The Issue Whether Certificate of Need (CON) Application No. 9992, filed by Sun City Hospital, Inc., d/b/a South Bay Hospital to establish a 112-bed replacement hospital in Riverview, Hillsborough County, Florida, satisfies, on balance, the applicable statutory and rule review criteria for approval.
Findings Of Fact The Parties A. South Bay South Bay is a 112-bed general acute care hospital located at 4016 Sun City Center Boulevard, Sun City Center, Florida. It has served south Hillsborough County from that location since its original construction in 1982. South Bay is a wholly-owned for-profit subsidiary of Hospital Corporation of America, Inc. (HCA), a for-profit corporation. South Bay's service area includes the immediate vicinity of Sun City Center, the communities of Ruskin and Wimauma (to the west and east of Sun City Center, respectively), and the communities of Riverview, Gibsonton, and Apollo Beach to the north. See FOF 68-72. South Bay is located on the western edge of Sun City Center. The Sun City Center area is comprised of the age- restricted communities of Sun City Center, Kings Point, Freedom Plaza, and numerous nearby senior living complexes, assisted- living facilities, and nursing homes. This area geographically comprises the developed area along the north side of State Road (SR) 674 between I–75 and U.S. Highway 301, north to 19th Avenue and south to the Little Manatee River. South Bay predominantly serves the residents of the Sun City Center area. In 2009, Sun City Center residents comprised approximately 57% of all discharges from SB. South Bay had approximately 72% market share in Sun City Center zip code 33573. (Approximately 32% of all market service area discharges came from zip code 33573.) South Bay provides educational programs at the hospital that are well–attended by community residents. South Bay provides comprehensive acute care services typical of a small to mid-sized community hospital, including emergency services, surgery, diagnostic imaging, non-invasive cardiology services, and endoscopy. It does not provide diagnostic or therapeutic cardiac catheterization or open-heart surgery. Patients requiring interventional cardiology services or open-heart surgery are taken directly by Hillsborough County Fire Rescue or other transport to a hospital providing those services, such as Brandon Regional Hospital (Brandon) or SJH, or are transferred from SB to one of those hospitals. South Bay has received a number of specialty accreditations, which include accreditation by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), specialty accreditation as an advanced primary stroke center, and specialty accreditation by the Society for Chest Pain. South Bay has also received recognition for its quality of care and, in particular, for surgical infection prevention and outstanding services relating to heart attack, heart failure, and pneumonia. South Bay's 112 licensed beds comprise 104 general medical-surgical beds and eight Intensive Care Unit (ICU) beds. Of the general medical-surgical beds, 64 are in semi-private rooms, where two patient beds are situated side-by-side, separated by a curtain. Forty-eight are in private rooms. Semi- private rooms present challenges in terms of infection control and patient privacy, and are no longer the standard of care in hospital design and construction. Over the years, SB has upgraded its hospital physical plant to accommodate new medical technology, including an MRI suite and state-of-the-art telemetry equipment. South Bay is implementing automated dispensing cabinets on patient floors for storage of medications and an electronic medication administration record system that provides an extra safety measure for dispensing medications. Since 2009, SB has implemented numerous programmatic initiatives that have improved the quality of care. South Bay is converting one wing of the hospital to an orthopedic unit. In 2001, South Bay completed a major expansion of its ED and support spaces, but has not added new beds. Patients presenting to the ED have received high quality of care and timely care. Since 2009, SB has improved its systems of care and triage of patients in the ED to improve patient flow and reduce ED wait times. Overall, South Bay has a reputation of providing high- quality care in a timely manner, notwithstanding problems with its physical plant and location. South Bay's utilization has been high historically. From 2006 to 2009, SB's average occupancy has been 79.5%, 80.3%, 77.2%, and 77.7%, respectively. Its number of patient discharges also increased in that time, from 6,190 in 2006 to 6,540 in 2009, at an average annual rate increase of 1.9%. (From late November until May, the seasonal months, utilization is very high, sometimes at 100% or greater.) Despite its relatively high utilization, SB has also had marginal financial results historically. It lost money in 2005 and 2007, with operating losses of $644,259 in 2005 and $1,151,496 in 2007 and bottom-line net losses of $447,957 (2005) and $698,305 (2007). The hospital had a significantly better year in 2009, with an operating gain of $3,365,113 and a bottom- line net profit of $2,144,292. However, this was achieved largely due to a reduction in bad debt from $11,927,320 in 2008 to $7,772,889 in 2009, an event the hospital does not expect to repeat, and a coincidence of high surgical volume. Its 2010 financial results were lagging behind those of 2009 at the time of the hearing. South Bay's 2009 results amount to an aberration, and it is likely that 2010 would be considerably less profitable. South Bay's marginal financial performance is due, in part, to its disproportionate share of Medicare patients and a disproportionate percentage of Medicare reimbursement in its payor mix. Medicare reimburses hospitals at a significantly lower rate than managed care payors. As noted, SB is organizationally a part of HCA's West Florida Division, and is one of two HCA-affiliated hospitals in Hillsborough County; Brandon is the other. (There are approximately 16 hospitals in this division.) Brandon has been able to add beds over the past several years, and its services include interventional cardiology and open-heart surgery. However, SB and Brandon combined still have fewer licensed beds than either St. Joseph's Hospital or Tampa General Hospital, and fewer than the BayCare Health System- affiliated hospitals in Hillsborough in total. South Bay's existing physical plant is undersized and outdated. See discussion below. Whether it has a meaningful opportunity for expansion and renovation at its 17.5-acre site is a question for this proceeding to resolve. South Bay proposes the replacement and relocation of its facility to the community of Riverview. In 2005, SB planned to establish an 80-bed satellite hospital in Riverview, on a parcel owned by HCA and located on the north side of Big Bend Road between I-75 and U.S. Highway 301. SB filed CON Application No. 9834 in the February 2005 batching cycle. The application was preliminarily denied by AHCA, and SB initially contested AHCA's determination. South Bay pursued the satellite hospital CON at that time because of limited availability of intercompany financing from HCA. By the time of the August 2007 batching cycle, intercompany financing had improved, allowing SB to pursue the bigger project of replacing and relocating the hospital. South Bay dismissed its petition for formal administrative hearing, allowing AHCA's preliminary denial of CON Application No. 9834 to become final, and filed CON Application No. 9992 to establish a replacement hospital facility on Big Bend Road in Riverview. St. Joseph's Hospital St. Joseph's Hospital was founded by the Franciscan Sisters of Allegany, New York, as a small hospital in a converted house in downtown Tampa in 1934. In 1967, SJH opened its existing main hospital facility on Martin Luther King Avenue in Tampa, Florida. St. Joseph's Hospital, Inc., a not-for-profit entity, is the licensee of St. Joseph's Hospital, an acute care hospital located at 3001 West Martin Luther King, Jr., Boulevard, Tampa, Florida. As a not-for-profit organization, SJH's mission is to improve the health care of the community by providing high- quality compassionate care. St. Joseph's Hospital, Inc., is a Medicaid disproportionate share provider and provided $145 million in charity and uncompensated care in 2009. St. Joseph's Hospital, Inc., is licensed to operate approximately 883 beds, including acute care beds; Level II and Level III neonatal intensive care unit (NICU) beds; and adult and child-adolescent psychiatric beds. The majority of beds are semi-private. Services include Level II and pediatric trauma services, angioplasty, and open-heart surgery. These beds and services are distributed among SJH's main campus; St. Joseph's Women's Hospital; St. Joseph's Hospital North, a newer satellite hospital in north Tampa; and St. Joseph's Children's Hospital. Except for St. Joseph's Hospital North, these facilities are land-locked. Nevertheless, SJH has continued to invest in its physical plant and to upgrade its medical technology and equipment. In February 2010, SJH opened St. Joseph's Hospital North, a state-of-the-art, 76-bed satellite hospital in Lutz, north Hillsborough County, at a cost of approximately $225 million. This facility is approximately 14 miles away from the main campus. This followed the award of CON No. 9610 to SJH for the establishment of St. Joseph's Hospital North, which was unsuccessfully opposed by University Community Hospital and Tampa General Hospital, two existing hospital providers in Tampa. Univ. Cmty. Hosp., Inc., d/b/a Univ. Cmty. Hosp. v. Agency for Health Care Admin., Case Nos. 03-0337CON and 03-0338CON. St. Joseph's Hospital North operates under the same license and under common management. St. Joseph's Hospital, Inc., is also the holder of CON No. 9833 for the establishment of a 90-bed state-of-the-art satellite hospital on Big Bend Road, Riverview, Hillsborough County. These all private beds include general medical-surgical beds, an ICU, and a 10-bed obstetrical unit. On October 21, 2009, the Agency revised CON No. 9833 with a termination date of October 21, 2012. This project was unsuccessfully opposed by TG, SB, and Brandon. St. Joseph's Hosp., Inc. v. Agency for Health Care Admin., Case No. 05-2754CON, supra. St. Joseph's Hospital anticipates construction beginning in October 2012 and opening the satellite hospital, to be known as St. Joseph's Hospital South, in early 2015. This hospital will be operating under SJH's existing license and Medicare and Medicaid provider numbers and will in all respects be an integral component of SJH. The implementation of St. Joseph's Hospital South is underway. SJH has contracted with consultants, engineers, architects, and contractors and has funded the first phase of the project with $6 million, a portion of which has been spent. The application for CON No. 9833 refers to "evidence- based design" and the construction of a state-of-the-art facility. (The design of St. Joseph's Hospital North also uses "evidence-based design.") St. Joseph's Hospital South will have all private rooms, general surgery operating rooms as well as endoscopy, and a 10-bed obstetrics unit. Although CON No. 9833 is for a project involving 228,810 square feet of new construction, SJH intends to build a much larger facility, approximately 400,000 square feet on approximately 70 acres. St. Joseph's Hospital Main's physical plant is 43 years old. The majority of the patient rooms are semi–private and about 35% of patients admitted at this hospital received private rooms. Notwithstanding the age of its physical plant and its semi–private bed configuration, SJH has a reputation of providing high quality of care and is a strong competitor in its market. St. Joseph's Hospital, Inc., has two facility expansions currently in progress at its main location in Tampa: a new five-story building that will house SJH neonatal intensive care unit, obstetrical, and gynecology services; and a separate, two-story addition with 52 private patient rooms. Of the 52 private patient rooms, 26 will be dedicated to patients recovering from orthopedic surgery, and will be large enough to allow physical therapy to be done in the patient room itself. The other 26 rooms will be new medical-surgical ICU beds at the hospital. At the same time that SJH expands its main location, it is pursuing a strategic plan whereby the main location is the "hub" of its system, with community hospitals and health facilities located in outlying communities. As proposed in CON Application No. 9610, St. Joseph's Hospital North was to be 240,000 square feet in size. Following the award of CON No. 9610, SJH requested that AHCA modify the CON to provide for construction of a larger facility. In its modification request, SJH requested to establish a large, state- of-the-art facility with all private patient rooms, and the desirability of private patient rooms as a matter of infection control and patient preference. AHCA granted the modification. St. Joseph's Hospital, Inc., thereafter planned to construct St. Joseph's Hospital North to be four stories in height. The plan was opposed. St. Joseph's Hospital, Inc., offered to construct a three-story building, large enough horizontally to accommodate the CON square footage modification. The offer was accepted. St. Joseph's Hospital, Inc., markets St. Joseph's Hospital North as "The Hospital of the Future, Today." The hospital was constructed using "evidence-based design" to maximize operational efficiencies and enhance the healing process of its residents –- recognizing, among other things, the role of the patient's family and friends. The facility's patient care units are all state-of-the-art and include, for example, obstetrical suites in which a visiting family member can spend the night. A spacious, sunlit atrium and a "healing garden" are also provided. The hospital's dining facility is frequented by community residents. In addition, SJH owns a physician group practice under HealthPoint Medical Group, a subsidiary of St. Joseph's Health Care Center, Inc. The group practice has approximately 19 different office locations, including several within the service area for the proposed hospital. The group includes approximately 106 physicians. However, most of the office locations are in Tampa, and the group does not have an office in Riverview, although there are plans to expand locations to include the Big Bend Road site. St. Joseph's Hospital, Inc., anticipates having to establish a new medical staff for St. Joseph's Hospital South, and will build a medical office building at the site for the purpose of attracting physicians. It further anticipates that some number of physicians on SB's existing medical staff will apply for privileges at St. Joseph's Hospital South. St. Joseph's Hospital, Inc., is the market leader among Hillsborough County hospitals and is currently doing well financially, as it has historically. For 2010, St. Joseph's Hospital Main's operating income was approximately $78 million. Organizationally, SJH has a parent organization, St. Joseph's Health Care Center, Inc., and is one of eight hospitals in the greater Tampa Bay area affiliated with BayCare. On behalf of its member hospitals, BayCare arranges financing for capital projects, provides support for various administrative functions, and negotiates managed care contracts that cover its members as a group. St. Joseph's Hospital characterizes fees paid for BayCare services as an allocation of expenses rather than a management fee for its services. In 2009, SJH paid BayCare approximately $42 million for services. St. Joseph's Hospital is one of three BayCare affiliates in Hillsborough County. The other two are St. Joseph's Hospital North and South Florida Baptist Hospital, a community hospital in Plant City. St. Joseph's Hospital South would be the fourth BayCare hospital in the county. Tampa General The Hillsborough County Hospital Authority, a public body appointed by the county, operated Tampa General Hospital until 1997. In that year, TG was leased to Florida Health Sciences Center, Inc., a non-profit corporation and the current hospital licensee. Tampa General is a 1,018-bed acute care hospital located at 2 Columbia Drive, Davis Island, Tampa, Florida. In addition to trauma surgery services, TG provides tertiary services, such as angioplasty, open-heart surgery, and organ transplantation. Tampa General operates the only burn center in the area. A rehabilitation hospital is connected to the main hospital, but there are plans to relocate this facility. Tampa General owns a medical office building. Tampa General is JCAHO accredited and has received numerous honors. Tampa General provides high-quality of care. Approximately half of the beds at TG are private rooms. Tampa General's service area for non-tertiary services includes all of Hillsborough County. Tampa General is also the teaching hospital for the University of South Florida's College of Medicine. As a statutory teaching hospital, TG has 550 residents and funds over 300 postgraduate physicians in training. Tampa General is the predominant provider of services to Medicaid recipients and the medically indigent of Hillsborough County. It is considered the only safety-net hospital in Hillsborough County. (A safety net hospital provides a disproportionate amount of care to indigent and underinsured patients in comparison to other hospitals.) A high volume of indigent (Medicaid and charity) patients are discharged from TG. In 2009, the costs TG incurred treating indigent patients exceeded reimbursement by $56.5 million. Approximately 33% of Tampa General's patients are Medicare patients and 25% commercial. Tampa General has grown in the past 10 years. It added 31 licensed acute care beds in 2004 and 82 more since SB's application was filed in 2007. In addition, the Bayshore Pavilion, a $300-million project, was recently completed. The project enlarged TG's ED, and added a new cardiovascular unit, a new neurosciences and trauma center, a new OB-GYN floor, and a new gastrointestinal unit. Facility improvements are generally ongoing. Tampa General's capital budget for 2011 is approximately $100 million. In 2010, TG's operating margin was approximately $43 million and a small operating margin in 2011. AHCA AHCA is the state agency that administers the CON law. Jeff Gregg testified that during his tenure, AHCA has never preliminarily denied a replacement hospital CON application or required consideration of alternatives to a replacement hospital. Mr. Gregg opined that the lack of alternatives or options is a relevant consideration when reviewing a replacement hospital CON application. T 468. The Agency's State Agency Action Report (SAAR) provides reasons for preliminarily approving SB's CON application. During the hearing, Mr. Gregg testified, in part, that the primary reasons for preliminary approval were issues related to quality of care "because the facility represents itself as being unable to expand or adapt significantly to the rapidly changing world of acute care. This is consistent with what [he has] heard about other replacement hospitals." T 413. Mr. Gregg also noted that SB focused on improving access "[a]nd as the years go by, it is reasonable to expect that the population outside of Sun City Center, the immediate Sun City Center area, will steadily increase and improve access for more people, and that's particularly true because this application includes both a freestanding emergency department and a shuttle service for the people in the immediate area. And that was intended to address their concerns based upon the fact that they have had this facility very conveniently located for them in the past at a time when there was little development in the general south Hillsborough area. But the applicant wants to position itself for the expected growth in the future, and we think has made an excellent effort to accommodate the immediate interests of Sun City Center residents with their promises to do the emergency, freestanding emergency department and the shuttle service so that the people will continue to have very comfortable access to the hospital." T 413-14. Mr. Gregg reiterated "that the improvements in quality outweigh any concerns that [the Agency] should have about the replacement and relocation of this facility; that if this facility were to be forced to remain where it is, over time it would be reasonable to expect that quality would diminish." T 435. For AHCA, replacement hospital applications receive the same level of scrutiny as any other acute care hospital applications. T 439-40. South Bay's existing facility and site South Bay is located on the north side of SR 674, an east-west thoroughfare in south Hillsborough County. The area around the hospital is "built out" with predominantly residential development. Sun City Center, an age-restricted (55 and older) retirement community, is located directly across SR 674 from the hospital as well as on the north side of SR 674 to the east of the hospital. Other residential development is immediately to the west of the hospital on the north side of SR 674. See FOF 3-6. Sun City Center is flanked by two north-south arterial roadways, I-75 to the west and U.S. Highway 301 to the east, both of which intersect with SR 674. The community of Ruskin is situated generally around the intersection of SR 674 and U.S. 41, west of I-75. The community of Wimauma is situated along SR 674 just east of U.S. Highway 301. South Bay is located in a three-story building that is well–maintained and in relatively good repair. The facility is well laid out in terms of design as a community hospital. Patients and staff at SB are satisfied with the quality of care and scope of acute care services provided at the hospital. Notwithstanding current space limitations, and problems in the ICU, see FOF 77-82, patients receive a high quality of care. One of the stated reasons for replacement is with respect to SB's request to have all private patient rooms in order to be more competitive with St. Joseph's Hospital South. South Bay's inpatient rooms are located within the original construction. The hospital is approximately 115,800 square feet, or a little over 1,000 square feet per inpatient bed. By comparison, small to mid-sized community hospitals built today are commonly 2,400 square feet per inpatient bed on average. All of SB's patient care units are undersized by today's standards, with the exception of the ED. ICU patients, often not ambulatory, require a higher level of care than other hospital patients. The ICU at SB is not adequate to meet the level of care required by the ICU patient. SB's ICU comprises eight rooms with one bed apiece. Eight beds are not enough. As Dr. Ksaibati put it at hearing: "Right now we have eight and we are always short . . . double . . . the number of beds, that's at least [the] minimum [t]hat I expect we are going to have if we go to a new facility." T 198-99 (emphasis added). The shortage of beds is not the only problem. The size of SB's ICU rooms is too small. (Problems with the ICU have existed at least since 2006.) Inadequate size prohibits separate, adjoining bathrooms. For patients able to leave their beds, therefore, portable bathroom equipment in the ICU room is required. Inadequate size, the presence of furniture, and the presence of equipment in the ICU room creates serious quality of care issues. When an EKG is conducted, the nurse cannot be present in the room. Otherwise, there would be no space for the EKG equipment. It is difficult to intubate a patient and, at times, "extremely dangerous." T 170. A major concern is when a life-threatening problem occurs that requires emergency treatment at the ICU patient's bedside. For example, when a cardiac arrest "code" is called, furniture and the portable bathroom equipment must be removed before emergency cardiac staff and equipment necessary to restore the function of the patient's heart can reach the patient for the commencement of treatment. Comparison to ICU rooms at other facilities underscores the inadequate size of SB's ICU rooms. Many of the ICU rooms at Brandon are much larger -- more than twice the size of SB's ICU rooms. Support spaces are inadequate in most areas, resulting in corridors (at times) being used for inappropriate storage. In addition, the hospital's general storage is inadequate, resulting in movable equipment being stored in mechanical and electrical rooms. Of the medical-surgical beds at SB, 48 are private and 64 are semi-private. The current standard in hospital design is for acute care hospitals to have private rooms exclusively. Private patient rooms are superior to semi-private rooms for infection control and patient well-being in general. The patient is spared the disruption and occasional unpleasantness that accompanies sharing a patient room –- for example, another patient's persistent cough or inability to use the toilet (many of SB's semi-private rooms have bedside commodes). Private rooms are generally recognized as promoting quality of care. South Bay's site is approximately 17.5 acres, bordered on all sides by parcels not owned by either SB or by HCA- affiliated entities. The facility is set back from SR 674 by a visitor parking lot. Proceeding clockwise around the facility from the visitor parking lot, there is a small service road on the western edge of the site; two large, adjacent ponds for stormwater retention; the rear parking lot for ED visitors and patients; and another small service road which connects the east side of the site to SR 674, and which is used by ambulances to access the ED. Dedicated parking for SB's employees is absent. A medical office building (MOB), which is not owned by SB, is located to the north of the ED parking lot. The MOB houses SB's Human Resources Department as well as medical offices. Most of SB's specialty physicians have either full or part-time offices in close proximity to SB. Employee parking is not available in the MOB parking lot. Some of SB's employees park in a hospital-owned parking lot to the north of the MOB, and then walk around the MOB to enter the hospital. South Bay's CEO and management employees park on a strip of a gravel lot, which is rented from the Methodist church to the northeast of the hospital's site. In 2007, as part of the CON application to relocate, SB commissioned a site and facility assessment (SFA) of the hospital. The SFA was prepared for the purpose of supporting SB's replacement hospital application and has not been updated since its preparation in 2007. The architects or engineers who prepared the SFA were not asked to evaluate proposed options for expansion or upgrade of SB on-site. However, the SFA concludes that the SB site has been built out to its maximum capacity. On the other hand, the SFA concluded that the existing building systems at SB met codes and standards in force when constructed and are in adequate condition and have the capacity to meet the current needs of the hospital. The report also stated that if SB wanted to substantially expand its physical plant to accommodate future growth, upgrades to some of the existing building systems likely would be required. Notwithstanding these reports and relative costs, expansion of SB at its existing site is not realistic or cost- effective as compared to a replacement hospital. Vertical expansion is complicated by two factors. First, the hospital's original construction in 1982 was done under the former Southern Standard Building Code, which did not contain the "wind-loading" requirements of the present-day Florida Building Code. Any vertical expansion of SB would not only require the new construction to meet current wind-loading requirements, but would also require the original construction to be retrofitted to meet current wind-loading requirements (assuming this was even possible as a structural matter). Second, if vertical expansion were to meet current standards for hospital square footage, the new floor or floors would "overhang" the smaller existing construction, complicating utility connections from the lower floor as well as the placement of structural columns to support the additional load. The alternative (assuming feasibility due to current wind-loading requirements) would be to vertically stack patient care units identical to SB's existing patient care units, thereby perpetuating its undersized and outdated design. Vertical expansion at SB has not been proposed by the Gould Turner Group (Gould Turner), which did a Master Facility Plan for SB in May 2010, but included a new patient bed tower, or by HBE Corporation (HBE). Horizontal expansion of SB is no less complicated. The hospital would more than double in size to meet the modern-day standard of 2,400 square feet per bed, and its site is too small for such expansion. It is apparent that such expansion would displace the visitor parking lot if located to the south of the existing building, and likely have to extend into SR 674 itself. South Bay's architectural consultant expert witness substantiated that replacing SB is justified as an architectural matter, and that the facility cannot be brought up to present-day standards at its existing location. According to Mr. Siconolfi, the overall building at SB is approximately half of the total size that would normally be in place for a new hospital meeting modern codes and industry standards. The more modest expansions offered by Gould Turner and HBE are still problematic, if feasible at all. Moreover, with either proposal, SB would ultimately remain on its existing 17.5-acre site, with few opportunities to expand further. Gould Turner's study was requested by SB's CEO in May 2010, to determine whether and to what extent SB would be able to expand on-site. (Gould Turner was involved with SB's recent ED expansion project area.) The resulting Master Facility Plan essentially proposes building a new patient tower in SB's existing visitor parking lot, to the left and right of the existing main entrance to SB. This would require construction of a new visitor parking lot in whatever space remained in between the new construction and SR 674. The Master Facility Plan contains no discussion of the new impervious area that would be added to the site and the consequential requirement of additional stormwater capacity, assuming the site can even accommodate additional stormwater capacity. This study also included a new 12-bed ICU and the existing ICU would be renovated into private patient rooms. For example, "[t]he second floor would be all telemetry beds while the third floor would be a combination of medical/surgical, PCU, and telemetry beds." In Gould Turner's drawings, the construction itself would be to the left and to the right of the hospital's existing main entrance. Two scenarios are proposed: in the first, the hospital's existing semi-private rooms would become private rooms and, with the new construction, the hospital would have 114 licensed beds (including two new beds), all private; in the second, some of the hospital's existing semi-private rooms would become private rooms and, with the new construction, the hospital would have 146 licensed beds (adding 34 beds), of which 32 would be semi-private. South Bay did not consider Gould Turner's alternative further or request additional, more detailed drawings or analysis, and instead determined to pursue the replacement hospital project, in part, because it was better not to "piecemeal" the hospital together. Mr. Miller, who is responsible for strategic decisions regarding SB, was aware of, but did not review the Master Facility Plan and believes that it is not economically feasible to expand the hospital. St. Joseph's Hospital presented testimony of an architect representing the hospital design/build firm of HBE, to evaluate SB's current condition, to provide options for expansion and upgrading on-site, and to provide a professional cost estimate for the expansion. Mr. Oliver personally inspected SB's site and facility in October 2010 and reviewed numerous reports regarding the facility and other documents. Mr. Oliver performed an analysis of SB's existing physical plant and land surrounding the hospital. HBE's analysis concluded that SB has the option to expand and upgrade on-site, including the construction of a modern surgical suite, a modern 10-bed ICU, additional elevators, and expansion and upgrading of the ancillary support spaces identified by SB as less than ideal. HBE's proposal involves the addition of 50,000 square feet of space to the hospital through the construction of a three-story patient tower at the south side of the hospital. The additional square footage included in the HBE proposal would allow the hospital to convert to an all-private bed configuration with either 126 private beds by building out both second and third floors of a new patient tower, or to 126 private beds if the hospital chose to "shell in" the third floor for future expansion. Under the HBE proposal, SB would have the option to increase its licensed bed capacity 158 beds by completing the second and third floors of the new patient tower (all private rooms) while maintaining the mix of semi-private and private patient rooms in the existing bed tower. The HBE proposal also provides for a phased renovation of the interior of SB to allow for an expanded post-anesthesia care unit, expanded laboratory, pharmacy, endoscopy, women's center, prep/hold/recovery areas, central sterile supply and distribution, expanded dining, and a new covered lobby entrance to the left side of the hospital. Phasing of the expansion would permit the hospital to remain in operation during expansion and renovation with minimal disruption. During construction the north entrance of the hospital would provide access through the waiting rooms that are currently part of the 2001 renovated area of the hospital with direct access to the circulation patterns of the hospital. The HBE proposal also provides for the addition of parking to bring the number of parking spaces on-site to 400. The HBE proposal includes additional stormwater retention/detention areas that could serve as attractive water features and, similar to the earlier civil engineering reports obtained by SB, proposes the construction of a parking garage at the rear of the facility should additional parking be needed in the future. However, HBE essentially proposes the alternative already rejected by SB: construction of a new patient tower in front of the existing hospital. Similar to Gould Turner, HBE proposes new construction to the left and right of the hospital's existing lobby entrance and the other changes described above. HBE's proposal recognizes the need for additional stormwater retention: the stand of trees that sets off the existing visitor parking lot from SR 674 would be uprooted; in their place, a retention pond would be constructed. Approval of the Southwest Florida Water Management District (SWFWMD) would be required for the proposal to be feasible. Assuming the SWFWMD approved the proposal, the retention pond would have to be enclosed by a fence. This would then be the "face" of the hospital to the public on SR 674. HBE's proposal poses significant problems. The first floor of the three-story component would be flush against the exterior wall of the hospital's administrative offices, where the CEO and others currently have windows with a vista of the front parking lot and SR 674. Since the three-story component would be constructed first in the "phased" construction, and since the hospital's administration has no other place to work in the existing facility, the CEO and other management team would have to work off-site until the new administrative offices (to the left of the existing hospital lobby entrance) were constructed. The existing main entrance to the hospital, which faces SR 674, would be relocated to the west side of the hospital once construction was completed in its entirety. In the interim, patients and visitors would have to enter the facility from the rear, as the existing main entrance would be inaccessible. This would be for a period of months, if not longer. For the second and third floors, HBE's proposal poses two scenarios. Under the first, SB would build the 24 general medical-surgical beds on the tower's second floor, but leave the third floor as "shelled" space. This would leave SB with a total of 106 licensed beds, six fewer than it has at present. Further, since HBE's proposal involves a second ICU at SB, 18 of the 106 beds are ICU beds, leaving 88 general medical-surgical beds. By comparison, SB currently has 104 general medical- surgical beds, meaning that it loses 16 general medical-surgical beds under HBE's first scenario. In the second scenario, SB would build 24 general medical-surgical beds on the third floor as well, and would have a total of 126 licensed beds. Since 18 of those beds would be ICU beds, SB would have 108 general medical-surgical beds, or only four more than it has at present. Further, the proposal does not make SB appreciably bigger. The second and third floors in HBE's proposal are designed in "elongated" fashion such that several rooms may be obscured from the nursing station's line of sight by a new elevator, which is undesirable as a matter of patient safety and security. Further, construction of the second and third floors would be against the existing second and third floors above the lobby entrance's east side. This would require 12 existing private patient rooms to be taken out of service due to loss of their vista windows. At the same time, the new second and third floors would be parallel to, but set back from, existing semi- private patient rooms and their vista windows along the southeast side of the hospital. This means that patients and visitors in the existing semi-private patient rooms and patients and visitors in the new private patient rooms on the north side of the new construction may be looking into each other's rooms. HBE's proposal also involves reorganization and renovation of SB's existing facility, and the demolition and disruption that goes with it. To accommodate patient circulation within the existing facility from the ED (at the north side of the hospital) to the new patient tower (at the south side of the hospital), two new corridors are proposed to be routed through and displace the existing departments of Data Processing and Medical Records. Thus, until the new administrative office space would be constructed, Data Processing and Medical Records (along with the management team) would have to be relocated off-site. Once the new first floor of the three-story component is completed, the hospital's four ORs and six PACU beds will be relocated there. In the existing vacated surgical space, HBE proposes to relocate SB's existing cardiology unit, thus requiring the vacated surgical space to be completely reconfigured (building a nursing station and support spaces that do not currently exist in that location). In the space vacated by the existing cardiology unit, HBE proposed expanding the hospital's clinical laboratory, meaning extensive demolition and reconfiguration in that area. The pharmacy is proposed to be relocated to where the existing PACU is located, requiring the building of a new pharmacy with a secure area for controlled substances, cabinets for other medications, and the like. The vacated existing pharmacy is in turn proposed to be dedicated to general storage, which involves still more construction and demolition, tearing out the old pharmacy to make the space suitable for general storage. HBE's proposal is described as a "substantial upgrade" of SB, but it was stated that a substantial upgrade could likewise be achieved by replacing the facility outright. This is SB's preference, which is not unreasonable. There have been documented problems with other hospital expansions, including patient infection due to construction dust. South Bay's proposal South Bay proposes to establish a 112-bed replacement hospital on a 39-acre parcel (acquired in 2005) located in the Riverview community, on the north side of Big Bend Road between I-75 and U.S. Highway 301. The hospital is designed to include 32 observation beds built to acute care occupancy standards, to be available for conversion to licensed acute care beds should the need arise. The original total project cost of $215,641,934, calculated when the application was filed in October 2007 has been revised to $192,967,399. The decrease in total project cost is largely due to the decrease in construction costs since 2007. The parties stipulated that SB's estimated construction costs are reasonable. The remainder of the project budget is likewise reasonable. The budgeted number for land, $9,400,000, is more than SB needs: the 39-acre parcel is held in its behalf by HCA Services of Florida, Inc., and was acquired in March 2005 for $7,823,100. An environmental study has been done, and the site has no environmental development issues. The original site preparation budgeted number of $5 million has been increased to $7 million to allow for possible impact fees, based on HCA's experience with similar projects. Building costs, other than construction cost, flow from the construction cost number as a matter of percentages and are reasonable. The equipment costs are reasonable. Construction period interest as revised from the original project budget is approximately $4 million less, commensurate with the revised project cost. Other smaller numbers in the budget, such as contingencies and start-up costs, were calculated in the usual and accepted manner for estimated project costs and are reasonable. South Bay's proposed service area (PSA) comprises six zip codes (33573 (Sun City Center), 33570 (Ruskin), 33569 (Riverview), 33598 (Wimauma), 33572 (Apollo Beach), and 33534 (Gibsonton)) in South Hillsborough County. These six zip codes accounted for 92.2% of SB's discharges in 2006. The first three zip codes, which include Riverview (33569), accounted for 76.1% of the discharges. Following the filing of the application in 2007, the U.S. Postal Service subdivided the former zip code 33569 into three zip codes: 33569, 33578, and 33579. (The proposed service area consists of eight zip codes.) The same geographic area comprises the three Riverview zip codes taken together as the former zip code 33569. In 2009, the three Riverview zip codes combined accounted for approximately 504 to 511/514 of SB's discharges, with 589 discharges in 2006 from the zip code 33569. Of SB's total discharges in 2009, approximately 8 to 9% originated from these three zip codes. In 2009, approximately 7,398 out of 14,424 market/service-area discharges, or approximately 51% of the total market discharges came from the three southern zip codes, 33573 (Sun City Center), 33570 (Ruskin), and 33598 (Wimauma). Also, approximately 81% of SB's discharges in 2009 originated from the same three zip codes. (The discharge numbers for SB for 2009 presented by St. Joseph's Hospital and SB are similar. See SB Ex. 9 at 11 and SJH Ex. 4 at 8-9. See also TG Ex. 4 at 3-4.) In 2009, SB and Brandon had an approximate 68% market share for the eight zip codes. See FOF 152-54 and 162-65 for additional demographic data. St. Joseph's Hospital had an approximate 5% market share within the service area and using 2009-2010 data, TG had approximately 6% market share in zip code 33573 and an overall market share in the three Riverview zip codes of approximately 19% and a market share of approximately 23% in zip code 33579. South Bay's application projects 37,292 patient days in year 1; 39,581 patient days in year 2; and 41,563 patient days in year 3 for the proposed replacement hospital. The projection was based on the January 2007 population for the service area as reflected in the application, and what was then a projected population growth rate of 20.8% for the five-year period 2007 to 2012. These projections were updated for the purposes of hearing. See FOF 246-7. The application also noted a downturn in the housing market, which began in 2007 and has continued since then. The application projected a five-year (2007-2012) change of 20.8% for the original five zip codes. At hearing, SB introduced updated utilization projections for 2010-2015, which show the service area population growing at 15.3% for that five-year period. South Bay's revised utilization projections for 2015- 2017 (projected years 1-3 of the replacement hospital) are 28,168 patient days in year 1; 28,569 patient days in year 2; and 29,582 patient days in year 3. The lesser utilization as compared with SB's original projections is partly due to slowed population growth, but predominantly due to SB's assumption that St. Joseph's Hospital will build its proposed satellite hospital in Riverview, and that SB will accordingly lose 20% of its market share. The revised utilization projections are conservative, reasonable, and achievable. With the relocation, SB will be more proximate to the entirety of its service area, and will be toward the center of population growth in south Hillsborough County. In addition, it will have a more viable and more sustainable hospital operation even with the reduced market share. Its financial projections reflect a better payor mix and profitability in the proposed location despite the projection of fewer patient days. Conversely, if SB remains in Sun City Center, it is subject to material operating losses even if its lost market share in that location is the same 20%, as compared to the 30 to 40% it estimates that it would lose in competition with St. Joseph's Hospital South. South Bay's medical staff and employees support the replacement facility, notwithstanding that their satisfaction with SB is very high. The proposal is also supported by various business organizations, including the Riverview Chamber of Commerce and Ruskin Chamber of Commerce. However, many of the residents of Sun City Center who testified opposed relocation of SB. See FOF 210-11. South Bay will accept several preconditions on approval of its CON application: (1) the location of SB on Big Bend Road in Riverview; (2) combined Medicaid and charity care equal to 7.0% of gross revenues; and (3) operating a free- standing ED at the Sun City location and providing a shuttle service between the Sun City location and the new hospital campus ("for patients and visitors"). SB Ex. 46, Schedule C. In its SAAR, the Agency preliminarily approved the application including the following: This approval includes, as a component of the proposal: the operation of a freestanding emergency department on a 24-hour, seven-day per week basis at the current Sun City location, the provision of extended hours shuttle service between the existing Sun City Center and the new campuses to transport patients and visitors between the facilities to locations; and the offering of primary care and diagnostic testing at the Sun City Center location. These components are required services to be provided by the replacement hospital as approved by the Agency. Mr. Gregg explained that the requirement for transport of patients and visitors was included based on his understanding of the concerns of the Sun City Center community for emergency as well as routine access to hospital services. Notwithstanding the Agency statement that the foregoing elements are required, the Agency did not condition approval on the described elements. See SB Ex. 12 at 39 and 67. Instead, the Agency only required SB, as a condition of approval, to provide a minimum of 7.0% of the hospital's patient days to Medicaid and charity care patients. (As noted above, SB's proposed condition says 7.0% of gross revenues.) Because conditions on approval of the CON are generally subject to modification, there would be no legal mechanism for monitoring or enforcement of the aspects of the project not made a condition of approval. If the Agency approves SB's CON application, the Agency should condition any approval based on the conditions referenced above, which SB set forth in its CON application. SB Ex. 12 at 39 and 67. See also T 450 ("[The Agency] can take any statement made in the application and turn that into a condition," although conditions may be modified.1 St. Joseph's Hospital and Tampa General are critical of SB's offer of a freestanding ED and proposed shuttle transportation services. Other than agreeing to condition its CON application by offering these services, SB has not evaluated the manner in which these services would be offered. South Bay envisions that the shuttle service (provided without charge) would be more for visitors than it would be for patients and for outpatients or patients that are ambulatory and able to ride by shuttle. Other patients would be expected to be transported by EMS or other medical transport. As of the date of hearing, Hillsborough County does not have a protocol to address the transport of patients to a freestanding ED. South Bay contacted Hillsborough County Fire Rescue prior to filing its CON application and was advised that they would support SB's establishment of a satellite hospital on Big Bend Road, but did not support the closure and relocation of SB, even with a freestanding ED left behind. See FOF 195-207. At hearing, SB representatives stated that SB would not be closed if the project is denied. Compliance with applicable statutory and rule criteria Section 408.035(1): The need for the health care facilities and health services being proposed The need for SB itself and at its current location is not an issue in this case. That need was demonstrated years ago, when SB was initially approved. For the Agency, consideration of a replacement hospital application "diminishes the concept of need in [the Agency's] weighing and balancing of criteria in this case." There is no express language in the CON law, as amended, which indicates that CON review of a replacement hospital application does not require consideration of other statutory review criteria, including "need," unless otherwise stipulated. Replacement hospital applicants, like SB, may advocate the need for replacement rather than expansion or renovation of the existing hospital, but a showing of "need" is still required. Nevertheless, institution-specific factors may be relevant when "need" is considered. The determination of "need" for SB's relocation involves an analysis of whether the relocation of the hospital as proposed will enhance access or quality of care, and whether the relocation may result in changes in the health care delivery system that may adversely impact the community, as well as options SB may have for expansion or upgrading on-site. In this case, the overall "need" for the project is resolved, in part, by considering, in conjunction with weighing and balancing other statutory criteria, including quality of care, whether the institution-specific needs of SB to replace the existing hospital are more reasonable than other alternatives, including renovation and whether, if replacement is recommended, the residents of the service area, including the Sun City Center area, will retain reasonable access to general acute care hospital services. The overall need for the project has not been proven. See COL 360-70 for ultimate conclusions of law regarding the need for this project. Section 408.035(2): The availability, quality of care, accessibility, and extent of utilization of existing health care facilities and health services in the service district of the applicant The "service district" in this case is acute care subdistrict 6-1, Hillsborough County. See Fla. Admin. Code R. 59C-2.100. The acute care hospital services SB proposes to relocate to Big Bend Road are available to residents of SB's service area. Except as otherwise noted herein with respect to constraints at SB, there are no capacity constraints limiting access to acute care hospital services in the subdistrict. The availability of acute care services for residents of the service area, and specifically the Riverview area, will increase with the opening of St. Joseph's Hospital South. All existing providers serving the service area provide high quality of care. Within the service district as a whole, SB proposes to relocate the existing hospital approximately 5.7 linear miles north of its current location and approximately 7.7 miles using I-75, one exit north. South Bay would remain in south Hillsborough County, as well as the southernmost existing health care facility in Hillsborough County, along with St. Joseph's Hospital South when it is constructed. The eight zip codes of SB's proposed service area occupy a large area of south Hillsborough County south of Tampa (to the northwest) and Brandon (to the northeast). Included are the communities of Gibsonton, Riverview, Apollo Beach, Ruskin, Sun City Center, and Wimauma. The service area is still growing despite the housing downturn, with a forecast of 15.3% growth for the five-year period 2010 to 2015. The service area's population is projected to be 168,344 in 2015, increasing from 145,986 in 2010. The service area is currently served primarily by SB, which is the only existing provider in the service area, and Brandon. For non-tertiary, non-specialty discharges from the service area in 2009, SB had approximately 40% market share, including market share in the three Riverview zip codes of approximately 10% (33569), 6% (33578), and 16% (33579). Brandon had approximately 28% of the market in the service area, and a market share in the three Riverview zip codes of approximately 58% (33569), 46% (33578), and 40% (33579). Thus, SB and Brandon have approximately a 61% market share in the Riverview zip codes and approximately a 68% market share service area-wide. The persuasive evidence indicates that Riverview is the center of present and future population in the service area. It is the fastest-growing part of the service area overall and the fastest-growing part of the service area for patients age 65 and over. Of the projected 168,334 residents in 2015, the three Riverview zip codes account for 80,779 or nearly half the total population. With its proposed relocation to Riverview, SB will be situated in the most populous and fastest-growing part of south Hillsborough County. At the same time, it will be between seven and eight minutes farther away from Sun City Center. In conjunction with St. Joseph's Hospital South when constructed, SB's proposed relocation will enhance the availability and accessibility of existing health care facilities and health services in south Hillsborough County, especially for the Riverview-area residents. However, it is likely that access will be reduced for the elderly residents of the Sun City Center area needing general acute care hospital services. St. Joseph's Hospital and Tampa General contend that: (1) it would be problematic to locate two hospitals in close proximity in Riverview (those being St. Joseph's Hospital South and the relocated SB hospital) and (2) SB's relocation would deprive Sun City Center's elderly of reasonable access to hospital services. St. Joseph's Hospital seems to agree that the utilization projections for SB's replacement hospital are reasonable. Also, St. Joseph's Hospital expects St. Joseph's Hospital South to reach its utilization as projected in CON Application No. 9833, notwithstanding the decline in population growth and the proposed establishment of SB's proposed replacement hospital, although the achievement of projected utilization may be extended. There are examples of Florida hospitals operating successfully in close proximity. The evidence at hearing included examples where existing unaffiliated acute care hospitals in Florida operate within three miles of each another; in two of those, the two hospitals are less than one-half mile apart. These hospitals have been in operation for years. However, some or all of the examples preceded CON review. There are also demographic differences and other unique factors in the service areas in the five examples that could explain the close proximity of the hospitals. Also, in three of the five examples, at least one of the hospitals had an operating loss and most appeared underutilized. One such example, however, is pertinent in this case: Tallahassee Memorial Hospital and Capital Regional Medical Center (CRMC) in Tallahassee, which are approximately six minutes apart by car. CRMC was formerly Tallahassee Community Hospital (TCH), a struggling, older facility with a majority of semi-private patient rooms, similar to South Bay. Sharon Roush, SB's current CEO, became CEO at TCH in 1999. As she explained at hearing, HCA was able to successfully replace the facility outright on the same parcel of land. TCH was renamed CRMC and re-opened as a state-of-the-art hospital facility with all private rooms. The transformation improved the hospital's quality of care and its attractiveness to patients, better enabling it to compete with Tallahassee Memorial Hospital. St. Joseph's Hospital and Tampa General also contend that SB's relocation would deprive Sun City Center's elderly of reasonable access to hospital services. When the application was filed in 2007, Sun City Center residents in zip code 33573 accounted for approximately 52% of all acute care discharges to SB and SB had a 69% market share. By 2009, Sun City Center residents accounted for approximately 57% of all SB discharges and SB had approximately 72% market share. Approximately half of the age 65-plus residents in the service area reside within the Sun City Center area. This was true in 2010 and will continue to be true in 2015. The projected percentage of the total population in the Sun City Center zip code over 65 for 2009-2010 is approximately 87%. This percentage is expected to grow to approximately 91% by 2015. Sun City Center also has a high percentage of residents who are over the age of 75. Demand for acute care hospital services is largely driven by the age of the population. The age 65-plus population utilizes acute-care hospital services at a rate that is approximately two to three times that of the age 64 and younger population. South Bay plans to relocate its hospital from the Sun City Center zip code 33573 much closer to an area (Riverview covering three zip codes) that has a less elderly population. Elderly patients are known to have more transportation difficulties than other segments of the population, particularly with respect to night driving and congested traffic in busy areas. Appropriate transportation services for individuals who are transportation disadvantaged typically require door-to- door pickup, but may vary from community to community. At the time of preliminary approval of SB's proposed relocation, the Agency was not provided and did not take into consideration data reflecting the percentage of persons in Sun City Center area who are aged 65 or older or aged 75 and older. The Agency was not provided data reflecting the number of residents within the Sun City Center area who reside in nursing homes or assisted living facilities. In general, the 2010 median household incomes and median home values for the residents of Sun City Center, Ruskin, and Gibsonton are materially less than the income and home values for the residents from the other service areas. Freedom Village is located near Sun City Center and within walking distance to SB. Freedom Village is comprises a nursing home, assisted living, and senior independent living facilities, and includes approximately 120 skilled nursing facility beds, 90 assisted living beds, and 30 Alzheimer's beds. Freedom Village is home to approximately 1,500 people. There are additional skilled nursing and assisted living facilities within one to two miles of SB comprising approximately an additional 400 to 500 skilled nursing facility beds and approximately 1,500 to 2,000 residents in assistant or independent living facilities. Residents in skilled nursing facilities and assisted living facilities generally require a substantial level of acute- care services on an ongoing basis. Many patients 65 and older requiring admission to an acute-care facility have complex medical conditions and co-morbidities such that immediate access to inpatient acute care services is of prime importance. Area patients and caregivers travel to SB via a golf cart to access outpatient health care services and to obtain post-discharge follow-up care. Although there are some crossing points along SR 674, golf carts are not allowed on SR 674 itself, and the majority of Sun City Center residents who utilize SB in its existing location do not arrive by golf cart -– rather, they travel by automobile. The Sun City Center area has a long–established culture of volunteerism. Residents of Sun City Center provide a substantial number of man-hours of volunteer services to community organizations, including SB. Among the many services provided by community volunteers is the Sun City Center Emergency Squad, an emergency medical transport service that operates three ambulances and provides EMT and basic life support transport services in Sun City Center 24-hours a day, seven days a week. The Emergency Squad provides emergency services free of charge, but charges patients for transport which is deemed a non-emergency. Most patients transported by the Emergency Squad are taken to the SB ED. It is customary for specialists to locate their offices adjacent to an acute-care hospital. Most of the specialty physicians on the medical staff of SB have full-time or part-time offices adjacent to SB. The location of physician offices adjacent to the hospital facilitates access to care by patients in the provision of care on a timely basis by physicians. The relocation of SB may result in the relocation of physician offices currently operating adjacent to SB in Sun City Center, which may cause additional access problems for local residents. In 2009, the SB ED had approximately 22,000 patient visits. Approximately 25% of the patients that visit the South Bay ED are admitted for inpatient care. South Bay recently expanded its ED to accommodate approximately 34,000 patient visits annually. The average age of patients who visit the South Bay ED is approximately 70. Patients who travel by ambulance may or may not experience undue transportation difficulties as a result of the proposed relocation of SB; however, patients also arrive at the South Bay ED by private transportation. But, most patients are transported to the ED by automobile or emergency transport. In October 2010, the Board of Directors of the Sun City Center Association adopted a resolution on behalf of its 11,000 members opposing the closure of SB. The Board of Directors and membership of Federation of Kings Point passed a similar resolution on behalf of its members. Residents of the Sun City Center area currently enjoy easy access to SB in part because the roadways are low-volume, low-speed, accessible residential streets. SR 674 is the only east-west roadway connecting residents of the Sun City Center area to I-75 and U.S. Highway 301. The section of SR 674 between I-75 and U.S. Highway 301 is a four-lane divided roadway with a speed limit of 40-45 mph. To access Big Bend Road from the Sun City Center area, residents travel east on SR 674 then north on U.S. Highway 301 or west on SR 674 then north on I-75. U.S. Highway 301 is a two-lane undivided roadway from SR 674 north to Balm Road, with a speed limit of 55 mph and a number of driveways and intersections accessing the roadway. (Two lanes from Balm Road South, then widened to six lanes from Balm Road North.) U.S. Highway 301 is a busy and congested roadway, and there is a significant backup of traffic turning left from U.S. Highway 301 onto Big Bend Road. A portion of U.S. Highway 301 is being widened to six lanes, from Balm Road to Big Bend Road. The widening of this portion of U.S. Highway 301 is not likely to alleviate the backup of traffic at Big Bend Road. I-75 is the only other north-south alternative for residents of the Sun City Center area seeking access to Big Bend Road. I-75 is a busy four-lane interstate with a 70 mph speed limit. The exchange on I-75 and Big Bend Road is problematic not only because of traffic volume, but also because of the unusual design of the interchange, which offloads all traffic on the south side of Big Bend Road, rather than divide traffic to the north and south as is typically done in freeway design. The design of the interchange at I-75 in Big Bend Road creates additional backup and delays for traffic seeking to exit onto Big Bend Road. St. Joseph's Hospital commissioned a travel (drive) time study that compared travel times to SB's existing location and to its proposed location from three intersections within Sun City Center. This showed an increase of between seven and eight minutes' average travel time to get to the proposed location as compared to the existing location of SB. The study corroborated SB's travel time analysis, included in its CON application, which shows four minutes to get to SB from the "centroid" of zip code 33573 (Sun City Center) and 11 minutes to get to SB's proposed location from that centroid, or a difference of seven minutes. The St. Joseph's Hospital travel time study also sets forth the average travel times from the three Sun City Center intersections to Big Bend Road and Simmons Loop, as follows: Intersection Using I-75 Using U.S. 301 South Pebble Beach Blvd. and Weatherford Drive 12 min. 17 secs. 14 min. 19 secs. Kings Blvd. and Manchester Woods Drive 15 min. 44 secs. 20 min. 39 secs. North Pebble Beach Blvd. and Ft. Dusquesna Drive 13 min. 15 secs. 15 min. 41 secs. The average travel time from Wimauma (Center Street and Delia Street) to Big Bend Road and Simmons Loop was 15 minutes and 16 seconds using I-75 and 13 minutes and 52 seconds using U.S. Highway 301, an increase of more than six minutes to the proposed site. The average travel time from Ruskin (7th Street and 4th Avenue SW) to Big Bend Road and Simmons Loop was 15 minutes and 22 seconds using U.S. 41 and 14 minutes and 15 seconds using I-75, an increase of more than five minutes to the proposed site. Currently, the average travel time from Sun City Center to Big Bend Road using U.S. Highway 301 is approximately to 16 minutes. The average travel time to Big Bend Road via I-75 assuming travel with the flow of traffic is approximately 13 minutes. The incremental increase in travel time to the proposed site for SB for residents of the Sun City Center area, assuming travel with the flow of traffic, ranges from nine to 11 minutes. For residents who currently access SB in approximately five to 10 minutes, travel time to Big Bend Road is approximately 15 to 20 minutes. As the area develops, traffic is likely to continue to increase. There are no funded roadway improvements beyond the current widening of U.S. Highway 301 north of Balm Road. Most of the roadways serving Sun City Center, Ruskin, and Wimauma have a county-adopted Level of Service (LOS) of "D." LOS designations range from "A" to "F", with "F" considered gridlock. Currently, Big Bend Road from Simmons Loop Road (the approximate location of SB's propose replacement hospital) to I-75 is at LOS "F" with an average travel speed of less than mph. Based on a conservative analysis of the projected growth in traffic volume, SR 674 east of U.S. Highway 301 is projected to degrade from LOS "C" to "F" by 2015. By 2020, several additional links on SR 674 will have degraded to LOS "F." The LOS of I-75 is expected to drop to "D" in the entirety of Big Bend Road between U.S. Highway 301 and I-75 is projected to degrade to LOS "F" by 2020. The Hillsborough County Fire Rescue Department (Rescue Department) opposes the relocation of SB to Big Bend Road. The Rescue Department supports SB's establishment of a satellite hospital on Big Bend Road, but does not support the closure of SB in Sun City Center. The Rescue Department anticipates that the relocation of SB will result in a reduction in access to emergency services for patients and increased incident response times for the Rescue Department. The Rescue Department would support a freestanding ED should SB relocate. David Travis, formerly (until February 2010) the rescue division chief of the Rescue Department, testified against SB's proposal. The basis of his opposition is his concern that relocating the hospital from Sun City Center to Riverview would tend to increase response times for rescue units operating out of the Sun City Center Fire Station. The term response time refers to the time from dispatch of the rescue unit to its arrival on the scene for a given call. Mr. Travis noted that rescue units responding from the Sun City Center Fire Station would make a longer drive (perhaps seven to eight minutes) to the new location in Riverview to the extent that hospital services are needed, and during the time of transportation would necessarily be unavailable to respond to another call. However, Mr. Travis had not specifically quantified increases in response times for Sun City Center's rescue units in the event that SB relocates. Further, SB is not the sole destination for the Rescue Department's Sun City Center rescue units. While a majority of the patients were transported to SB, out of the total patient transports from the greater Sun City Center area in 2009, approximately one-third went to other hospitals other than SB, including St. Joseph's Hospital, Tampa General, and Brandon. The Rescue Department is the only advanced life support (ALS) ground transport service in the unincorporated areas of Hillsborough County responding to 911 calls. The ALS vehicles provide at least one certified paramedic on the vehicle, cardiac monitors, IV medications, advanced air way equipment, and other services. The Rescue Department has two rescue units in south Hillsborough County - Station 17 in Ruskin and Station 28 in Sun City Center. (Station 22 is in Wimauma, but does not have a rescue unit.) Stations 17 and 28 run the majority of their calls in and around the Sun City Center area, with the majority of transports to the South Bay ED. The Rescue Department had 3,643 transports from the Sun City Center area in 2009, with 54.5% transports to SB. If SB is relocated to Big Bend Road, the rescue units for Stations 17 and 28 are likely to experience longer out-of- service intervals and may not be as readily available for responding to calls in their primary service area. The Rescue Department seeks to place an individual on the scene within approximately seven minutes, 90% of the time (an ALS personnel goal) in the Sun City Center area. Relocation of SB out of Sun City Center may make it difficult for the Rescue Department to meet this response time, notwithstanding the proximity of I-75. A rapid response time is critical to providing quality care. The establishment of a freestanding ED in Sun City Center would not completely alleviate the Rescue Department's concerns, including a subset of patients who may need to be transported to a general acute care facility. There are other licensed emergency medical service providers in Hillsborough County, with at least one basic life support EMS provider in Sun City Center. The shuttle service proposed by SB may not alleviate the transportation difficulties experienced by the patients and caregivers of Sun City Center. Also, SB has not provided a plan for the scope or method of the provisional shuttle services. Six residents of Sun City Center testified against SB's proposed relocation to Riverview, including Ed Barnes, president of the Sun City Center Community Association. Mr. Barnes and two other Sun City Center residents (including Donald Schings, president of the Handicapped Club, Sun City Center) spoke in favor of St. Joseph's Hospital's proposed hospital in Riverview at a public land-use meeting in July 2010, thus demonstrating their willingness to travel to Riverview for hospital services. Mr. Barnes supported St. Joseph's Hospital's proposal for a hospital in Riverview since its inception in 2005, when St. Joseph's Hospital filed CON Application No. 9833 and thought that St. Joseph's Hospital South would serve the Sun City Center area. There are no public transportation services per se available within the Sun City Center area. Volunteer transportation services are provided. In part, the door-to-door services are provided under the auspices of the Samaritan Services, a non-profit organization supported by donations and staffed by Sun City Center volunteers. It is in doubt whether these services would continue if SB is relocated. There is a volunteer emergency squad using a few vehicles that responds to emergency calls within the Sun City Center area, with SB as the most frequent destination. Approval of SB's project will not necessarily enhance financial access to acute care services. The relocation of SB is more likely than not to create some access barriers for low- income residents of the service area. The relocation would also be farther away from communities such as Ruskin and Wimauma as there are no buses or other forms of public transportation available in Ruskin, Sun City Center, or Wimauma. However, it appears that the Sun City Center residents would travel not only to Riverview, but north of Riverview for hospital services following SB's relocation, notwithstanding the fact that Sun City Center residents are transportation- disadvantaged. The Hillsborough County Board of County Commissioners recently amended the Comprehensive Land-Use Plan and adopted the Greater Sun City Center Community Plan, which, in part, lists the retention of an acute care hospital in the Sun City Center area as the highest health care planning priority. For Sun City Center residents who may not want to drive to SB's new location, SB will provide a shuttle bus, which can convey both non-emergency patients and visitors. South Bay has made the provision of the shuttle bus a condition of its CON. As noted herein, the CON's other conditions are the establishment of the replacement hospital at the site in Riverview; combined Medicaid and charity care in the amount of 7.0% of gross revenues; and maintaining a freestanding ED at SB. SB Ex. 46, Schedule C. Section 408.035(3): The ability of the applicant to provide quality of care and the applicant's record of providing quality of care South Bay has a record of providing high quality of care at its existing hospital. It is accredited by JCAHO, and also accredited as a primary stroke center and chest pain center. In the first quarter of 2010, SB scored well on "core measures" used by the Centers for Medicare and Medicaid Services (CMS) as an indicator of the quality of patient safety. South Bay received recognition for its infection control programs and successfully implemented numerous other quality initiatives. Patient satisfaction is high at SB. AHCA's view of the need for a replacement hospital is not limited according to whether or not the existing hospital meets broad quality indicators, such as JCAHO accreditation. Rather, AHCA recognizes the degree to which quality would be improved by the proposed replacement hospital -– and largely on that basis has consistently approved CON applications for replacement hospitals since at least 1991. See FOF 64-66. South Bay would have a greater ability to provide quality of care in its proposed replacement hospital. Private patient rooms are superior in terms of infection control and the patient's general well-being. The conceptual design for the hospital, included in the CON application, is the same evidence- based design that HCA used for Methodist Stone Oak Hospital, an award-winning, state-of-the-art hospital in San Antonio, Texas. Some rooms at SB are small, but SB staff and physicians are able, for the most part, to function appropriately and provide high quality of care notwithstanding. (The ICU is the exception, although it was said that patients receive quality of care in the ICU. See FOF 77-82.) Most of the rooms in the ED "are good size." Some residents are willing to give up a private room in order to have better access of care and the convenience of care to family members at SB's existing facility. By comparison, the alternative suggested by St. Joseph's Hospital does not use evidence-based design and involves gutting and rearranging roughly one-third of SB's existing interior; depends upon erecting a new patient tower that would require parking and stormwater capacity that SB currently does not have; requires SB's administration to relocate off-site during an indeterminate construction period; and involves estimated project costs that its witnesses did not disclose the basis of, claiming that the information was proprietary. South Bay's physicians are likely to apply for privileges at St. Joseph's Hospital South. Moreover, if SB remains at its current site, it is reasonable to expect that some number of those physicians would do less business at SB or leave the medical staff. Many of SB's physicians have their primary medical offices in Brandon, or otherwise north of Sun City Center. Further, many of the specialists at SB are also on staff at Brandon. St. Joseph's Hospital South would be more convenient for those physicians, in addition to having the allure of a new, state-of-the-art hospital. South Bay is struggling with its nursing vacancy rate, which was 12.3% for 2010 at the time of the hearing and had increased from 9.9% in 2009. The jump in nursing vacancies in 2010 substantially returned the hospital to its 2008 rate, which was 12.4%. As with its physicians, SB's nurses generally do not reside in the Sun City Center area giving its age restrictions as a retirement community; instead, they live further north in south Hillsborough County. In October 2007 when the application was filed, SB had approximately 105 employees who lived in Riverview. It is reasonable to expect that SB's nurses will be attracted to St. Joseph's Hospital South, a new, state-of-the-art hospital closer to where they live. Thus, if it is denied the opportunity to replace and relocate its hospital, SB could also expect to lose nursing staff to St. Joseph's Hospital South, increasing its nursing vacancy rate. Section 408.035(4): The availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation The parties stipulated that Schedule 2 of SB's CON application was complete and required no proof at hearing. South Bay will not have to recruit nursing or physician staff for its proposed replacement hospital. Its existing medical and nursing staff would not change, and would effectively "travel" with the hospital to its new location. Conversely, the replacement hospital should enhance SB's ability to recruit specialty physicians, which is currently a challenge for SB in its existing facility. The parties stipulated to the reasonableness of SB's proposed staffing for the replacement hospital as set out in Schedule 6A, but SJH and TG contend that the staffing schedule should also include full-time equivalent positions (FTEs) for the freestanding ED that SB proposes to maintain at its existing hospital. This contention is addressed in the Conclusions of Law, concerning application completeness under section 408.037, at COL 356-57. South Bay has sufficient funds for capital and operating expenditures for project accomplishment and operation. The project cost will be underwritten by HCA, which has adequate cash flow and credit opportunities. It is reasonable that SB's project will be adequately funded if the CON is approved. Section 408.035(5): The extent to which the proposed services will enhance access to health care for residents of the service district The specific area that SB primarily serves, and would continue to serve, is the service area in south Hillsborough County as identified in its application and exhibits. The discussion in section IV.B., supra, is applicable to this criterion and incorporated herein. With its proposed relocation to Riverview, SB will be situated in the most populous and fastest-growing part of south Hillsborough County; will be available to serve Sun City Center, Ruskin, and Wimauma; and will be between seven and eight minutes farther away from Sun City Center than it is at present. However, while the relocated facility will be available to the elderly residents of the Sun City Center area, access for these future patients will be reduced from current levels given the increase in transportation time, whether it be by emergency vehicle or otherwise. Section 408.035(6): The immediate and long-term financial feasibility of the proposal Immediate or "short-term" financial feasibility is the ability of the applicant to secure the funds necessary to capitalize and operate the proposed project. The project cost for SB's proposed replacement hospital is approximately $200 million. The costs associated with the establishment and operation of the freestanding ED and other services were not included in the application, but for the reasons stated herein, were not required to be projected in SB's CON application. South Bay demonstrated the short-term financial feasibility of the proposal. The estimated project cost has declined since the filing of the application in 2007, meaning that SB will require less capital than originally forecast. While Mr. Miller stated that he does not have authority to bind HCA to a $200 million capital project, HCA has indicated that it will provide full financing for the project, and that it will go forward with the project if awarded the CON. Long-term financial feasibility refers to the ability of a proposed project to generate a profit in a reasonable period of time. AHCA has previously approved hospital proposals that showed a net profit in the third year of pro forma operation or later. See generally Cent. Fla. Reg. Hosp., Inc. v. Agency for Health Care Admin. & Oviedo HMA, Inc., Case No. 05-0296CON (Fla. DOAH Aug. 23, 2006; Fla. AHCA Jan. 1, 2007), aff'd, 973 So. 2d 1127 (Fla. 1st DCA 2008). To be conservative, SB's projections, updated for purposes of hearing, take into account the slower population growth in south Hillsborough County since the application was originally filed. South Bay also assumed that St. Joseph's Hospital South will be built and operational by 2015. The net effect, as accounted for in the updated projections, is that SB's replacement hospital will have 28,168 patient days in year 1 (2015); 28,569 patient days in year 2 (2016); and 29,582 patient days in year 3 (2017). That patient volume is reasonable and achievable. With the updated utilization forecast, SB projects a net profit for the replacement hospital of $711,610 in 2015; $960,693 in 2016; and $1,658,757 in 2017. The financial forecast was done, using revenue and expense projections appropriately based upon SB's own most recent (2009) financial data. Adjustments made were to the payor mix and the degree of outpatient services, each of which would change due to the relocation to Riverview. The revenue projections for the replacement hospital were tested for reasonableness against existing hospitals in SB's peer group, using actual financial data as reported to AHCA. St. Joseph's Hospital opposed SB's financial projections. St. Joseph's Hospital's expert did not take issue with SB's forecasted market growth. Rather, it was suggested that there was insufficient market growth to support the future patient utilization projections for St. Joseph's Hospital South and SB at its new location and, as a result, they would have a difficult time achieving their volume forecasts and/or they would need to draw patients from other hospitals, such as Brandon, in order to meet utilization projections. St. Joseph's Hospital's expert criticized the increase in SB's projected revenues in its proposed new location as compared to its revenues in its existing location. However, it appears that SB's payor mix is projected to change in the new location, with a greater percentage of commercial managed care, thus generating the greater revenue. South Bay's projected revenue in the commercial indemnity insurance classification was also criticized because SB's projected commercial indemnity revenues were materially overstated. That criticism was based upon the commercial indemnity insurance revenues of St. Joseph's Hospital and Tampa General, which were used as a basis to "adjust" SB's projected revenue downward. St. Joseph's Hospital and Tampa General's fiscal-year 2009 commercial indemnity net revenue was divided by their inpatient days, added an inflation factor, and then multiplied the result by SB's year 1 (2015) inpatient days to recast SB's projected commercial indemnity net revenue. The contention is effectively that SB's commercial indemnity net revenue would be the same as that of St. Joseph's Hospital and Tampa General. There is no similarity between the three hospitals in the commercial indemnity classification. The majority of SJH's and TG's commercial indemnity net revenue comes from inpatients rather than outpatient cases; whereas the majority of SB's commercial indemnity net revenue comes from outpatient cases rather than inpatients. This may explain why SB's total commercial indemnity net revenue is higher than SJH or TG, when divided by inpatient days. The application of the lower St. Joseph's Hospital-Tampa General per-patient-day number to project SB's experience does not appear justified. It is likely that SB's project will be financially feasible in the short and long-term. Section 408.035(7): The extent to which the proposal will foster competition that promotes quality and cost-effectiveness South Bay and Brandon are the dominant providers of health care services in SB's service area. This dominance is likely to be eroded once St. Joseph's Hospital South is operational in and around 2015 (on Big Bend Road) if SB's relocation project is not approved. The proposed relocation of SB's facility will not change the geography of SB's service area. However, it will change SB's draw of patients from within the zip codes in the service area. The relocation of SB is expected to increase SB's market share in the three northern Riverview zip codes. This increase can be expected to come at the expense of other providers in the market, including TG and SJH, and St. Joseph's Hospital South when operational. The potential impact to St. Joseph's Hospital may be approximately $1.6 million based on the projected redirection of patients from St. Joseph's Hospital Main to St. Joseph's Hospital South, population growth in the area, and the relocation of SB. Economic impacts to TG are of record. Tampa General estimates a material impact of $6.4 million if relocation is approved. Notwithstanding, addressing "provider-based competition," AHCA in its SAAR noted: Considering the current location is effectively built out at 112 beds (according to the applicant), this project will allow the applicant to increase its bed size as needed along with the growth in population (the applicant's schedules begin with 144 beds in year one of the project). This will shield the applicant from a loss in market share caused by capacity issues and allow the applicant and its affiliates the opportunity to maintain and/or increase its dominant market share. SB Ex. 12 at 55. AHCA's observation that replacement and relocation of SB "will shield the applicant from a loss in market share caused by capacity issues" has taken on a new dimension since the issuance of the SAAR. At that time, St. Joseph's Hospital did not have final approval of CON No. 9833 for the establishment of St. Joseph's Hospital South. It is likely that St. Joseph's Hospital South will be operational on Big Bend Road, and as a result, SB, at its existing location, will experience a diminished market share, especially from the Riverview zip codes. In 2015 (when St. Joseph's Hospital proposes to open St. Joseph's Hospital South), SB projects losing $2,669,335 if SB remains in Sun City Center with a 20% loss in market share. The losses are projected to increase to $3,434,113 in 2016 and $4,255,573 in 2017. It follows that the losses would be commensurately more severe at the 30% to 40% loss of market share that SB expects if it remains in Sun City Center. St. Joseph's Hospital criticized SB's projections for its existing hospital if it remains in Sun City Center with a 20% loss in market share; however, the criticism was not persuasively proven. It was assumed that SB's expenses would decrease commensurately with its projected fewer patient days, thus enabling it to turn a profit in calendar year 2015 despite substantially reduced patient service revenue. However, it was also stated that expenses such as hospital administration, pharmacy administration, and nursing administration, which the analysis assumed to be variable, in fact have a substantial "fixed" component that does not vary regardless of patient census. South Bay would not, therefore, pay roughly $5 million less in "Administration and Overhead" expenses in 2015 as calculated. To the contrary, its expenses for "Administration and Overhead" would most likely remain substantially the same, as calculated by Mr. Weiner, and would have to be paid, notwithstanding SB's reduced revenue. The only expenses that were recognized as fixed by SJH's expert, and held constant, were SB's calendar year 2009 depreciation ($3,410,001) and short-term interest ($762,738), shown in the exhibit as $4,172,739 both in 2009 and 2015. Other expenses in SJH's analysis are fixed, but were inappropriately assumed to be variable: for example, "Rent, Insurance, Other," which is shown as $1,865,839 in 2009, appears to decrease to $1,462,059 in 2015. The justification offered at hearing, that such expenses can be re-negotiated by a hospital in the middle of a binding contract, is not reasonable. St. Joseph's Hospital's expert opined that SB's estimate of a 30 to 40% loss of market share (if SB remained in Sun City Center concurrent with the operation of St. Joseph's Hospital South) was "much higher than it should be," asserting that the loss would not be that great even if all of SB's Riverview discharges went to St. Joseph's Hospital South. (Mr. Richardson believes the "10 to 20 percent level is likely reasonable," although he opines that a 5 to 10% impact will likely occur.) However, this criticism assumes that a majority of the patients that currently choose SB would remain at SB at its existing location. The record reflects that Sun City Center area residents actively supported the establishment of St. Joseph's Hospital South, thus suggesting that they might use the new facility. Further, SB's physicians are likely to join the medical staff of St. Joseph's Hospital South to facilitate that utilization or to potentially lose their patients to physicians with admitting privileges at St. Joseph's Hospital South. Tampa General's expert also asserted that SB would remain profitable if it remained in its current location, notwithstanding the establishment of St. Joseph's Hospital South. It was contended that SB's net operating revenues per adjusted patient day increased at an annual rate of 5.3% from 2005 to 2009, whereas the average annual increase from 2009 to 2017 in SB's existing hospital projections amounts to 1.8%. On that basis, he opined that SB should be profitable in 2017 at its existing location, notwithstanding a loss in market share to St. Joseph's Hospital South. However, the 5.3% average annual increase from 2005 to 2009 is not necessarily predictive of SB's future performance, and the evidence indicated the opposite. Tampa General's expert did not examine SB's performance year-by-year from 2005 to 2009, but rather compared 2005 and 2009 data to calculate the 5.3% average annual increase over the five-year period. This analysis overlooks the hospital's uneven performance during that time, which included operating losses (and overall net losses) in 2005 and 2007. Further, the evidence showed that the biggest increase in SB's net revenue during that five-year period took place from 2008 to 2009, and was largely due to a significant decrease in bad debt in 2009. SB Ex. 16 at 64. (Bad debt is accounted for as a deduction from gross revenue: thus, the greater the amount of bad debt, the less net revenue all else being equal; the lesser the amount of bad debt, the greater the amount of net revenue all else being equal.) The evidence further showed that the 2009 reduction in bad debt and the hospital's profitability that year, is unlikely to be repeated. Overall, approval of the project is more likely to increase competition in the service area between the three health care providers/systems. Denial of the project is more likely to have a negative effect on competition in the service area, although it will continue to make general acute care services available and accessible to the Sun City Center area elderly (and family and volunteer support). Approval of the project is likely to improve the quality of care and cost-effectiveness of the services provided by SB, but will reduce access for the elderly residents of the Sun City Center area needing general acute care hospital services who will be required to be transported by emergency vehicle or otherwise to one of the two Big Bend Road hospitals, unless needed services, such as open heart surgery, are only available elsewhere. For example, if a patient presents to SB needing balloon angioplasty or open heart surgery, the patient is transferred to an appropriate facility such as Brandon. The presence of an ED on the current SB site may alleviate the reduction in access somewhat for some acute care services, although the precise nature and extent of the proposed services were not explained with precision. If its application is denied, SB expects to remain operational so long as it remains financially viable. Section 408.035(8): The costs and methods of the proposed construction, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction The parties stipulated that the costs and methods of the proposed construction, including the costs and methods of energy provision, were reasonable. St. Joseph's Hospital and Tampa General did not stipulate concerning the availability of alternative, less costly, or more effective methods of construction, and take the position that SB should renovate and expand its existing facility rather than replace and relocate the facility. Whether section 408.035(8) requires consideration (weighing and balancing with other statutory criteria) of potential renovation costs as alternatives to relocation was hotly debated in this case. For the reasons stated herein, it is determined that this subsection, in conjunction with other statutory criteria, requires consideration of potential renovation versus replacement of an existing facility. St. Joseph's Hospital offered expert opinion that SB could expand and upgrade its existing facility for approximately $25 million. These projected costs include site work; site utilities; all construction, architectural, and engineering services; chiller; air handlers; interior design; retention basins; and required movable equipment. This cost is substantially less than the approximate $200 million cost of the proposed relocation. It was proven that there are alternatives to replacing SB. There is testimony that if SB were to undertake renovation and expansion as proposed by SJH, such upgrades would improve SB's competitive and financial position. But, the alternatives proposed by SJH and TG are disfavored by SB and are determined, on this record, not to be reasonable based on the institutional- specific needs of SB. Section 408.035(9): The applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent Approval of SB's application will not significantly enhance access to Medicaid, charity, or underserved population groups. South Bay currently provides approximately 4% of its patient days to Medicaid beneficiaries and about 1% to charity care. South Bay's historic provision of services to Medicaid patients and the medically indigent is reasonable in view of its location in Sun City Center, which results in a disproportionate share of Medicare in its current payor mix. South Bay also does not offer obstetrics, a service which accounts for a significant degree of Medicaid patient days. South Bay proposes to provide 7% of its "gross patient revenue" to Medicaid and charity patients as part of its relocation. South Bay's proposed service percentage is reasonable. Section 408.035(10): The applicant's designation as a Gold Seal Program nursing facility pursuant to s. 400.235, when the applicant is requesting additional nursing home beds at that facility The parties stipulated that this criterion is not applicable.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered denying CON Application No. 9992. DONE AND ENTERED this 8th day of August, 2011, in Tallahassee, Leon County, Florida. S CHARLES A. STAMPELOS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of August, 2011.
The Issue Whether there is need for a new hospital in AHCA Acute Care Subdistrict 5-2 (eastern Pasco County)? If so, whether AHCA should approve either CON 9975 or CON 9977?
Findings Of Fact The Applicants and Background Pasco-Pinellas Pasco-Pinellas, the applicant for CON 9975, is a joint venture between two nonprofit healthcare organizations: University Community Hospital, Inc. (UCH) and Adventist Health System Sunbelt Healthcare Corporation (Adventist). A not-for-profit healthcare system, UCH has served the Tampa Bay area for the last 40 years. It owns and operates two hospitals in Hillsborough County and one in Pinellas County. UCH has approximately $100 million available for capital expenditures to fund the hospital proposed by CON 9975. One of its Hillsborough County facilities, University Community Hospital, is located on Fletcher Avenue in northern Hillsborough County, AHCA Health Planning District VI. Across the street from the main campus of the University of South Florida (USF) and its College of Medicine, University Community Hospital has an agreement with USF for GME. University Community Hospital at present serves the Wesley Chapel area in eastern Pasco County. The other member of the joint venture, Adventist, is a financially successful not-for-profit healthcare organization. It operates 17 hospitals in the state of Florida. As of December 31, 2007, Adventist's cash on hand, including investments, exceeded $3.6 billion and net revenue for 2007 was approximately $368 million. The joint venture between UCH and Adventist was formed to establish a hospital to serve the Wesley Chapel area of Pasco County and to provide other healthcare services in the county. At present, the two members of the joint venture compete to serve the Wesley Chapel area through University Community Hospital and Adventist's Florida Hospital Zephyrhills (FHZ), a 154-bed general acute care hospital in Pasco County. The collaboration of competing hospitals in seeking approval for a new hospital through Florida's CON process is unusual. But by bringing the similar missions, strength in community interests and capable leadership of UCH and Adventist together, the Pasco Pinellas joint venture poses potential healthcare benefits to eastern Pasco County. BayCare The Applicant for CON 9977, BayCare of Southeast Pasco, Inc., is a not-for-profit corporation formed to develop the hospital proposed in the application. The sole member of BayCare is BayCare Health System, Inc. ("BayCare System"). BayCare System is the largest full-service community- based health care system in the Tampa Bay area. It operates 9 nonprofit hospitals and 11 ambulatory/outpatient centers in Hillsborough, Pasco and Pinellas counties. Initially organized in 1997 under a joint operating agreement between several hospitals, BayCare System's purpose has been to compete effectively in managed care operations in order to reduce the expenses of the individual organizations that are its members. In the first 5 years of operation, BayCare System saved its members a total of $90 million because of the enhanced cost efficiencies it achieved through business function consolidations and group purchasing. Its members are all not-for-profit hospitals. BayCare System's focus is on the treatment of one patient at a time. Its mission is to improve the lives of people in the community it serves, to operate effectively as a group of not-for-profit hospitals, and to provide high quality, compassionate healthcare. BayCare's application, because it provides potential for its proposal with its teaching aspects, draws significant and considerable support from USF, a national research university. USF has a College of Medicine, a College of Nursing, and a College of Public Health, collectively "USF Health." USF Health will collaborate with BayCare in the development of the hospital BayCare proposes, should it be approved and should its teaching functions come to fruition. The Agency The Agency for Health Care Administration is the state agency that administers the CON program pursuant to Section 408.034, Florida Statutes. It will make the final decisions to approve or deny the two CON applications at issue in this proceeding. Community Community Hospital is a general acute care for profit hospital with 386 beds. It is located within the City of New Port Richey in western Pasco County, Acute Care Subdistrict 5-1. With the exception of neonatal intensive care, open heart surgery and organ transplantation, Community is a full- service community hospital. It provides OB services. It is licensed for 46 adult psychiatric beds. It offers a variety of outpatient services including outpatient surgery, endoscopy, and outpatient procedures and lab testing. Its medical staff consists of approximately 400 physicians. Community serves patients without regard to ability to pay, and does not discriminate in any manner. Accredited by the Joint Commission on Accreditation of Hospital Organizations, it has received numerous awards and recognition for the quality of its health care services. Community's hospital facility is over 30 years old. Access to the campus from US 19, the closest major thoroughfare approximately 1.5 miles away, is gained via a two-lane street through a residential area. Land-locked but for the two-lane street, the campus is sandwiched between the residences and a high school. There are no medical office buildings ("MOB") owned by Community on the campus; less than 20 acres in size, it is completely built out. Community's Replacement Hospital Community has a replacement hospital facility currently under construction in Acute Care Subdistrict 5-2. Approximately five miles southeast of Community's New Port Richey location, the replacement facility is located at the intersection of Little Road and State Road 54. Expected to open in late 2010 at a cost in excess of $200 million, it is to be known as Medical Center of Trinity ("Trinity"). All current Community services will be offered at Trinity. At the same time, the new hospital will offer many advantages over the old facility. Trinity will initially be five stories in height, with fewer licensed beds, but constructed with the ability to expand. It will offer new medical equipment with the latest technology. Situated on 52 acres, with a new three-story MOB adjacent to the hospital, Trinity has plans to add a second MOB at some time in the future. Unlike existing Community Hospital, Trinity will have all private rooms. Its more efficient layout among service areas will improve efficiencies and patient satisfaction. Trinity's location is more accessible than Community's current location in New Port Richey. It is on State Road 54 (SR 54), a six-lane highway that runs east/west through Pasco County. The road has recently undergone major construction and expansion which was nearly complete at the time of hearing. Suncoast Parkway (a/k/a Veterans Expressway), furthermore, is an expressway toll road system that runs north/south from Hernando County through Pasco County to Tampa airport. From the intersection of Suncoast Parkway and SR 54, it takes approximately seven minutes to reach Trinity. Little Road runs north/south along the Trinity site, and north through Pasco County to Regional Medical Center Bayonet Point ("Bayonet Point"). Community's poor financial performance in recent years is expected to improve after the opening of Trinity. The Proposals Although both applicants propose a new hospital in roughly the same location in Subdistrict 5-2, the two are different both in scope and approach. Pasco-Pinellas' Proposal Pasco-Pinellas proposes to build an 80-bed acute care hospital on Bruce B. Downs Boulevard in the area known as Wesley Chapel in eastern Pasco County. If approved and constructed, the hospital will include 36 medical/surgical beds, 8 labor/delivery/recovery/post partum beds, 12 critical care beds, and 24 progressive care beds. The project would involve 184,000 gross square feet of new construction, at a total estimated cost of $121 million. Pasco-Pinellas proposes a typical primary service area (PSA). Five and one-half zip codes comprise the PSA; Pinellas- Pasco reasonably projects 82% of its admissions will come from the PSA. Two and one-half zip codes comprise the secondary service area (SSA). The zip code that is shared by the PSA and the SSA (33559) is split roughly in half between Pasco County and Hillsborough County. The half that is in Pasco County is in Pasco-Pinellas' PSA. The five full zip codes in the PSA are 33541, 33543, 33544, 34639, and 33576. The two full zip codes in the SSA are 33549 and 33647. Pasco-Pinellas' in-migration from outside its proposed service area (the PSA and the SSA) is forecast by Pasco- Pinellas's health planner at 12%. For a community hospital in the Wesley Chapel area without tertiary services, the in- migration percentage projected by Pasco-Pinellas is reasonable. BayCare's Proposal BayCare proposes to establish a general acute care hospital with 130 beds. The application proposes that it be collaboratively developed by BayCare System and USF Health so as to provide teaching functions associated with the USF College of Medicine and other health-related university components of USF Health. Consisting of approximately 476,000 square feet of new construction at an estimated total project cost of approximately $308 million, the hospital will have 92 medical/surgical beds, 24 critical care beds, and 14 post-partum beds. Like Pasco-Pinellas' proposal, BayCare's proposed hospital will be located on Bruce B. Downs Boulevard in the Wesley Chapel area of southeastern Pasco County. BayCare's proposed PSA is circular. The center point of the PSA is the proposed BayCare hospital site in the Wesley Chapel area. The circumference is along a series of seven-mile radii so that the diameter of the circular PSA is 14 miles. The seven-mile radius was chosen to approximate a fifteen-minute travel time by automobile from the outer edge of the circular PSA to the hospital site. BayCare's PSA includes some part of seven zip codes. Two are Wesley Chapel zip codes: 33543 and 33544. Two are Lutz area zip codes: 33549 and 33559. Two are Land O'Lakes zip codes: 34639 and 34638, and one is a zip code in Hillsborough County: 33647. Relative to typical PSAs for most proposed hospitals, the PSA proposed by BayCare's application was described at hearing by BayCare's health planner as "small." See Tr. 1855. For calendar years 2013 and 2014, BayCare projects that 19,0976 and 20,008 patient days, respectively, will be generated from within the PSA. These projections constitute a projection of 60% of all patient days projected for the two years, a percentage substantially lower than would be generated from a typical PSA. The remaining 40% of projected patient days is roughly double what would be expected from beyond a PSA under a more typical proposal. The high number of projected patient days for patients originating outside the PSA was explained at hearing by BayCare's health planner. The involvement of the USF Physician's Group and the "teaching" nature of the proposal "pumps up and provides an additive level of in-migration that would not be experienced without the USF combination with BayCare in [the] project." Tr. 1856-7. Pasco County Hospitals There are five hospitals in Pasco County. Two in western Pasco County will continue to remain in Subdistrict 5-1 in the near future: Regional Medical Center Bayonet Point, located in northwest Pasco County and Morton Plant North Bay Hospital, located in New Port Richey. Two are in eastern Pasco County, Subdistrict 5-2: Pasco Regional Medical Center in east central Pasco County, and FHZ, located in southeast Pasco. The fifth is Community/Trinity. No Need for Both Hospitals None of the parties contends there is need for both hospitals. Nor would such a contention be reasonable. Indeed, the record does not demonstrate need for both a new 80-bed community hospital as proposed by Pinellas-Pasco and a new 130- bed hospital that BayCare denominates a "teaching" hospital, each with an intended location on Bruce B. Downs Boulevard in the Wesley Chapel area of southeastern Pasco County in Subdistrict 5-2. The question remains: is there a need for one new hospital? If so, which of the two applications, if either, should be approved? Need for a New Hospital; Access Enhancement Among the counties in the Tampa Bay area, Pasco County has been the fastest growing in recent years. From 1990 to 2000, its population grew 22.6%. Three times higher than the state average, this represents tremendous growth for any locale. The Wesley Chapel area of south Pasco County roughly coincides with the PSAs of the two applicants. Dramatic growth over the last 20 years has marked the Wesley Chapel area's transformation from an agricultural area to a suburban community. North of Hillsborough County and its largest city, Tampa, improvements in the transportation network has made south Pasco County and in particular, the Wesley Chapel area, a bedroom community for workers commuting to Tampa. Claritas, a national demographic data service, is a generally accepted population projection source for CON applications. Claritas projects the growth in Pasco County to continue. For example, the projected population for Pasco- Pinellas' proposed PSA, which substantially overlaps with BayCare's proposed PSA, is 113,397 in 2011 and 118,505 in 2012. The Claritas projections are based on the most recent decennial U.S. Census, that is, 2000, and do not take into account data of impending population growth, such as new housing starts and new schools. Claritas, therefore, may understate projections in areas that have experienced more recent, rapid growth. The University of Florida Bureau of Economic and Business Research ("BEBR") also provides reliable population data by county. In the year 2000, the census for the Pasco County population was 344,765. By 2030, that population is projected by BEBR to grow to 526,100 based on low projections, 681,100 based on medium projections, and 876,900 based on high projections. For the high projection rate, this would constitute a 154% increase in population. Even assuming the low growth rate, the population would increase by 53%. According to BEBR data, the county can be expected to grow at a rate of 4.71% per year. Another source of population data relied upon by population experts is Demographics USA. The Demographics USA data shows a substantial growth in population for Pasco County. According to Demographics USA, the population for Pasco County can be expected to grow from 343,795 in the year 2000 to 440,527 in the year 2010 and then to 504,277 by the year 2015. Based on the Demographics USA data, the county can be expected to grow at a rate of 3.11% per year. The Wesley Chapel area is considered to be the area of Pasco County with the most development and development potential now and in the future. Of 175 major projects actively undergoing development in Pasco County, 76 are in the Wesley Chapel area. Between 2010 and 2012, the population in the area is projected to grow by 5,000 persons per year. With the increase in the general population in the area comes an expected increase in the need for schools. Of 37 schools identified by the Pasco County School Board to be built in the near future, 19 are to be located in the Wesley Chapel area. Whether the historic growth rate of the last few decades will continue for sure is an open question with the downturn in the economy and the housing market that commenced in Pasco County in mid-2007. Absent a major recession, however, it is reasonable to expect growth in the Wesley Chapel area to continue even if not at a rate as rapid as in the recent past. Whatever the future holds for Wesley Chapel's growth rate, there is clearly a demand for inpatient general acute care services in the Wesley Chapel area. The total non-tertiary discharges from the Pasco-Pinellas service area was 15,777, excluding newborns, for the 12-month period ending June 30, 2006. As a result, AHCA found the existing and growing population in the Wesley Chapel area warranted a new hospital. Along with significant growth in the Wesley Chapel area comes resulting traffic and healthcare and hospital access issues. Drive time analysis shows the average drive time from each of the Pasco-Pinellas PSA six area zip codes to the eight area hospitals in 2007 to be 46.11 minutes. The analysis shows that future drive time is expected to be lengthier, strengthening the need for a hospital in the Wesley Chapel area. In 2012, the average time increase is expected to 57.68 minutes. A Drive Time Study Report prepared by Diaz Pearson & Associates compared drive times to the proposed site for Pasco- Pinellas hospital to eight existing hospitals: UCH, Pasco Regional, FHZ, Tampa General, University Community Hospital on Dale Mabry in Tampa, St. Joseph's North, St. Joseph's in Tampa, and the site for Community's replacement hospital. The study concluded: The results of this travel study demonstrate that the vehicular travel times for access to the proposed PPHCHS Hospital [Pasco- Pinellas' Hospital] are consistently LESS for residents within the six Zip codes of the Primary Service Area for years 2007, 2011, and 2012 than for comparable trips to any of the eight area hospitals for alternate choice. Pasco-Pinellas 36, p. 27. Of particular note are the travel times from each of the six zip codes in Pasco-Pinellas' PSA to UCH, FHZ, and Tampa General. For example, a patient driving from the centroid point in zip code 33559 to UCH would take 24.28 minutes and to FHZ would take 37.97 minutes in 2007. This increases to 29.55 minutes and 50.94 minutes in 2012. Another example, the time it takes a patient to travel from zip code 33541 to Tampa General was 75.51 minutes in 2007. In 2012, the travel time is projected to increase approximately 20 minutes to 95.33 minutes. In contrast, a new hospital in the Wesley Chapel area would decrease travel times significantly for patients in the six zip code areas of the Pasco-Pinellas PSA. For example, in 2007, it would only take a zip code 33559 patient 11.41 minutes to reach the proposed site for Pasco-Pinellas. This represents a time savings of 12.87 minutes compared to the average driving time to UCH and 26.56 minutes compared to the average driving time to FHZ. In 2012, the reduction in time to drive to Pasco- Pinellas' proposed hospital site instead of UCH is 18.34 minutes and for FHZ, it is 39.53 minutes. The time savings for patients from the 33541 zip code traveling to Tampa General for non- tertiary services is even greater. Using Pasco-Pinellas' site in the Wesley Chapel area would save the patient 52.67 minutes in 2007 and is projected to save 63.88 minutes in 2012. Anecdotal evidence supports the need for a new hospital in the Wesley Chapel area. Dr. Niraj Patel practices obstetrics and gynecology in the Wesley Chapel area. A drive for him in good traffic is typically 20 minutes to UCH (the only hospital at which he practices because the distance between area hospitals is too great). In morning traffic during "rush" periods, the drive can exceed 40 minutes. Caught in such a drive in January of 2008, Dr. Patel missed the delivery of a patient's baby. He was required to appear before the UCH Medical Staff's credentials committee to "explain the situation . . . [because it] was the third or fourth [such] episode." Pasco-Pinellas 47, p. 11. As Dr. Patel explained in a pre- hearing deposition, "it doesn't fare well for me . . . credential and requirement wise but it doesn't fare well for the patient [who] had to be delivered by the nursing staff which [without a physician present] increases patient risk and [the chance] of complication[s]." Id. A new hospital in the Wesley Chapel area will provide residents of the Pasco-Pinellas PSA or the BayCare PSA with shorter travel time to a hospital compared to the time necessary to reach one of the eight existing hospitals in the region. In 2007, residents of the six zip codes in the Pasco-Pinellas' PSA could be expected to access Pasco-Pinellas' proposed hospital in a range of 10.9 to 21.8 minutes. For the year 2012, the time can be reasonably predicted to range from 17 to 31.4 minutes. In comparison the drive times to the eight hospitals in the region for residents of Pasco-Pinellas' PSA are significantly longer. In 2007, it took a resident in zip code 34639 approximately 55 minutes to get to UCH and 73 minutes to get to St. Joseph's Tampa. By 2012, those drive times are reasonably projected to increase to 64 minutes and 83 minutes, respectively. Simply put, travel times are expected to increase as the population increases in coming years. The site of Pasco-Pinellas' hospital is approximately one mile from the site of the proposed BayCare hospital. The travel times suggested for the residents of the Pasco-Pinellas PSA to the proposed Pasco-Pinellas hospital can be expected to be similar to travel times to the proposed BayCare hospital. Given the proximity of the two proposed sites, either will significantly reduce travel time to hospitals for patients in the Wesley Chapel area. The existence in the Wesley Chapel area of a community hospital with an emergency room and primary inpatient services will benefit doctors, patients and their families. Heightened driving concerns among elderly patients and traffic congestion and inadequate roadways that delay Emergency Medical services support the need for a Wesley Chapel area hospital. The support is based not only on 2007 travel times but also on the reasonable expectation that travel time will be greater in the future. Existing hospitals are capable of absorbing the increased need for acute care hospital services that result from the increased growth that is reasonably projected to occur in Subdistrict 5-2. If there is to be a new hospital in the subdistrict, the Wesley Chapel area is the best location for it. A new hospital in the Wesley Chapel area will enhance access to acute care services for residents of Subdistrict 5-2. Preliminary Agency Action; the SAAR The Agency determined that there is a need for a new hospital in the Wesley Chapel Area when it issued its State Agency Action Report on CONs 9975 and 9977. The Agency also determined that between the two applications, Pasco-Pinellas was superior and should therefore be approved over BayCare's. This determination was founded primarily on Pasco-Pinellas' application being more reasonable in terms of size and impacts on existing providers. The Agency maintained at hearing the position it took in it preliminary action memorialized by the SAAR. Jeffrey Gregg, Chief of AHCA's Bureau of Health Facility Regulation received in this proceeding as an expert in health planning and CON Review explained when called to the stand to testify: The proposal by [Pasco-Pinellas] was on the smaller side and gave us more comfort [than BayCare's] . . . [W]hile we . . . agree with these applicants that there is a hospital in the future of [the Wesley Chapel area], we are more comfortable with the conservative approach, the smaller approach [of Pasco- Pinellas], particularly given that should it be necessary in the future, any hospital can add beds, acute care beds, merely by notifying us. And we were more comfortable that [Pasco-Pinellas'] approach would be able to expand access and improve services for people in this area while at the same time minimally impacting all of the competitors. Tr. 1995. As detailed below, AHCA's determination that the Pasco-Pinellas application is superior to BayCare's is supported by the record even if the basis for the determination made on the state of the record is not quite the same as the basis advanced at hearing by AHCA. Size and Cost Pasco-Pinellas proposed hospital involves about 184,000 square feet of new construction at a cost of approximately $121 million dollars. It is much smaller and less costly than BayCare's proposed hospital of 476,000 square feet of new construction for about $308 million. The Pasco-Pinellas proposal is more reasonably sized to meet the needs of the Wesley Chapel area and, in turn, Subdistrict 5-2. The difference in size and cost of the two proposals, however, is a function of a major difference in approach in the applications. Pasco-Pinellas' proposal is for a typical community hospital that would start out with a bed size within a range that includes 80 beds. BayCare, on the other hand, proposes to serve not only the Wesley Chapel area and Subdistrict 5-2, but also a substantial population of patients to be drawn to the subdistrict particularly from Hillsborough County. Patients migrating to the hospital from outside the subdistrict will for the most part be the product of BayCare's affiliation with USF Health and its service to the USF College of Medicine in its proposal denominated in the application as a "teaching hospital." Need for a New Teaching Hospital "Teaching hospital" is a term defined in the Health Facility and Services Development Act, sections 408.031-408.045, Florida Statutes: "Teaching hospital" means any Florida hospital officially affiliated with an accredited Florida medical school which exhibits activity in the area of graduate medical education as reflected by at least seven different graduate medical education programs accredited by the Accreditation Council for Graduate Medical Education or the Council of Postdoctoral Training of the American Osteopathic Association and the presence of 100 or more full-time equivalent resident physicians. The Director of the Agency for Health Care Administration shall be responsible for determining which hospital meets this definition. § 408.07(45), Fla. Stat. The Agency has not determined that BayCare's proposal meets the statutory definition as directed by the statute for it to qualify as a "teaching hospital." The record indicates that the proposal is not a typical teaching hospital. For example, teaching hospitals in the United States are usually located near indigent populations to achieve the efficiency of training future practitioners with treating people who otherwise could not afford services. BayCare's proposal in a small county with a more affluent population does not serve that purpose. BayCare contends neither that it is a "statutory" teaching hospital nor that it should be determined by the Agency to meet the statutory definition of "teaching hospital." Instead it grounds its case for need in the teaching functions its proposal would fulfill for USF Health and in particular for the GME needs of the students of the USF College of Medicine and the results those teaching functions would produce. Considerable testimony was offered by BayCare at hearing with regard to GME and the needs and aspirations of the USF College of Medicine. The Dean of the College, Stephen K. Klasko, M.D., spiritedly and eloquently related a narrative of need which was supported and amplified by other witnesses including faculty members at the college. There were many elements to the narrative. Highlights include the hybrid nature of the USF College of Medicine, "acting like a research intensive medical school . . . in a community-based body" (tr. 1132)," its on-going successful striving towards becoming an academic center for world class physicians as evidenced by this year's receipt of a research grant from the National Institute for Health, "the largest . . . given to a medical school in the last four or five years," id., and the GME challenges the college faces in the Tampa Bay area such as the recent loss of its anesthesiology residency program. BayCare's opponents point out the many ways in which the proposal is not only not a statutory teaching hospital but does not fit a nationwide model for teaching hospitals. BayCare counters that its model is one of many different models for a teaching facility. Whatever the merits of the various assertions of the parties on the point, USF's need for a teaching facility will be filled at least in part by the BayCare proposal. It is not an exaggeration, moreover, to call USF's need in this regard compelling. USF's institution-specific need, however, does not fall under any of the CON review criteria. See paragraphs 167- 8, below, in the Conclusions of Law. Perhaps not unmindful of the limits of the criteria, BayCare's presented other evidence that flows from the teaching function of the BayCare proposal. Relevant to the general criterion of "need" in subsection (1) of the Statutory CON Review Criteria, the evidence relates to physician shortages. The Physician Shortage There is a shortage of physicians in the district as there is in Pasco County. The problem has statewide dimensions. The state is not doing enough to replace aging doctors in Florida with younger doctors. Nor are aging doctors providing sufficient emergency room call coverage. The physician shortage both in general and in emergency rooms in the state is likely to increase. Residents are more likely to remain and practice in the community in which they train. Residents in the Tampa Bay area, in particular, are more likely to remain in the Tampa Bay area to practice. Even 20 residents per year in training at BayCare's proposed hospital would make a difference in existing physician shortages. Should BayCare's proposed hospital be built and operated as contemplated, the teaching functions that BayCare's application proposes to offer at the hospital would serve as a step, however small, toward meeting Florida's physician shortage as well as the shortage in District V, Pasco County, Subdistrict 5-2 and the Tampa Bay area. Nonetheless, there is a feature of this case that undermines BayCare's claim that the proposal will aid the physician shortage and its denomination in the application of the proposal as a "teaching hospital." The feature is present in the agreement between USF and BayCare (the "BayCare and USF Agreement) to make the BayCare proposed hospital a University Hospital. The BayCare and USF Agreement The BayCare and USF Agreement contains a section devoted to implementation and termination. The following is excerpted from the section's six separately numbered paragraphs: The Parties [the University of South Florida Board of Trustees or USF and BayCare Health System, Inc.] shall negotiate in good faith all other terms and conditions relating to the execution and implementation of this Agreement, including, without limitation, any revisions to the provisions of the Articles of Incorporation and Bylaws of the Hospital Corporation, the terms and conditions of the Health Affiliation Agreement, the design and layout of the University Hospital . . . [etc.] and such other documents and instruments as the Parties may find necessary or desirable to implement the terms of this Agreement. In the event the Parties are unable to agree on all such terms and conditions and all such documents required to implement the terms and provisions of this Agreement despite their good faith efforts to do so, either Party shall have the option after a period of at least twenty four months from the Effective Date or six months after the final approval of the Certificate of Need for the University Hospital is received, whichever is longer, to terminate this Agreement on the terms described in this [s]ection . . . . BayCare 2, Appendix C, BayCare and USF Agreement, Section G, p. 8. (Emphasis supplied.) For USF to terminate, the terms include payment to BayCare of $500,000 and agreement that for five years after termination it will not enter into an affiliation or other agreement with any other provider for the establishment of a university hospital in Pasco County. See id. The ability of USF to terminate the agreement is not "at will." It requires good faith efforts to have been made at implementations that fail to work. Furthermore, termination is not without consequences. But the termination provision in the agreement is consistent with the lack of a condition in BayCare's application that the BayCare proposal be a teaching hospital, "one more detail that made [AHCA officials] scratch our heads about the characterization of this hospital as a teaching hospital." Tr. 2011. It is also consistent with USF's support for "legislation that would be statewide that would allow state medical schools at some point, if they chose to, to make it easier . . . to have a hospital or research hospital on campus . . . [of which] USF would be one . . . " Tr. 1190-91. Adverse Impact Providers Outside the District Evidence was produced at hearing about the adverse impact of approval of either of the two applications on providers outside the district. Objections to the evidence were taken under advisement pending consideration of post-hearing memoranda submitted by the parties. Upon consideration of the memoranda, the objections are sustained. See paragraphs 159-66, below, in the Conclusions of Law. Providers Within the District The Pasco-Pinellas proposal will have minimal impact on Community/Trinity Medical Center. Its impact on other hospitals will be minimal with the exception of its two partner hospitals--UCH and FHZ--and of those two, only FHZ is in the District. There will be no adverse impact on Community as a result of the BayCare proposal. There is little patient flow from eastern Pasco to the western Pasco hospitals. Only about 1% of the patients in eastern Pasco travel west for services at Community, Morton Plant or Bayonet Point. It is reasonable to project that there will be no material change in Community's patient draw as a result of the new Trinity Medical Center. The projections by Community's health care and financial experts of patient days that would be lost and adverse financial impact to Community/Trinity should the BayCare proposal be approved were based on faulty assumptions. The majority of the adverse impact from BayCare's proposal, as in the case of Pasco-Pinellas' proposal, will be on UCH and FHZ. Availability of Resources Nursing and Non-Nursing Staff Pasco-Pinellas should be able to recruit and retain nursing and other staff for its hospital based on the Adventist experience at FHZ. The nursing vacancy at FHZ is 1% lower than the vacancy rate reported by the Florida Hospital Association (7.5% and 8.5%, respectively.) The turn-over rate for nurses at FHZ is 12%, significantly lower than the national rate in the 18-19% range. Recruitment of nurses has been successful at FHZ particularly in the last few years. In 2007, FHZ hired 100 nurses and reduced its use of agency nursing staff by roughly 75%. Among its different recruitment tactics have been a foreign nursing program, education and training incentives, scholarships at local colleges and specialty pay programs. Pasco-Pinellas will use many of the same recruiting techniques that have been successful at FHZ. It is reasonably anticipated that the same recruitment practices employed by FHZ will work for Pasco-Pinellas. Many members of the current nursing staff at FHZ, moreover, live in the Wesley Chapel area and have expressed an interest in working at Pasco-Pinellas. Retention programs at FHZ have been aimed at retaining better nurses. These include the magnet concept and a self- governance program with "a unit based council and nursing council so nurses . . . practicing . . . at the bedside have the opportunity to help govern the practice of nursing." Tr. 225-6. Retention programs similar to those used at FHZ will be implemented at Pasco-Pinellas. Schedule 6 in Pasco-Pinellas application reflects anticipated staffing for its new hospital. The staffing model is consistent with staffing at other Adventist facilities, specifically FHZ. The average salaries and wages are based on actual salaries inflated forward to the projected date of opening. The FTEs per adjusted occupied bed are adequate and consistent with the staffing patterns at FHZ. All necessary staffing positions are accounted for and the number of FTEs and salaries are sufficient for the hospital to operate and provide high quality of care. The registered nurse FTEs, as opposed to LPNs and lower-level nursing care, in Schedule 6 offer optimal staffing to provide high quality care and positive patient safety. The nursing salaries are adequate for the time frame in which Pasco-Pinellas will open with a one-time 5% increase and a 4% increase per year from present until opening. Schedule 6 supports the reasonable expectation that Pasco-Pinellas will be able to recruit and hire nursing staff and retain an adequate staff. The proposed staffing pattern in Schedule 6 of the Pasco-Pinellas application, which includes nursing staff, moreover, is reasonable. BayCare has a comprehensive recruitment program for recruiting and retaining nursing personnel as well. The strategies include a partnership with the nursing programs at USF and St. Petersburg College. BayCare System provides additional training to its nurses and with regard to salaries has committed to remaining competitive in the market. BayCare's recruitment and retention initiatives have been successful. In the 2008 year to date at the time of hearing, BayCare System had been able to hire more experienced nurses that it did in 2007 for the same time period. Overall, the BayCare System has a turnover rate of about 15%. The RN vacancy is 10% with a 13% turnover rate. These figures are comparable to state and national figures; in some cases they are lower. With regard to non-nursing employees or team members, BayCare System also had developed recruitment initiatives that are targeted toward those individuals. BayCare System has a positive reputation in the community as a good place to work. As an example, the three St. Joseph's hospitals (St. Joseph', Women's and Children's) and South Florida Baptist received recognition among the "Best Work Places in Health Care" for the years 2005 and 2006. The award recognizes outstanding practices related to employees. BayCare has the ability to recruit and retain the staff necessary to staff the proposed BayCare SE Pasco hospital. The staffing projections in Schedule 6 of BayCare's application, which includes nursing staff, are reasonable. Physician Support Despite the physician shortage, both applicants should be able to adequately staff their hospitals with physicians as shown by the evidence with regard to physician support for the hospitals. Florida Medical Clinic (FMC), a multi-specialty physician group practice with 85 physicians, is the primary physician group that serves the Wesley Chapel area. Thirty percent of its members are family practitioners or specialists in internal medicine. The remainder of the members cover 20 or so specialties that include both secondary and tertiary specialties. FMC has determined that it will support the Pasco- Pinellas proposal through its physicians, admissions and outpatients activity. Ninety percent or more of the clinic's patients use the UCH and FHZ facilities. FMC has a long- standing relationship with the administrators, personnel, and strategic issues of FHZ and UCH and is comfortable developing future plans for a hospital facility in Wesley Chapel with the two organizations FMC is able to meet the needs of the Wesley Chapel community both today and in the future. In addition, there are numerous other individual physicians who practice in the Wesley Chapel area who "predominantly support University Community Medical Center and Florida Hospital in Zephyrhills." Tr. 63. Having relationships with physicians already in a market when a hospital is being developed is advantageous to the new hospital. Among other advantages, it minimizes resources used to recruit and move new physicians into the area. In contrast to support for the Pasco-Pinellas proposal, FMC has not made a commitment to BayCare as to its proposal because of lack of knowledge about the structure of the facility, its strategic plans and whether or not FMC's interests align with the BayCare proposal but it has not foreclosed such a commitment. The USF physicians group will be a source of many of the physicians who will staff the BayCare proposed hospital, a likely reason for FMC's lukewarm to non-existing support for BayCare's proposal. USF emergency physicians will staff the Emergency Department. The BayCare System has approximately 28 physicians with privileges at BayCare System facilities with offices in the Wesley Chapel area. The proposed BayCare hospital will be staffed by recruited physicians and USF faculty physicians. Other physicians from the Wesley Chapel area provided testimony of their support for the BayCare proposal. It is reasonable to anticipate that some local Wesley Chapel area physicians will join the medical staff of the proposed BayCare hospital. Despite the physician shortages in the subdistrict, District V and the Tampa Bay area, both Pasco-Pinellas and BayCare will be able to staff their hospitals adequately with physicians. Charity and Medicaid; Conditions Pasco-Pinellas committed to a number of conditions of its applications. These include a 12.6% commitment to charity and Medicaid; the establishment of funding for a clinic for the underserved, provision of educational programs for the community, and two neonatal transports and funding for local fire and rescue services. BayCare projects a 6.1% level of charity care, 2.4% higher than Pasco-Pinellas' charity care commitment. It projects 10.3% of its Medicaid and Medicaid HMO patients will be attributable to Medicaid and Medicaid HMO patients versus 8.9% at Pasco-Pinellas. BayCare System has a history of providing services to Medicaid and Charity Patients. In 2006, for example, as not- for-profit entities, BayCare System facilities and related entities provided a total community benefit of $135 million in uncompensated care. Approximately 50% was pure charity care. BayCare System facilities currently serve patients from the Wesley Chapel area, including, of course, Medicaid and charity patients. BayCare System facilities provide 57% of the charity care and 31% of the Medicaid in the market. St. Joseph's Children's Hospital and St. Joseph's Women's Hospital operate at approximately 50-to-60% Medicaid and un-reimbursed care. St. Joseph's Hospital currently serves approximately 20% of the patients from the Wesley Chapel area. St. Joseph's, however, provides 36% of the total charity, Medicaid, and Medicaid HMO care rendered to patients who reside in the Wesley Chapel area. Thus, the facilities within the BayCare System have a demonstrated track record of providing care without regard to a patient's resources. In light of the record, it is reasonable to expect BayCare to carry on in the same vein under the BayCare proposal. Utilization Schedule 5 relates to projected utilization after project completion. The projections in the schedule in Pasco- Pinellas' application were developed by looking at service area population, applying a use rate growth and taking a market share by individual zip code. They are based on the expectation that the hospital would be operating at approximately 70% occupancy in its third year of operation, which equates to an average census of approximately 56 patients. The assumptions contained in the schedule are reasonable. The utilization projections in Schedule 5 in Pasco- Pinellas' application are reasonable; they indicate that an 80- bed hospital is appropriate to meet the need for a new hospital in the Wesley Chapel area of the subdistrict. BayCare will able to achieve its projected utilization from its primary service area and from the 40% of its patients it expects to receive by way of in-migration. The population forecast and market share forecast for the primary service area are reasonable. While the support among local physicians is much stronger for the Pasco-Pinellas proposal, it is likely that they will admit patients to the BayCare proposed hospital since it will be in the Wesley Chapel area, the area of the subdistrict that is most suitable for a new hospital. The 40% projected in-migration from outside of the seven mile service area is a reasonable projection. It is reasonable to expect that the bulk of these admissions will come from USF physicians located at the USF north Hillsborough campus. Projected Revenues Schedule 7A governs projected revenues. The payor mix in Schedule 7A of Pasco-Pinellas' application is based on historic admission and patient days by payor class occurring in the proposed Pasco-Pinellas service area based on the most recent available AHCA data. Gross charges and net revenues were developed based on historical data from FHZ as reported to AHCA. These figures were inflated forward using a net increase over all in revenue payments of approximately 3%. The projected revenues including net revenues in Schedule 7A of Pasco- Pinellas' application are reasonable and consistent with the marketplace. The payor mix in BayCare's Schedule 7A was based on an analysis of patient discharge data from the proposed primary service area plus an analysis of the experience of other BayCare System facilities in the same market. It is a reasonable payor mix. It allows for consideration of the experience of BayCare System, including the high level of charity care and Medicaid and Medicaid HMO services and at the same time reflects that the Wesley Chapel area is more affluent and younger than other areas of Pasco and Hillsborough Counties. BayCare's revenue assumptions were based on an analysis of gross and net revenue per patient day from another BayCare System facility, South Florida Baptist. Financial class specific projected patient days were applied to derive a gross and net revenue number for each of the three pro forma years for the proposed project denominated by Schedule 7A as "Projected Operating Year 1, 2 and 3" and ending "12/31/11, 12/31/12 and 12/31/13" respectively as indicated by BayCare in the application. See BayCare 2, pp. 133-135. The 2006 South Florida Baptist gross and net revenue per patient day were trended forward for each of the three projected operating years to reach the projected revenue figures in Schedule 7A. The projected revenues in Schedule 7A of the BayCare application are reasonable. Projected Income and Expenses Schedule 8A in a CON application contains projected income and expenses for the proposal. Pasco-Pinellas' application used a methodology in Schedule 8 that its expert had used in other CON cases. The methodology is consistent with methodologies of other health care experts and has been accepted in recommended and final orders in CON cases. The projections in Schedule 8 of Pasco-Pinellas' application are appropriate and reasonable. BayCare's methodology used to project income and expenses in Schedule 8A is also appropriate and reasonable. BayCare's healthcare finance expert asked BayCare financial analysts to look at his initial projections. They recommended that expenses be increased in physical therapy, radiology lab and pharmacy and that expense be reduced in plant operations. The recommendations were accepted; the projections were adjusted. Medicare GME reimbursement in year 3 of operations was assumed to be $1.7 million. If no addition Medicare GME reimbursement were received, BayCare's proposal would still show a profit of $2.8 million by year 3. It is virtually certain, moreover, that some portion of the $1.7 million included in calculation of BayCare's income projections will be realized. However valid criticism of the inclusion of the $1.7 million, BayCare's proposal remains financially feasible in the long- term. Financial Feasibility Pasco-Pinellas proved the immediate and long-term financial feasibility of its proposal. The schedules in its application related to financial feasibility used reasonable methodologies that yielded reasonable projections. Analysis of capital costs and funding is contained in Schedules 1 through 3. Schedule 1 presents an accurate summation of total project cost. That figure, $121 million, is a reasonable and typical cost for a new 80-bed community hospital. The $149 million on Schedule 2 reflects an accurate summation of anticipated capital costs, including the hospital project and necessary capital expenditures for the first tow or three years of operation. Schedule 3 set forth the sources of funding, a combination of equity and debt financing, discussed below. Both UCH and Adventist are financially successful systems. They will have not difficulty funding the Pasco- Pinellas proposal. As of December 31, 2007, Adventist's net revenue was approximately $368 million. About $100 million in funds were available to UCH at the time of hearing to contribute to development of the project. Due to the financial strength of its members, Pasco- Pinellas will easily be able to fund the project through a combination of equity and debt. The equity, $45 million, will be provided equally by Adventist and UCH, $22.5 million each. The remaining $76 million will be financed through tax-free bonds issued by Ziegler Securities. The project is immediately financially feasible. The Pasco-Pinellas project is also financially feasible in the long-term. Schedule 8 in the application, year 3, shows the project will generate a return of approximately $5.3 million in revenue over expenses, an amount that "more than meet[s] the test for financial feasibility in the long-term." Id. Based on the sources of BayCare System, BayCare has access to the financial resources to implement its proposed hospital. Funding for the hospital will come from BayCare System on the basis of 50% debt and 50% equity investment. As of early 2008, BayCare System had approximately $1.2 billion in unrestricted cash on hand. BayCare System's financial strength will allow BayCare to obtain the financing it needs for the project. Schedule 3 of the BayCare application sets forth an accurate and reasonable statement of the sources of funds necessary to develop the project. The immediate financial feasibility of BayCare's proposal is demonstrated by the evidence presented by BayCare. By year three of the pro forma, the BayCare proposal is reasonably projected to generate a net income over expenses in the amount of $4,498,637. BayCare demonstrated that the proposal's long-term financial feasibility. Costs and Construction Methods The costs and methods of the proposed construction of the Pasco-Pinellas project are reasonable. The facility is adequately sized and programmed for the services included in the Pasco-Pinellas application. All of the departments, including central storage, fall within an appropriate benchmark range for community hospitals. The 2,300 square feet per bed is reasonable as are the construction costs when compared to similar community hospitals. The proposed Pasco-Pinellas facility meets the codes for all of the services included in the application. The design of the Pasco-Pinellas facility enable expansion. The designed expansion capabilities are reasonable, logical and appropriate to meet the needs of the Wesley Chapel community. The drawings contained in the CON application show an efficient community hospital. The departments allow for efficient intra-department circulation and department-to- department circulation. There are adequate separation of public and staff flow corridors. All of the areas and departments as shown in the Pasco-Pinellas plans are code compliant. The layout of the patient rooms is consistent with industry standards for the design of single patient rooms. The number and size of the operating rooms are adequate and appropriate for an 80-bed community hospital not offering tertiary services. The emergency department, including the trauma room, complies with code and its layout is adequate and appropriate for an 80-bed hospital. The ambulance entrance in relation to the trauma bay allows for efficient location of patients based on acuity level. The number of treatment beds, treatment bays, including observation areas, provide adequate emergency department capacity. The Schedule 1 costs set forth in the BayCare application are reasonable. These costs include projected costs associated with necessary medical equipment. The medical equipment costs set forth in Schedule 1 are reasonable and BayCare has properly accounted for the items and costs of equipment necessary to operate the hospital. The Schedule 9 construction costs of approximately $180 million are reasonable as are the construction costs per square foot ($347 versus $325 for Pasco-Pinellas). Contingencies and escalation factors have been built into the projected costs. Facilities, Sites, Related Costs At the time the UCH and Adventist joint venture was formed, UCH had a parcel of land under contract located on State Road 54 across from the Saddlebrook Resort (the "UCH Parcel"). When it filed its application, Pasco-Pinellas hoped the UCH Parcel would serve as the site of its hospital. In fact, Pasco- Pinellas touted the location of the parcel for meeting the need of the growing population in Pasco County when it represented in the application that the UCH Parcel is the center point of the Wesley Chapel area. Close to Interstate 75, the UCH Parcel is a good location for a hospital. Pasco-Pinellas' aspiration for the use of the parcel was defeated, however, when the Pasco County denied a request to re-zone the UCH Parcel for use as a hospital. After the inability to have the UCH Parcel re-zoned, Pasco-Pinellas changed the site for the hospital to a parcel owned by FHZ (the "Pasco-Pinellas Site"). Located on Bruce B. Downs Boulevard, a major north-south corridor in the Wesley Chapel area, the site is 51.5 acres. The Pasco-Pinellas Site had been purchased by FHZ in 2001 with the intention of using it for a hospital. Subject to a height variance to allow a seven-story building, the site is zoned for special use as a hospital and related medical uses. The site has good visibility and access from Bruce B. Downs Boulevard as evidenced by its compliance with the State Road 581 (Bruce B. Downs Boulevard) access management plan. It meets other regulatory requirements such as the minimum spacing criteria for Pasco County. The Pasco-Pinellas Site is governed by a development order associated with the Wiregrass Ranch Development of Regional Impact (the "Wiregrass DRI DO"). The Wiregrass DRI DO "indicates that the phasing schedule assumed 100 hospital beds would be developed within the building phase." Tr. 597. As explained at hearing by Lara Daly, Pasco-Pinellas' expert in civil engineering and property site development, there are other aspects of the Wiregrass DRI DO, "like trade-off matrices" and "entitlement advancements" that indicate "entitlements are not limited on a parcel-by-parcel basis." Tr. 598. The assumption, therefore, does not necessarily restrict the number of hospital beds on the Pasco-Pinellas Site; rather it allows impacts associated with 100 hospital beds. The number of allowable beds may be increased following action taken under other provisions of the Wiregrass DRI DO. A significant portion of the Pasco-Pinellas Site is wetlands: some of low quality, some of high quality. The higher quality wetlands, referred to in the record as "a high quality category 1 wetland as defined by Pasco County," tr. 552, (the "Category 1 Wetland") are on the north and east perimeter of the site. The project is designed so as to have no impacts on the Category 1 Wetland. The only potential impact to these high quality wetlands is if there were a county-mandated road to be built in their vicinity. The lesser quality wetlands located in the interior of the site are herbaceous in nature or an open water feature that is "an older borrow pit that naturalized over time." Tr. 552-53. These lower quality wetlands constitute roughly 11.5 acres of the site. They will be impacted by the project but it is reasonable to expect that the impacts will be permitted. As Ms. Daly put it at hearing, "[a]fter reviewing, running stormwater models, looking at the proposed wetland impacts, coming up with appropriate mitigation ratios based on our experience elsewhere on the Wiregrass site, the site will accommodate all the necessary wetland and floodplain historic basin compensation . . . ." Tr. 550. The costs contained in Schedule 1 of the application were arrived assuming the use of the UCH Parcel as the site for the Pasco-Pinellas project. The Pasco-Pinellas Site requires expenditures for site preparation and other expenditures, such as wetland mitigation, related to the site that were not required had the UCH Parcel been used. For example, three potential foundation systems have been suggested for the hospital because of the wetland and subsurface conditions on the Pasco-Pinellas Site had the UCH Parcel been the site. Using the most expensive of the three, however, would not cause Pasco- Pinellas to exceed the construction costs contained in Schedule 1 of the CON Application. The land acquisition costs were reasonably projected to be less for the Pinellas-Pasco Site than for the UCH Parcel as reflected in the application. All told, the estimated project cost using the Pasco-Pinellas site was not materially different from the cost projected in the application and presented the possibility of being less than the $121 million reflected in the application. Likewise, the equipment cost figure shown in Schedule 1 of the Pasco-Pinellas application is reasonable and achievable. The total of the costs for the project sited at the Pasco-Pinellas Site, despite the change of site that occurred after the filing of the application, should not exceed the total of the costs listed in the Pasco-Pinellas application. The preponderance of the evidence is that the Pasco- Pinellas Site should ultimately qualify as an appropriate, developable site for the Pasco-Pinellas project. The BayCare site, north of Highway 56 and bordering I-75, (the "BayCare Site") includes two parcels of 54 and 17 acres. The 54 contiguous acres will be used for the hospital, outpatient services, and a planned medical office building. The 17 acres will be used for research space, physician office space, and academic training space necessary for the research and education function at the project. BayCare has the appropriate zoning and approvals necessary to develop the hospital. The hospital will have all private beds. It will be fully digital and will rely on electronic medical records. The BayCare Site is well suited for construction of the hospital and related buildings. The available footprint and design of the hospital, which includes shelled-in space, will readily allow for future expansion of the hospital up to 300 beds. Design of the BayCare facility is based on principles of family-centered care, flexibility to allow for change and future growth, efficiency, a quality of environment for teaching, a sustainable, green building, and patient safety. A "health building" with improved environmental quality and energy efficiency, the facility will seek LEED certification given to facilities constructed to have minimal adverse environmental impact. In keeping with the teaching function intended by the application, the facility's design includes additional work space, reading areas, sleep areas and conference rooms to facilitate teaching. Overall, the BayCare facility is twice as large as the Pasco-Pinellas facility. Size has its advantages. For example, it allows for larger treatment patient areas. But the facility is much more expensive to build. It is reasonably projected to cost more than $180 million above the costs associated with the Pasco-Pinellas facility which is more than twice as much. The high expense associated with the BayCare facility is shown by its cost per bed: in excess of $2 million-- much more than the cost per bed of the Pasco-Pinellas facility.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Agency for Health Care Administration approve CON 9975, Pasco-Pinellas' application for a new hospital in AHCA Subdistrict 5-2, and deny CON 9977, BayCare's application for a new hospital in the same subdistrict. DONE AND ENTERED this 28th day of October, 2008, in Tallahassee, Leon County, Florida. S DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of October, 2008. COPIES FURNISHED: Richard J. Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Building 3 Mail Station 3 Tallahassee, Florida 32308 Craig H. Smith, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Building 3 Mail Station 3 Tallahassee, Florida 32308 Karin M. Byrne, Esquire Agency for Health Care Administration 2727 Mahan Drive, Building 3 Mail Station 3 Tallahassee, Florida 32308 Stephen K. Boone, Esquire Boone, Boone, Boone, Koda & Frook, P.A. 1001 Avenida Del Circo Post Office Box 1596 Venice, Florida 34284 Jonathan L. Rue, Esquire Parker, Hudson, Rainer & Dobbs, LLP 1500 Marquis Two Tower 285 Peachtree Center Avenue Northeast Atlanta, Georgia 30303 Robert A. Weiss, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 R. David Prescott, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551
Findings Of Fact CON APPLICATIONS HCR-CON No.7530 HCR is a publicly owned, for-profit corporation which operates approximately 25 nursing homes in Florida. HCR filed an application, CON No. 7530, to construct a 98-bed freestanding nursing home. HCR proposes to locate the nursing home in the northwest part of Orange County, Florida. HCR proposes that the entire 98-bed facility will be dedicated to the care of patients with Alzheimer's Disease and related dementias. The total cost of the HCR project is $7,132,000 for 47,750 square feet, or $472,776 per bed. The HCR proposal is modeled after an HCR 120-bed nursing home facility in Boynton Beach, Florida. The Boynton Beach facility is entirely dedicated to the treatment of patients with Alzheimer's Disease or related dementias. The proposed HCR facility in Orange County would be identical to the Boynton Beach facility less one patient wing. HCR's Boynton Beach facility, as well as HCR's existing Orange County nursing home facility, have superior licensure ratings. HCR's Boynton Beach facility received accreditation with commendation from the Joint Commission on the Accreditation of Health Care Organizations (JCAHCO), a national accreditation body which has established standards to measure the quality of care in dementia care units. Dementia is a complex of symptoms that can be caused by many different underlying diseases. Alzheimer's disease is one cause of dementia. Alzheimer's disease is the most common cause of dementia. Significant research is being conducted into the cause and treatment of Alzheimer's disease. Dementia is defined as a decline in intellectual function; global cognitive impairment, that is memory impairment and at least one of the following: impairment of abstract thinking; impairment of judgment; impairment of other complex capabilities such as language use, ability to perform complex physical tasks, ability to recognize objects or people, or to construct objects; and, personality change. The Reisberg Cognitive Rating Scale (RCS) classifies the stages of Alzheimer's disease from 1 to 7, with a rating of 7 being most severe. The rating scale is based on 10 axes: concentration, recent memory, past memory, orientation, functioning and self-care, speech, motor functioning, mood and behavior, practice of an art or skill, and calculation ability. The Global Deterioration Scale (GDS) for Age-Associated Cognitive decline and Alzheimer's Disease also defines seven stages of deterioration ranging from no cognitive decline to very severe cognitive decline. Persons suffering from Alzheimer's disease generally cannot survive without assistance upon reaching early dementia or level five on both the RCS and GDS. Approximately 50-58 percent of persons currently residing in community nursing homes suffer from some form of dementia. There is a need for community nursing home beds for persons suffering from the latter stages (levels 5-7) of Alzheimer's disease in Orange County. It is particularly difficult to place in nursing homes in Orange County, persons suffering from the latter stages of Alzheimer's disease (levels 5-7) who also have displayed a history of disruptive behavior patterns. Persons suffering from the latter stages of Alzheimer's disease have specific needs for care and treatment in nursing homes. Alzheimer's victims tend to wander and should have areas set aside for secured walking. The movement of Alzheimer's victims should also be carefully monitored. HCR's Boynton Beach facility, which is the prototype for HCR's proposed Orange County facility, has specific design features to accommodate the needs of patients suffering from the latter stages (levels 5-7) of Alzheimer's disease. HCR proposes a pod design of five residential pod units each with a central living area, also called the atrium area. The resident rooms open to the central living area. Each pod has an enclosed courtyard. Access to the courtyards is controlled. The two nursing stations are centrally located in each wing of the facility. Each central living area, or atrium, is visible from one or the other of the nursing stations. HCR provides specific staff training in the care and treatment of Alzheimer's disease and related dementias. A unit or a facility dedicated to the treatment of dementia patients may reduce the need for psychotropic medication of the patients. On a long-term basis, there may be some staff burnout in a facility or unit dedicated solely to the care and treatment of victims of Alzheimer's disease or related dementias. HCR proposes that its CON be conditioned upon locating in northwest Orange County, providing at least 30 percent of its patient days to Medicaid eligible persons, providing respite care, and dedicating all 98 beds to the care and treatment of persons suffering from Alzheimer's disease and related dementias. HCR currently meets its Medicaid commitment in the Boynton Beach facility. LIFE CARE CON Nos. 7534 and 7534P LIFE CARE is a for-profit corporation which owns and operates two nursing homes in Florida. LIFE CARE also operates three other nursing homes in Florida. As of September 1993, LIFE CARE had a net worth of approximately $50 million. LIFE CARE proposes to construct a freestanding 98-bed nursing home (CON No. 7534) in southwest Orange County, at a total cost of $5,988,000. The LIFE CARE 98-bed facility proposal includes a 20-bed unit dedicated to the care and treatment of persons suffering from Alzheimer's disease, a 20-bed subacute unit, an adult day care center, mental health services, and services to persons suffering from AIDS/HIV. LIFE CARE also made a partial request (CON No. 7534P) for a 60-bed facility which would be constructed at the same site and would include the same features. For economic reasons, patients are being released from acute care hospital settings at earlier stages of recovery and there is a need for subacute nursing home services in Orange County. The incidence of AIDS/HIV is increasing and there is a need for nursing home services for persons suffering from AIDS/HIV in Orange County. The 20-bed unit proposed by LIFE CARE for the care and treatment of Alzheimer's patients will be a distinct part of the facility, separate from other residents. The Alzheimer's unit has its own dining area and activity area, a centrally located bathing facility, and a secured courtyard for wandering space. The 20-bed LIFE CARE subacute unit will also be separate. The subacute unit will have two ventilator areas and be contiguous to a therapy area. The LIFE CARE design includes outdoor courtyards, a library, gift shop, and ice cream parlor. Pursuant to Sections 408.037(2)(a) and (b), Florida Statutes, one of the required elements of a CON application is the listing of capital projects, which is presented in Schedule 2 of the CON application. The Schedule 2 filed by LIFE CARE in these proceedings is identical to the Schedule 2 filed by LIFE CARE in the December 1993 batching cycle for LIFE CARE'S proposed Clay County Project, CON No. 7501. It has been held that Schedule 2 of the LIFE CARE Clay County Project CON application No. 7501 met minimum CON application content requirements. Life Care Centers of America, Inc. v. State of Florida, Agency for Health Care Administration, 20 F.L.W. 1435 (Fla. 1st DCA June 12, 1995). During November of 1993, a LIFE CARE nursing home located in Altamonte Springs was downgraded from a superior to a conditional licensure rating due to a deficiency related to outdated medication. The conditional rating given to the facility was in effect for approximately fifty days. The facility was then given a standard rating, and upon the annual survey in the fall of 1994, the facility has been recommended for a superior rating. All other LIFE CARE facilities have superior ratings. LIFE CARE proposes to condition its CON application upon providing Medicaid participation of 65 percent in the 98-bed facility, and 43 percent in the 60-bed facility. ADVENTIST CON No. 7528 ADVENTIST is a not-for-profit corporation that owns and operates nursing homes, hospitals, and other health care related enterprises. ADVENTIST is a wholly owned subsidiary of Adventist Health System/Sunbelt Health Care Corporation, which owns and operates hospitals and health care facilities throughout the United States. ADVENTIST has operated health care facilities in Orange County since the early 1900s when Florida Hospital was founded. ADVENTIST is the largest hospital system in Orange County, with more than 1,400 beds located on five campuses. ADVENTIST proposes to add 38 beds to an existing freestanding 80-bed community nursing home, Sunbelt Living Center-East Orlando (SLC), which is directly adjacent to Florida Hospital's East Orlando campus. The ADVENTIST proposal would include a 20-bed subacute unit and also an 18-bed skilled nursing unit. This addition to SLC would be accomplished by constructing two new wings to the existing facility. The projected cost of the ADVENTIST addition is $1,386,500, or approximately $36,000 per bed. SLC is an 80-bed skilled nursing facility which opened in January of 1993. SLC has a superior licensure rating. SLC provides nursing home service to a variety of residents, including persons with AIDS/HIV, as well as persons with a primary diagnosis of Alzheimer's disease and related dementia. SLC does not have a distinct Alzheimer's unit, but is equipped with security features to accommodate Alzheimer's patients. SLC staff is trained in the care and treatment of all its residents, including those with dementia. SLC reached an occupancy rate of 96 percent-97 percent capacity in its first ten months of operation. The SLC design is based on a residential model. The intent of the design is to create a residential community, and to encourage the interaction among the residents, and also between the residents and staff. The residential wings contain twelve rooms with private and semiprivate accommodations. Each room has its own toilet facilities. The support facilities, food service, therapy areas, administrative offices, visitor and welcoming areas, are located in the center of the facility. The residential wings are clustered on each side of the facility. The facility also features outdoor courtyards and walkways adjacent to the residential wings. ADVENTIST proposes to condition its CON application on providing a Medicaid commitment of 65 percent of total patient days in the non-subacute wing of the 38-bed expansion. The ADVENTIST proposal also features an AIDS program and respite care. ADVENTIST currently meets it Medicaid commitment at SLC. As indicated above, there is a need for subacute nursing home beds in Orange County. There is a need for nursing home beds for persons suffering from AIDS/HIV in Orange County. In the 20-bed subacute unit ADVENTIST proposes that each room will include wall-mounted suction and gases to accommodate ventilator dependent patients, which will enable ADVENTIST to provide more intensive subacute care. RHA/PRINCETON CON No.7538 RHA is the owner and operator of Princeton Hospital, located on the west side of Orlando. Princeton Hospital is situated on 32 acres bordering Lake Lawne. Princeton Hospital has 150 beds, including 24 psychiatric beds, a multipurpose intensive care unit, a 13-bed progressive care unit, a nursery, pediatric services, women's services, an obstetrical unit and an inpatient cardiac catheterization lab. The psychiatric unit at Princeton Hospital treats a wide range of mental disorders, including those afflicting the elderly population. The hospital also operates a senior psychiatric partial hospitalization program which serves geriatric patients, including persons suffering from Alzheimer's disease and related dementias. Princeton Hospital currently provides care and treatment to persons suffering from AIDS/HIV. Princeton Hospital is accredited by the Joint Commission on Accreditation of Health Care Organizations. On August 1, 1994, subsequent to the filing of CON application No. 7538, Princeton Hospital entered into a wide-ranging affiliation agreement with the University of Florida, College of Medicine and Shands Hospital. The agreement provides for extensive reciprocal training and educational programs between Princeton Hospital and the College of Medicine, as well as Shands Hospital. The agreement also provides for priority transfer of patients between Princeton and Shands hospitals. RHA proposes to include its nursing home facility within the scope of the affiliation agreement. The nursing home staff would benefit from the training and educational opportunities, and the nursing home patients would have access to priority reciprocity with the College of Medicine and Shands Hospital as provided for in the agreement. During fiscal years 1993 and 1994 Princeton Hospital had a Medicaid patient ratio of approximately 40 percent. Princeton Hospital also provides indigent care. RHA proposes to construct a freestanding 60-bed Medicaid certified skilled nursing facility on the campus of Princeton Hospital at a cost of $4,991,961 for 43,741 square feet, or $83,199 per bed. The services that are proposed include subacute care, a 15-bed unit for persons suffering from Alzheimer's disease and related dementias, long term care, and two pediatric beds. Respite care will also be provided. RHA proposes that its subacute care unit would provide step-down care for patients referred from acute care hospital settings. RHA also proposes to provide rehabilitative therapies to serve patients suffering from fractured hips and joint replacements as well as other patients needing more intensive physical therapy. Cardiac and respiratory patients will also be served in the subacute unit. As indicated above, there is a need for subacute nursing home beds in Orange County. RHA's proposed 15-bed Alzheimer's unit will be a distinct and secured part of the facility. The unit will have its own enclosed courtyard and activities area. As indicated above, there is a need for nursing home beds for persons suffering from Alzheimer's disease and related dementias in Orange County. RHA also proposes a program dedicated to the care and treatment of persons suffering from AIDS/HIV. This program will provide long-term care, and will include psychiatric, as well as subacute services. As indicated above, there is a need for nursing home beds for persons suffering from AIDS/HIV in Orange County. The RHA proposal includes two pediatric nursing home beds. It is not uncommon to provide pediatric nursing home beds in a small unit within a nursing home facility. These beds will provide subacute care to pediatric patients referred from acute care hospital settings. It is anticipated that the pediatric unit will serve patients with respiratory problems and other multiple system failures. RHA has experienced difficulty in placing pediatric patients discharged from Princeton Hospital. The RHA facility is designed in a series of modules. There are four patient wings located around a single nursing station. The Alzheimer's wing is distinct and secured. The pediatric beds are located in a single semiprivate room close to the nursing station. The subacute unit includes six beds with wall-mounted medical gases and vacuums. Each residential room has approximately 272 net square feet, and features its own handicapped toilet and bathing facilities. The facility includes a chapel, convenience store, laundry, ice cream shop, and beauty shop, designed in a mall concept. The corridors are ten feet in width instead of the standard eight feet. The intent of the design concept is to encourage social interaction. As designed, the location of the soiled utility room in the facility does not comply with applicable Florida code regulations; however, a proposed minor change in the design will move the soiled utility room approximately twenty feet to bring the facility into compliance with Florida code regulations. ALLOCATION FACTORS Relationship to District and State Health Plans Section 408.035(1)(a), Florida Statutes District Health Plan Allocation Factor 1 of the District Health Plan provides a priority for an applicant proposing to locate in the northwest Orange County population center. This preference will continue to be given applicants until a total of 120 beds is obtained. HCR is the only applicant proposing to locate in the northwest Orange County population center; however, in January of 1993, Sunbelt Living Center, a 120-bed community nursing home opened in Apopka, Florida, which is located in the northwest Orange County population center. Accordingly, the total bed number for this preference has been obtained, and this district allocation factor is inapplicable to these proceedings. Allocation Factor 2 of the District Health Plan provides a preference for applicants developing specific services for newborn and/or pediatric patients. RHA is the only applicant proposing specific services which include a unit for the care and treatment of pediatric patients. Accordingly, RHA is the only applicant which meets this allocation factor. Allocation Factor 3 of the District Health Plan provides a preference for an applicant proposing to develop a specific specialty service (or services), such as a unit for medically complex patients, a unit dealing with psychiatric disorders as a primary diagnosis, or services for persons suffering from AIDS/HIV. This preference is also provided to an applicant which commits to working with, or in conjunction with, an existing provider of a specialty service, such as hospices, or mental health providers. RHA is the applicant which best meets this allocation factor. The RHA proposal provides for specialty services for medically complex patients, provides for services to persons suffering from AIDS/HIV, and RHA specifically commits to working with mental health providers, including working with the psychiatric unit at Princeton Hospital. ADVENTIST and LIFE CARE also propose to provide specialty services to medically complex patients in subacute units; however, the ADVENTIST facility is better equipped in this regard and is designed with piped in medical gases, vacuum, and expanded electrical capacity will have the capability to provide more extensive services. LIFE CARE also proposes to treat persons suffering from AIDS/HIV and persons with mental disorders. The LIFE CARE proposal, however, is not as specific in this regard as that of RHA. HCR proposes to provide specialty services to persons suffering from Alzheimer's disease and related dementias, and is in general compliance with this allocation factor. State Health Plan Allocation Factors Each applicant meets the first State Health Plan allocation factor which provides a preference for an applicant proposing to locate in areas within the subdistrict with occupancy rates exceeding 90 percent. The occupancy rate in Orange County exceeds 90 percent. RHA and LIFE CARE meet the second State Health Plan allocation factor which provides a preference for an applicant proposing to serve Medicaid patients in proportion to the average subdistrict-wide percentage of nursing homes. In Orange County the average is 65 percent for Medicaid service. ADVENTIST meets this preference with regard to its non-subacute unit. HCR which proposes a 30 percent Medicaid service does not meet this preference. The third State Health Plan allocation factor provides a preference to an applicant proposing specialized services to special care residents, including AIDS residents, Alzheimer's residents, and the mentally ill. Each applicant generally complies with this allocation factor and offers specialty services; however, RHA with its broader spectrum of specialty services, including services to AIDS/HIV residents, Alzheimer's residents, and its specific commitment to working with residents suffering from psychiatric disorders best meets this preference. The fourth State Health Plan allocation factor provides a preference to an applicant proposing to provide a continuum of services to community residents including, but not limited to, respite care and adult day care. RHA and ADVENTIST best meet this preference. RHA and ADVENTIST have a history of providing quality health care service to the community. RHA and ADVENTIST have extensive ongoing relationships with acute care hospitals. HCR and LIFE CARE have also established relationships which will address providing a continuum of care, but not to the extent proposed by RHA and ADVENTIST. The fifth State Health Plan allocation factor provides a preference to an applicant proposing to construct facilities which provide maximum resident comfort and quality of care. Each applicant proposes facilities designed to provide resident comfort and quality care. Each design has comfortable resident rooms, spacious activities areas, recreation areas, courtyards, landscaping, therapy rooms, and staff lounge areas. Each applicant meets this preference. The sixth State Health Plan allocation factor provides a preference for an applicant proposing innovative therapeutic programs which have proven effective in enhancing the residents' physical and mental functioning level and which emphasize restorative care. Each of the applicants' proposals feature specific elements of innovative therapeutic programs. HCR has received an award for its innovative design of the Boynton Beach Alzheimer's unit. RHA offers a multi-discipline approach with a psychiatric program. ADVENTIST offers an intensive subacute care unit, and LIFE CARE offer a well-balanced approach with intensive staff training. The seventh State Health Plan allocation factor provides a preference for an applicant proposing charges which do not exceed the highest Medicaid per diem rate in the subdistrict. In this respect, HCR projects Medicaid charges of $96.20 per patient day in Year 1, and $93.32 in Year 2. LIFE CARE projects Medicaid charges of $104.74 per patient day in Year 1, and $106.20 in Year 2. ADVENTIST projects Medicaid charges of $106.00 per patient day in Year 1, and $111.30 in Year 2. RHA projects Medicaid charges of $107.02 per patient day in Year 1, and $109.24 in Year 2. While HCR projects the lowest Medicaid per diem charges and appears to best meet this allocation factor, all applicants have agreed to a specified Medicaid utilization rate, and will accept the appropriate Medicaid reimbursement levels. The eighth State Health Plan allocation factor provides a preference for an applicant with a history of providing superior resident care in Florida or other states. HCR has maintained superior licensure ratings, and its prototype Boynton Beach facility currently is rated superior. LIFE CARE in 1993 experienced a conditional rating for its Altamonte Springs facility; however, the facility, upon evaluation in the fall of 1994, is now recommended for a superior licensure rating. RHA does not currently operate nursing homes; however, RHA has a history of providing quality care in its Princeton Hospital. ADVENTIST is the only applicant proposing to add nursing home beds to an existing facility that currently has a superior licensure rating, and in this respect, ADVENTIST best meets this allocation factor. The ninth State Health Plan allocation factor provides a preference to an applicant proposing staff levels which exceed minimum staffing standards contained in licensure administrative rules. Applicants proposing higher ratios of RNs- and LPNs-to-residents shall be given preference. All applicants meet this factor; however a comparison of the nursing staffing patterns of the applicants reflects that HCR (45.40 nursing FTE) and LIFE CARE (45.30 nursing FTE) have a higher than the minimum required ratio of nursing staff to residents for their proposed 98-bed facilities. RHA has proposed 35.30 nursing FTE for its 60-bed facility. ADVENTIST proposes a total 62.40 nursing FTE for its facility after the proposed 38-bed addition. The tenth State Health Plan allocation factor provides a preference for an applicant who will use professionals from a variety of disciplines to meet the residents' needs for social services, specialized therapies, nutrition, recreational activities, and spiritual guidance. These professionals shall include physical therapists, mental health nurses, and social workers. All the applicants offer a wide range of social, spiritual, nutritional, and recreational services. RHA, however, also proposes specific utilization of mental health care professionals, and a specific affiliation with the psychiatric care professionals from Princeton Hospital, and best meets this factor. The eleventh State Health Plan allocation factor provides a preference for an applicant who ensures the residents' rights and privacy, and who implements a well-designed quality assurance and discharge planning program. Each applicant has documented specific plans for quality assurance and ensuring the residents' rights and privacy are protected. Accordingly, each applicant meets this factor. The final State Health Plan allocation factor provides for a preference to an applicant proposing lower administrative costs, and higher resident care costs compared to the average nursing home in the district. HCR has the lowest projected administrative and overhead costs ($18.28 per patient day as of Year 2), and best meets this allocation factor. Statutory Review Criteria, Section 408.035(1), F.S. Section 408.035(1)(b): The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, inadequacy of like and existing health care services and hospices in the service district of the applicant. HCR, LIFE CARE, and RHA each proposes a unit dedicated to the care and treatment of persons suffering from Alzheimer's disease and related dementias (HCR 98-bed facility, LIFE CARE 20-bed unit, and RHA 15-bed unit). ADVENTIST, while currently providing care for Alzheimer's patients at SLC, does not propose a distinct Alzheimer's unit in its 38-bed addition. There are currently at least five nursing homes in the service district, and two others in close proximity, which feature dedicated Alzheimer's units, with a total of at least 345 nursing home beds serving Alzheimer's patients. There is a high utilization rate of Alzheimer's nursing home beds in the district. While there is an established need for more beds to serve Alzheimer's patients, particularly Alzheimer's patients with a history of disruptive behavior, there are additional needs in the service district to provide care and treatment for subacute patients, and for persons suffering from AIDS/HIV. It is difficult to quantify the need for subacute nursing home beds due to the differing professional definitions of what constitutes subacute care; however, acute care hospitals in Orange County are, for cost-effective reasons, now releasing patients on an earlier basis, and there is an established need for nursing home beds to accommodate persons released from acute care hospitals. There is a high utilization rate of subacute beds in the district. There has also been an increase in the incidence of AIDS/HIV patients, and in the need for nursing home beds for persons suffering from AIDS/HIV in the service district. Section 408.035(1)(c): The ability of the applicant to provide quality of care and the applicant's record of providing quality of care. Each applicant has the ability to provide quality of care, and each applicant has a history of providing quality of care. The distinguishing factors in this regard are that LIFE CARE is the only applicant that has experienced a downgrading of a nursing home facility from a superior to a conditional licensure rating, and ADVENTIST is the only applicant that proposes to add nursing home beds to a facility that currently has a superior licensure rating. In comparison, ADVENTIST best meets this factor, and LIFE CARE least meets this factor. Section 408.035(1)(e): Probable economies and improvements in service that may be derived from operation of joint, cooperative, or shared health care resources. ADVENTIST and RHA both have specific proposals to work with, and share services with acute care hospitals. Both are in close proximity to acute care hospitals which will expedite sharing of medical resources. RHA will also share dietary services with Princeton Hospital. The freestanding facilities proposed by HCR and LIFE CARE do not have this advantage. Section 408.035(1)(f): The need in the service district for special equipment and services which are not reasonably and economically accessible in adjoining areas. This factor is inapplicable to the proposals. No specific need was established as to special services and equipment not reasonably and economically accessible in adjoining areas. There are dedicated Alzheimer's units and dementia services for persons in adjoining areas. Section 408.035(1)(g): The need for research and educational facilities, including but not limited to, institutional training programs and community training programs for health care practitioners. RHA has an extensive proposal for the participation and training of health care practitioners in conjunction with Princeton Hospital and best meets this criterion. RHA's affiliation with the University of Florida College of Medicine, Shands Hospital, and the Brain Institute at the University of Florida enhances this proposal. ADVENTIST shares a similar educational and training relationship with Florida Hospital, and with Florida Hospital's registered nurse baccalaureate degree program through Southern College. LIFE CARE proposes to establish relationships with local community colleges and education centers to sponsor nursing programs. Section 408.035(1)(h): The availability of resources, including health manpower, management personnel, and funds for capital and operating expenditures for project accomplishment As stipulated, each applicant meets this criterion. Each applicant also has substantial personnel and management resources available for project accomplishment. Section 408.035(1)(i): The immediate and long- term financial feasibility of the proposal. LIFE CARE, ADVENTIST and RHA meet this criterion, and reasonably project positive cash flows by the second year of operation. RHA a not-for- profit corporation, projects a net loss of $114,000 in Year 1 of operation, and an excess of revenues over expenses of $53,000 in Year 2 of operation. LIFE CARE projects a net loss of $440,496 in Year 1 and a net gain of $145,085 in Year 2 for the 98-bed facility, and a net loss of $259,971 in Year 1 and a net gain of $54,920 in Year 2 for the 60-bed facility. HCR projects an after-tax profit of $25,000 in Year 2; however, in order to attain a level of profitability HCR must meet its projected 65 percent private pay utilization. This is a very high private payor mix, and there is a significant question as to whether this payor mix is attainable in the subdistrict; however, as proposed, HCR meets this factor. Sections 408.035(1)(k)(l) and (m): Impact of the project on cost of health services; cost effective- ness; construction costs. ADVENTIST proposes the most cost-effective project by adding beds to an existing facility (SLC). The addition of 38 beds to SLC will promote and maximize the overall efficiency of the facility which was originally designed with core support features to accommodate 120 residents. The proposed 38-bed addition to SLC will also lower the costs per patient day of the entire facility. The ADVENTIST proposal adds nursing home beds at the lowest per bed cost ($36,000 per bed) of all applicants. Similarly, RHA is located on the campus of an existing acute care hospital owned by the applicant and, unlike HCR and LIFE CARE, projects no actual cash expenditure for land acquisition. Each applicant has proposed a reasonable design of its proposed facility and reasonable construction costs, and taken into consideration applicable costs and methods of energy provision and conservation. Each applicant meets this criterion. Each applicant has also proposed a very high quality of care facility that will foster competition and promote quality assurance and cost- effectiveness. Each applicant meets this criterion. Section 408.035(1)(n): The applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent. RHA, ADVENTIST and LIFE CARE have proposed providing health care services to Medicaid patients at rates at, or in excess of, the district average. HCR proposes the lowest Medicaid service rate at 30 percent. RHA also has a strong record of providing Medicaid services and service to the medically indigent at Princeton Hospital. All applicants except HCR meet this factor. Section 408.035(1)(o): The applicant's past and proposed provision of services which promote a continuum of care in a multilevel health care system. The RHA and ADVENTIST proposals best meet this criterion. Both the RHA and the ADVENTIST proposals are closely associated with existing hospitals, and emphasize a continuum of care from the acute hospital setting to a nursing home facility. The RHA and ADVENTIST proposals promote the interaction of health care professionals in a multilevel health care system. The HCR and LIFE CARE proposals do not reflect such an extensive interconnection with other aspects of the health care system, and do not promote a continuum of care to the extent proposed by RHA and ADVENTIST. Section 408.035(2)(b): Whether existing inpatient facilities providing inpatient services similar to those being proposed are being used in an appropriate and efficient manner. The evidence reflects that the existing inpatient facilities in, or adjacent to, the district which offer subacute and AIDS services, as well as services dedicated to the care and treatment of persons suffering from Alzheimer's disease and related dementias are operating at, or near, capacity, and are being used in an appropriate and efficient manner.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that: RHA's application for CON No. 7538 be APPROVED. ADVENTIST'S application for CON No. 7528 be APPROVED. HCR's application for CON No. 7530 be DENIED. LIFE CARE'S applications for CON Nos. 7534 and 7534P be DENIED. RECOMMENDED in Tallahassee, Leon County, Florida, this 27th day of July, 1995. RICHARD HIXSON 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 27th day of July, 1995. APPENDIX HCR's Proposed Findings 1-5. Accepted in substance. 6. Rejected, insofar as quantification of need for subacute services, while not readily ascertainable, was demonstrated by other applicants.demonstrated need existed in district 7-8. Accepted in substance. 9. See Number 6. 10-14. Accepted in substance, but disposed of by ruling in Clay County case. 15-27. Accepted in substance. 28-36. Rejected insofar as quantification of need for subacute services is not readily accessible; however, need for such services was established. Accepted, except that need for 120 beds has been met. Accepted, except that RHA proposes specific pediatric services and is entitled to preference. Accepted in substance, except last sentence is rejected. Accepted. Accepted, except that ADVENTIST meets preference as to the non- subacute unit. 42-43. Accepted in substance. 44-45. Rejected. Accepted in substance. Accepted, except that ADVENTIST and RHA also meet this factor, and ADVENTIST is adding beds to an existing superior-rated facility. 48-50. Accepted in part, other applicants meet these factors. 51-65. Accepted in substance; however other services are also needed in the district. 66-67. Rejected. 68-73. Accepted in substance. 74-76. Accepted; however other services are also needed in the district. 77. Rejected. 78-86. Accepted in substance. 87-94. Accepted only to the extent that the HCR proposal meets the minimum requirements to demonstrate financial feasibility. 95-103. Accepted in substance; however each applicant's proposal also meets this factor. 104-112. Accepted in substance. 113. Rejected. 114. Accepted; however RHA proposes a minor change to correct this design. 115-116. Accepted only as to RHA design features. 117-122. Rejected. 123-127. Accepted in substance. 128-131. Rejected. LIFE CARE's Proposed Findings 1-3. Accepted in substance. 4. Accepted, except that district plan includes consideration of pediatric population. 5-7. Accepted; however other applicants also meet these factors. See Finding No. 4. Rejected to the extent that it is not uncommon for pediatric care to be provided in a nursing home setting. 10-38. Accepted in substance. 39-40. Rejected to the extent that RHA and ADVENTIST have competitive staff salaries and have experienced no difficulty in hiring qualified staff. 41-57. Accepted in substance. 58-59. Rejected. Accepted; however RHA proposes a minor change to correct this design. Rejected. 62-65. Accepted in substance. 66-69. Disposed of by Clay County case. Accepted; however ADVENTIST meets this factor in the non-subacute unit. Accepted in substance. ADVENTIST's Proposed Findings 1-4. Accepted in substance. 5. Accepted only to the extent that HCR does not propose a specific subacute care unit. 6-13. Accepted in substance. Rejected to the extent that HCR's proposal meets minimum financial feasibility requirements. Accepted. 16-17. Rejected. Accepted. Accepted to the extent that RHA and ADVENTIST best meet this criterion. 20-21. Accepted in substance. 22-26. Disposed of by Clay County case. 27-29. Accepted in substance 30-31. Rejected. 32-35. Accepted in substance. 36. Rejected; see No. 19. 37-106. Accepted in substance. 107. Accepted; see No. 19. RHA's Proposed Findings 1-21. Accepted in substance. 22. Accepted; however other applicants also meet these factors. 23-54. Accepted in substance. 55. Accepted to the extent that there are at least seven nursing homes with dedicated Alzheimer's units in or near the service area. 56-92. Accepted in substance. 93-96. Accepted; however HCR meets minimum financial feasibility requirements. 97-102. Accepted; however LIFE CARE meets minimum financial feasibility requirements. 103. Rejected. 104-122. Accepted in substance. 123. Rejected. 124-135. Accepted in substance. 136. Rejected to the extent that all applicants have met the design criterion. 137-140. Accepted in substance. 141. Rejected. 142-145. Accepted in substance. 146. Accepted to the extent that RHA and ADVENTIST best meet this criterion. COPIES FURNISHED: Stephen K. Boone, Esquire BOONE, BOONE & BOONE, P.A. Post Office Box 1596 Venice, Florida 34284 Alfred W. Clark, Esquire 117 South Gadsden, Suite 201 Tallahassee, Florida. 32301 R. Bruce McKibben, Jr., Esquire PENNINGTON & HABEN, P.A. 215 South Monroe Street, 2nd Floor Post Office Box 10095 Tallahassee, Florida 32301 Michael J. Glazer, Esquire MACFARLANE, AUSLEY, FERGUSON & MCMULLEN, P.A. Post Office Box 391 Tallahassee, Florida 32301 Samuel Dean Bunton, Esquire Senior Attorney, AHCA Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303-4131 Steven R. Bechtel, Esquire MATEER, HARBERT & BATES, P.A. Post Office Box 2854 Orlando, Florida 32802 James M. Barclay, Esquire COBB, C0LE & BELL 131 North Gadsden Street Tallahassee, Florida 32301
Findings Of Fact Cilla McCray, is a resident of Gadsden County. The parties have stipulated that on December 3, 1977, she was admitted to the Tallahassee Memorial Hospital in an emergency medical condition, and that the treatment performed by the hospital was of an emergency nature. The parties have further stipulated that the Tallahassee Memorial Hospital is a regional referral hospital within the meaning of Section 154.304(4) , Florida Statutes (1977). Cilla McCray was admitted to the Tallahassee Memorial Hospital on December 3, 1977, and was discharged on January 9, 1978. The total bill for her services amounted to $8,753.80. The Hospital submitted a bill to Gadsden County in the amount of $1,521.48 for the services. This latter amount is the maximum allowed to be billed in accordance with the Florida Health Care Responsibility Act. Gadsden County has refused to pay the bill, contending that the patient was not indigent. The patient has not paid the bill. Cilla McCray is married to Lawrence McCray. They have three children but only two of them reside at home. The oldest child is not supported by his parents. During the six months preceding the hospitalization of Cilla McCray her husband had average earnings of $80.00 per week as a logger. Mrs. McCray had earned a total of $732.60 for employment during the six months prior to her hospitalization. The McCray's thus had average monthly earnings during that period in excess of $450.00 per month.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED: That a final order be entered rejecting the bill submitted by the Tallahassee Memorial Hospital for medical services performed for Cilla McCray. RECOMMENDED this 16th day of June, 1978, in Tallahassee, Florida. G. STEVEN PFEIFFER, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: John Shaw Curry, Esquire Post Office Box 706 Quincy, Florida 32351 John D. Buchanan, Jr., Esquire Post Office Drawer 1049 Tallahassee, Florida 32302 Chairman Board of County Commissioners Gadsden County Courthouse Quincy, Florida
The Issue Whether the Certificate of Need (CON) applications filed by Central Florida Regional Hospital, Inc. d/b/a Central Florida Regional Hospital (Central Florida) (CON Application No. 9805) and Oviedo HMA, Inc. (Oviedo HMA) (CON Application No. 9807P) for a new, 60-bed acute care hospital in Seminole County, Agency for Health Care Administration (Agency or AHCA) acute care subdistrict 7-4, satisfy, on balance, the applicable statutory and rule review criteria sufficiently to warrant approval; and, if so, which of the two applications best meets the applicable statutory and rule review criteria for approval.
Findings Of Fact The Parties The Agency AHCA is the state agency authorized to evaluate and render final determinations on CON applications pursuant to Section 408.034(1), Florida Statutes.2 Oviedo HMA Oviedo HMA, Inc. is a start-up subsidiary of Health Management Associates, Inc. (HMA), a national for-profit hospital chain, headquartered in Naples, Florida. Oviedo HMA was formed for the sole purpose of constructing, owning, and operating a hospital in the Oviedo area. HMA traditionally develops hospitals in non-urban markets. It describes itself as a "turnaround specialist for non-urban hospitals," that "acquires and then revitalizes hospitals in growing communities with [population of] 30,000 to 400,000 that have a clear demographic need." HMA focuses on smaller-type hospitals ranging in bed size from 50 to 200 beds. HMA's ownership of hospitals has grown from 16 in 1993 to 59 hospitals in 2005. HMA owns and operates approximately 16 hospitals in Florida, all of which have come under HMA's ownership and operation by acquisition. HMA has not yet opened and constructed a new acute care hospital in Florida. HMA is building a new hospital in Collier County and has recently completed a replacement hospital in Brooksville, Florida. HMA anticipates acquiring an 80 percent interest in St. Cloud Hospital (owned by ORHS) in the greater Orlando area, with ORHS retaining a 20 percent interest. This transaction had not closed as of the final hearing. HMA owned and operated hospitals nationwide are accredited by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) and provide high quality of care to their patients. HMA has experienced financial growth in recent years; growing from approximately $250 million in net revenue in 1993 to over $3.6 billion in 2005, and growing from approximately $12 million in net income in 1993 to approximately $350 million in 2005. Its financial strength among for-profit hospitals is strong. For HMA, company-wide, over 15.4 percent of gross revenues were attributable to Medicaid in fiscal year (FY) 2005, with an additional 4.5 percent in charity care. In Florida, 9.7 percent of gross revenues of HMA were attributable to Medicaid (over $324 million) in 2005, with an additional 4.4 percent in charity care (over $147 million). In the SAAR, AHCA conditioned its approval of Oviedo HMA's project with the condition that Oviedo HMA provide "[a] minimum of 7.1 percent of the total annual patient days in the 60-bed facility . . . to Medicaid patients" and "[a] minimum of 2.9 percent of the 60-bed facility's gross revenues . . . to charity patients." OV 99 at 52. AHCA should impose these conditions if the project is approved. Oviedo HMA has committed to provide obstetrical services. In order to perfect its CON application, Oviedo HMA is relying heavily on Orlando Regional Healthcare System, Inc. (ORHS), a Florida not-for-profit corporation that owns and operates health care facilities in Orange, Seminole, Lake, and Osceola Counties. HMA would not pursue the project without a collaborative clinical and financial arrangement with ORHS. Following the filing of Oviedo HMA's letter of intent, on October 20, 2004, representatives of HMA, Inc. and ORHS, Inc., signed a letter of intent "relating to the possible formation of a joint venture or other business relationship" for the construction of a new hospital in Oviedo." Thereafter, HMA and ORHS agreed in principle that if the CON application were approved and the hospital project proceeded forward, 20 percent of the stock of Oviedo HMA will be owned by ORHS or one of its affiliates. (Stated otherwise, ORHS will contribute 20 percent of the project cost.) Losses and profits will be shared in accordance with percentages of stock ownership. Any written agreement between Oviedo HMA and ORHS is expected to be modeled after the ORHS/HMA St. Cloud Hospital agreement. See Finding of Fact 6. It is anticipated that any such agreement will contain, in part, buy-out and non-compete provisions.3 The entity that files a CON application must be the same entity that licenses and operates the CON approved project, here a hospital. OV 69 at 9-10.4 According to Mr. Gregg, "as of the [legislative] changes of 2004, if a change of ownership occurs, then that new owner acquires the certificates [sic] of need that were [sic] associated with the provider being purchased." Id. at 10. See generally § 408.036(2)(a), Fla. Stat.; Ch. 2004-383, § 6, Laws of Fla. The proposed stock purchase by ORHS does not affect the corporate status of Oviedo HMA, Inc., the applicant/entity.5 The situation would be different if the applicant/entity changed. The persuasive evidence indicates that Oviedo HMA, Inc. will own and operate the new hospital. ORHS has sufficient funds and is committed to expend between $15 and $20 million toward the Oviedo HMA hospital project, but is not willing to finance the entire cost of the project. This is one reason why ORHS did not pursue a CON application for a similar project as it had done in a prior batching cycle. The ORHS hospitals/health care facilities provide high quality of care to their patients. ORHS uses an enterprise-wide health information system which is complemented by other systems. ORHS physicians can access patient clinical information at an ORHS facility or remotely. PACS is a picture, archiving, and communications system. PACS provides the user with the ability to view images digitally, e.g., X-rays can be transmitted electronically and can be viewed remotely. With the design and structural cabling system in place, the PACS system can be used by the Oviedo HMA hospital and OHRS. The anticipated collaboration between the entity systems will afford the ability to tie the computer systems together. This system is available among collaborative hospitals and by credentialed staff who are given access to the system.6 Generally, physicians who do not have privileges at an ORHS facility would not be able to access the information unless given permission, which is not done on a standard basis. Hospital facilities with a "business relationship" with ORHS facilities can access the information. However, federal confidentiality requirements must be followed. Unaffiliated hospitals, such as CFRH, could be provided access to the information. See Endnote 6. Central Florida Central Florida Regional Hospital, Inc. (Central Florida), a for-profit corporation, is an applicant in this proceeding and will own the new hospital proposed in its CON application. If approved, the new hospital will have a separate management team charged with running the day-to-day operations of the new hospital. Central Florida is an indirect wholly-owned subsidiary of HCA Inc. (Health Corporation of America), a national for- profit corporation with hospitals distributed throughout the United States, including the State of Florida, and abroad. HCA's health care services include physician practices, ambulatory surgical centers, community hospitals, and large tertiary referral centers. Central Florida owns and operates Central Florida Regional Hospital (CFRH), a general acute care hospital with 226 licensed beds, consisting of 208 acute care beds and 18 skilled nursing unit beds (a separate unit within the hospital). CFRH is located at 1401 West Seminole Boulevard, Sanford, Florida, and is accredited by the JCAHO. Osceola Regional Medical Center, in Osceola County, Florida, is also an HCA facility in District 7. Central Florida will transfer (and delicense) 60 acute care licensed beds from CFRH to effectuate the CON application. CFRH asserts that it can maintain an appropriate census with the remaining bed complement. If the reduced bed complement is insufficient in number, CFRH can add new acute care beds without obtaining a CON. Ch. 2004-383, § 6, Laws of Fla., amending Section 408.036(1)(a) and (d), Florida Statutes (2003). CFRH's geographic service area is predominantly north Seminole County and west Volusia County. CFRH provides inpatient and outpatient services, including obstetrics, and has the only adult open-heart surgery and interventional cardiology program in Seminole County. CFRH's OB department averages 80 to 100 OB deliveries a month. CFRH does not operate a Level 2 or Level 3 Neonatal Intensive Care Unit (NICU). Orlando Regional Medical Center and Florida Hospital operate these units. CFRH has a history of providing health care services to Medicaid patient and indigent patients. CFRH expects to implement otolaryngology services, as well as a neurosurgery program that will include state-of-the- art "cyberknife" technology, a surgical tool that can also be used in cancer and tumor treatment in areas of the body other than the brain. (CFRH has not offered neurosurgery for some time, but signed a contract with a neurosurgeon that starts March 1, 2006, and is recruiting for a second neurosurgeon.) The hospital will be offering a 64-slice CAT scanner, which is a state-of-the-art imaging system. It is used for ruling out the necessity of a cardiac intervention procedure. CFRH has two OB/GYN physicians in Oviedo who are employed by the hospital. One works part-time. CFRH is recruiting for additional OB physicians for CFRH. CFRH has a reputation for providing high quality of care to its patients. This includes but is not limited to CFRH's cardiovascular and interventional programs. (For calendar year 2004, there were 300 open heart surgery discharges from CFRH. In 2004, CFRH ranked 40 out of 73 Florida hospitals with interventional cardiology programs in the number of open heart surgery discharges.) CFRH uses an electronic medical administration record (eMAR) system, which increases patient safety. Each patient's arm band is coded and can be scanned for, in part, drug compatibility. Nurses are alerted if there are any abnormalities. This particular system is unique to HCA hospitals. CFRH also uses a PACS system to transmit images to other facilities. Central Florida enjoys an excellent reputation as a corporate citizen in the Sanford community and Seminole County generally. Central Florida makes annual monetary contributions to a number of local organizations, including, for example, Seminole Community College for the purpose of expanding their nursing program. ORHS and Florida Hospital also contribute to this project. On September 7, 2004, the City of Oviedo issued a letter of support of Central Florida's application "for a 60 bed satellite facility in Oviedo, Florida."7 On November, 15, 2005, The Greater Oviedo Chamber of Commerce passed a resolution favoring Central Florida's application over Oviedo HMA's application. Until Central Florida filed its CON application, Central Florida had not begun to aggressively consider a greater presence in the Oviedo area. Central Florida expects to recruit in the area (and build a medical office) if its CON application is approved. CFRH has approximately 164 doctors on staff with active privileges (or active provisional) and requires its physicians to be board certified in order to be a part of the medical staff, unless the physician provides a specialty service for a limited period of time. CFRH will support the new hospital and provide any necessary training. CFRH expects to be the referral hospital for the new hospital, as opposed to a Florida Hospital or ORHS facility. Health Services in Orange and Seminole Counties Within District 7 Agency health planning service District 7 consists of Brevard, Orange, Osceola, and Seminole Counties. § 408.032(5), Fla. Stat. For acute care beds, each of the four counties is treated as a separate "subdistrict" by AHCA. Fla. Admin. Code R. 59C-2.100(3)(g). Both applications were filed to construct a new, acute care hospital in Seminole County, subdistrict 7-4. Specifically, each application proposes a new, 60-bed hospital in Oviedo, in Seminole County. At present, Seminole County has three acute care hospitals: CFRH is located in Sanford, near the Volusia County line in north Seminole County; Florida Hospital-Altamonte, located in Altamonte Springs, in south Seminole County to the west of Oviedo; and ORHS South Seminole Hospital, also located in south Seminole County to the west of Oviedo. For the period January, 2003, through December, 2003, CFRH reported 55.82 percent occupancy in its 208 acute care beds. By comparison, Florida Hospital-Altamonte reported 72.40 percent occupancy in its 258 acute care beds and ORHS South Seminole Hospital reported 53.80 percent occupancy in its 126 acute care beds. See CF 12 at Table 1-20. Florida Hospital-Altamonte and ORHS South Seminole Hospital are each a part of large hospital organizations that collectively dominate the market for hospital services in Seminole County and District 7. Both applicants propose to address the maldistribution of existing licensed acute care beds in Seminole County, with the greater need for acute care beds in south Seminole County. There are approximately 2,470 acute care beds in Orange County and approximately 600 acute care beds in Seminole County. Adventist Health System/Sunbelt, Inc., owns and operates seven general acute care hospitals under the "Florida Hospital" name in the greater Orlando area: Florida Hospital- Altamonte (258 acute care beds) in Seminole County; Florida Hospital-Orlando (702 acute care beds), Florida Hospital-East Orlando (144 acute care beds), Winter Park Memorial Hospital,8 and Florida Hospital-Apopka (50 acute care beds) in Orange County; and Florida Hospital-Celebration and Florida Hospital- Kissimmee in Osceola County. See Orlando Regional Healthcare System, Inc. vs. Agency for Health Care Administration, Case Nos. 02-0448CON and 02-0449CON, 24 FALR 714, 720 (DOAH November 18, 2002; AHCA December 31, 2002). In 2001, Florida Hospital and ORHS filed competing CON applications to build a 60-bed hospital in Oviedo, and each was preliminarily denied by AHCA. Both organizations challenged AHCA's determination, and, following an administrative hearing, AHCA awarded the CON to Florida Hospital. See Orlando Regional Healthcare System, Inc., supra. However, Florida Hospital never implemented its proposal, and the CON lapsed. ORHS is a large tertiary health care system in the greater Orlando area comprised of several health care facilities and one additional facility which will be opening this year, the Winnie Palmer Hospital for Women and Babies (Winnie Palmer), a 273-bed facility. It is anticipated that obstetrical and women services and infant care will relocate from the Arnold Palmer Hospital for Children and Women (Arnold Palmer) to Winnie Palmer in May 2006. ORHS and Florida Hospital offer outstanding cardiovascular services. (For calendar year 2004, Florida Hospital-Orlando and Orlando Regional Medical Center had 1,759 and 898 open heart surgery discharges, respectively, and rank one and four, respectively, among open heart surgery providers statewide.) ORHS owns and operates several general acute care hospitals in the greater Orlando area. South Seminole Hospital in Longwood, Seminole County, is a 206-bed hospital with approximately 126 acute care beds, and 80 psychiatric beds in a detached facility. Several ORHS facilities are located in Orange County. Orlando Regional Medical Center (ORMC), located in downtown Orlando, is a 600-bed general acute care hospital that provides tertiary care services and serves as a teaching hospital. ORMC is the only Level 1 trauma center in the greater Orlando area. M.D. Anderson Cancer Center is physically attached to ORMC and functions as the medical-surgical and radiation/oncology program for ORMC. Arnold Palmer is a 275-bed specialty hospital that provides subspecialty pediatric care, neonatology, and obstetrics. A $50 million construction project is underway. Lucerne Hospital is a 275-bed general acute care hospital, a few miles away from ORMC. Sand Lake Hospital is a 150-bed general acute care hospital (located near Disney). ORHS previously owned St. Cloud Hospital in Osceola County, but sold an 80 percent interest in St. Cloud to HMA in November, 2005. See Findings of Fact 6 and 13. South Lake Hospital is a smaller, 100-bed general acute care hospital located in Lake County, Florida, that is digitally linked to ORMC. ORHS owns a 50 percent interest in and manages this hospital. The South Lake Hospital District owns the remaining interest. ORHS has approximately 40 physicians who practice or have offices within the Oviedo market. CFRH has one full-time physician practicing within the area. See Finding of Fact 30. Approximately 1,700 physicians have privileges at ORHS facilities. If the Oviedo HMA project is approved, ORHS expects to regain tertiary care referrals now lost to the Florida Hospital system. Florida Hospital and ORHS healthcare facilities dominate the market for hospital services in Orange and Seminole Counties. The Oviedo area: demographics, utilization of existing providers, and applicant service area and occupancy projections The City of Oviedo is located in south Seminole County, east of Longwood (where South Seminole Hospital is located) and Altamonte Springs (where Florida Hospital-Altamonte is located), and approximately 10 to 15 miles from downtown Orlando. The City of Oviedo is included within zip codes 32765 and 32766, although there are other adjacent zip codes to the northeast 32732 (Geneva) and to the west 32708 (Winter Springs). See CF 80. The Oviedo area is growing. In 2004, the total population for the four zip codes was 106,789 and projected to increase 12.6 percent (to 120,227) by 2009. (The population is projected to increase 9.3 percent statewide and 11.2 percent in Seminole County by 2009.) The population in zip code 32765 was 49,985 in 2004, projected to grow to 57,742 in 2009, or 15.9 percent. In zip code 32766, the population was 9,068 in 2004, projected to grow to 11,302 in 2009, or 24.6 percent. Population in the Winter Springs and Geneva areas are projected to increase 7.1 percent and 8.5 percent, respectively, by 2009. The Oviedo area is described as "a young, family oriented suburb of Orlando" or more generally as a suburban community. The parties have stipulated to the need for a new, 60- bed acute care hospital in Oviedo. Oviedo HMA proposes to serve a four zip code area, i.e., zip codes 32765, 32766, 32708, and 32732 and projected that 95 percent of its utilization will come from within these zip codes. OV 27. Oviedo HMA projects occupancy levels to be 57.9 and 75 percent for Years 1 and 2, respectively. (Central Florida's expert opined that Oviedo HMA's occupancy levels for Years 1 and 2 would be 54 and 60 percent, respectively. CF 25-15.) Oviedo HMA's projected occupancy levels for Year 2 may be optimistic for a start-up hospital, but nevertheless appear achievable, in part, in light of the collaborative arrangement. Oviedo HMA excluded from its market area, zip code 32773 because of its proximity to CFRH and zip code 32792 because of its proximity to Florida Hospital-Winter Park Memorial Hospital in Orange County. The southernmost zip codes, 32817, 32826, and 32820 (east of zip code 32792) were excluded because of current patient travel patterns. At present, the Oviedo area is served almost exclusively by either Florida Hospital or ORHS. Oviedo area residents are out-migrating to Orange County for obstetrical and emergency room services. (For calendar year 2003, approximately 44 percent of Seminole County residents received acute care services outside of Seminole County.) Florida Hospital and ORHS serve the majority of the out-migrating residents. In 2004, for the four zip codes of Oviedo HMA's proposed service area (32765, 32766, 32708, and 32732), Florida Hospital facilities had a combined 61.7 percent non-tertiary market share, and ORHS facilities had a combined 30.9 percent non-tertiary market share. Winter Park Memorial Hospital provided the most non-tertiary discharges (1,771 or 20.7 percent), followed by Florida Hospital-Orlando (1,647 or 19.2 percent), Florida Hospital-Altamonte (1,335 or 15.6 percent), and South Seminole Hospital (1,183 or 13.8 percent). CFRH accounted for 309 or 3.6 percent of the discharges. CF 25-6 and 25-9. In 2004, Florida Hospital facilities had a combined 18,701 or 54.1 percent of the "non-tertiary" discharges of patients residing in Seminole County, and ORHS facilities had a combined 9,473 or 27.4 percent of such discharges. By comparison, CFRH had 5,131 or 14.8 percent of such discharges. CFRH 25-2 and 25-3. Central Florida proposes to serve a ten zip code service area. Central Florida's primary service area consists of four zip codes in Seminole County, 32765 (Oviedo), 32766 (Oviedo), 32708 (Winter Springs), 32773, just south of CFRH and northeast of ORHS South Seminole Hospital, and zip code 32792 in Orange County. (Other cases from Seminole County are also included.) OV 23 and 26; CF 12, Table 1-15, at 1-25. Central Florida's secondary service area consists of two Seminole County zip codes 32707, south of zip code 32708 and just east of Florida Hospital-Altamonte, and zip code 32732 (Geneva and in the northeastern portion of Seminole County, and Orange County (bordering Seminole County to the north) zip codes 32817, 32826, and 32820, running west to east from zip code 32792. (Other cases from Orange County are also included.) Id. In five zip codes (out of ten) of Central Florida's proposed primary service area (32708, 32765, 32766, 32773, and 32792, which includes Winter Park Memorial Hospital on the western edge), see OV 27 and CF 12 at 1-28, in 2004, Florida Hospital facilities had a combined 63.9 percent non-tertiary market share and ORHS facilities had a combined 25.0 percent non-tertiary market share. Winter Park provided the most non- tertiary discharges (4,037 or 26.7 percent), followed by Florida Hospital-Orlando (2,961 or 19.6 percent), Florida Hospital- Altamonte (1,938 or 12.8 percent), and ORHS South Seminole Hospital (1,619 or 10.7 percent). CFRH's market share was 9.2 percent or 1,389 discharges. CF 25-7, 25-8, and 25-11. For Years 1 (2008) and 2 (2009), Central Florida projects that it will receive approximately 83 percent of its total cases from its primary service area, including cases from other Seminole County zip codes, of which approximately 75 percent are expected from the five zip codes, and approximately 17 percent from its secondary service area. CF 12 at Table 1- 15. Central Florida's projected occupancy levels for Years 1 and 2 were approximately 60 and 63 percent, respectively, and approximately 75 percent by Year 5 (2012). CF 12, Tables 1-15 and 1-16 at 1-25, 1-26, and 1-28; CF 42. Central Florida also provided adjusted numbers (downward) for Years 1 and 2 to account for the start-up phases of opening the new hospital, which yielded projected occupancy levels of approximately 45 and 55 percent, respectively. Central Florida's revenue projections were based on these adjusted occupancy levels. Central Florida also projected 66.4 percent occupancy for Year 3. Id. See also CF 12, Schedules 5 and 7A and CF 42. (Oviedo HMA's expert projected 61 percent occupancy for Year 5 for Central Florida.) Central Florida's projected occupancy levels for Year 5 appear reasonable. If Oviedo HMA's CON application is approved, the market share for Oviedo HMA's primary service area for the new Oviedo HMA hospital, in conjunction with ORHS facilities for 2009 (Year 2), is projected to be approximately 50 to 54 percent, with Florida Hospital facilities market share reduced to approximately 41 to 45 percent.9 For 2009 (Year 2), if Central Florida's CON application is approved and the five zip codes are used to determine market share, the market shares for Florida Hospital, ORHS, CFRH, Central Florida/Oviedo, and other facilities are projected to be 55.5 percent, 21.4 percent, 6.6 percent, 13.5 percent, and 3.0 percent, respectively. CF 25-13. The Proposals and applicants' commitment Central Florida's proposal Central Florida proposes to build a new, 60-bed hospital in Oviedo (on a purchased site) through the transfer (and delicensure) of 60 acute care beds from its existing hospital. The proposed hospital is modeled after and is an enlarged version of West Marion Community Hospital, a licensed and operational HCA facility in Ocala, Florida. The proposed hospital is made up of 173,335 gross square feet, with a projected construction cost of $36,400,350 or $210 per gross square foot. The total project cost is $93,630,559. The licensed bed complement includes 48 general medical-surgical beds and 12 Intensive Care Unit (ICU) beds. An obstetrics unit comprised of six labor-delivery-recovery (LDR) rooms will be located on the second floor (LDRs are not licensed beds). The twelve medical-surgical beds adjacent to the LDR rooms are "swing" beds that may be used for either general medical-surgical patients or as post-partum beds, as the need may require. All patient rooms in Central Florida's proposed hospital will be private rooms. In addition to general medical services and obstetrics, the services to be provided by the hospital will include emergency services, imaging, diagnostic cardiac catheterization, mammography, radiology, ultrasound, nuclear medicine, bone density imaging, surgery (including general and orthopedic surgery), and endoscopy. The design accommodates horizontal expansion of departments on the first floor by using "soft space," and the addition of 12 beds on both the second and third floors. The hospital can also be expanded vertically. A medical office building is planned to be phased in during construction. As a condition of its CON, Central Florida agreed to provide 7.8 percent of total patient days to Medicaid patients and 1.74 percent of total patient days to charity patients. Central Florida intends to provide OB services, but not as a condition of approval. Central Florida's proposal has the support of its parent organization, HCA Inc. The project involves a capital expenditure of greater than $10 million and is subject to formal approval by HCA following the award of the CON. However, Chuck Hall, President of HCA's North Florida Division, stated that HCA's senior management understands the Central Florida proposal, and Central Florida can be confident of approval. Oviedo HMA contends that Central Florida did not address in its CON application the impacts (loss of cases or cannibalization) to CFRH if Central Florida's CON application is approved. There is evidence that the loss of 60 beds could require CFRH to add back beds or run in excess of capacity and that the loss of cases, such as OB cases, could have an impact on CFRH. During the hearing, Central Florida persuasively proved that, if its CON application is approved, the overall impact on CFRH would be minimal.10 Oviedo HMA's proposal Oviedo HMA proposes to build a new, 60-bed acute care hospital in Oviedo. The project involves 133,081 square feet at a construction cost of $26,616,200, or $200 per gross square foot. The total project cost is $62,734,334. HMA is committed to fund the project, even if it is as high as $82 million, so long as ORHS provides its financial and collaborative commitment as reflected herein. Oviedo HMA proposes to offer a full range of primary and secondary non-tertiary hospital services, such as medical- surgical care, emergency room case, ambulatory surgical care, cardiac catheterization laboratory services, outpatient services, etc., and expressly agrees to "provide Obstetrical Services." The floor plan for the hospital is taken from the replacement facility for Heart of Florida Regional Medical Center in Haines City, Florida, which HMA constructed in 1997. The design includes 47 medical-surgical beds, eight ICU beds, and five dedicated post-partum beds. The hospital will also have four LDR beds. The project includes 12 emergency treatment rooms and two non-licensed observation beds. All patient rooms will be private rooms. The hospital is designed to be expanded horizontally (for example, expanding the Emergency Department), and to be expanded vertically from three to five floors. While disputed by Central Florida, the proposed hospital, with surface parking, can be constructed on 15 to 20 acres, which can also accommodate future expansion. Additional acreage may be needed to accommodate a full build-out of a five- story hospital and additional surface parking. There are currently no plans for a medical office building on-site and additional acreage would be needed. Oviedo HMA did not propose a specific provision of health care services to Medicaid patients and the medically indigent. Rather, Oviedo HMA "commits to accept all Medicaid and Indigent [sic] patients that are clinically appropriate for services offered by Oviedo HMA, Inc." Oviedo HMA's proposal does not enjoy the unconditional support of its parent organization. Rather, the proposal is contingent upon a collaborative effort between Oviedo HMA and ORHS, whereby ORHS has agreed to contribute 20 percent of the project cost of Oviedo HMA's proposal and, in turn, receives 20 percent of the profits of the proposed hospital. HMA formed the belief that the Oviedo market cannot be penetrated by a hospital provider not affiliated with either Florida Hospital or ORHS, and HMA would not attempt to enter the Oviedo market on its own. Each applicant's experts found flaws with the competing applicant's plans for their respective hospitals. Each of the flaws can be remedied prior to construction. Land for the proposals Central Florida In June 2005, Central Florida purchased approximately 27 acres for its proposed hospital, at a cost of $7,864,439, within the $8.2 million budgeted for land in its CON application. The site comprises seven contiguous parcels centrally located in the Oviedo area (within zip code 32765), situated between State Road 417 and State Road 426 and between Red Bug Lake Road and Oviedo Marketplace Boulevard (south-to- north). Four of the seven parcels are currently within the City of Oviedo and Central Florida has requested the City of Oviedo to annex the remaining parcels. The proposed site is approximately ten miles from CFRH. While the subject of some criticism by Oviedo HMA, the site does not pose any significant road access issues which can not be reasonably cured. An amendment to the City of Oviedo's comprehensive plan is required before the site can be developed for hospital use. Central Florida filed its application in October, 2005, and a decision is expected in August or September, 2006. Having a hospital on the site proposed by Central Florida would provide the residents of the Oviedo area with a centrally located hospital site. Central Florida's budget for land costs and site preparation are reasonable. Oveido HMA Oviedo HMA budgeted $5.5 million for the acquisition of the hospital site in the Oviedo area. $3.4 million has been allocated for site development. Oviedo HMA does not anticipate purchasing any land for the project unless its CON application is approved. Oviedo HMA's experts reviewed several sites, which may be potentially suitable for the hospital. See OV 17A and 17-1 through 17-10. Mr. Harling, an expert in civil engineering and commercial site development, and Mr. Axel, an expert in commercial real estate sales, were quite familiar with the real estate market and development potential (for the proposed Oviedo HMA hospital) of several parcels in the Oviedo area. They did not perform a formal feasibility study or an estimate of the probable cost of site development for the sites. Mr. Harling was aware of the nature of the project, a 60-bed hospital, and some details regarding the parcels he examined, such as the existence of utilities and drainage outfall systems, but was not aware of the square footage of the proposed hospital and had not reviewed a site or floor plan. Despite challenges for the development of specific sites, such as the existence of wetland areas, and challenges in purchasing a site within the budgeted amount, based upon his review of the sites and assumptions regarding, in part, the amount of impervious coverage required, he opined that one or more of the parcels was suitable for the planned hospital and that $170,000 per acre for 20 acres was reasonable. The uncertainty regarding the location of the hospital site raises some concerns given Oviedo HMA's primary service area. A new hospital centrally located within the Oviedo area would be optimal to meet the needs of those residents. There was persuasive evidence that Oviedo HMA will be able to purchase a suitable hospital site at the cost reflected in the CON application. However, there are reasonable concerns whether a 15 to 20-acre site can accommodate a fully-expanded hospital with five floors, a medical office building, and any required additional parking. (Oviedo HMA does not have plans to build a medical office building on the 15 to 20-acre site. Such a building would require additional acreage.) Central Florida's proposal receives an edge here because it has already purchased a site which is centrally located for a hospital to serve the Oviedo area. Section 408.035(1), Florida Statutes - The need for the health services being proposed The parties stipulated to the need for a new, 60-bed acute care hospital in Oviedo, Seminole County, Florida, AHCA District 7, subdistrict 7-4. Section 408.035(2), Florida Statutes - The availability, quality of care, accessibility, and extent of utilization of existing health care facilities and health services in the district of the applicant Quality health care services proposed by the applicants are available to the residents of District 7, Seminole County, and in particular, the Oviedo area. As noted herein, the health care market in Orange and Seminole Counties is dominated by Florida Hospital and ORHS. The utilization of existing facilities in Seminole County is acceptable notwithstanding the maldistribution of acute care beds in Seminole County. Seminole County residents will continue to outmigrate from Seminole County to Orange County for tertiary care services if Oviedo HMA's project is approved. This outmigration may continue even if Central Florida's project is approved, although some curtailment would be expected in time. Neither applicant is favored by this criterion. Section 408.035(3), Florida Statutes - The ability of the applicant to provide quality of care and the applicant's record of providing quality of care Central Florida (specifically CFRH) has a history of providing high quality of care to its patients. CFRH has received awards for its health care services. Central Florida has the ability to provide quality of care should its project be approved. HMA hospitals have also been honored with several awards and recognitions for quality of care. Oviedo HMA, by virtue of its affiliation with HMA-affiliated hospitals and collaboration with ORHS, has the ability to provide high quality of care should its project be approved. Oviedo HMA proposes to develop its hospital through a clinical and financial collaborative effort with ORHS using ORHS as a tertiary care referral partner and incorporating ORHS' resources in developing a quality program. Both applicants expect that any patients needing tertiary care will be sent to ORHS (for Oviedo HMA hospital patients) or to CFRH (for Central Florida patients). It is anticipated that if certain tertiary care services are not offered at CFRH, Central Florida hospital patients would be referred to Florida Hospital or ORHS. The Oviedo HMA/ORHS collaborative effort offers advantages over the Central Florida/CFRH (or elsewhere) referral network. There is some evidence that hospital transfers within affiliated systems may be quicker and easier than from competing systems. Another advantage is the ability of using an integrated IT system among ORHS affiliated hospitals. It is often cumbersome for non-affiliated hospitals to exchange patient data electronically. Conversely, the transfer of patient information to and from CFRH and the new Central Florida hospital, if approved, will facilitate patient care between these hospitals. Certain tertiary services offered by and through ORHS may afford Oviedo residents a greater range of services than those offered by CFRH. This criterion favors Oviedo HMA in light of its collaborative arrangement with ORHS. Section 408.935(4), Florida Statutes - The availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation The parties stipulated that the applicants have sufficient funds available for capital and operating expenses, for project accomplishment and operation. Central Florida questioned the reasonableness of Oviedo HMA's land cost projection. The parties also stipulated that the applicants' proposed staffing is adequate and that the proposed average annual salaries are reasonable for their respective hospitals. Oviedo HMA questions whether Central Florida's CON application failed to include the appropriate Schedule 6, whereas Central Florida reserved the right to question whether Oviedo HMA accurately reflected proposed staffing expenses in Schedule 8A. The ability of each applicant to attract the necessary medical and clinical staff necessary to implement their respective hospitals is also is dispute. Both applicants have the ability to recruit and retain nursing and other related medical personnel, including physicians. Oviedo HMA has an edge in recruitment of physicians and nurses by virtue of its collaboration with ORHS and given existing physician referral patterns. Central Florida has identified a need to recruit additional physicians in several practice areas, although they appear to have been recently successful in recruiting physicians for specialty services such as neurosurgery. Both applicants can appropriately manage and operate their respective hospitals. Central Florida's proposed hospital will have its own management team and will be administered separate and apart from CFRH. Oviedo HMA will also operate the proposed hospital notwithstanding the intended collaboration with ORHS. Oviedo HMA's projected land cost is reasonable. Also, Central Florida's Schedule 6 and Oviedo HMA's Schedule 8A are appropriate. By stipulation, the applicants have the ability to fund their respective projects and their construction and equipment costs are reasonable. This criterion is neutral except for Central Florida's purchase of a centrally located site. See Finding of Fact 173. Section 408.035(5), Florida Statutes - The extent to which the proposed services will enhance access to health care for residents of the service district The parties stipulated that the hospitals proposed by the applicants will enhance health care for residents of the Oviedo area. At issue was which hospital project will better enhance such access. Both applicants proposed similar health care services, which are needed in the Oviedo community. As noted elsewhere in this Recommended Order, approval of the Central Florida proposal would afford patients and physicians with another choice of health care provider. It is expected that patients receiving health care services at a Central Florida hospital in Oviedo will be able to access certain tertiary care services (such as open heart surgery) at CFRH, and other tertiary care facilities. On the other hand, the Oviedo HMA proposal does not afford another choice to patients and physicians in the area in any meaningful way, given the current market share of ORHS in the Oviedo area and the expected collaborative effort. This negative is out-weighed by the prospect that patients accessing an Oviedo HMA hospital would be expected to access a full array of tertiary care services at ORHS facilities given the collaborative nature of the relationship. Both proposals would enhance access to health care for residents of the Oviedo area. But the Oviedo HMA project has a significant comparative edge, and it is this edge which ultimately favors approval of the Oviedo HMA project when all statutory and rule criteria are considered. Section 408.035(6), Florida Statutes - The immediate and long-term financial feasibility of the proposals Immediate or Short-term financial feasibility 129. Generally, immediate or short-term financial feasibility refers to the ability of the applicants to fund construction and start up of the proposed project. Each applicant has this ability. Long-term financial feasibility Long-term financial feasibility refers to the ability of the project to break even or show a profit within a reasonable period in the future. There is no AHCA rule that states profitability must be shown within a specific period of years. Generally, applicants project financial feasibility within two years of operation. This may be due, in part, because AHCA requires detailed financial projections, including a statement of the projected revenue and expenses for the first two years of operation after completion of the proposed project. See § 408.037(1)(b)3., Fla. Stat. CON applicants define their financial projections within these general parameters. Where there are two or more competing applicants and one demonstrates financial feasibility within two years and the others do not demonstrate financial feasibility until subsequent years, the competitive advantage often goes to the applicant showing a profit in year two, although AHCA has approved CON applications which projected profitability in later years. OV 69 at 34; CF 84 at 25. The financial projections of each applicant were based upon the hospital utilization projections discussed previously. To the extent the utilization projections were overstated, this would of course effect the financial projections. Each applicant presented evidence to demonstrate the reasonableness of their own financial projections, and offered criticism of the financial projections of the other applicant. A. Oviedo HMA Projections Oviedo HMA projects that it will achieve a net profit in Year 1 of operation of $82,000 (after taxes) and a net profit in Year 2 of $2.4 million (after taxes). The payor mix assumptions in Schedule 7A were derived from existing (historical) discharges generated from the zip codes in the primary service area. Oviedo HMA used three HMA hospitals in Florida, i.e., Brooksville Regional Hospital, Pasco Regional Medical Center (120-bed, excluding newborn nursery, hospital), and Sebastian Hospital, as proxy or target hospitals for the basis of the expense projections in the financial pro formas. (Brooksville and Spring Hill report on a consolidated basis.) Fiscal year 2003 financial data on these proxy hospitals was taken from AHCA Prior Year Actual Reports. See Ov 38. This was the most recent data available to Oviedo HMA's expert at the time the financial portions of the CON application were prepared. These reports are a detailed source of data submitted to AHCA and certified as accurate.11 Each of the three hospitals was profitable for the reporting fiscal year. A hospital's occupancy refers to the average head county divided by the number of days. Average daily census refers to the average number of patients in the facility over the year on average, generally a year. The projected occupancy for the Oviedo facility is 57.9 percent in Year 1 (2008) and 75.1 percent in Year 2 (2009). The average occupancy for the three proxy hospitals was between 55 and 59 percent. Central Florida's expert estimated occupancy levels (for the Oviedo HMA project) of 54 and 69 percent for Years 1 and 2. Compare OV 12, Schedule 5 - Projected Utilization Assumptions with CFRH 25-15. (In Year 2, the occupancy for the Oviedo HMA hospital is projected to be higher than the three proxy hospitals.)12 Central Florida criticized the use of the three proxy hospitals as not appropriate, in part, because one of the hospitals did not include a cardiac catheterization lab, and another did not have an OB program, which are services that will be available at the Oviedo HMA hospital. However, the evidence demonstrates that the three proxy hospitals were reasonable, as these hospitals included one hospital (Pasco Regional Medical Center) which was at the highest end of HMA's cost experience, and two hospitals that were in the middle of HMA's overall cost experience. It does not appear that HMA attempted to choose hospitals with lower- cost experience in an effort to overstate the expected profits. Use of "proxy hospitals" for cost experience is a common methodology, and the hospitals selected appear reasonable. Central Florida also claimed that Oviedo HMA's projected costs were understated because there was not a specific allocation for "fringe benefits" (estimated at 22 percent of salaries) added to the salary costs extrapolated from the FTE and salary projections in Schedule 6.13 Oviedo HMA's financial planner agreed that the financial model he utilized did not make a "straight line" mapping of the Schedule 6 FTEs and salary projections into Schedule 8A statement of expenses. However, an accounting of all salary and wages, as well as fringe benefits, was included in Oviedo HMA's Schedule 8A, based on the actual experience of the three proxy hospitals as reflected in the Prior Year Actual Reports. Each of the proxy hospitals is required to report all of its hospital costs, including salaries and fringe benefits, in the Prior Year Actual Reports, and all costs from these proxy hospitals were included in Oviedo HMA's financial model. Although the Prior Year Actual Reports do not have a specific "fringe benefits" line item, these expenses are included in the reports either under the columns for "salary and wages" or for "other" expenses. All of the costs were carried over into the financial model. The applicant also conducted a reasonableness test when the financial model and Schedule 8A were prepared, by comparing the total salaries and wages from the three proxy hospitals ($15.7 million) versus the extrapolation of total salary and wages from Schedule 6 ($15 million). The amount allocated in the model and placed on Schedule 8A for salaries and wages was more than sufficient to cover all salaries and wages on Schedule 6. Additional allocation for fringe benefits was included within the "other" cost centers in the Prior Year Actual Reports which also carried over to Schedule 8A. Oviedo HMA's expert also conducted a series of other "sensitivity analysis" verifying that the costs included on Schedule 8A for salaries and wages and fringe benefits, and other expenses were reasonable. Central Florida criticized the "sensitivity analysis" claiming one year of inflation for expenses was omitted in the analysis. However, even if accepted as true, applying an inflation adjustment of 3.5 percent for one additional year of expenses, does not materially change any of the sensitivity analysis, because revenues would also have to be inflated forward for the additional year. Further, Oviedo HMA's Schedule 8A included $15.7 million for salary and wage expenses, and included additional costs for fringe benefits in other line items. Central Florida also criticized Oviedo HMA for not including any interest expense to account for financing the proposed project. However, no interest is anticipated, as the project will be funded by the parent company through cash on hand and operating cash flow without borrowing; the company does not charge interest to its affiliates (even though for tax accounting and external audit reports it may impute interest to the affiliates). Moreover, to the extent any interest would be hypothetically imputed to the project as overall corporate overhead, it is captured in the financial pro formas through the management fee which was allocated as an expense in the pro formas. Moreover, even if Central Florida's claims of over $1 million in omitted expenses are accepted as valid, the project is likely to show a profit in the second year of operation. In sum, the financial model utilized by Oviedo HMA was a reasonable approach to financial forecasting. Given the Oviedo HMA's occupancy projections, the hospital is likely to be financially feasible in the long-term and likely show a profit by the second year of operation. B. Central Florida's Projections The revenues and expenses projected for the proposed hospital are based on the experience of CFRH's existing facility, with adjustments made to reflect the service lines and payor mix of the proposed hospital. Based on this record, in the past, it appears that CON applicants for a new hospital generally have projected financial feasibility by the first two or three years of operation. This does not necessarily mean that they have been successful at achieving these projections, only that the projections have been made. Central Florida projected that the proposed hospital, before taxes, will have net income losses before taxes of: $8,978,068 in Year 1; $6,641,454 in Year 2; $3,318,963 in Year 3; and $1,140,062 in Year 4 of operation. In Year 5, Central Florida projects a profit (net income before taxes) of $1,970,340 and a profit (net income after taxes) of $1,162,501 at 75 percent occupancy. CF 12 at Table 8A-2. (Central Florida projected profitable years (Years 1 through 5) on an EBDITA (earnings before depreciation, interest, taxes, and amortization) basis. Id.) Despite the projected losses for the first four years of operation of the project, HCA, by its representatives, considers the project to be financially feasible in the long- term and is committed to the project. The assumptions made for the revenue and expense projections are reasonable, notwithstanding criticisms by Oviedo HMA which have been considered. It is concluded that Central Florida's proposed hospital is likely to be financially feasible in the long-term and by Year 5.14 This criterion is neutral. Section 408.035(7), Florida Statutes - The extent that the proposal will foster competition that promotes quality and cost- effectiveness The greater Orlando area is a competitive market. Nevertheless, Mr. Gregg, for AHCA, stated that he would want to see more diversity in the greater Orlando market. ORHS and Florida Hospital are large health care provider systems. Notwithstanding the potential improvement of the delivery of health care services to the residents of the Oviedo area, the net impact of a 60-bed acute care hospital is going to be minimal when compared to these systems. Currently ORHS, Florida Hospital, and to a much lesser extent CFRH compete for patients from the Oviedo area. ORHS and Florida Hospital are the dominant providers. If Oviedo HMA were sponsoring the project alone, it could be said that approval of its project would bring a new provider to the market. However, this is not the case. Notwithstanding the day-to-day management of the new hospital by Oviedo HMA, the expected collaborative arrangement between Oviedo HMA and ORHS, discussed in Oviedo HMA's CON application and presented as a significant feature at the final hearing, negates the suggestion that Oviedo HMA will be a new provider. This is especially so given the expected referrals to ORHS. Central Florida argues that its proposal would release the strangle-hold of Florida Hospital and ORHS on the greater Orlando area, including the Oviedo area. The presence of Central Florida would give the Oviedo area residents (and physicians) another choice for acute care related health care services and, in time, could be expected to cause a re-direction of patients needing certain tertiary care services away from ORHS and Florida Hospital, to CFRH. Nevertheless, the applicable statutory review criteria specifically states that it applies to competition that promotes "quality" and "cost effectiveness." ORHS and Florida Hospital provide high quality of care. No persuasive evidence was presented that either Oviedo HMA's or Central Florida's proposal will foster competition that will promote quality of care to any significant degree. As to cost-effectiveness, while there is an argument that having additional choices will enhance cost-effectiveness, it was not demonstrated by either applicant in this case. There was no persuasive analysis offered of the current costs of healthcare in the Oviedo area and what impact, if any, the addition of Oviedo HMA or Central Florida would have on those costs. The best that can be said about enhancement in competition is that another provider might have some impact on managed care rates. Without specific detailed analysis, this evidence can be given very little weight. Also, there is insufficient evidence to say which applicant would more likely impact managed care rates. In light of the statutory criterion, Central Florida and Oviedo HMA did not demonstrate that their proposals should be given any advantage under this criterion. Section 408.035(8), Florida Statutes - The costs and methods of proposed construction, including the costs and construction of energy provision and the availability of alternative, less costly, or more effective methods of construction The parties stipulated that each party meets this criterion and that costs are not in dispute in this proceeding. However, each party reserved the right to argue their design was better and the impact of cost on financial feasibility. Central Florida also reserved the right to argue that its proposal should be more favorably reviewed comparatively because it has purchased land in the Oviedo area and because Oviedo HMA cannot purchase enough land in the Oviedo area at the price reflected in the CON Application. Both applicants project reasonable costs and methods of construction and satisfy this criterion. Regarding this criterion, despite some criticism, Central Florida should receive an edge because it has purchased a desirable site, which is centrally located in the Oviedo area. Section 408.035(9), Florida Statutes: Applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent The parties stipulated that HMA's Florida hospitals and Central Florida have historically provided significant health care services to Medicaid patients and the medically indigent. Central Florida proposes to provide 7.8 percent of total patient days to Medicaid patients and 1.74 percent of total patient days to charity patients, as a condition of its CON. By comparison, Oviedo HMA did not propose a specific percentage of patient days dedicated to Medicaid or charity patients. Rather, Oviedo HMA commits to accept all Medicaid and indigent patients that are clinically appropriate for services offered by Oviedo HMA. Central Florida should receive a comparative edge regarding this criterion. Section 408.035(10), Florida Statutes - The applicant's designation as a Gold Seal Program nursing facility pursuant to Section 400.235, Florida Statutes, when the applicant is requesting additional nursing home beds at that facility The parties stipulated that this criterion is not applicable.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order approving Oviedo HMA, Inc.'s CON application No. 9807P and denying Central Florida Regional Hospital, Inc. d/b/a Central Florida Regional Hospital's CON application No. 9805. DONE AND ENTERED this 23rd day of August, 2006, in Tallahassee, Leon County, Florida. S CHARLES A. STAMPELOS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of August, 2006.
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.
The Issue Whether the certificate of need (CON) applications filed by New Port Richey Hospital, Inc., d/b/a Community Hospital of New Port Richey (Community Hospital) (CON No. 9539), and Morton Plant Hospital Association, Inc., d/b/a North Bay Hospital (North Bay) (CON No. 9538), each seeking to replace and relocate their respective general acute care hospital, satisfy, on balance, the applicable statutory and rule criteria.
Findings Of Fact The Parties AHCA AHCA is the single state agency responsible for the administration of the CON program in Florida pursuant to Chapter 408, Florida Statutes (2000). The agency separately reviewed and preliminarily approved both applications. Community Hospital Community Hospital is a 300,000 square feet, accredited hospital with 345 licensed acute care beds and 56 licensed adult psychiatric beds, located in southern New Port Richey, Florida, within Sub-District 5-1. Community Hospital is seeking to construct a replacement facility approximately five miles to the southeast within a rapidly developing suburb known as "Trinity." Community Hospital currently provides a wide array of comprehensive inpatient and outpatient services and is the only provider of obstetrical and adult psychiatric services in Sub-District 5-1. It is the largest provider of emergency services in Pasco County with approximately 35,000 visits annually. It is also the largest provider of Medicaid and indigent patient days in Sub-District 5-1. Community Hospital was originally built in 1969 and is an aging facility. Although it has been renovated over time, the hospital is in poor condition. Community Hospital's average daily census is below 50 percent. North Bay North Bay is a 122-bed facility containing 102 licensed acute care beds and 20 licensed comprehensive medical rehabilitation beds, located approximately one mile north of Community Hospital in Sub-District 5-1. It serves a large elderly population and does not provide pediatric or obstetrical care. North Bay is also an aging facility and proposes to construct a replacement facility in the Trinity area. Notably, however, North Bay has spent approximately 12 million dollars over the past three years for physical improvements and is in reasonable physical condition. Helen Ellis Helen Ellis is an accredited hospital with 150 licensed acute care beds and 18 licensed skilled nursing unit beds. It is located in northern Pinellas County, approximately eight miles south of Community Hospital and nine miles south of North Bay. Helen Ellis provides a full array of acute care services including obstetrics and cardiac catheterization. Its daily census average has fluctuated over the years but is approximately 45 percent. Mease Mease operates two acute care hospitals in Pinellas County including Mease Dunedin Hospital, located approximately 18 to 20 miles south of the applicants and Mease Countryside Hospital, located approximately 16 to 18 miles south of Community and North Bay. Each hospital operates 189 licensed beds. The Mease hospitals are located in the adjacent acute care sub-district but compete with the applicants. The Health Planning District AHCA's Health Planning District 5 consists of Pinellas and Pasco Counties. U.S. Highway 41 runs north and south through the District and splits Pasco County into Sub- District 5-1 and Sub-District 5-2. Sub-District 5-1, where Community Hospital and North Bay are located, extends from U.S. 41 west to the Gulf Coast. Sub-District 5-2 extends from U.S. 41 to the eastern edge of Pasco County. Pinellas County is the most densely populated county in Florida and steadily grows at 5.52 percent per year. On the other hand, its neighbor to the north, Pasco County, has been experiencing over 15 percent annual growth in population. The evidence demonstrates that the area known as Trinity, located four to five miles southeast of New Port Richey, is largely responsible for the growth. With its large, single- owner land tracts, Trinity has become the area's fuel for growth, while New Port Richey, the older coastal anchor which houses the applicants' facilities, remains static. In addition to the available land in Trinity, roadway development in the southwest section of Pasco County is further fueling growth. For example, the Suncoast Highway, a major highway, was recently extended north from Hillsborough County through Sub-District 5-1, west of U.S. 41. It intersects with several large east-west thoroughfares including State Road 54, providing easy highway access to the Tampa area. The General Proposals Community Hospital's Proposal Community Hospital's CON application proposes to replace its existing, 401-bed hospital with a 376-bed state- of-the-art facility and relocate it approximately five miles to the southeast in the Trinity area. Community Hospital intends to construct a large medical office adjacent to its new facility and provide all of its current services including obstetrical care. It does not intend to change its primary service area. North Bay's Proposal North Bay's CON application proposes to replace its existing hospital with a 122-bed state-of-the-art facility and also plans to relocate it approximately eight miles to the southeast in the Trinity area of southwestern Pasco County. North Bay intends to provide the same array of services it currently offers its patients and will not provide pediatric and obstetrical care in the proposed facility. The proposed relocation site is adjacent to the Trinity Outpatient Center which is owned by North Bay's parent company, Morton Plant. The Outpatient Center offers a full range of diagnostic imaging services including nuclear medicine, cardiac nuclear stress testing, bone density scanning, CAT scanning, mammography, ultrasound, as well as many others. It also offers general and specialty ambulatory surgical services including urology; ear, nose and throat; ophthalmology; gastroenterology; endoscopy; and pain management. Approximately 14 physician offices are currently located at the Trinity Outpatient Center. The Condition of Community Hospital Facility Community Hospital's core facilities were constructed between 1969 and 1971. Additions to the hospital were made in 1973, 1975, 1976, 1977, 1979, 1981, 1992, and 1999. With an area of approximately 294,000 square feet and 401 licensed beds, or 733 square feet per bed, Community Hospital's gross area-to-bed ratio is approximately half of current hospital planning standards of 1,600 square feet per bed. With the exception of the "E" wing which was completed in 1999, all of the clinical and support departments are undersized. Medical-Surgical Beds And Intensive Care Units Community Hospital's "D" wing, constructed in 1975, is made up of two general medical-surgical unit floors which are grossly undersized. Each floor operates 47 general medical-surgical beds, 24 of which are in three-bed wards and 23 in semi-private rooms. None of the patient rooms in the "D" wing have showers or tubs so the patients bathe in a single facility located at the center of the wing on each floor. Community Hospital's "A" wing, added in 1973, is situated at the west end of the second floor and is also undersized. It too has a combination of semi-private rooms and three-bed wards without showers or tubs. Community Hospital's "F" wing, added in 1979, includes a medical-surgical unit on the second and third floor, each with semi-private and private rooms. The second floor unit is centrally located between a 56-bed adult psychiatric unit and the Surgical Intensive Care Unit (SICU) which creates security and privacy issues. The third floor unit is adjacent to the Medical Intensive Care Unit (MICU) which must be accessed through the medical-surgical unit. Neither intensive care unit (ICU) possesses an isolation area. Although the three-bed wards are generally restricted to in-season use, and not always full, they pose significant privacy, security, safety, and health concerns. They fail to meet minimum space requirements and are a serious health risk. The evidence demonstrates that reconfiguring the wards would be extremely costly and impractical due to code compliance issues. The wards hinder the hospital's acute care utilization, and impair its ability to effectively compete with other hospitals. Surgical Department and Recovery Community Hospital's surgical department is separated into two locations including the main surgical suite on the second floor and the Endoscopy/Pain Management unit located on the first floor of "C" wing. Consequently, the department cannot share support staff and space such as preparation and recovery. The main surgical suite, adjacent recovery room, and central sterile processing are 25 years old. This unit's operating rooms, cystoscopy rooms, storage areas, work- stations, central sterile, and recovery rooms are undersized and antiquated. The 12-bay Recovery Room has no patient toilet and is lacking storage. The soiled utility room is deficient. In addition, the patient bays are extremely narrow and separated by curtains. There is no direct connection to the sterile corridor, and staff must break the sterile field to transport patients from surgery to recovery. Moreover, surgery outpatients must pass through a major public lobby going to and returning from surgery. The Emergency Department Community Hospital's existing emergency department was constructed in 1992 and is the largest provider of hospital emergency services in Pasco County, handling approximately 35,000 visits per year. The hospital is also designated a "Baker Act" receiving facility under Chapter 394, Florida Statutes, and utilizes two secure examination rooms for emergent psychiatric patients. At less than 8,000 total square feet, the emergency department is severely undersized to meet the needs of its patients. The emergency department is currently undergoing renovation which will connect the triage area to the main emergency department. The renovation will not enlarge the entrance, waiting area, storage, nursing station, nor add privacy to the patient care areas in the emergency department. The renovation will not increase the total size of the emergency department, but in fact, the department's total bed availability will decrease by five beds. Similar to other departments, a more meaningful renovation cannot occur within the emergency department without triggering costly building code compliance measures. In addition to its space limitations, the emergency department is awkwardly located. In 1992, the emergency department was relocated to the front of the hospital and is completely separated from the diagnostic imaging department which remained in the original 1971 building. Consequently, emergency patients are routinely transported across the hospital for imaging and CT scans. Issues Relating to Replacement of Community Hospital Although physically possible, renovating and expanding Community Hospital's existing facility is unreasonable. First, it is cost prohibitive. Any significant renovation to the 1971, 1975, 1977, and 1979 structures would require asbestos abatement prior to construction, at an estimated cost of $1,000,000. In addition, as previously noted, the hospital will be saddled with the major expense of complying with all current building code requirements in the 40-year-old facility. Merely installing showers in patient rooms would immediately trigger a host of expensive, albeit necessary, code requirements involving access, wiring, square footage, fireproofing columns and beams, as well as floor/ceiling and roof/ceiling assemblies. Concurrent with the significant demolition and construction costs, the hospital will experience the incalculable expense and loss of revenue related to closing major portions, if not all, of the hospital. Second, renovation and expansion to the existing facility is an unreasonable option due to its physical restrictions. The 12'4" height of the hospital's first floor limits its ability to accommodate HVAC ductwork large enough to meet current ventilation requirements. In addition, there is inadequate space to expand any department within the confines of the existing hospital without cannibalizing adjacent areas, and vertical expansion is not an option. Community Hospital's application includes a lengthy Facility Condition Assessment which factually details the architectural, mechanical, and electrical deficiencies of the hospital's existing physical plant. The assessment is accurate and reasonable. Community Hospital's Proposed Replacement Community Hospital proposes to construct a six- story, 320 licensed beds, acute care replacement facility. The hospital will consist of 548,995 gross square feet and include a 56-bed adult psychiatric unit connected by a hallway to the first floor of the main hospital building. The proposal also includes the construction of an adjacent medical office building to centralize the outpatient offices and staff physicians. The evidence establishes that the deficiencies inherent in Community Hospital's existing hospital will be cured by its replacement hospital. All patients will be provided large private rooms. The emergency department will double in size, and contain private examination rooms. All building code requirements will be met or exceeded. Patients and staff will have separate elevators from the public. In addition, the surgical department will have large operating rooms, and adequate storage. The MICU and SICU will be adjacent to each other on the second floor to avoid unnecessary traffic within the hospital. Surgical patients will be transported to the ICU via a private elevator dedicated to that purpose. Medical-surgical patient rooms will be efficiently located on the third through sixth floors, in "double-T" configuration. Community Hospital's Existing and Proposed Sites Community Hospital is currently located on a 23-acre site inside the southern boundary of New Port Richey. Single- family homes and offices occupy the two-lane residential streets that surround the site on all sides. The hospital buildings are situated on the northern half of the site, with the main parking lot located to the south, in front of the main entrance to the hospital. Marine Parkway cuts through the southern half of the site from the west, and enters the main parking lot. A private medical mall sits immediately to the west of the main parking lot and a one-acre storm-water retention pond sits to the west of the mall. A private medical office building occupies the south end of the main parking lot and a four-acre drainage easement is located in the southwest corner of the site. Community Hospital's administration has actively analyzed its existing site, aging facility, and adjacent areas. It has commissioned studies by civil engineers, health care consultants, and architects. The collective evidence demonstrates that, although on-site relocation is potentially an option, on balance, it is not a reasonable option. Replacing Community Hospital on its existing site is not practical for several reasons. First, the hospital will experience significant disruption and may be required to completely close down for a period of time. Second, the site's southwestern large four-acre parcel is necessary for storm-water retention and is unavailable for expansion. Third, a reliable cost differential is unknown given Community Hospital's inability to successfully negotiate with the city and owners of the adjacent medical office complexes to acquire additional parcels. Fourth, acquiring other adjacent properties is not a viable option since they consist of individually owned residential lots. In addition to the site's physical restrictions, the site is hindered by its location. The hospital is situated in a neighborhood between small streets and a local school. From the north and south, motorists utilize either U.S. 19, a congested corridor that accommodates approximately 50,000 vehicles per day, or Grand and Madison Streets, two-lane streets within a school zone. From the east and west, motorists utilize similar two-lane neighborhood streets including Marine Parkway, which often floods in heavy rains. Community Hospital's proposed site, on the other hand, is a 53-acre tract positioned five miles from its current facility, at the intersection of two major thoroughfares in southwestern Pasco County. The proposed site offers ample space for all facilities, parking, outpatient care, and future expansion. In addition, Community Hospital's proposed site provides reasonable access to all patients within its existing primary service area made up of zip codes 34652, 34653, 34668, 34655, 34690, and 34691. For example, the average drive times from the population centers of each zip code to the existing site of the hospital and the proposed site are as follows: Zip code Difference Existing site Proposed site 34652 3 minutes 14 minutes 11 minutes 34653 8 minutes 11 minutes 3 minutes 34668 15 minutes 21 minutes 6 minutes 34655 11 minutes 4 minutes -7 minutes 34690 11 minutes 13 minutes 2 minutes 34691 11 minutes 17 minutes 6 minutes While the average drive time from the population centroids of zip codes 34653, 34668, 34690, and 34691 to the proposed site slightly increases, it decreases from the Trinity area, where population growth has been most significant in southwestern Pasco County. In addition, a motorist's average drive time from Community Hospital's existing location to its proposed site is only 10 to 11 minutes, and patients utilizing public transportation will be able to access the new hospital via a bus stop located adjacent to the proposed site. The Condition of North Bay Facility North Bay Hospital is also an aging facility. Its original structure and portions of its physical plant are approximately 30 years old. Portions of its major mechanical systems will soon require replacement including its boilers, air handlers, and chillers. In addition, the hospital is undersized and awkwardly configured. Despite its shortcomings, however, North Bay is generally in good condition. The hospital has been consistently renovated and updated over time and is aesthetically pleasing. Moreover, its second and third floors were added in 1986, are in good shape, and structurally capable of vertical expansion. Medical Surgical Beds and ICU Units By-in-large, North Bay is comprised of undersized, semi-private rooms containing toilet and shower facilities. The hospital does not have any three-bed wards. North Bay's first floor houses all ancillary and support services including lab, radiology, pharmacy, surgery, pre-op, post-anesthesia recovery, central sterile processing and supply, kitchen and cafeteria, housekeeping and administration, as well as the mechanical, electrical, and facilities maintenance and engineering. The first floor also contains a 20-bed CMR unit and a 15-bed acute care unit. North Bay's second and third floors are mostly comprised of semi-private rooms and supporting nursing stations. Although the rooms and stations are not ideally sized, they are in relatively good shape. North Bay utilizes a single ICU with ten critical care beds. The ICU rooms and nursing stations are also undersized. A four-bed ICU ward and former nursery are routinely used to serve overflow patients. Surgery Department and Recovery North Bay utilizes a single pre-operative surgical room for all of its surgery patients. The room accommodates up to five patient beds, but has limited space for storage and pre-operative procedures. Its operating rooms are sufficiently sized. While carts and large equipment are routinely stored in hallways throughout the surgical suite, North Bay has converted the former obstetrics recovery room to surgical storage and has made efficient use of other available space. North Bay operates a small six-bed Post Anesthesia Care Unit. Nurses routinely prepare patient medications in the unit which is often crowded with staff and patients. The Emergency Department North Bay has recently expanded its emergency department. The evidence demonstrates that this department is sufficient and meets current and future expected patient volumes. Replacement Issues Relating to North Bay While it is clear that areas of North Bay's physical plant are aging, the facility is in relatively good condition. It is apparent that North Bay must soon replace significant equipment, including cast-iron sewer pipes, plumbing, boilers, and chillers which will cause some interruption to hospital operations. However, North Bay's four-page written assessment of the facility and its argument citing the need for total replacement is, on balance, not persuasive. North Bay's Proposed Replacement North Bay proposes to construct a new, state-of-the- art, hospital approximately eight miles southeast of its existing facility and intends to offer the identical array of services the hospital currently provides. North Bay's Existing and Proposed Sites North Bay's existing hospital is located on an eight-acre site with limited storm-water drainage capacity. Consequently, much of its parking area is covered by deep, porous, gravel instead of asphalt. North Bay's existing site is generally surrounded by residential properties. While the city has committed, in writing, it willingness to assist both applicants with on-site expansion, it is unknown whether North Bay can acquire additional adjacent property. North Bay's proposed site is located at the intersection of Trinity Oaks Boulevard and Mitchell Boulevard, south of Community Hospital's proposed site, and is quite spacious. It contains sufficient land for the facilities, parking, and future growth, and has all necessary infrastructure in place, including utility systems, storm- water structures, and roadways. Currently however, there is no public transportation service available to North Bay's proposed site. Projected Utilization by Applicants The evidence presented at hearing indicates that, statewide, replacement hospitals often increase a provider's acute care bed utilization. For example, Bartow Memorial Hospital, Heart of Florida Regional Medical Center, Lake City Medical Center, Florida Hospital Heartland Medical Center, South Lake Hospital, and Florida Hospital-Fish Memorial each experienced significant increases in utilization following the opening of their new hospital. The applicants in this case each project an increase in utilization following the construction of their new facility. Specifically, Community Hospital's application projects 82,685 total hospital patient days (64,427 acute care patient days) in year one (2006) of the operation of its proposed replacement facility, and 86,201 total hospital patient days (67,648 acute care patient days) in year two (2007). Using projected 2006 and 2007 population estimates, applying 2002 acute care hospital use rates which are below 50 percent, and keeping Community Hospital's acute care market share constant at its 2002 level, it is reasonably estimated that Community Hospital's existing hospital will experience 52,623 acute care patient days in 2006, and 53,451 acute care patient days in 2007. Consequently, Community Hospital's proposed facility must attain 11,804 additional acute care patient days in 2006, and 14,197 more acute care patient days in 2007, in order to achieve its projected acute care utilization. Although Community Hospital lost eight percent of the acute care market in its service area between 1995 and 2002, two-thirds of that loss was due to residents of Sub- District 5-1 acquiring services in another area. While Community Hospital experienced 78,444 acute care patient days in 1995, it projects only 64,427 acute care patient days in year one. Given the new facility and population factors, it is reasonable that the hospital will recapture half of its lost acute care market share and achieve its projections. With respect to its psychiatric unit, Community Hospital projects 16,615 adult psychiatric inpatient days in year one (2006) and 17,069 adult inpatient days in year two (2007) of the proposed replacement hospital. The evidence indicates that these projections are reasonable. Similarly, North Bay's acute care utilization rate has been consistently below 50 percent. Since 1999, the hospital has experienced declining utilization. In its application, North Bay states that it achieved total actual acute care patient days of 21,925 in 2000 and 19,824 in 2001 and the evidence at hearing indicates that North Bay experienced 17,693 total acute care patient days in 2002. North Bay projects 25,909 acute care patient days in the first year of operation of its proposed replacement hospital, and 27,334 acute care patient days in the second year of operation. Despite each applicant's current facility utilization rate, Community Hospital must increase its current acute care patient days by 20 percent to reach its projected utilization, and North Bay must increase its patient days by at least 50 percent. Given the population trends, service mix and existing competition, the evidence demonstrates that it is not possible for both applicants to simultaneously achieve their projections. In fact, it is strongly noted that the applicants' own projections are predicated upon only one applicant being approved and cannot be supported with the approval of two facilities. Local Health Plan Preferences In its local health plan for District 5, the Suncoast Health Council, Inc., adopted acute care preferences in October, 2000. The replacement of an existing hospital is not specifically addressed by any of the preferences. However, certain acute care preferences and specialty care preferences are applicable. The first applicable preference provides that preference "shall be given to an applicant who proposes to locate a new facility in an area that will improve access for Medicaid and indigent patients." It is clear that the majority of Medicaid and indigent patients live closer to the existing hospitals. However, Community Hospital proposes to move 5.5 miles from its current location, whereas North Bay proposes to move eight miles from its current location. While the short distances alone are less than significant, North Bay's proposed location is further removed from New Port Richey, is not located on a major highway or bus-route, and would therefore be less accessible to the medically indigent residents. Community Hospital's proposed site will be accessible using public transportation. Furthermore, Community Hospital has consistently provided excellent service to the medically indigent and its proposal would better serve that population. In 2000, Community Hospital provided 7.4 percent of its total patient days to Medicaid patients and 0.8 percent of its total patient days to charity patients. Community Hospital provided the highest percentage and greatest number of Medicaid patient days in Sub-District 5-1. By comparison, North Bay provided 5.8 percent of its total patient days to Medicaid patients and 0.9 percent of its total patient days to charity patients. In 2002, North Bay's Medicaid patients days declined to 3.56 percent. Finally, given the closeness and available bed space of the existing providers and the increasing population in the Trinity area, access will be improved by Community Hospital's relocation. The second local health plan preference provides that "[i]n cases where an applicant is a corporation with previously awarded certificates of need, preference shall be given to those which follow through in a timely manner to construct and operate the additional facilities or beds and do not use them for later negotiations with other organizations seeking to enter or expand the number of beds they own or control." Both applicants meet this preference. The third local health plan preference recognizes "Certificate of Need applications that provide AHCA with documentation that they provide, or propose to provide, the largest percentage of Medicaid and charity care patient days in relation to other hospitals in the sub-district." Community Hospital provides the largest percentage of Medicaid and charity care patient days in relation to other hospitals in Sub-District 5-1, and therefore meets this preference. The fourth local health plan preference applies to "Certificate of Need applications that demonstrate intent to serve HIV/AIDS infected persons." Both applicants accept and treat HIV/AIDS infected persons, and would continue to do so in their proposed replacement hospitals. The fifth local health plan preference recognizes "Certificate of Need applications that commit to provide a full array of acute care services including medical-surgical, intensive care, pediatric, and obstetrical services within the sub-district for which they are applying." Community Hospital qualifies since it will continue to provide its current services, including obstetrical care and psychiatric care, in its proposed replacement hospital. North Bay discontinued its pediatric and obstetrical programs in 2001, does not intend to provide them in its proposed replacement hospital, and will not provide psychiatric care. Agency Rule Preferences Florida Administrative Code Rule 59C-1.038(6) provides an applicable preference to a facility proposing "new acute care services and capital expenditures" that has "a documented history of providing services to medically indigent patients or a commitment to do so." As the largest Medicaid provider in Sub-District 5-1, Community Hospital meets this preference better than does North Bay. North Bay's history demonstrates a declining rate of service to the medically indigent. Statutory Review Criteria Section 408.035(1), Florida Statutes: The need for the health care facilities and health services being proposed in relation to the applicable district health plan District 5 includes Pasco and Pinellas County. Pasco County is rapidly developing, whereas Pinellas County is the most densely populated county in Florida. Given the population trends, service mix, and utilization rates of the existing providers, on balance, there is a need for a replacement hospital in the Trinity area. Section 408.035(2), Florida Statutes: The availability, quality of care, accessibility, and extent of utilization of existing health care facilities and health services in the service district of the applicant Community Hospital and North Bay are both located in Sub-District 5-1. Each proposes to relocate to an area of southwestern Pasco County which is experiencing explosive population growth. The other general acute care hospital located in Sub-District 5-1 is Regional Medical Center Bayonet Point, which is located further north, in the Hudson area of western Pasco County. The only other acute care hospitals in Pasco County are East Pasco Medical Center, in Zephyrhills, and Pasco Community Hospital, in Dade City. Those hospitals are located in Sub-District 5-2, east Pasco County, far from the area proposed to be served by either Community Hospital or North Bay. District 5 includes Pinellas County as well as Pasco County. Helen Ellis and Mease are existing hospital providers located in Pinellas County. Helen Ellis has 168 licensed beds, consisting of 150 acute care beds and an 18-bed skilled nursing unit, and is located 7.9 miles from Community Hospital's existing location and 10.8 miles from Community Hospital's proposed location. Access to Helen Ellis for patients originating from southwestern Pasco County requires those patients to travel congested U.S. 19 south to Tarpon Springs. As a result, the average drive time from Community Hospital's existing and proposed site to Helen Ellis is approximately 22 minutes. Helen Ellis is not a reasonable alternative to Community Hospital's proposal. The applicants' proposals are specifically designed for the current and future health care needs of southwestern Pasco County. Given its financial history, it is unknown whether Helen Ellis will be financially capable of providing the necessary care to the residents of southwestern Pasco. Mease Countryside Hospital has 189 licensed acute care beds. It is located 16.0 miles from Community Hospital's existing location and 13.8 miles from Community Hospital's proposed location. The average drive time to Mease Countryside is 32 minutes from Community Hospital's existing site and 24 minutes from its proposed site. In addition, Mease Countryside Hospital has experienced extremely high utilization over the past several years, in excess of 90 percent for calendar years 2000 and 2001. Utilization at Mease Countryside Hospital has remained over 80 percent despite the addition of 45 acute care beds in April 2002. Given the growth and demand, it is unknown whether Mease can accommodate the residents in southwest Pasco County. Mease Dunedin Hospital has 189 licensed beds, consisting of 149 acute care beds, a 30-bed skilled nursing unit, five Level 2 neonatal intensive care beds, and five Level 3 neonatal intensive care beds. Its former 15-bed adult psychiatric unit has been converted into acute care beds. It is transferring its entire obstetrics program at Mease Dunedin Hospital to Mease Countryside Hospital. Mease Dunedin Hospital is located approximately 18 to 20 miles from the applicants' existing and proposed locations with an average drive time of 35-38 minutes. With their remote location, and the exceedingly high utilization at Mease Countryside Hospital, neither of the two Mease hospitals is a viable alternative to the applicants' proposals. In addition, the construction of a replacement hospital would positively impact economic development and further attract medical professionals to Sub-District 5-1. On balance, given the proximity, utilization, service array, and accessibility of the existing providers, including the applicants, the relocation of Community Hospital will enhance access to health care to the residents. Section 408.035(3), Florida Statutes: The ability of the applicant to provide quality of care and the applicant's record of providing quality of care As stipulated, both applicants provide excellent quality of care. However, Community Hospital's proposal will better enhance its ability to provide quality care. Community is currently undersized, non-compliant with today's standards, and located on a site that does not allow for reasonable expansion. Its emergency department is inadequate for patient volume, and the configuration of the first floor leads to inefficiencies in the diagnosis and treatment of emergency patients. Again, most inpatients are placed in semi-private rooms and three-bed wards, with no showers or tubs, little privacy, and an increased risk of infection. The hospital's waiting areas for families of patients are antiquated and undersized, its nursing stations are small and cramped and the operating rooms and storage facilities are undersized. Community Hospital's deficiencies will be effectively eliminated by its proposed replacement hospital. As a result, patients will experience qualitatively better care by the staff who serve them. Conversely, North Bay is in better physical condition and not in need of replacement. It has more reasonable options to expand or relocate its facility on site. Quality of care at North Bay will not be markedly enhanced by the construction of a new hospital. Sections 408.035(4)and(5), Florida Statutes, have been stipulated as not applicable in this case. Section 408.035(6), Florida Statutes: The availability of resources, including health personnel, management personnel, and funds available for capital and operating expenditures, for project accomplishment and operation The parties stipulated that both Community Hospital and North Bay have available health personnel and management personnel for project accomplishment and operation. In addition, the evidence proves that both applicants have sufficient funds for capital and operating expenditures. Community Hospital proposes to rely on its parent company to finance the project. Keith Giger, Vice-President of Finance for HCA, Inc., Community Hospital's parent organization, provided credible deposition testimony that HCA, Inc., will finance 100 percent of the total project cost by an inter-company loan at eight percent interest. Moreover, it is noted that the amount to be financed is actually $20 million less than the $196,849,328 stated in the CON Application, since Community Hospital previously purchased the proposed site in June 2003 with existing funds and does not need to finance the land acquisition. Community Hospital has sufficient working capital for operating expenditures of the proposed replacement hospital. North Bay, on the other hand, proposes to acquire financing from BayCare Obligated Group which includes Morton Plant Hospital Association, Inc.; Mease; and several other hospital entities. Its proposal, while feasible, is less certain since member hospitals must approve the indebtedness, thereby providing Mease with the ability to derail North Bay's proposed bond financing. Section 408.035(7), Florida Statutes: The extent to which the proposed services will enhance access to health care for residents of the service district The evidence proves that either proposal will enhance geographical access to the growing population in the service district. However, with its provision of obstetrical services, Community Hospital is better suited to address the needs of the younger community. With respect to financial access, both proposed relocation sites are slightly farther away from the higher elderly and indigent population centers. Since the evidence demonstrates that it is unreasonable to relocate both facilities away from the down-town area, Community Hospital's proposal, on balance, provides better access to poor patients. First, public transportation will be available to Community Hospital's site. Second, Community Hospital has an excellent record of providing care to the poor and indigent and has accepted the agency's condition to provide ten percent of its total annual patient days to Medicaid recipients To the contrary, North Bay's site will not be accessible by public transportation. In addition, North Bay has a less impressive record of providing care to the poor and indigent. Although AHCA conditioned North Bay's approval upon it providing 9.7 percent of total annual patient days to Medicaid and charity patients, instead of the 9.7 percent of gross annual revenue proposed in its application, North Bay has consistently provided Medicaid and charity patients less than seven percent of its total annual patient days. Section 408.035(8), Florida Statutes: The immediate and long-term financial feasibility of the proposal Immediate financial feasibility refers to the availability of funds to capitalize and operate the proposal. See Memorial Healthcare Group, Ltd. d/b/a Memorial Hospital Jacksonville vs. AHCA et al., Case No. 02-0447 et seq. Community Hospital has acquired reliable financing for the project and has sufficiently demonstrated that its project is immediately financially feasible. North Bay's short-term financial proposal is less secure. As noted, North Bay intends to acquire financing from BayCare Obligated Group. As a member of the group, Mease, the parent company of two hospitals that oppose North Bay's application, must approve the plan. Long-term financial feasibility is the ability of the project to reach a break-even point within a reasonable period of time and at a reasonable achievable point in the future. Big Bend Hospice, Inc. vs. AHCA and Covenant Hospice, Inc., Case No. 02-0455. Although CON pro forma financial schedules typically show profitability within two to three years of operation, it is not a requirement. In fact, in some circumstances, such as the case of a replacement hospital, it may be unrealistic for the proposal to project profitability before the third or fourth year of operation. In this case, Community Hospital's utilization projections, gross and net revenues, and expense figures are reasonable. The evidence reliably demonstrates that its replacement hospital will be profitable by the fourth year of operation. The hospital's financial projections are further supported by credible evidence, including the fact that the hospital experienced financial improvement in 2002 despite its poor physical condition, declining utilization, and lost market share to providers outside of its district. In addition, the development and population trends in the Trinity area support the need for a replacement hospital in the area. Also, Community Hospital has benefited from increases in its Medicaid per diem and renegotiated managed care contracts. North Bay's long-term financial feasibility of its proposal is less certain. In calendar year 2001, North Bay incurred an operating loss of $306,000. In calendar year 2002, it incurred a loss of $1,160,000. In its CON application, however, North Bay projects operating income of $1,538,827 in 2007, yet omitted the ongoing expenses of interest ($1,600,000) and depreciation ($3,000,000) from its existing facility that North Bay intends to continue operating. Since North Bay's proposal does not project beyond year two, it is less certain whether it is financially feasible in the third or fourth year. In addition to the interest and depreciation issues, North Bay's utilization projections are less reasonable than Community Hospital's proposal. While possible, North Bay will have a difficult task achieving its projected 55 percent increase in acute care patient days in its second year of operation given its declining utilization, loss of obstetric/pediatric services and termination of two exclusive managed care contracts. Section 408.035(9), Florida Statutes: The extent to which the proposal will foster competition that promotes quality and cost-effectiveness Both applicants have substantial unused capacity. However, Community Hospital's existing facility is at a distinct competitive disadvantage in the market place. In fact, from 1994 to 1998, Community Hospital's overall market share in its service area declined from 40.3 percent to 35.3 percent. During that same period, Helen Ellis' overall market share in Community Hospital's service area increased from 7.2 percent to 9.2 percent. From 1995 to the 12-month period ending June 30, 2002, Community Hospital's acute care market share in its service area declined from 34.0 percent to 25.9 percent. During that same period, Helen Ellis' acute care market share in Community Hospital's service area increased from 11.7 percent to 12.0 percent. In addition, acute care average occupancy rates at Mease Dunedin Hospital increased each year from 1999 through 2002. Acute care average occupancy at Mease Countryside Hospital exceeded 90 percent in 2000 and 2001, and was approximately 85 percent for the period ending June 30, 2002. Some of the loss in Community Hospital's market share is due to an out-migration of patients from its service area to hospitals in northern Pinellas and Hillsborough Counties. Market share in Community's service area by out-of- market providers increased from 33 percent in 1995 to 40 percent in 2002. Community Hospital's outdated hospital has hampered its ability to compete for patients in its service area. Mease is increasing its efforts to attract patients and currently completing a $92 million expansion of Mease Countryside Hospital. The project includes the development of 1,134 parking spaces on 30 acres of raw land north of the Mease Countryside Hospital campus and the addition of two floors to the hospital. It also involves the relocation of 51 acute care beds, the obstetrics program and the Neonatal Intensive Care Units from Mease Dunedin Hosptial to Mease Countryside Hospital. Mease is also seeking to more than double the size of the Countryside emergency department to handle its 62,000 emergency visits. With the transfer of licensed beds from Mease Dunedin Hospital to Mease Countryside Hospital, Mease will also convert formerly semi-private patient rooms to private rooms at Mease Dunedin Hospital. The approval of Community Hospital's relocated facility will enable it to better compete with the hospitals in the area and promote quality and cost- effectiveness. North Bay, on the other hand, is not operating at a distinct disadvantage, yet is still experiencing declining utilization. North Bay is the only community-owned, not-for- profit provider in western Pasco County and is a valuable asset to the city. Section 408.035(10), Florida Statutes: The costs and methods of the proposed construction, including the costs and methods or energy provision and the availability of alternative, less costly, or more effective methods of construction The parties stipulated that the project costs in both applications are reasonable to construct the replacement hospitals. Community Hospital's proposed construction cost per square foot is $175, and slightly less than North Bay's $178 proposal. The costs and methods of proposed construction for each proposal is reasonable. Given Community Hospital's severe site and facility problems, the evidence demonstrates that there is no reasonable, less costly, or more effective methods of construction available for its proposed replacement hospital. Additional "band-aide" approaches are not financially reasonable and will not enable Community Hospital to effectively compete. The facility is currently licensed for 401 beds, operates approximately 311 beds and is still undersized. The proposed replacement hospital will meet the standards in Florida Administrative Code Rule 59A-3.081, and will meet current building codes, including the Americans with Disabilities Act and the Guidelines for Design and Construction of Hospitals and Health Care Facilities, developed by the American Institute of Architects. The opponents' argue that Community Hospital will not utilize the 320 acute care beds proposed in its CON application, and therefore, a smaller facility is a less- costly alternative. In addition, Helen Ellis' architectural expert witness provided schematic design alternatives for Community Hospital to be expanded and replaced on-site, without providing a detailed and credible cost accounting of the alternatives. Given the evidence and the law, their arguments are not persuasive. While North Bay's replacement cost figures are reasonable, given the aforementioned reasons, including the fact that the facility is in reasonably good condition and can expand vertically, on balance, it is unreasonable for North Bay to construct a replacement facility in the Trinity area. Section 408.035(11), Florida Statutes: The applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent Community Hospital has consistently provided the most health care services to Medicaid patients and the medically indigent in Sub-District 5-1. Community Hospital agreed to provide at least ten percent of its patient days to Medicaid recipients. Similarly, North Bay agreed to provide 9.7 percent of its total annual patient days to Medicaid and charity patients combined. North Bay, by contrast, provided only 3.56 percent of its total patient days to Medicaid patients in 2002, and would have to significantly reverse a declining trend in its Medicaid provision to comply with the imposed condition. Community Hospital better satisfies the criterion. Section 408.035(12) has been stipulated as not applicable in this case. Adverse Impact on Existing Providers Historical figures demonstrate that hospital market shares are not static, but fluctuate with competition. No hospital is entitled to a specific or historic market share free from competition. While the applicants are located in health planning Sub-District 5-1 and Helen Ellis and the two Mease hospitals are located in health planning Sub-District 5- 2, they compete for business. None of the opponents is a disproportionate share, safety net, Medicaid provider. As a result, AHCA gives less consideration to any potential adverse financial impact upon them resulting from the approval of either application as a low priority. The opponents, however, argue that the approval of either replacement hospital would severely affect each of them. While the precise distance from the existing facilities to the relocation sites is relevant, it is clear that neither applicants' proposed site is unreasonably close to any of the existing providers. In fact, Community Hospital intends to locate its replacement facility three miles farther away from Helen Ellis and 1.5 miles farther away from Mease Dunedin Hospital. While Helen Ellis' primary service area is seemingly fluid, as noted by its chief operating officer's hearing and deposition testimony, and the Mease hospitals are located 15 to 20 miles south, they overlap parts of the applicants' primary service areas. Accordingly, each applicant concedes that the proposed increase in their patient volume would be derived from the growing population as well as existing providers. Although it is clear that the existing providers may be more affected by the approval of Community Hosptial's proposal, the exact degree to which they will be adversely impacted by either applicant is unknown. All parties agree, however, that the existing providers will experience less adverse affects by the approval of only one applicant, as opposed to two. Furthermore, Mease concedes that its hospitals will continue to aggressively compete and will remain profitable. In fact, Mease's adverse impact analysis does not show any credible reduction in loss of acute care admissions at Mease Countryside Hospital or Mease Dunedin Hospital until 2010. Even then, the reliable evidence demonstrates that the impact is negligible. Helen Ellis, on the other hand, will likely experience a greater loss of patient volume. To achieve its utilization projections, Community Hospital will aggressively compete for and increase market share in Pinellas County zip code 34689, which borders Pasco County. While that increase does not facially prove that Helen Ellis will be materially affected by Community Hospital's replacement hospital, Helen Ellis will confront targeted competition. To minimize the potential adverse affect, Helen Ellis will aggressively compete to expand its market share in the Pinellas County zip codes south of 34689, which is experiencing population growth. In addition, Helen Ellis is targeting broader service markets, and has filed an application to establish an open- heart surgery program. While Helen Ellis will experience greater competition and financial loss, there is insufficient evidence to conclude that it will experience material financial adverse impact as a result of Community Hospital's proposed relocation. In fact, Helen Ellis' impact analysis is less than reliable. In its contribution-margin analysis, Helen Ellis utilized its actual hospital financial data as filed with AHCA for the fiscal year October 1, 2001, to September 30, 2002. The analysis included total inpatient and total outpatient service revenues found in the filed financial data, including ambulatory services and ancillary services, yet it did not include the expenses incurred in generating ambulatory or ancillary services revenue. As a result, the overstated net revenue per patient day was applied to its speculative lost number of patient days which resulted in an inflated loss of net patient service revenue. Moreover, the evidence indicates that Helen Ellis' analysis incorrectly included operational revenue and excluded expenses related to its 18-bed skilled nursing unit since neither applicant intends to operate a skilled nursing unit. While including the skilled nursing unit revenues, the analysis failed to include the sub-acute inpatient days that produced those revenues, and thereby over inflated the projected total lost net patient service revenue by over one million dollars.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that: Community Hospital's CON Application No. 9539, to establish a 376-bed replacement hospital in Pasco County, Sub- District 5-1, be granted; and North Bay's CON Application No. 9538, to establish a 122-bed replacement hospital in Pasco County, Sub-District 5- 1, be denied. DONE AND ENTERED this 19th day of March, 2004, in Tallahassee, Leon County, Florida. S WILLIAM R. PFEIFFER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of March, 2004. COPIES FURNISHED: James C. Hauser, Esquire R. Terry Rigsby, Esquire Metz, Hauser & Husband, P.A. 215 South Monroe Street, Suite 505 Post Office Box 10909 Tallahassee, Florida 32302 Stephen A. Ecenia, Esquire R. David Prescott, Esquire Richard M. Ellis, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551 Richard J. Saliba, Esquire Agency for Health Care Administration Fort Knox Building III, Mail Station 3 2727 Mahan Drive Tallahassee, Florida 32308 Robert A. Weiss, Esquire Karen A. Putnal, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 Darrell White, Esquire William B. Wiley, Esquire McFarlain & Cassedy, P.A. 305 South Gadsden Street, Suite 600 Tallahassee, Florida 32301 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Rhonda M. Medows, M.D., Secretary Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308
The Issue Whether Respondent, a physician, violated the provisions of Sections 458.331(1)(t) and 458.331(1)(m), Florida Statutes, as alleged in the administrative complaint and the penalties, if any, that should be imposed.
Findings Of Fact At all times pertinent to this proceeding, Respondent was licensed as a physician in the State of Florida and held medical license number ME00597713. Respondent graduated from medical school in the Dominican Republic in 1981. Subsequent to medical school, Respondent completed a year residency at St. Clare's Hospital and Memorial Center in New York City, which was affiliated with New York Medical College. Respondent completed a second year of surgical residency at University of Miami, Jackson Memorial Hospital. Respondent then completed one year of flexible residency and three years of internal medicine residency at Mercy Catholic Medical Center, which was affiliated with Thomas Jefferson University in Philadelphia, Pennsylvania. Respondent has practiced as an emergency medicine physician since 1988. Respondent has served as the medical director of the emergency department of Palm Springs General Hospital, Hialeah, Florida, since 1990. At the times pertinent to this proceeding, Respondent was not board certified in any specialty. The administrative complaint centers on Respondent's treatment of patient R. A., a 48 year old male, at the Palm Springs emergency room on December 24, 1991. EMERGENCY ROOM TREATMENT ON DECEMBER 23, 1991 R. A. presented to the Palm Springs emergency room on December 23, 1991, at 3:50 p.m., via ambulance. He complained of severe epigastric pain over the past 24 hours that radiated to the right quadrant of his back. His blood pressure reading was 230 over 110. R. A. reported that he smoked a pack of cigarettes a day, did not drink alcohol, and had no allergies. R. A. also reported that he had not been vomiting. On December 23, 1991, R. A. was treated by Dr. Wilfred P. Fernandez, an emergency room physician employed by Palm Springs. Dr. Fernandez took the patient's medical history and then proceeded with his physical examination. The examination of the head, ears, eyes, nose, and throat were within normal limits. The lungs were clear and the heart rate and rhythm were regular. The abdominal evaluation demonstrated positive bowel sounds and positive epigastric tenderness. There was no guarding or rebound tenderness. A rectal exam revealed there was no blood in the stool. The extremity evaluation was within normal limits, as was the neurological evaluation. Dr. Fernandez ordered several diagnostic studies, including a complete blood count, an EKG, chest x-ray, abdominal film, and gallbladder sonogram. For reasons that were not made clear, the gallbladder sonogram was not performed. All other diagnostic tests were unremarkable. At 4:45 p.m. on December 23, 1991, Dr. Fernandez prescribed the following medications for R. A.: Donnatal, Maalox, Procardia, and Reglan. Donnatal contains a mild sedative and belladonna contains alkaloids to treat spasms. Maalox is an anti-acid. Procardia contains a channel blocker and was used to treat his hypertension. Reglan was administered via IV to clear R. A.'s bowels. R. A. was discharged from the Palm Springs emergency room at approximately 6:30 p.m. on December 23, 1991. On discharge, Dr. Fernandez gave R. A. a tablet of Clondine for his hypertension and prescriptions for Clondine 1 mg. and Zantac 150 mg. Dr. Fernandez instructed R. A. not to smoke, not to drink, and not to operate dangerous machinery while on the prescribed medication. R. A. was instructed to see his personal physician or return to the emergency room if his condition worsened. R. A. did not have his prescription for Clondine or for Zantac filled before his second admission to Palm Springs emergency room on December 24, 1991. EMERGENCY ROOM TREATMENT ON DECEMBER 24, 1991 On December 24, 1991, R. A. presented to Palm Springs emergency room for the second time. R. A. was transported to the emergency room by Hialeah Fire Rescue and arrived at approximately 6:05 p.m. On arrival, R. A. complained of epigastric pain. His vital signs at 6:10 p.m. included his blood pressure reading of 230 over 130. The nurses notes for this visit reflect that the patient had been seen the day before and had received a GI (gastrointestinal) cocktail, which is a reference to the concoction given to him to relieve his epigastric pain. Respondent treated R. A. while he was at the Palm Springs emergency room on December 24, 1991.1 At 6:20 p.m., Respondent performed his initial evaluation of R. A. Respondent took a history from the patient and observed the patient's appearance and composure. R. A. reported that he had not filled his prescriptions from the prior day. He reported to Respondent that he had epigastric pain in the mid-epigastric region that had been ongoing for several days. R. A. also reported that the medications he had received the previous day had helped him. Respondent noted the initial blood pressure on admission and that the patient had not filled his prescription for Clondine. Respondent discussed with R. A. the importance of taking Clondine for his hypertension. After observing the patient initially and obtaining a history, Respondent requested the emergency room records for R. A. from the previous day. He noted that Dr. Fernandez diagnosed the patient's condition as dyspepsia and hypertension. He also noted the laboratory and radiological studies that had been ordered, including that a gallbladder ultrasound had been ordered. The records did not at that time indicate that the gallbladder ultrasound had not been performed. Respondent discussed R. A.'s prior visit with an emergency room nurse who had participated in his treatment on December 23, 1991. The nurse told Respondent that all tests were normal. Respondent understood from what the nurse had told him that the gallbladder ultrasound was also normal. It is common practice for an emergency room doctor to rely on such statements from an emergency room nurse. Respondent thereafter performed an appropriate physical examination of R. A. The patient's eyes were found to be slightly jaundiced (icteric), which was a factor in leading Respondent to suspect that the patient may have had an illness affecting his liver, such as hepatitis. The abdominal evaluation revealed epigastric tenderness on palpation but no rebound. The patient's blood pressure was elevated. All other physical findings were within normal limits. A consistent blood pressure of 230 over 130 or higher is considered hypertension that warrants treatment before discharge. Labile hypertension is the acute elevation of blood pressure caused by anxiety, stress, or pain. Labile hypertension will often resolve itself without treatment once stressors or pain is resolved. A patient with a blood pressure of 230 over 130 who is suspected of suffering labile hypertension should have his blood pressure checked no less than every fifteen minutes to observe whether the hypertension resolves itself. Based on the patient's history and his evaluation and observation of the patient, Respondent determined that R. A. was more likely suffering from labile hypertension than from an emergent condition that warranted emergency treatment of the patient's hypertension. Respondent thereafter administered to the patient what was referred to as a GI cocktail to relieve his epigastric distress. The GI cocktail consisted of Zantac, Connatal, and Viscous Lidocaine and was administered at approximately 6:30 p.m. Respondent believed it likely that the GI cocktail would reduce the patient's pain and result in a lowering of the patient's blood pressure. The emergency room staff checked R. A.'s blood pressure every fifteen minutes and advised Respondent of the readings. Respondent ordered additional tests to evaluate whether the patient's epigastric pains were symptoms of a condition that required emergency care. Respondent ordered a complete blood count, a liver profile, and EKG and an abdominal x-ray. The blood studies came back within normal limits. The liver profile indicated an elevation of serum bilirubin as well as an elevation of the liver enzymes. All other tests were within normal limits. The GI cocktail relieved most of R. A.'s epigastric pain. Because he had lingering discomfort, Respondent administered a small dose of Demerol and Vistaril, which completely relieved R. A.'s pain. Respondent determined that R. A. was not suffering from a condition that required emergency care. He formed the opinion that the patient had hepatitis, but that his condition did not require immediate hospitalization. At approximately 9:00 p.m., R. A. was discharged from the Palm Springs emergency room. At the time of his discharge, R. A.'s blood pressure was approximately 160 over 80, which is within acceptable limits. Prior to his discharge, Respondent spoke with the physician who he thought would be following R. A.'s condition. This physician had treated R. A.'s wife, but he had not treated R. A. The patient was also given the name of a doctor who was on the hospitals primary physician call list. Also prior to discharge the patient was instructed not to drink any alcohol while taking his medication, to fill his prescriptions for Zantac and Clondine, and to follow-up with his primary care physician in three to four days. He was also instructed to eat lightly and increase fluid intake. Respondent told R. A. to return to the emergency room or go to his primary physician if his condition worsened. Respondent's care and treatment of R. A., including his determination that the patient did not require further emergency treatment did not fall below the standard of care imposed on emergency room physicians. As will be discussed below, his diagnosis of hepatitis was incorrect. The testimony of Dr. Dellerson established that the incorrect diagnosis did not fall below the standard of care imposed on emergency room physicians. THE MEDICAL RECORDS FOR DECEMBER 24, 1991 R. A.'s records for the emergency room visit to Palm Springs on December 24, 1991, indicate that his blood pressure reading at 6:45 p.m. was 230 over 170. This is the last recorded blood pressure reading for R. A. on December 24, 1991. Respondent testified, credibly, that R. A.'s blood pressure was checked approximately every 15 minutes and that his blood pressure came down to an acceptable level during the course of his emergency room stay on December 24, 1991,2 but that the records do not reflect those blood pressure readings. While it was the emergency room nurse's responsibility to take and to record that blood pressure, Respondent had the ultimate responsibility for the records as the treating physician. Although Respondent's practice did not fall below the standard of care imposed on emergency room physicians, the records that were kept were inadequate to reflect the patient's condition or to justify the Respondent's course of treatment.3 EMERGENCY ROOM TREATMENT ON DECEMBER 25, 1991 On December 25, 1991, R. A. presented to Jackson Memorial Hospital at approximately 2:10 p.m. He complained of epigastric pain that radiated to his back. He had vomited earlier that morning and had noticed blood in his vomit and blood in his stool. These were complaints and symptoms that were not present the day before. At the time of his presentation, his blood pressure was 160 over 110. The following day a CT scan was performed that led to a diagnosis of gall stones in the gallbladder and in the distal common bile duct, which did not require emergency surgery. R. A. was also diagnosed as having suffered a recent hypertensive stroke. This stroke most likely occurred after the patient presented at Jackson Memorial Hospital.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order that dismisses count one of the Administrative Complaint, but finds Respondent guilty of violating Section 458.331(1)(m), Florida Statutes, as alleged in count two of the Administrative Complaint. It is further recommended that Respondent be reprimanded and assessed an administrative fine in the amount of $250.00. DONE AND ENTERED this 14th day of July, 1997, in Tallahassee, Leon County, Florida. Hearings Hearings CLAUDE B. ARRINGTON Administrative Law Judge Division of Administrative The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative this 14th day of July, 1997
