8 to 2.0. The application figures are lower than the actual average because students and other non-paid personnel were not included. Thus, when all programmatic FTEs are included, the number of FTEs per occupied bed is higher than what is listed in the Table 11 for either project. There is a relationship between the number and quality of staff personnel and a facility's ability to provide quality psychiatric care. The industry standard for FTEs is 1.8 to 2.0 FTEs per occupied bed. HCAC's proposed staffing for both the 120-bed and 105-bed projects are reasonable. For both proposed facilities, HCAC projects 110.5 FTEs for the first year with a total annual salary of $1,932,000 which equals an average salary of approximately $17,400 per FTE. HCAC's projected total annual salary expense is unreasonably low. Specifically, the salary for the occupational therapist is too low and the nursing salaries are too low because of shortages. Table 16 - Areas and Square Feet / Table 18 - Space Requirements HCAC proposes a total 59,603 square feet of gross area for the 120-bed facility and a total of 56,050 square feet of gross area for the 105-bed facility. The decrease in size for the 105-bed facility is attributed to a reduction of the ground floor, a reduction of the second floor by removing the adolescent portion and an increase of ancillary services on the second floor for the geriatric population. HCAC projects 168 feet of net living space in the patient's bedroom for both the 120-bed facility and the 105-bed facility. HCAC's proposal of total area and square feet requirements for both the 120-bed and 105-bed facility are reasonable for the delivery of quality psychiatric care within the proposed facilities. There would be adequate land space for parking at HCAC's facility to forego the necessity of constructing a parking garage. Table 19 - Nursing Unit Area Summary HCAC proposes a total of 34,479 square feet of gross area for the nursing unit in the 120-bed facility and the 105-bed facility. The square footage figures under Table 19 for both the 120-bed facility and 105-bed facility are reasonable. Table 25 - Estimated Project Costs Project Advisors Corporation (PAC), of which Mr. Estevez is the Chief Executive Officer, will be responsible for the design and construction of the proposed facility. PAC is a design and construction company which employs a registered architect, several licensed general contractors, an engineer, two graduate architects and a registered graduate architect. The registered architect and basically 90 percent of the staff have previously been involved in the design and construction of health related facilities. HCAC's projected total cost for the 120-bed facility is $6,469,500 and the projected total costs for the 105-bed facility is $5,696,940. HCAC projected construction costs per square foot of $57.55 for the 120-bed facility and $60.00 per square foot for the 105-bed facility. Although the average construction cost of psychiatric facilities today is around $75 to $95 per square foot, HCAC's projected costs are reasonable and reflect reasonable charges given the fact that PAC, the company which would construct the facility, is controlled by Mr. Estevez. The projected costs of land acquisition are also reasonable. HCAC's projected equipment costs are contained in both Table 25 and Table 2. As previously discussed, the projected equipment costs for both projects are unreasonably low. Table 26 - Project Completion Forecast HCAC projects that construction for both the 120-bed facility and 105- bed facility would be completed approximately one year after DHRS' approval of the construction documents. The project completion forecasts for both projects are reasonable. Exhibit III.D.1.- Operating Pro Forma/Forecasted Income Statement Revised Exhibit III.D.1 sets forth the operating pro forma for the first two years of operation of the 120-bed facility (1989 and 1990). HCAC's pro forma for its 120-bed facility is not reasonable. The supplies and other expenses depicted in the pro forma (year one at $55.60 per patient day and year two at $58.10 per patient day) are unreasonably low. A more reasonable estimate would be approximately $100 per patient day. The pro forma for the 120-bed facility does not include any estimate for the Hospital Cost Containment Board (HCCB) tax. Similar facilities in Florida pay an HCCB tax which is composed of one and a half percent of net revenue. Utilizing the more reasonable estimate of $100 per patient day for supplies and other expenses, and including the appropriate HCCB tax, the total supplies and other expenses would increase approximately $1,100,000 and the HCCB tax would be approximately $85,000 in year one. Instead of showing a profit of $395,012, HCAC would potentially lose approximately $785,000 in that year. In year two, the total supplies and other expenses would increase approximately $1,400,000 and the HCCB tax would be approximately $115,000 to $117,000. Thus, in year two, instead of showing a profit of $919,036, HCAC would potentially lose approximately $617, 000. HCAC's "forecasted income statement" for the 105-bed project is also not reasonable. Specifically, the contractual allowances, the allowance for bad debt, and the salaries, wages and fringe benefits are unreasonable. Contractuals include such things as Medicare, Medicaid, HMOs and PPOs, which all generate discounts which are considered contractual allowances. HCAC estimates its bad debt factor at 1.6 percent. A more reasonable projection would be 6 to 8 percent of gross revenue. CONSISTENCY WITH THE DISTRICT XI HEALTH PLAN AND STATE MENTAL HEALTH PLAN The District XI local health council has produced the 1986 District XI Health Plan. The district plan contains the relevant policies, priorities, criteria and standards for evaluation of an application such as HCAC's. HCAC's application is consistent with some of the applicable sections of the District XI Health Plan but inconsistent with the plan taken as a whole. Policy No. 1 of the District XI health plan states that the district should direct its efforts toward a licensed bed capacity of 5.5 non-federal beds per thousand population ratio by 1989. Presently there are 11,294 beds in District XI which represents a number in excess of 5.5 non-federal beds. HCAC's application is inconsistent with this policy. Policy No. 1, Priority No. 1, states that proposals for the construction of new beds in the district should be considered only when the overall average occupancy of licensed beds exceeds 80 percent. Priority No. 1 refers to certain types of beds, specifically, acute care general beds, short- term psychiatric beds and substance abuse beds. HCAC's application is not inconsistent with this priority because long-term psychiatric beds are not mentioned. Policy No. 1, Priority No. 2 favors the encouragement of projects that meet specific district service needs through the conversion of existing beds from currently underutilized services. Because HCAC is not the operator of an existing hospital and it is not possible for HCAC to convert any beds from other services, HCAC's application is inconsistent with Policy No. 1, Priority No. 2. Policy No. 1, Priority No. 3 would only be relevant in the case of an existing hospital but not in the case of a new hospital where no comparative hearing is involved. HCAC's application is not inconsistent with Policy No. 1, Priority No. 3. Policy No. 1, Priority No. 4 allows for priority consideration for the initiation of new services for projects which have had an average occupancy rate of 80 percent for the last two years and which have a documented history of providing services to Medicaid and/or other medically indigent patients. HCAC's application is not entitled to priority consideration under Policy No. 1, Priority No. 4. Policy No. 2 is a broad policy which provides that service alternatives should be available within the district to meet the needs of community residents, while at the same time maintaining an efficient level of utilization. This policy is necessarily tied to the demonstration of overall need for the facility. If HCAC can show need for the proposed facility, its proposal would be consistent with this policy. Policy No. 2, Priority No. 1(f) (Psychiatric Bed Services) provides for priority consideration to be given to specific institutions which have achieved an 80 percent occupancy rate for the preceding year. HCAC's application is not entitled to priority consideration under Policy No. 2, Priority No. 1(f). Policy No. 2, Policy No. 3(f) states that a CON applicant should propose to provide the scope of services consistent with the level of care proposed in the application in accordance with appropriate accrediting agency standards. In the case of psychiatric bed services the appropriate accrediting agency is the Joint Commission for Accreditation of Hospitals (JCAH). Although HCAC neglected to address its ability to comply with JCAH standards in its application, it has established its intent to seek JCAH accreditation. HCAC's proposal is consistent with Policy No. 2, Priority No. 3(f). Policy No. 2, Priority No. 4 gives a preference to those applicants that propose innovative mechanisms such as various complimenting outpatient and inpatient services which are directed toward an ultimate reduction in dependency upon hospital beds. HCAC does not meet this priority because it has not proposed any mechanisms to complement outpatient services with inpatient services directed toward an ultimate reduction in the dependency on hospital beds. Policy No. 2, Priority No. 5 gives a preference to applicants who have based their project on a valid marketing research effort and have placed it in the context of a long-range plan. HCAC does not meet this priority because there was no evidence that the project was based on a valid marketing research plan or placed in the context of a long-range plan. Policy No. 2f Priority No. 6 states that existing facilities as well as applicants for new services should demonstrate a willingness to enter into cooperative planning efforts directed at establishing a system whereby duplication of specialized services is avoided while quality of such services is enhanced. HCAC presented no documentation of transfer agreements with other hospitals and did not substantiate its willingness to enter into cooperative planning efforts with letters of intent, referral agreements or memoranda of understanding. Policy No. 3 provides that services in the community should be made available to all segments of the resident population regardless of the ability to pay. HCAC's proposal is consistent with this policy because a provision for services to indigent patients has been made. Policy No. 3, Priority No. 1 provides that priority should be given to applications proposing services and facilities designed to include Medicaid (Baker Act) patients to the greatest extent possible based on documented history or proposed services. Although Medicaid does not reimburse for freestanding psychiatric services, and Baker Act is only available to short-stay facilities specifically chosen to receive a Baker Act contract, HCAC has not designed its project to include those patients to the greatest extent possible. Thus, HCAC's application is not consistent with Policy No. 3, Priority No. 1. Goal I of the 1986 District XI Goals and Policies for Mental Health and Substance Abuse Services is applicable to HCAC's application. This goal favors mental health services in the least restrictive setting possible. Long- term institutional care may be the least restrictive setting possible in the continuum of mental health care for the treatment of certain more serious types of patients. The concept of "continuum of care" means the full breadth of services available within a community, from least restrictive to most restrictive, from least intensive to most intensive. There must be settings along the full continuum of psychiatric care for patients to receive the level of care they may need. HCAC's application is not inconsistent with Goal I. Issues Relating to CON Recommendations and Priority for Inpatient Psychiatric Services (District XI Health Plan 1986, page 26). In this section of the district health plan, the Planning Advisory Committee states its recommendations and preferences for services for the comprehensive treatment of the mentally ill. The Committee recognizes that long-term hospitalization is a viable form of treatment for some mentally ill patients. However, the Committee expresses a preference for short hospital stays and applicants that project treatment modalities with an average length of stay under 20 days. In addition, the Committee emphasizes a preference for services to be obtained through the conversion of medical/surgical beds, because the district has a large surplus of such beds. Overall, HCAC's project is not consistent with the recommendations and priorities of the Planning Advisory Committee. HCAC's proposal is inconsistent with the goals, objectives and recommendations of the State Health Plan taken as a whole. The State Health Plan contains an important and significant goal that no additional long-term hospital psychiatric beds should be added in the area until the existing and approved beds in the district have achieved an 80 percent occupancy level. The existing long-term hospital psychiatric beds in the district have an occupancy level at approximately 67 percent. AVAILABILITY AND ADEQUACY OF ALTERNATIVES There are available, accessible and appropriate facilities within the service district which can be utilized for the services proposed by HCAC that are presently underutilized. Currently, there are short-term psychiatric providers, a long-term provider, residential facilities, nursing homes and adult congregate living facilities that are available as alternatives in the service district, and in many cases are significantly underutilized. Although the services to be offered by the HCAC facility would be in excess of what is provided in an adult residential treatment facility, nursing home or adult congregate living facility, those facilities could serve as viable alternatives in appropriate cases. In 1986, there were 6,513 existing nursing home beds in District XI and an additional 1,928 approved for opening. There are 24 adult congregate living facilities in District XI with 50 beds or more. The total number of beds for ACLFs in 1986 was 2,620. In addition, Grant Center Hospital has 140 existing and 20 approved long-term psychiatric beds; its occupancy rate is low. THE ABILITY OF THE APPLICANT TO PROVIDE QUALITY OF CARE AND THE APPLICANT'S RECORD OF PROVIDING QUALITY OF CARE The "Flowers Model," made a part of the application, is a description of how, from a clinical perspective, the proposal will be managed. Although Flowers does not presently operate any long-term psychiatric facilities, the Flowers Model is appropriate for a long-term psychiatric care facility. From a clinical and programmatic perspective, the HCAC facility would provide good quality of care. PROBABLE ECONOMIES AND IMPROVEMENTS IN SERVICE WHICH MAY BE DERIVED FROM OPERATION OF JOINT, COOPERATIVE OR SHARED HEALTH CARE RESOURCES HCAC has not demonstrated that there will be any improvements in service which may be derived from operation of joint, cooperative or shared health care resources. The Northwest Dade County proposed location of the HCAC facility would place the project within two hours travel of 90 percent or more of District XI population. Nevertheless, HCAC's facility would increase the number of people who would be within two hours of long-term adult psychiatric facilities by less than 1 percent. The patients in District XI will not experience serious problems in obtaining inpatient care of the type proposed in the absence of the service proposed by HCAC. There is presently adequate and accessible long-term hospital inpatient services for District XI population based on the existing and approved facilities in District X (Southwinds Hospital, Florida Medical Center) and District XI (Grant Center). There are two approved but not yet open long-term psychiatric facilities in District X, Broward County. Florida Medical Center holds a CON for 60 long-term adult psychiatric beds to be located in Lauderdale Lakes and Southwinds Hospital holds a 75-bed CON with 60 beds counted for long-term treatment of adult and geriatric patients to be located in Andy Town. In addition, there are 238 long-term state hospital beds at South Florida State Hospital in Broward County. Although the need for long-term psychiatric beds is assessed on a district-wide basis, it is reasonable to consider psychiatric beds in Broward County (District X) as an alternative to HCAC's proposal because they are within two hours access of individuals within the two counties. Likewise, it is reasonable to consider approved beds because need is projected for a future date. Not counting approved beds would overestimate need and result in duplication of services. FINANCIAL FEASIBILITY HCAC has not demonstrated that the 120-bed project or the 105-bed facility is financially feasible in the short or the long term. The projection of revenues and expenses in the pro forma (120-bed project) and the forecasted income statement (105-bed project) were flawed to such an extent that financial feasibility of the project was not shown. IMPACT ON COSTS AND COMPETITION If HCAC's project were to be built, a likely result is increased charges for the provision of services in the area. HCAC's proposed facility would negatively impact the availability of psychiatric nurses. There is a shortage of psychiatric nurses in Dade County and it is difficult to recruit and hire R.N.s with psychiatric experience. In order to hire nurses in a time of shortage, hospitals must recruit staff from other facilities. Shortages can increase the cost of recruitment and the cost of salaries. Charter is a hospital located in District XI and consists of 88 beds, 80 of which are licensed as short-term psychiatric beds and eight of which are licensed as short-term substance abuse beds. Short-term psychiatric inpatient care is defined in Rule 10-5.011(1)(o), Florida Administrative Code, as "a service not exceeding three months and averaging a length of stay of 30 days or less for adults." HCAC's proposed facility, if approved, would have a negative economic impact on Charter. It is very likely that many of the patients at the proposed HCAC facility would experience lengths of stay between 45 and 60 days. Charter treats a significant number of patients (approximately 15 percent) who stay longer than 30 days. Because of the difficulty of initially identifying patients who would require either short or long-term stays, many of Charter's patients could be lost to the HCAC project. Charter could suffer a loss of up to 657 patient days per year if HCAC's proposed facility is approved. This loss of patients would impair Charter's ability to have certain types of programs, equipment and staff. PROVISION OF HEALTH CARE SERVICES TO MEDICAID PATIENTS AND THE MEDICALLY INDIGENT HCAC's project does not propose a significant amount of indigent care and HCAC has no history of providing health care services to Medicaid patients and the medically indigent. OCCUPANCY RATE FOR EXISTING LONG-TERM HOSPITAL PSYCHIATRIC BEDS Grant Center Hospital is the only existing long-term psychiatric facility in District XI. It has 140 beds and specializes in treating children and adolescent patients. Its occupancy rate at the time of review for the preceding year was approximately 67 percent. The appropriate period to calculate occupancy rate of existing facilities in this case is July 1985 to July 1986 because this is the most recent 12-month period preceding application decision. The occupancy rate of all psychiatric beds within District XI was below 80 percent. HCAC'S PROPOSED NEED METHODOLOGY At the hearing, W. Eugene Nelson testified on behalf of HCAC on the need for the proposed long-term adult psychiatric beds. Mr. Nelson was accepted as an expert in the field of health care planning, including psychiatric bed need assessment. Mr. Nelson performed his analysis in District XI using the Graduate Medical Educational National Advisory Committee (GMENAC) methodology. The need methodology proposed by HCAC is inappropriate to adequately and accurately predict need for long-term adult psychiatric beds in District XI. The GMENAC study is a national study based on national data developed to determine physician requirements in 1990 for 23 medical specialities. GMENAC estimates the prevalence of certain psychiatric disorders among the general population and estimates the number of those persons who need care for their conditions in differing treatment settings ranging from outpatient services to 24-hour institutional care. HCAC's methodology, utilizing the GMENAC study, predicted a gross need of 895 beds in District XI in the applicable horizon (July 1991). The total number of existing long-term psychiatric beds in the entire State of Florida is only 836 beds, and the majority of those beds are experiencing occupancy levels under 65 percent. Many of these long-term facilities have been around for a period of at least three years and are still experiencing low occupancy. Therefore, the low levels are probably not based on the fact that the facilities are in a start-up mode. HCAC's bed need computation is as follows: Adult Long Term Psychiatric Bed Requirements (Excludes Alcohol, Drug Abuse, Mental Retardation, Organic Brain Syndrome and "other" Conditions) District XI: July 1991 Condition Admission Rate Schizophrenia & Other Psychoses 99 Affective Disorder Psychosis 20 Affective Disorder Neuroses 60 Neuroses and Personality Disorders 199 20 Projected 1991 Population Age 18+ 1,459,437 Total Projected Admissions 2,904 Average Length of Stay 90 Projected Patient Days Target Occupancy 80.00 261,385 percent Total Beds Required 895 Beds Currently Available 438 South Florida State Hospital (450 X .48) Residential Treatment Facilities 216 233 Net Beds Needed 496 The projected 1991 population for District XI for age 18 and above is 1,459,473. The population projections were received from the Office of the Governor. The anticipated admissions per 100,000 is calculated to be 199 for the conditions listed. The total projected admissions for 1991 is 2,904. The 2,904 projected long-term care admissions when multiplied by the average length of stay of 90 days generates 261,385 projected patient days in the 1991 horizon period in District XI. The 261,385 patient days is then divided by 365 days in the year, and then by 80 percent, the latter of which is contained in the rule as the optimum or desired occupancy for long-term psychiatric beds. This yields a total gross long-term psychiatric bed requirement for adults and geriatrics of 895 beds. In performing his analysis, Mr. Nelson used Table 4, page 22 of the GMENAC Study which lists information for mental disorders requiring care by treatment setting. The prevalence rate of 199 admissions per 100,000 population was based on the study's projection of the mental disorders listed requiring a "24-hour" treatment setting. Nelson used a projected 90-day length of stay in his computations. There is nothing in the GMENAC document that sets forth the average length of stay of persons reflected in the 24-hour column. Therefore, it is misleading to assume that persons admitted subject to the 199 per 100,000 admissions rate will actually experience an average length of stay as long as 90 days. For HCAC's admission rate to be valid, all of the facilities in District XI would have to average a 90-day length of stay. This is an unreasonable assumption. Nationwide, only a small percentage of all psychiatric admissions experience a length of stay as long as 90 days. In computing beds currently available in District XI, Mr. Nelson did not consider nursing home beds, adult congregate living facility beds, or the 135 long-term psychiatric beds that have been approved for two facilities in District X (Broward County). Nelson also did not consider whether short-term facilities were capable or willing to take additional patients for long-term treatment. Thus, the computation of beds currently available in the HCAC methodology is unreasonably low. HCAC's need methodology generated a long-term psychiatric bed to population ratio of .61 per thousand. DHRS' rule for short-term psychiatric beds was a population ratio of .35 per thousand. Short-term care facilities have admission rates two to three times greater than long-term facilities and nationwide statistics establish that only 4 percent of all psychiatric patients stay longer than 90 days. It is not reasonable for the bed rate for long-term adult psychiatric beds to be higher than the rate for short-term psychiatric beds. Mr. Nelson excluded organic brain syndrome diagnosis from his analysis and admission rate based on an assumption that many of those patients are in nursing homes. Nelson did not use nursing home beds in computing his need methodology because he believed that eliminating the organic brain syndrome category from the Table 4, page 22, 24-hour column in the GMENAC study eliminates the need for considering nursing home beds in the inventory. For that approach to be valid, the number of organic brain syndrome patients that go to long-term psychiatric facilities would need to cancel out the number of patients in other diagnostic categories who go to nursing homes. Nelson did not consult or review any data concerning the number or percentage rates of schizophrenics and other mentally ill patients in nursing homes or the number of organic brain syndrome people being treated in long-term psychiatric facilities. In addition, Nelson did not know what percentage, if any, of the GMENAC projected admissions were nursing home admissions. In computing existing beds, Nelson listed two types of facilities previously existing in District XI which were applicable to his methodology: the state hospital (216 beds) and residential treatment facilities (233 beds). The correct number of beds available for adults from District XI in the state hospital is 238. The actual number of beds for residential facilities is 335. Dr. Howard Fagin testified as an expert in health planning and feasibility analysis, including psychiatric bed need assessment and feasibility. In Dr. Fagin's opinion, Nelson's bed need methodology is incorrect and the conclusions drawn are wrong because Nelson used an inappropriate length of stay based on the GMENAC study and also incorrectly identified the applicable beds which should be considered for comparable facilities under the GMENAC study and, therefore, his total numbers in terms of gross and net beds needed are incorrect. Dr. Fagin's critique of Mr. Nelson's bed need methodology is persuasive and credible. HCAC has failed to show that its proposed need methodology could accurately project the need for long-term psychiatric beds in District XI.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that CON Application No. 4854 by Health Care Advisors Corporation, Inc. be DENIED. DONE and ORDERED this 1st day of March, 1988 in Tallahassee, Leon County, Florida. W. MATTHEW STEVENSON Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of March, 1988. COPIES FURNISHED: Lesley Mendelson, Esquire Assistant General Counsel Department of Health and Rehabilitative Services Fort Knox Executive Center 2727 Mahan Drive, Suite 308 Tallahassee, Florida 32308 H. Darrell White, Esquire Gerald B. Sternstein, Esquire Post Office Box 2174 Tallahassee, Florida 32302 William E. Hoffman, Esquire 2500 Trust Company Tower 25 Park Place Atlanta, Georgia 30303 George N. Neros, Jr., Esquire 101 North Monroe Street Monroe-Park Tower Suite 900 Tallahassee, Florida 32301 Donna H. Stinson, Esquire The Perkins House Suite 100 118 North Gadsden Street Tallahassee, Florida 32301 R. S. Power, Esquire Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
Findings Of Fact The Parties FRTC is a wholly-owned subsidiary of Charter Medical Corporation which proposes to construct and operate a 60 bed intensive residential treatment program (IRTP) in Bradenton, Florida, which is located in the Department's District VI. The Department is the state agency with the authority and responsibility to consider CON applications. Manatee Palms is an existing residential treatment center in Manatee County, Florida which opened in January, 1987 and is currently operating without a CON. It provides services similar or identical to those proposed by FRTC. Manatee Palms was developed by, and is a subsidiary of, Psychiatric Institutes of America. Its primary service area extends beyond District VI from Orlando to Naples. Manatee Palms is a sixty bed facility providing psychiatric, substance abuse and educational services for juveniles up to 18 years of age, and is licensed by the Department as a child caring facility, as a provider of services to the Department, and for subspecialties involving drug and alcohol programs. It is accredited by the Joint Commission on Accreditation of Hospitals as a residential treatment center. The average length of stay for patients is six months. Occupancy rates have been consistently above projections and have been as high as 97 percent in May, 1987. Manatee Memorial is a full-service acute care hospital and an existing provider of short-term psychiatric services in Bradenton, Florida, with 25 licensed short-term psychiatric beds, nine of which comprise a children's and adolescent unit. It is the Manatee County contract provider of in-patient psychiatric services to the medically indigent, and provides approximately 91 percent of the indigent care in Manatee County. Manatee Memorial does not have, and has never sought, a CON as an IRTP, but does have earlier-batched applications pending for additional short and long term psychiatric beds. Its average length of stay is 35-40 days, and its utilization rate is approaching 100 percent. Manatee Memorial provides services similar or identical to those proposed by FRTC, and its program also utilizes a "levels system" similar to that used by FRTC. The Application and Project On September 15, 1986 FRTC filed a Letter of Intent notifying the Department of its intent to file a CON application for an IRTP for children and adolescents in Bradenton, Florida. On October 14, 1986 FRTC filed CON application number 4825 to obtain specialty hospital licensure as an IRTP. This application was initially approved by the Department on March 10, 1987, after the filing of a completeness response on or about December 23, 1986 at the request of the Department. Manatee Palms and Manatee Memorial timely filed petitions for formal administrative hearings challenging the Department's intent to issue the CON. The project at issue in this case is a 60 bed IRTP situated on a 9.35 acre site. The proposed building will have total gross square footage of approximately 32,000 and has been adapted from a prototype short-term psychiatric hospital design which has been used in approximately 50 locations. The floor plan submitted by FRTC provides for 28 semi-private rooms, three of which are designed to accommodate the handicapped, and one 4- bed assessment unit. Additionally, reasonable and sufficient space is provided for five classrooms, occupational therapy, a gymnasium, three group rooms, three day rooms, a seclusion area, three consult rooms, laundry and storage rooms, a nurses' station, dining room, and an administrative wing. A parking area, multi-purpose court, pool, activities field and drainage retention area are also provided. The parties have stipulated that the building will be energy efficient. Total project cost is reasonably estimated at $4,303,020. As a result of design modifications, the square footage of the project has increased by approximately 1,000 gross square feet and project costs have increased by approximately $69,000 from FRTC's completed application. The Department's Deputy Assistant Secretary for Regulation and Health Facilities, John Griffin, testified that for a project of this size these changes are not considered to be "amendments" to the application. The changes in facility design identified at hearing represent refinements and permissible modifications, rather than application amendments. There is no architectural significance to the changes. Rather, they make the design more appropriate for an IRTP. Specifically, a multi-purpose area was converted to a half-court gymnasium, the occupational therapy and interior mechanical spaces were slightly increased for more storage area, a seclusion room was deleted, the nurses' station was reduced, a 4-bed assessment unit was added, and other minor changes were made. FRTC proposes to offer 24-hour psychiatric services to children and adolescents under the age of 18, who are severely emotionally disturbed, and who are admitted voluntarily, after screening, with a history of prior treatment. Its program elements will include occupational therapy, recreational therapy, group and individual therapy, nursing care, an educational component, psychological testing, counseling and family therapy. The FRTC program will be initiated as a locked intensive program whose goal is to return the patient to his family and to life in a natural setting. Patients who are severely retarded, autistic, or with an active diagnosis of substance abuse will not be admitted. The average length of stay for patients is reasonably projected to be one year, with a range of from 6 months to two years. There are no licensed intensive residential treatment programs (IRTP) for children and adolescents in Manatee County, Florida or in the Department's District VI, which includes Manatee County as well as Hardee, Highland, Hillsborough and Polk Counties. There are also no licensed IRTPs in adjoining Districts V and VIII. Stipulations The parties have stipulated that FRTC has the ability to recruit physicians for this project, and also has funds available for FRTC's capital and operating expenditures. In addition, the parties have stipulated that review criteria concerning the need for research and educational facilities, the extent to which the services will be accessible to schools for health professional, and the special needs and circumstances of health maintenance organizations are not applicable to this CON application. Non-Rule Policy For IRTP The Department currently has no rule governing the approval of IRTP applications for a CON. However, since February 1987 the Department has followed a non-rule policy which presumes there is a need for at least one licensed IRTP of reasonable size in each Departmental service district, and which does not consider the existence of unlicensed residential treatment beds in a district in determining if the presumed need has been met. No changes or revisions in this non-rule policy of the Department are under review. The Department applied this non-rule policy in initially approving the CON application. Based upon the testimony of John Griffin, the Department's Deputy Assistant Secretary who administers the CON program and is responsible for health planning, an IRTP applicant does not have to establish "need" in a particular service district where it wants to locate a facility because the non- rule policy presumes there is a need for one IRTP of reasonable size per district. The applicant must, however, establish that there is not presently a licensed IRTP in the district and that it proposed to establish an IRTP of reasonable size. Griffin was not able to explicate this non-rule policy based upon health planning concerns, considerations or factors. Sharon Gordon-Girvin, Administrator of the Department's Office of Community Medical Services and Facilities, was also unable to articulate or explicate a health planning basis for this policy. Rather, the only basis enunciated at hearing by the Department for this non-rule policy was its statutory interpretation of Sections 395.002(8) and 395.003(2)(f), Florida Statutes, as renumbered by Section 34, Chapter 87-92, Laws of Florida. Need And Consistency With State And Local Health Plans There are no licensed IRTPs in District VI. Manatee Palms is a residential treatment center for children and adolescents located in Manatee County, but it is not licensed by the Department as an IRTP. Relevant issues identified in the District VI Local Health Plan are stated as follows: As a general policy, the least restrictive, most cost effective setting and programs should be used. The State of Florida, as a major purchaser of mental health and substance abuse services, can continue to lead the way by encouraging the development of non-hospital alternatives and by purchasing services from them preferentially. Another important issue in psychiatric care is the trend toward hospitalization of children who have behavior and conduct disorders, and who should more appropriately be served through non-hospital alternatives. . . At the present time, the severe emotionally disturbed or emotionally handicapped (SED/EH) child or adolescent is served in a broad range of programs. There are crisis stabilization units (CSUs) for stabilizing the adult client in acute crisis. Currently CSU services for children and adolescents are not adequate throughout the District. Intensive residential, day/night program, group and foster homes are for the client requiring close supervision. Relevant policies set forth in the District Local Health Plan are as follows: The multi-modality approach as expressed in the community mental health (and substance abuse) system should be considered a model of programming, staffing, facility requirements, costs, etc., against which applications for inpatient services should be reviewed. Review of applications for inpatient psychiatric and substance abuse services should include comment from the Alcohol, Drug Abuse and Mental Health Program Offices of DHRS. No additional psychiatric and/or substance abuse beds should be granted approval unless the capacity of current hospital providers is being fully utilized (75 percent occupancy rate annual). Additional psychiatric and/or substance abuse beds should be through conversion of existing beds. The State Health Plan sets forth the following relevant policies and statements: The goal of (mental health) services is (to) . . . provide educational; mental health treatment; and when needed, residential services for severely emotionally disturbed students. It is the intent of the Legislature that the least restrictive means of intervention be employed based on the individual needs of each patient within the scope of available services . . . The program goals for each component of the network are . . . to provide programs and services as close as possible to the child's home in the least restrictive manner consistent with the child's needs. Sufficient funding for the development of residential treatment and community support services is necessary if the state is to fulfill its commitment to providing services for long term mentally ill persons. These services provide, in the long run, a more humane and cost effective means of meeting the mental health needs of Florida residents. Continued development of long and short term inpatient hospital programs for the treatment of adolescents and children is contrary to current treatment practices for these groups and is, therefore, inappropriate without local data to support the need for these services. Such development can contribute to inappropriate placement, unnecessary costs of treatment, and divert scarce resources away from alternative uses. In addition, the following relevant goals are contained in the State Health Plan: Promote the development of a continuum of high quality, cost effective private sector mental health and substance abuse treatment and preventive services. Bring about changes in third party reimbursement policy for psychiatric and substance abuse care which would promote the development of the most appropriate, cost-effective treatment settings . . . Develop a network of residential treatment settings for Florida's severely emotionally disturbed children by 1989 . . . Develop residential placements within Florida for all SED children currently receiving treatment in out of state facilities by 1990. The FRTC application is consistent with the above cited relevant portions of the state and local health plans. It is consistent with the State Health Plan which reflects and emphasizes the trend toward deinstitutionalization and the current emphasis on education, treatment and residential services for severely emotionally disturbed students rather than what has been the traditional approach to treatment in an institutional setting, a generally more costly approach from a capital cost and staffing perspective. The FRTC application promotes treatment within the State and will assist in reducing out of state placements. Through the report and testimony of Ronald T. Luke, Ph.D., J.D., and despite the testimony of Jay Cushman, both of whom were accepted as experts in health planning, FRTC established the need for, and reasonableness of, its 60 licensed IRTP beds in District VI, with 50 percent occupancy in the first year and 60 percent in the second year, using two bed need assessment methodologies. First, using the ratio of licensed IRTP beds in other service districts to population ages 0-17 years old, a range of .07 to 1.33 beds per 1,000 population is identified. Using 1991 population projections for District VI, the 60 bed FRTC facility would result in a bed to population ratio of .17 per 1,000 population aged 0-17 years. Since there are no licensed beds in the current inventory, no adjustment of this ratio must be made to account for existing beds. Thus, the FRTC application is within the range of ratios of currently licensed IRTPs in other districts, and is therefore reasonable. Second, a utilization methodology identifies an intensive residential treatment bed need of 90 in 1987 to 95 in 1991, with target occupancy rates of 90 percent. This methodology is based upon 1987 and 1991 population projections. Using a census rate per 100,000 population of 21.58 which is appropriately and reasonably derived from national data for residential treatment patients aged 0-17, an average daily census of 74 in 1987 and 78 in 1991 is derived. Thus, FRTC has established a need for its facility in District VI, given its projected occupancy levels, and given that there are no licensed beds currently in the District. It is important to recognize that the bed ratio analysis is based upon licensed intensive residential treatment beds in Florida, and is therefore clearly relevant and credible to the issues in this case. The utilization methodology supports and confirms the need found thorough the bed ratio analysis, although it is noted that this methodology, by using national data, is not based upon licensed beds in Florida, and would therefore not be sufficient, in itself, to establish need. It is, however, persuasive and credible in confirming the bed ratio analysis. Accessibility To All Residents FRTC projects only 1.5 percent indigent care and 8 percent bad debt. Its projection for private pay patients is 25 percent and for insurance covered care is 65.5 percent. This is a marginal and insignificant indigent load. There is no provision for services to state-funded patients. FRTC's projected utilization by class of pay is reasonable. The clear purpose of this application is to enable FRTC to become licensed as a hospital under Section 395.002, Florida Statutes, and thereby enable it to be called a "hospital". It was established through the testimony of Dwight Hood, who was accepted as an expert in health care finance and health care third party payments, that if a facility is licensed as a hospital it has a significant advantage for reimbursement from third parties who more readily reimburse for care in a licensed facility than in an unlicensed residential treatment center. Therefore, accessibility will be increased for those children and adolescents in need of this care whose families have insurance coverage, since it is more likely that payments under such third party coverage will be made at an IRTP licensed as a "hospital" than otherwise. Quality of Care The applicant has clearly demonstrated its ability to provide quality care to its patients, based upon the testimony of C. Hal Brunt, M.D., Robert Friedel, M.D. and G. L. Tischler, M.D., who were accepted as experts in psychiatry, and notwithstanding the testimony of Howard Goldman, M.D., and Glen Lewis, M.D., who were also accepted as experts in psychiatry. FRTC is a wholly owned subsidiary of Charter Medical Corporation which has experience in the operation and management of a residential treatment center, Charter Colonial Institute in Virginia, and also has extensive experience in providing quality health care at five hospitals in Florida, including Charter Hospital of Tampa Bay. The treatment program at FRTC will be adapted to local community needs. In providing quality care, FRTC will assign patients to the correct level of care within the facility by insuring that they are seen by a psychiatrist within 24 hours of admission, and by having each case reviewed by an independent utilization review committee, completing appropriate patient assessments and developing integrated treatment programs which are regularly updated, making appropriate treatment outcome assessments, and providing for continuity of care for patients leaving the IRTP through the development of a community-wide continuum of care. Charter has six out-patient counselling centers located within two hours of the FRTC proposed facility. It is both reasonable and appropriate to structure psychiatric treatment and care in a hospital setting within a "levels system" that rewards and reinforces desired behavior, and FRTC will utilize a "levels system" in its highly goal oriented patient treatment programs. Quality of care is not dependent upon a hospital's environment and physical facilities, according to Dr. Goldman. The floor plan proposed by FRTC is functional and is a proto- typical design used by Charter in approximately fifty locations, although not as an IRTP. The criticisms of the floor plan and facility design to which Maxine Wolfe, Ph.D., and Glen Lewis, M.D., testified do not establish that the applicant will be unable to provide quality care in this facility. While the Petitioners might design a facility differently, and specifically provide for a different orientation of the nurses' station relative to the patient wings, a different location for the dining room, more rooms where a patient can have privacy, and more opportunity for individualized treatment, these preferences do not establish that FRTC's floor plan and design will impair the quality of care rendered at this proposed facility. It is also noted that Dr. Wolfe testified critically about residential treatment in general, and expressed the opinion that residential treatment in a hospital is not beneficial and that children should never be treated in a large facility of any kind under any circumstance. Her testimony clearly establishes her bias and impairs her own credibility and the weight to be given to her testimony in this case. Availability and Adequacy of Alternatives Although there are no licensed IRTPs in District VI residential treatment and/or psychiatric services are currently available to children and adolescents through Manatee Memorial (9 beds), Manatee Palms (60 beds), Glenbeigh (14-16 beds), Sarasota Palms (60-70 beds), Sarasota Memorial Care Center (30 beds), Children's Home in Tampa (68 beds) and Northside Center in Tampa (12 beds). The average of length of stay at the significant majority of these facilities is up to 90 days, and they also attract patients from outside District VI. FRTC proposes to serve patients who require an average length of stay of a year. Some of these facilities serve patients with a dual diagnosis that includes substance abuse whereas FRTC will not. Therefore, these facilities do not offer adequate alternatives for the patients which FRTC is seeking to serve. Further, it was not established that outpatient or ambulatory services represent an adequate and appropriate alternative to an IRTP. Availability of Resources The total project cost of $4,303,020 will be funded through an equity contribution from Charter Medical Corporation and through a conventional loan. Assuming a 50 percent occupancy rate (30 beds) in its first year of operation, the proposed facility will have a staff of 43 positions, 27 of which will represent personnel who will be direct nursing or staff support for the patients, including social workers, psychologists, staff registered nurses, mental health workers, patient care coordinator, nursing supervisors, occupational and recreational therapists and special education teachers. A part-time medical director will also be available. This results in a ratio of 1.4 positions per patient. In comparison, Manatee Palms has a 1.8 staffing ratio based on a census of 55 patients. FRTC has proposed a reasonable and adequate staffing pattern and ratio to treat 30 patients. FRTC will recruit personnel through direct advertising, community contacts, posted notices, job fairs, and school visits. It will compete with unlicensed residential treatment centers, as well as short and long term psychiatric hospitals, in attracting staff for its facility. Although only six mental health workers are identified in FRTC's list of manpower requirements, and it would be beneficial to the level of treatment and care to increase this number, nevertheless, the staffing patterns proposed by FRTC will allow it to render quality care to patients at its facility, based upon 50 percent occupancy in its first year of operation. Staff salaries proposed by FRTC are reasonable and realistic, although its proposed salaries for nurses and mental health workers are higher than that available at Manatee Memorial. Existing facilities may have to increase their salaries to the levels proposed by FRTC to continue to retain and attract qualified staff, particularly nurses and mental health workers. Recruitment difficulties have been experienced in the District VI area for nurses, social workers, mental health workers and occupational therapists. However, it appears that FRTC will be able to attract qualified applicants for all positions due to the level of salaries offered and quality of care provided. Financial Feasibility Net revenues from the first year of operation are projected to be $100,000, which represents 2.3 percent of the capital expenditure as a return on investment. In the second year of operation, net revenues are projected to be $302,000, a 7 percent return on investment. Both years show a fair return on investment, and the pro forma establishes the financial feasibility of this project. In preparing the pro forma for this project, William S. Love, who was accepted as an expert in health care finance, used the reasonable assumption of 50 percent occupancy in the first year of operation and 60 percent in the second year. Despite the testimony of Jay Cushman, who was accepted as an expert health planner, it was not established that FRTC's location will preclude these occupancy rates. Love also assumed patient revenues of $300 per day and an average length of stay of one year. Utilization by class of payor was estimated to be 65 1/2 percent insurance, 25 percent private pay, 8 percent bad debt and 1 1/2 percent indigent care. It was assumed there would be no Medicare or Medicaid. Assumptions regarding patient revenues and utilization by class of payor are reasonable based on the testimony of Love, Luke and Dwight Hood, as well as a survey of insurance benefits available through employers, and despite the testimony of Christopher Knepper, who was accepted as an expert in health care finance. Knepper's testimony is applicable to unlicensed residential treatment centers rather than an IRTP. Therefore, his criticism of the pro forma as underestimating bad debt and overestimating the private pay portion is not persuasive since it disregards the fact that a licensed IRTP, due to its status as a specialty hospital, will have an increased ability to attract patients with insurance and with an ability to pay deductibles and other unreimbursed costs for care. It was established that a residential treatment center licensed as a specialty hospital has a significant advantage in terms of an improved payor mix over unlicensed facilities because of its recognized status with insurance companies. In addition, Knepper's testimony at hearing concerning the financial feasibility of this project conflicted with estimates made during discovery, and his explanation of such discrepancy was not credible. This conflict in Knepper's position at hearing and during discovery reduces the weight to be given to his testimony. FRTC assumed it would not be subject to the indigent care tax, but even if it were subject to the tax this would only add $29,000 in expenses, and therefore not affect the financial feasibility of the project. A management fee will be charged by Charter Medical Corporation, although this is not separately shown on the pro forma. It is the position of FRTC that this fee is associated with home office costs which will exist without regard to this facility. However, this fee, as well as additional construction costs of approximately $70,000, will not affect the financial feasibility of this project since salary costs associated with administration, as well as data processing costs have been separately shown and included on the pro forma as expenses, even though they are sometimes included in a management fee. FRTC's estimate of gross patient revenue of $300 per day for the first year of operation is substantially higher than other facilities offering like services. Net revenues per day during the first year of operation are estimated to be $265.30. Total direct expenses are estimated to be $198.70 for the first year, with total expenses per patient day estimated at $250.50 in the first year. A 7 percent inflation factor was used for the second year of operation, and this is a reasonable inflation factor. Impact On Costs and Competition As previously noted, salary estimates for nurses and mental health workers for this project are above those provided at Manatee Memorial, and therefore could reasonably be expected to increase salaries in these categories for some facilities in the area. The all inclusive charge of $300 per day proposed by FRTC is greater than Manatee Palm's average gross charge of between $270 - $280 per day. It is likely that paying patients, including patients with insurance coverage, who would otherwise be treated at Petitioners' facilities, will be treated at FRTC if this application is approved. However, the extent of such a loss in paying patients due to FRTC is unclear since Manatee Palms is recently receiving greater acceptance by insurers for reimbursement purposes, and Manatee Memorial's estimates of patient losses were based upon impact from both Manatee Palms and FRTC. Reasonableness of Costs The equipment cost estimate of $360,015 is reasonable. This finding is based on the testimony of Susan Hickman, who was accepted as an expert in health care facility equipment. The equipment and beds are appropriate for an IRTP of this size. The total cost of $707,897 for telephones, signage, graphics, interior design and equipment is also reasonable. The construction cost estimate of $2,010,823 is reasonable. This finding is based on the testimony of Patrick A. Regan, who was accepted as an expert in health care facility construction budgeting. Due to the conservative nature of the cost figures, a 2 1/2 percent contingency is adequate, rather than the normal 5-6 percent contingency. The contingency could be used for unbudgeted items such as stucco siding and hard ceilings. FRTC owns the facility site, which was purchased for $664,000.
Recommendation Based upon the foregoing, it is recommended that the Department enter a Final Order approving FRTC's application for CON 4825. DONE AND ENTERED this 22nd day of December, 1987 in Tallahassee, Florida. DONALD D. CONN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of December, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 87-2036, 87-2049 Rulings on the Joint Proposed Findings of Fact filed by FRTC and the Department: 1 Adopted in Findings of Fact 1, 27. 2-4 Adopted in Finding of Fact 6. 5 Rejected as irrelevant and unnecessary. 6-9 Adopted in Findings of Fact 8, 29, but otherwise rejected as cumulative and unnecessary. 10-11 Adopted in Finding of Fact 8. Adopted in Finding of Fact 47. Adopted in Findings of Fact 8, 47. Adopted in Finding of Fact 8. 15-16 Adopted in Finding of Fact 46, Adopted in Finding of Fact 27. Adopted in Finding of Fact 28, but otherwise rejected as irrelevant and unnecessary. Adopted in Findings of Fact 9, 10 but otherwise rejected as unnecessary. Rejected as irrelevant and unnecessary. 21-22 Adopted in Finding of Fact 9. Adopted in Finding of Fact 28, but otherwise rejected as unnecessary. Rejected as unnecessary. Adopted in Findings of Fact 9, 10, 27. Adopted in Finding of Fact 9. 27-30 Adopted in part in Findings of Fact 27, 28, but otherwise rejected as unnecessary. 31 Adopted in Finding of Fact 9. 32-34 Adopted in Findings of Fact 27, 28, but otherwise rejected as unnecessary. Adopted in Finding of Fact 12. Rejected as unnecessary. Adopted in part in Finding of Fact 33, but otherwise rejected as unnecessary. Adopted in Findings of Fact 33, 35. Adopted in Finding of Fact 34. Adopted in Finding of Fact 37. Adopted in Finding of Fact 12. Rejected as unnecessary. Adopted in part in Finding of Fact 39, but otherwise rejected as unnecessary. Adopted in Finding of Fact 40. Adopted in Finding of Fact 42. Adopted in Finding of Fact 39. Adopted in Finding of Fact 40. Adopted in Finding of Fact 38. Adopted in Finding of Fact 39. 50-57 Adopted in Findings of Fact 26, 39, but otherwise rejected as cumulative and unnecessary. 58 Rejected as unnecessary. 59-61 Adopted in Finding of Fact 15, but otherwise rejected as irrelevant, unnecessary or as a conclusion of law. 62 Adopted in Finding of Fact 16. 61 Adopted in Findings of Fact 6, 15, 16. Rejected as unnecessary and irrelevant. Rejected in Finding of Fact 17. Rejected in Finding of Fact 17, but adopted in part in Finding of Fact 26. Rejected as irrelevant and unnecessary. Rejected as unnecessary. 69-72 Adopted in part in Finding of Fact 24, but otherwise rejected as irrelevant since the Department's non-rule policy was not explicated and therefore cannot be relied upon. Rejected as unnecessary and irrelevant since the "reasonableness" of the facility's size is not at issue, the Department having failed to explicate its non-rule policy. Adopted in Finding of Fact 24, but otherwise rejected as cumulative and unnecessary. Adopted in Findings of Fact 9, 31, but otherwise rejected as unnecessary. Rejected in Findings of Fact 24, 33, 35, 39. The proposed average length of stay of one year is found to be reasonable in Finding of Fact 10. Adopted in Findings of Fact 21, 22. 79-81 Adopted in Findings of Fact 19, 23, but otherwise rejected as unnecessary and cumulative. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 11, 18, but otherwise rejected as unnecessary. Adopted in Finding of Fact 31. Rejected as unnecessary. Adopted in part in Findings of Fact 11, 26 but otherwise rejected as unnecessary. 87-88 Adopted in Finding of Fact 3. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 3, 44, but otherwise rejected as unnecessary and cumulative. Rejected as simply a summation of testimony and therefore unnecessary. Adopted in part in Finding of Fact 4, but otherwise rejected as unnecessary. Rejected as simply a summation of testimony and not a Finding of Fact. Rejected as unnecessary and simply a summation of testimony. 95-96 Rejected as irrelevant, unnecessary and in part simply a summation of testimony. 97-98 Rejected as a summation of testimony and otherwise as speculative and irrelevant. 99 Rejected as simply a summation of testimony. 100-103 Rejected as irrelevant. 104 Rejected as a summation of, and argument on, the evidence rather than a Finding of Fact. Rulings on the Proposed Findings of Fact filed by Manatee Palms: Adopted in Findings of Fact 1, 27. Adopted in Finding of Fact 2. Adopted in Finding of Fact 3. Adopted in Finding of Fact 4. Adopted in Finding of Fact 5. Adopted in Finding of Fact 6, but otherwise rejected as irrelevant. Adopted in part in Finding of Fact 7. Rejected as unnecessary, and as simply a statement of position. 9-11 Rejected as unnecessary and as otherwise covered in preliminary procedural matters. Adopted in Finding of Fact 8. Adopted in Finding of Fact 5, but otherwise rejected as unnecessary. Adopted in Finding of Fact 8. Adopted in Findings of Fact 9, 31, but otherwise rejected as simply a summation of testimony and position of the parties. Adopted in Finding of Fact 8. Adopted in Findings of Fact 10, 25, 39, 44. Adopted in Finding of Fact 14, but rejected in Finding of Fact 24. Adopted in Finding of Fact 17, but rejected in Finding of Fact 24. Rejected in Findings of Fact 21, 22, 23. Rejected as simply argument and a statement of position rather than a Finding of Fact. Adopted in part in Findings of Fact 25, 39. Rejected in Findings of Fact 21, 22, 23. 24-26 Rejected in Findings of Fact 19, 20, 23. Adopted in Findings of Fact 19, 44, but rejected in Finding of Fact 23. Rejected in Findings of Fact 23, 24. Adopted in Finding of Fact 17. Adopted in Findings of Fact 16, 17. Adopted in Finding of Fact 17. Rejected as unnecessary. Adopted in Finding of Fact 17. 34-42 Rejected as irrelevant and unnecessary. This is a de novo proceeding through which final agency action will be taken, and therefore preliminary agency findings are irrelevant to a determination of the issues in this case which must be decided based upon evidence presented at hearing. Rejected as simply a statement of position without any citation to the record. Adopted in Finding of Fact 24. 45-46 Rejected in Finding of Fact 24. 47-48 Adopted and rejected in part in Finding of Fact 24. 49-60 Rejected in Finding of Fact 24. Rejected as simply a conclusion of law. Rejected as without citation to the record and as simply a statement of position rather than a Finding of Fact. Rejected as irrelevant. Adopted in part in Finding of Fact 3. Adopted in Finding of Fact 3. 66-70 Rejected as unnecessary and cumulative, since it is established that services are similar or identical to those proposed by FRTC. Adopted in Findings of Fact 3, 44. Rejected as unnecessary and cumulative. Adopted in Finding of Fact 3, but otherwise rejected as cumulative and unnecessary. Rejected in Findings of Fact. 26, 39 and otherwise as irrelevant. Rejected as irrelevant and otherwise not based on competent substantial evidence. Rejected as irrelevant. Adopted in Finding of Fact 30. Rejected as simply a statement of position, without citation to the record. Rejected as simply a conclusion of law. 80-81 Adopted in part in Finding of Fact 8, but otherwise rejected as not based on competent substantial evidence. 82 Rejected as unnecessary. 83-84 Rejected in Findings of Fact 33 and 35, and otherwise as irrelevant. Rejected as simply a conclusion of law. Rejected in Finding of Fact 34. Adopted in Finding of Fact 37. Adopted in Findings of Fact 34, 36. 89-90 Rejected in Findings of Fact 35, 37. Rejected as simply a conclusion of law. Adopted in Finding of Fact 39. Rejected as irrelevant. Rejected in Findings of Fact 38, 39, 42. Adopted in Finding of Fact 39. Rejected as irrelevant. Adopted in part in Finding of Fact 39, but otherwise rejected as irrelevant and unnecessary. 98-100 Adopted in Finding of Fact 39. 101-102 Adopted in Findings of Fact 38, 39. 103-109 Rejected in Finding of Fact 39, and otherwise as not based on competent substantial evidence. Rejected in Findings of Fact 26, 29. Rejected in Finding of Fact 39. Rejected in Finding of Fact 35, and otherwise as irrelevant. Rejected in Findings of Fact 38, 39, 42. Adopted in Finding of Fact 39. 115-117 Adopted and rejected in part in Finding of Fact 40, but otherwise rejected as irrelevant. Adopted and rejected in part in Findings of Fact 8, 40, but otherwise rejected as not based on competent substantial evidence. Rejected in Findings of Fact 38-42. Rejected as a conclusion of law. Rejected as not based on competent substantial evidence. Adopted in Findings of Fact 34, 37. Adopted in Finding of Fact 36. Rejected as not based on competent substantial evidence. Adopted in part in Finding of Fact 45. Rejected as not based on competent substantial evidence and without citation to the record. Rejected as a conclusion of law. 128-129 Rejected as simply a comment on the evidence and not a Finding of Fact. Adopted in part in Finding of Fact 8. Rejected in Finding of Fact 47. Rejected as irrelevant. Adopted in part in Finding of Fact 8, but otherwise rejected as irrelevant and not based on competent substantial evidence. Rejected as simply a statement of position and argument. Rulings on Proposed Findings of Fact filed by Manatee Memorial: 1-2 Adopted in Finding of Fact 1. 3-4 Rejected as irrelevant. 5 Adopted in Findings of Fact 8, 29. 6-7 Rejected as irrelevant to a determination of the issues in this case. 8-10 Adopted in Finding of Fact 3. Adopted in part in Findings of Fact 34, 36, 45. Adopted in Finding of Fact 2. 13-22 Adopted in Finding of Fact 4, but otherwise rejected as irrelevant or unnecessary. Rejected in Finding of Fact 24 and otherwise rejected as not based on competent substantial evidence. Rejected as cumulative and unnecessary. Adopted in Findings of Fact 34, 36. Rejected as speculative and not based on competent substantial evidence. Rejected as irrelevant. Adopted in Finding of Fact 6. Adopted in Findings of Fact 1, 5, 10, but rejected in in Finding of Fact 44. 30-32 Adopted in Finding of Fact 6. 33 Adopted in Finding of Fact 7. 34-39 Rejected as unnecessary. Adopted in Finding of Fact 15. Adopted in Finding of Fact 14. Adopted in Finding of Fact 17. 43-45 Adopted in Finding of Fact 16. Rejected as unnecessary and irrelevant. Since Mr. Griffin is the highest level departmental representative who testified at hearing, his statement of the non-rule policy is presumed to be correct. Rejected in Finding of Fact 16. Rejected in Finding of Fact 16 and otherwise as unnecessary and irrelevant. 49-51 Rejected as irrelevant since this is a de novo hearing by which final agency action will be taken. Rejected as simply a conclusion of law. Rejected in Findings of Fact 21-23. Adopted in Finding of Fact 39. 58-60 Rejected in Findings of Fact 21-23 and otherwise as irrelevant. 61-63 Rejected in Findings of Fact 19, 20, 23. Adopted in Finding of Fact 30, but rejected in Finding of Fact 31. Rejected in Finding of Fact 39 and otherwise as irrelevant. Adopted in Finding of Fact 25 and rejected in Finding of Fact 26. Rejected in Findings of Fact 26, 39, 42. Adopted in part in Findings of Fact 38, 39, 44. Rejected in Findings of Fact 24 and 39. Rejected as speculative, and not based on competent substantial evidence. 71-79 Rejected in Findings of Fact 26, 38, 39 and otherwise rejected as not based on competent substantial evidence. 80-83 Rejected in Findings of Fact 33, 35. Rejected in Findings of Fact 33, 35, 38, 39, 42. Rejected in Findings of Fact 39, 40. Rejected in Findings of Fact 38-42. Rejected in Finding of Fact 37. Adopted in Finding of Fact 33. Rejected in Finding of Fact 33. Rejected in Finding of Fact 35. Rejected in Findings of Fact 27, 33, 35. Rejected in Finding of Fact 37. Rejected as unnecessary. 94-95 Rejected in Finding of Fact 37. 96 Adopted in Finding of Fact 36. 97-100 Rejected in Findings of Fact 28, 29. 101-102 Adopted in Finding of Fact 8. 103-105 Rejected in Finding of Fact 29. 106 Rejected in Finding of Fact 8. 107-109 Rejected in Findings of Fact 27, 28, 29 and otherwise not based on competent substantial evidence. 110 Rejected as irrelevant. 111-112 Rejected in Finding of Fact 9. Rejected in Findings of Fact 9, 27, 28, 29. Adopted in Finding of Fact 8. 115-116 Rejected as irrelevant. Adopted in Finding of Fact 8. Adopted in Finding of Fact 47. Adopted and rejected in Finding of Fact 47. Adopted in Finding of Fact 8 and rejected in Finding of Fact 47. Rejected as irrelevant. Adopted and rejected in Finding of Fact 47. Adopted in part in Findings of Fact 3, 4. Adopted in Findings of Fact 25, 39, 45. 125-127 Rejected as speculative and not based on competent substantial evidence. 128-130 Rejected as irrelevant and unnecessary. COPIES FURNISHED: John Rodriguez, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Michael J. Glazer, Esquire Post Office Box 391 Tallahassee, Florida 32302 Jean Laramore, Esquire Anthony Cleveland, Esquire Bruce A. Leinback, Esquire Post Office Box 11068 Tallahassee, Florida 32302 William Hoffman, Esquire Deborah Winegard, Esquire 2500 Trust Co. Tower 25 Park Place Atlanta, Georgia 30303 Fred W. Baggett, Esquire Stephen A. Ecenia, Esquire Post Office Drawer 1838 Tallahassee, Florida 32302 John T. Brennan, Jr., Esquire 900 Seventeenth Street, N.W., Suite 600 Washington, DC 20006 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 John Miller, Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Fl 32399-0700 =================================================================
