The Issue Whether Petitioners' applications for Certificates of Need should be approved?
Findings Of Fact Ocala Ocala is a general partnership composed of three partners: Ocala Health Care Associates, Inc., Casterfield, Ltd., and Big Sun Healthcare Systems, the lessee and operator of Munroe Regional Medical Center. Ocala is the current holder of an approved CON for 35 community beds in Marion County. If the 21-bed transfer of sheltered beds to community beds is approved, Ocala intends to operate a 56-bed facility. A 56-bed facility is more viable than a 35-bed facility. At the time of the hearing, there were 642 approved and licensed beds and 215 approved not yet licensed beds in Marion County. The 215 beds include Ocala's 35-bed CON. A patient needing subacute care is one who has been released from acute care status by a physician and is ready to be released from a hospital (acute care) to a less costly facility, e.g. a skilled nursing home. Subacute care patients are those needing, e.g., intravenous tubes, respirators, IV medication, decubitus ulcer care, tracheotomy tubes, or antibiotic therapy. Patients needing subacute care should be placed in a nursing home, since this is less costly than hospital care and it allows for acute care beds in a hospital to be used for patients needing acute care. Skilled nursing homes are authorized to provide subacute care, but are not required to do so. In order to provide subacute care, a nursing home may need additional staff and equipment. There is a problem in Marion County with the placement of subacute care patients in nursing homes. This problem is caused by a variety of factors and usually results in a patient remaining in a hospital longer than is necessary. One factor is that some of the existing nursing homes will not accept patients needing certain types of subacute care, e.g., patients needing ventilators or feeding tubes. Another equally important factor is that the nursing homes want to make sure they will get paid and there is usually some delay in determining how the nursing home will be compensated. Other factors include the patients inability to pay and, on occasion, the unavailability of beds. Ocala intends to use its 35-bed approved CON to provide subacute care. Country Club While the application shows the applicant's name as "Country Club Retirement Center," that is the name of the project. The applicant is Mr. J. E. Holland. Mr. Holland's application is for a 60-bed nursing home which will be part of a 250-apartment continuing care community. The facility is to be located in Clermont, in Lake County. Lake County is in Planning Area VII of HRS District III. Planning Area VII also includes Sumter County. Mr. Keach, the only witness presented by Country Club, is Vice President of National Health Care. National Health Care operates a nursing home in Gainesville, Florida. In addition to operating the nursing home, National Health Care assists persons seeking a CON with preparation of the CON application. Mr. Keach and other National Health Care employees assisted Mr. Holland with the preparation of the CON application submitted in this case. National Health Care will not own or operate Mr. Holland's facility. Mr. Keach is of the opinion that there is need in Clermont for a 60- bed nursing home. He bases his opinion on letters of support for the construction of the facility, on petitions signed by persons attending a public hearing, and on four or five visits to the area. Mr. Keach never performed a study which would indicate the number of persons with a "documented need" for nursing home services who have been denied access to a nursing home. At the time HRS issued its State Agency Action Report there were 958 beds approved and licensed in Planning Area VII. Of these, 838 are located in Lake County, with 142 located in a nursing home in Clermont. Also these are swing-beds providing long-term care at a hospital in Clermont. Finally, there were 236 beds approved not yet licensed in Planning Area VII, with 176 to be located in Lake County. The occupancy rate for the nursing home facility located in Clermont is approximately 89 percent. For the six months ending March, 1988, the occupancy rate for Planning Area VII was below 80 percent. There are at least two nursing homes in operation within a 20-mile radius of Clermont. These two nursing homes are located in Winter Garden and one of them has received a CON to add 89 beds. Twenty-Eight Corporation The applicant in this case is Twenty-Eight Corporation. "The owner of the nursing home will be the Levy Nursing Care Center, a limited partnership, which will be owned and secured by Twenty-Eight Corporation." (28 Corporation, Composite Exhibit 1.) Twenty-Eight corporation seeks approval of a CON for 60 nursing home beds to be operated as part of a continuing care project which will include a 50-unit apartment complex. The facility is to be located in Chiefland, Florida, in Levy County. Levy County is in Planning Area II of HRS District III. Planning Area II also includes Alachua, Gilchrist and Dixie counties. At the time HRS issued its State Agency Action Report, there were 1112 licensed nursing home beds in Planning Area II. Of these, 120 are located in Trenton, in Gilchrist County, 180 are located in Williston, in Levy County, and the rest are located in Alachua County. Also, there are 147 beds approved not yet licensed to be located in Alachua County. Chiefland is approximately 12 miles from Trenton. Williston is approximately 27 miles from Trenton. Mr. Keach was the only witness who testified on behalf of Twenty-Eight Corporation. Mr. Keach is vice-president of National Health Care. (See Finding of Fact 17, supra.) Mr. Keach is of the opinion that there is need in the Chiefland area for a 60-bed nursing home. His opinion is based on letters of support and petitions of support he received for the project. Also, his opinion is based on the fact that there is no nursing home located in Chiefland and the nearest nursing home is located in Trenton, 12 miles away. The 1986 District III Health Plan shows the Trenton facility having an occupancy rate of 99.93 percent. Mr. Keach never performed a study which would indicate the number of persons with a "documented need" for nursing home services who have been denied access to a nursing home.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that HRS enter a Final Order denying Petitioners' applications in these three cases. DONE and ENTERED this 3rd day of March, 1989, in Tallahassee, Leon County, Florida. JOSE A. DIEZ-ARGUELLES Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of March, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 88-1862, 88-1863, 88-1864 Rulings on Proposed Findings of Fact Ocala's Proposed Findings of Fact: 1. Accepted. 2-4. Supported by competent, substantial evidence but unnecessary to the decision reached. 5-7. Accepted. Irrelevant. Accepted. Rejected as not supported by the weight of the evidence. There is not an absolute absence of facilities willing to accept all patients needing subacute care. Irrelevant. "Serious concerns" are not what is needed under the Rule. First sentence rejected as recitation of testimony. Second sentence irrelevant; issue is whether nursing homes will accept patients, not whether nursing homes will enter into agreement with MRMC. 13-16. True, but irrelevant. Accepted. (a) Rejected to the extent it implies that the approved facilities would not provide subacute care. Mr. Bailey's testimony is that the facilities refused to enter into a relationship with MRMC; this does not establish that the facilities would not provide subacute care. Rejected as a recitation of testimony. The weight of the evidence shows that some facilities would accept same subacute patients. True, but it is unclear if these are the physician's notations the HRS witness referred to. True that charts and logs were provided, but they did not establish the number of patients in need of subacute care in excess of licensed or approved beds. 19-26. Irrelevant. 27-29. Accepted-for what they are, but insufficient to establish need. Twenty-Eight Corporation's Proposed Findings of Fact: 1-4 Accepted. Irrelevant. This is a de novo proceeding. True, but irrelevant. Accepted. Accepted. Rejected as hearsay. But see Finding of Fact 31. Mr. Keach testified that Chiefland is 40 miles from Williston. The road map published by the Department of Transportation shows the distance between the two cities at 27 miles. True, but irrelevant. True, but irrelevant. Accepted. Accepted. However, this special consideration should be given only where numeric need has been established in the District. True, but irrelevant. True, but irrelevant. Rejected as hearsay. True, but irrelevant. Rejected as hearsay. Also, a determination by a family member does not establish medical "need". True that this is Mr. Keach's opinion. However, Mr. Keach's opinion is rejected. His opinion of need is not based on what the Rule requires or on what health planners rely on to establish need. Mr. Keach is not able to testify as to the financial feasibility of the facility because he has no first- hand knowledge of the finances. 21-22. Irrelevant. 23. Rejected. See ruling on 10., supra. 24-26. Irrelevant. Rejected as contrary to the weight of the evidence. Irrelevant. Irrelevant; this is not a rule challenge. Irrelevant. True, but irrelevant. Irrelevant. Accepted. Rejected as hearsay. Rejected as not supported by the weight of the evidence. Rejected as argument. Also, unable to determine what the "second portion" is. 37-38. Irrelevant. First phrase accepted. Second phrase rejected to extent implies that only need to show that no other facility exists within 20 miles. Irrelevant. Country Club's Proposed Findings of Fact: 1-4. Accepted. Irrelevant. This is a de novo proceeding. True, but irrelevant. Accepted. Irrelevant. True, but irrelevant. Accepted. Accepted. However, this special consideration should be given only where numeric need has been established in the District. True, but irrelevant. True, but irrelevant. 14-17. Irrelevant. Rejected as contrary to the weight of the evidence. Accepted. Rejected as not supported by competent evidence; hearsay. Accepted. Rejected as not supported by competent evidence; hearsay. Irrelevant. Rejected as not supported by competent evidence; hearsay. True, but irrelevant. See ruling on 11, supra. Irrelevant. Rejected as not supported by competent evidence; hearsay. Irrelevant. The Rule also recognizes this. Irrelevant. Rejected as not supported by the weight of the evidence and irrelevant. True, but irrelevant. True, but irrelevant. 33-34. True, but irrelevant. This is a de novo proceeding. 35-39. Irrelevant. 40. Rejected as argument. Also, unable to determine what the "second portion" is. 41-42. Accepted 43. Rejected as contrary to the weight of the evidence. 44. True, but irrelevant. Also, there are approved beds within 20 miles, but located in a different HRS District. Leesburg's Proposed Findings of Fact 1-7. Accepted. Rejected as not a finding of fact. Accepted. 10-15. See Conclusions of Law section of RO. Accepted. Rejected as argument. Accepted. Rejected. Fact that need does not exist under HRS rule doesn't necessarily mean that that facility will not be financially feasible. In any event, Country Club was not able to establish financial feasibility. 20-21. See Conclusions of Law. 22. Rejected as argument. 23-28. Supported by competent substantial evidence but unnecessary to the decision reached. Accepted. Rejected as a recitation of testimony. Accepted.- HRS's Proposed Findings of Fact 1-19. Accepted. Rejected. The HRS witness did not specifically state that HRS needs to see the actual physician referral. Accepted. See Conclusions of Law. 22-28. Accepted. See Conclusions of Law. 29. Not a finding of fact. 30-37. Accepted. 38. Irrelevant. 39-42. Unnecessary to the decision reached. Irrelevant. Accepted. 45-46. See Conclusions of Law. Accepted. Accepted. Not a finding of fact. 50-65. Accepted. See Conclusions of Law. 66. Not a finding of fact. 67-71. Accepted, but Ocala's Exhibits 6 & 7 are not amendments to the application but simply more of the same information that was provided with the application. COPIES FURNISHED: Gerald B. Sternstein, Esquire Darrell White, Esquire Post Office Box 2174 First Florida Bank Building Suite 600 215 South Monroe Street Tallahassee, Florida 32301 Theodore Mack, Esquire Assistant General Counsel 2727 Mahan Drive Fort Knox Executive Center Tallahassee, Florida 32308 R. Bruce McKibben, Jr., Esquire 307 West Park Avenue Post Office Box 10651 Tallahassee, Florida 32302 Grafton Wilson, II, Esquire 711 NW 23rd Avenue, Suite #4 Gainesville, Florida 32609 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
The Issue The issue is whether BayCare Long Term Acute Care Hospital, Inc.'s Certificate of Need Application No. 9753 and University Community Hospital's Certificate of Need Application No. 9754, both submitted to the Agency for Health Care Administration, should be approved.
Findings Of Fact LTCHs defined An LTCH is a medical facility which provides extended medical and rehabilitation care to patients with multiple, chronic, or clinically complex acute medical conditions. These conditions include, but are not limited to, ventilator dependency, tracheotomy care, total parenteral nutrition, long- term intravenous anti-biotic treatment, complex wound care, dialysis at bedside, and multiple systems failure. LTCHs provide an interdisciplinary team approach to the complex medical needs of the patient. LTCHs provide a continuum of care between short-term acute care hospitals and nursing homes, skilled nursing facilities (SNFs), or comprehensive medical rehabilitation facilities. Patients who have been treated in an intensive acute care unit at a short-term acute care hospital and who continue to require intensive care once stabilized, are excellent candidates for care at an LTCH. Included in the interdisciplinary approach is the desired involvement of the patient's family. A substantial number of the patients suitable for treatment in an LTCH are in excess of 65 years of age, and are eligible for Medicare. Licensure and Medicare requirements dictate that an LTCH have an average length of stay (ALOS) of 25 days. The Center for Medicare and Medicaid Services (CMS) reimburses for care received through the prospective payment system (PPS). Through this system, CMS reimburses the services of LTCHs separately from short-term acute care providers and other post acute care providers. The reimbursement rate for an LTCH under PPS exceeds that of other providers. The reimbursement rate for an LTCH is about twice that of a rehabilitation facility. The increased reimbursement rate indicates the increased cost due to the more intensive care required in an LTCH. The Agency The Agency is a state agency created pursuant to Section 20.42. It is the chief health policy and planning entity for the State of Florida. The Agency administers the Health Facility and Services Development Act found at Sections 408.031-408.045. Pursuant to Section 408.034, the Agency is designated as the single state Agency to issue, revoke, or deny certificates of need. The Agency has established 11 health service planning districts. The applications in this case are for facilities in District 5, which comprises Pinellas and Pasco counties. UCH UCH is a not-for-profit organization that owns and operates a 431-bed tertiary level general acute care hospital and a 120-bed acute care general hospital. Both are located in Hillsborough County. UCH also has management responsibilities and affiliations to operate Helen Ellis Hospital, a 300-bed hospital located in Tarpon Springs, and manages the 300-bed Suncoast Hospital. Both of these facilities are in Pinellas County. UCH also has an affiliation to manage the open heart surgery program at East Pasco Medical Center, a general acute care hospital located in Pasco County. As a not-for-profit organization, the mission of UCH is to provide quality health care services to meet the needs of the communities where it operates regardless of their patients' ability to pay. Baycare BayCare is a wholly-owned subsidiary of BayCare Healthsystems, Inc. (BayCare Systems). BayCare Systems is a not-for-profit entity comprising three members that operate Catholic Health East, Morton Plant Mease Healthcare, and South Florida Baptist. The facilities owned by these organizations are operated pursuant to a Joint Operating Agreement (JOA) entered into by each of the participants. BayCare Systems hospitals include Morton Plant Hospital, a 687-bed tertiary level facility located in Clearwater, Pinellas County; St. Joseph's Hospital, an 887-bed tertiary level general acute care hospital located in Tampa, Hillsborough County; St. Anthony's Hospital, a 407-bed general acute care hospital located in St. Petersburg, Pinellas County; and Morton Plant North Bay, a 120-bed hospital located in New Port Richey, Pasco County. Morton Plant Mease Health Care is a partnership between Morton Plant Hospital and Mease Hospital. Although Morton Plant Mease Healthcare is a part of the BayCare System, the hospitals that are owned by the Trustees of Mease Hospital, Mease Hospital Dunedin, and Mease Hospital Countryside, are not directly members of the BayCare System and are not signatories to the JOA. HealthSouth HealthSouth is a national company with the largest market share in inpatient rehabilitation. It is also a large provider of ambulatory services. HealthSouth has about 1,380 facilities across the nation. HealthSouth operates nine LTCHs. The facility that is the Intervenor in this case is a CMR located in Largo, Pinellas County. Kindred Kindred, through its parent company, operates LTCH facilities throughout Florida and is the predominant provider of LTCH services in the state. In the Tampa Bay area, Kindred operates three LTCHs. Two are located in Tampa and one is located in St. Petersburg, Pinellas County. The currently operating LTCH in District 5 that may be affected by the CON applications at issue is Kindred-St. Petersburg. Kindred-St. Petersburg is a licensed 82-bed LTCH with 52 private beds, 22 semi-private beds, and an 8-bed intensive care unit. It operates the array of services normally offered by an LTCH. It is important to note that Kindred-St. Petersburg is located in the far south of heavily populated District 5. The Applications UCH proposes a new freestanding LTCH which will consist of 50 private rooms and which will be located in Connerton, a new town being developed in Pasco County. UCH's proposal will cost approximately $16,982,715. By agreement of the parties, this cost is deemed reasonable. BayCare proposes a "hospital within a hospital" LTCH that will be located within Mease Hospital-Dunedin. The LTCH will be located in an area of the hospital currently used for obstetrics and women's services. The services currently provided in this area will be relocated to Mease Hospital- Countryside. BayCare proposes the establishment of 48 beds in private and semi-private rooms. Review criteria which was stipulated as satisfied by all parties Section 408.035(1)-(9) sets forth the standards for granting certificates of need. The parties stipulated to satisfying the requirements of subsections (3) through (9) as follows. With regard to subsection (3), 'The ability of the applicant to provide quality of care and the applicant's record of providing quality of care,' all parties stipulated that this statutory criterion is not in dispute and that both applicants may be deemed to have satisfied such criteria. With regard to subsection (4), 'The availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation,' it was stipulated that both applicants have all resources necessary in terms of both capital and staff to accomplish the proposed projects, and therefore, both applicants satisfy this requirement. With regard to subsection (5), 'The extent to which the proposed services will enhance access to health care for residents of the service district,' it was stipulated that both proposals will increase access. Currently there are geographic, financial and programmatic barriers to access in District 5. The only extant LTCH is located in the southernmost part of District 5. With regard to subsection (6), 'The immediate and long-term financial feasibility of the proposal,' the parties stipulated that UCH satisfied the criterion. With regard to BayCare, it was stipulated that its proposal satisfied the criterion so long as BayCare can achieve its utilization projections and obtain Medicare certification as an LTCH and thus demonstrate short-term and long-term feasibility. This issue will be addressed below. With regard to subsection (7), 'The extent to which the proposal will foster competition that promotes quality and cost- effectiveness,' the parties stipulated that approval of both applications will foster competition that will promote quality and cost effectiveness. The only currently available LTCH in District 5, unlike BayCare and UCH, is a for-profit establishment. With regard to subsection (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 construction for both proposals are reasonable. With regard to subsection (9), 'the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent,' it was stipulated that both UCH and BayCare have a demonstrated history and a commitment to providing services to Medicaid, Medicaid HMO, self-pay, and underinsured payments. Technically, of course, BayCare has no history at all. However, its sponsors do, and it is they that will shape the mission for BayCare. BayCare's Medicare certification as an LTCH The evidence of record demonstrates that BayCare can comply with Medicare reimbursement regulations and therefore can achieve its utilization projections and obtain Medicare certification as an LTCH. Thus short-term and long-term feasibility is proven. Because BayCare will be situated as a hospital within a hospital, in Mease Hospital Dunedin, and because there is a relationship between that hospital and BayCare Systems, Medicare reimbursement regulations limit to 25 percent the number of patients that may be acquired from Mease Hospital Dunedin or from an organization that controls directly or indirectly the Mease Hospital Dunedin. Because of this limitation, it is, therefore, theoretically possible that the regulator of Medicare payments, CMS, would not allow payment where more than 25 percent of admissions were from the entire BayCare System. Should that occur it would present a serious but not insurmountable problem to BayCare. BayCare projects that 21 percent of its admissions will come from Mease Hospital Dunedin and the rest will come from other sources. BayCare is structured as an independent entity with an independent board of directors and has its own chief executive officer. The medical director and the medical staff will be employed by the independent board of directors. Upon the greater weight of the evidence, under this structure, BayCare is a separate corporate entity that neither controls, nor is controlled by, BayCare Systems or any of its entities or affiliates. One must bear in mind that because of the shifting paradigms of federal medical regulation, predictability in this regard is less than perfect. However, the evidence indicates that CMS will apply the 25 percent rule only in the case of patients transferring to BayCare from Mease Hospital Dunedin. Most of the Medicare-certified LTCHs in the United States operate as hospitals within hospitals. It is apparent, therefore, that adjusting to the CMS limitations is something that is typically accomplished. BayCare will lease space in Mease Hospital Dunedin which will be vacated by it current program. BayCare will contract with Mease Hospital Dunedin for services such as laboratory analysis and radiology. This arrangement will result in lower costs, both in the short term and in the long term, than would be experienced in a free-standing facility, and contributes to the likelihood that BayCare is feasible in the short term and long term. Criteria related to need The contested subsections of Section 408.035 not heretofore addressed, are (1) and (2). These subsections are illuminated by Florida Administrative Code Rule 59C- 1.008(2)(e)2., which provides standards when, as in this case, there is no fixed-need pool. Florida Administrative Code Rule 59C-1.008(2)(e)2., provides as follows: 2. If no agency policy exists, the applicant will be responsible for demonstrating need through a needs assessment methodology which must include, at a minimum, consideration of the following topics, except where they are inconsistent with the applicable statutory or rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, sub district or both; Medical treatment trends; and Market conditions. Population Demographics and Dynamics The applicants presented an analysis of the population demographics and dynamics in support of their applications in District 5. The evidence demonstrated that the population of District 5 was 1,335,021 in 2004. It is anticipated that it will grow to 1,406,990 by 2009. The projected growth rate is 5.4 percent. The elderly population in the district, which is defined as persons over the age of 65, is expected to grow from 314,623 in 2004, to 340,676, in 2009, which represents an 8.3 percent increase. BayCare BayCare's service area is defined generally by the geographic locations of Morton Plant Hospital, Morton Plant North Bay Hospital, St. Anthony's Hospital, Mease Hospital Dunedin, and Mease Hospital Countryside. These hospitals are geographically distributed throughout Pinellas County and southwest Pasco County and are expected to provide a base for referrals to BayCare. There is only one extant LTCH in Pinellas County, Kindred, and it is located in the very southernmost part of this densely populated county. Persons who become patients in an LTCH are almost always moved to the LTCH by ambulance, so their movement over a long distance through heavy traffic generates little or no problem for the patient. Accordingly, if patient transportation were the only consideration, movement from the north end of the county to Kindred in the far south, would present no problem. However, family involvement is a substantial factor in an interdisciplinary approach to addressing the needs of LTCH patients. The requirement of frequent movement of family members from northern Pinellas to Kindred through congested traffic will often result in the denial of LTCH services to patients residing in northern Pinellas County or, in the alternative, deny family involvement in the interdisciplinary treatment of LTCH patients. Approximately 70 letters requesting the establishment of an LTCH in northern Pinellas County were provided in BayCare's application. These letters were written by medical personnel, case managers and social workers, business persons, and government officials. The thread common to these letters was, with regard to LTCH services, that the population in northern Pinellas County is underserved. UCH Pasco County has experienced a rapid population growth. It is anticipated that the population will swell to 426,273, in 2009, which represents a 10.1 percent increase over the population in 2004. The elderly population accounts for 28 percent of the population. This is about 50 percent higher than Florida as a whole. Rapid population growth in Pasco County, and expected future growth, has resulted in numerous new housing developments including Developments of Regional Impact (DRI). Among the approved DRI's is the planned community of Connerton, which has been designated a "new town" in Pasco County's Comprehensive Plan. Connerton is a planned community of 8,600 residential units. The plan includes space for a hospital and UCH has negotiated for the purchase of a parcel for that purpose within Connerton. The rate of growth, and the elderly population percentages, will support the proposed UCH LTCH and this is so even if BayCare establishes an LTCH in northern Pinellas County. Availability, utilization, and quality of like services in the district, sub-district, or both The Agency has not established sub-districts for LTCHs. As previously noted, Kindred is the only LTCH extant in District 5. It is a for-profit facility. Kindred was well utilized when it had its pediatric unit and added 22 additional beds. Subsequently, in October 2002, some changes in Medicare reimbursement rules resulted in a reduction of the reimbursement rate. This affected Kindred's income because over 70 percent of its patients are Medicare recipients. Kindred now uses admission criteria that have resulted in a decline in patient admissions. From 1998, the year after Kindred was established, until 2002, annual utilization was in excess of 90 percent. Thereafter, utilization has declined, the 22-bed addition has been shut down, and Kindred projects an occupancy of 55 percent in 2005. Kindred must make a profit. Therefore, it denies access to a significant number of patients in District 5. It denies the admission of patients who have too few "Medicare- reimbursable days" or "Medicaid-reimbursable days" remaining. The record indicates that Kindred only incurs charity care or Medicaid patient days when a patient admitted to Kindred with seemingly adequate funding unexpectedly exhausts his or her funding prior to discharge. Because of the constraints of PPS, Kindred has established admission criteria that excludes certain patients with conditions whose prognosis is so uncertain that it cannot adequately predict how long they will require treatment. Kindred's availability to potential patients is thus constrained. HealthSouth, a licensed CMR, is not a substitute for an LTCH. Although it is clear that there is some overlap between a CMR and an LTCH, HealthSouth, for instance, does not provide inpatient dialysis, will not accept ventilator patients, and does not treat complex wound patients. The nurse staffing level at HealthSouth is inadequate to provide for the type of patient that is eligible for treatment in an LTCH. The fact that LTCHs are reimbursed by Medicare at approximately twice the rate that a CMR is reimbursed, demonstrates the higher acuity level of LTCH services when compared to a CMR. HealthSouth is a facility which consistently operates at high occupancy levels and even if it were capable of providing the services typical of an LTCH, it would not have sufficient capacity to provide for the need. A CMR is a facility to which persons who make progress in an LTCH might repair so that they can return to the activities of daily living. SNFs are not substitutes for LTCHs although there could be some limited overlap. SNFs are generally not appropriate for patients otherwise eligible for the type of care provided by an LTCH. They do not provide the range of services typically provided by an LTCH and do not maintain the registered nurse staffing levels required for delivering the types of services needed for patients appropriate for an LTCH. LTCHs are a stage in the continuum of care. Short- term acute care hospitals take in very sick or injured patients and treat them. Thereafter, the survivors are discharged to home, or to a CMR, or to a SNF, or, if the patients are still acutely ill but stable, and if an LTCH is available, to an LTCH. As noted above, currently in northern Pinellas County and in Pasco County, there is no reasonable access to an LTCH. An intensive care unit (ICU) is, ideally, a treatment phase that is short. If treatment has been provided in an ICU and the patient remains acutely ill but stable, and is required to remain in the ICU because there is no alternative, greater than necessary costs are incurred. Staff in an ICU are not trained or disposed to provide the extensive therapy and nursing required by patients suitable for an LTCH and are not trained to provide support and training to members of the patient's family in preparation for the patient's return home. The majority of patients suitable for an LTCH have some potential for recovery. This potential is not realized in an ICU, which is often counterproductive for patients who are stabilized but who require specialized long-term acute care. Patients who remain in an ICU beyond five to seven days have an increased morbidity/mortality rate. Maintaining patients suitable for an LTCH in an ICU also results in over-utilization of ICU services and can cause congestion when ICU beds are fully occupied. UCH in Pasco County, and to a lesser extent BayCare in northern Pinellas County, will bring to the northern part of District 5 services which heretofore have not been available in the district, or, at least, have not been readily available. Persons in Pasco County and northern Pinellas County, who would benefit from a stay in an LTCH, have often had to settle for some less appropriate care situation. Medical Treatment Trends LTCHs are relatively new cogs in the continuum of care and the evidence indicates that they will play an important role in that continuum in the future. The evidence of record demonstrates that the current trend in medical treatment is to find appropriate post acute placements in an LTCH setting for those patients in need of long-term acute care beyond the stay normally experienced in a short-term acute care hospital. Market conditions The federal government's development of the distinctive PPS for LTCHs has created a market condition which is favorable for the development of LTCH facilities. Although the Agency has not formally adopted by rule a need methodology specifically for LTCHs, by final order it has recently relied upon the "geometric mean length of stay + 7" (GMLOS +7) need methodology. The GMLOS +7 is a statistical calculation used by CMS in administering the PPS reimbursement system in determining an appropriate reimbursement for a particular "diagnostic related group" (DRG). Other need methodologies have been found to be unsatisfactory because they do not accurately reflect the need for LTCH services in areas where LTCH services are not available, or where the market for LTCH services is not competitive. GMLOS +7 is the best analysis the Agency has at this point. Because the population for whom an LTCH might be appropriate is unique, and because it overlaps with other populations, finding an algebraic need expression is difficult. An acuity measure would be the best marker of patient appropriateness, but insufficient data are available to calculate that. BayCare's proposal will provide beneficial competition for LTCH services in District 5 for the first time and will promote geographic, financial, and programmatic access to LTCH services. BayCare, in conducting its need calculations used a data pool from Morton Plant Hospital, Mease Dunedin Hospital, Mease Countryside Hospital, Morton Plant North Bay Hospital, and St. Anthony's Hospital for the 12 months ending September 2003. The hospitals included in the establishment of the pool are hospitals that would be important referral sources for BayCare. BayCare then identified 160 specific DRGs historically served by existing Florida LTCHs, or which could have been served by Florida LTCHs, and lengths of stay greater than the GMLOS for acute care patients, and compared them to the data pool. This resulted in a pool of 871 potential patients. The calculation did not factor in the certain growth in the population of the geographic area, and therefore the growth of potential LTCH patients. BayCare then applied assumptions based on the proximity of the referring hospitals to the proposed LTCH to project how many of the patients eligible for LTCH services would actually be referred and admitted to the proposed LTCH. That exercise resulted in a projected potential volume of 20,265 LTCH patient days originating just from the three District 5 BayCare hospitals and the two Mease hospitals. BayCare assumes, and the assumption is found to be reasonable, that 25 percent of their LTCH volume will originate from facilities other than BayCare or Mease hospitals. Adding this factor resulted in a total of 27,020 patient days for a total net need of 82 beds at 90 percent occupancy. BayCare's GMLOS +7 bed need methodology reasonably projects a bed need of 82 beds based on BayCare's analysis of the demand arising from the three District 5 BayCare hospitals and the two Mease hospitals. UCH provided both a GMLOS +7 and a use rate analysis. The use rate analysis is suspect in a noncompetitive environment and, obviously, in an environment where LTCHs do not exist. UCH's GMLOS +7 analyses resulted in the identification of a need for 159 additional LTCH beds in District 5. This was broken down into a need of 60 beds in Pasco County and 99 additional beds in Pinellas County. There is no not-for-profit LTCH provider in District The addition of BayCare and UCH LTCHs to the district will meet a need in the case of Medicaid, indigent, and underinsured patients. Both BayCare and UCH have agreed in their applications to address the needs of patients who depend on Medicaid, or who are indigent, or who have private insurance that is inadequate to cover the cost of their treatment. The statistical analyses provided by both applicants support the proposed projects of both applicants. Testimony from doctors who treat patients of the type who might benefit from an LTCH testified that those types of facilities would be utilized. Numerous letters from physicians, nurses, and case managers support the need for these facilities. Adverse impacts HealthSouth and Kindred failed to persuade that BayCare's proposal will adversely impact them. HealthSouth provides little of the type of care normally provided at an LTCH. Moreover, HealthSouth is currently operating near capacity. Kindred is geographically remote from BayCare's proposed facility, and, more importantly, remote in terms of travel time, which is a major consideration for the families of patients. Kindred did not demonstrate that it was currently receiving a large number of patients from the geographic vicinity of the proposed BayCare facility, although it did receive some patients from BayCare Systems facilities and would likely lose some admissions if BayCare's application is approved. The evidence did not establish that Kindred would suffer a material adverse impact should BayCare establish an LTCH in Mease Dunedin Hospital. HealthSouth and Kindred conceded that UCH's program would not adversely impact them. The Agency's Position The Agency denied the applications of BayCare and UCH in the SAARs. At the time of the hearing the Agency continued to maintain that granting the proposals was inappropriate. The Agency's basic concern with these proposals, and in fact, the establishments of LTCHs throughout the state, according to the Agency's representative Jeffrey N. Gregg, is the oversupply of beds. The Agency believes it will be a long time before it can see any measure of clinical efficiency and whether the LTCH route is the appropriate way to go. The Agency has approved a number of LTCHs in recent years and is studying them in order to get a better understanding of what the future might hold. The Agency noted that the establishment of an LTCH by ongoing providers, BayCare Systems and UCH, where there are extant built-in referring facilities, were more likely to be successful than an out-of-state provider having no prior relationships with short-term acute care hospitals in the geographic vicinity of the LTCH. The Agency noted that both a referring hospital and an LTCH could benefit financially by decompressing its intensive care unit, and thus maximizing their efficiency. The Agency did not explain how, if these LTCHs are established, a subsequent failure would negatively affect the delivery of health services in District 5. The Agency, when it issued its SAAR, did not have the additional information which became available during the hearing process.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED that UCH Certificate of Need Application No. 9754 and BayCare Certificate of Need Application No. 9753 satisfy the applicable criteria and both applications should be approved. DONE AND ENTERED this 29th day of November, 2005, in Tallahassee, Leon County, Florida. S HARRY L. HOOPER 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 29th day of November, 2005. COPIES FURNISHED: Robert A. Weiss, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 J. Robert Griffin, Esquire J. Robert Griffin, P.A. 1342 Timberlane Road, Suite 102-A Tallahassee, Florida 32312-1762 Patricia A. Renovitch, Esquire Oertel, Hoffman, Fernandez, Cole, & Bryant P.A. Post Office Box 1110 Tallahassee, Florida 32302-1110 Geoffrey D. Smith, Esquire Blank, Meenan & Smith, P.A. 204 South Monroe Street Tallahassee, Florida 32301 Timothy Elliott, Esquire Agency for Health Care Administration 2727 Mahan Drive Building Three, Mail Station 3 Tallahassee, Florida 32308 Alan Levine, Secretary Agency for Health Care Administration Fort Knox Building, Suite 3116 2727 Mahan Drive Tallahassee, Florida 32308 Christa Calamas, General Counsel Agency for Health Care Administration Fort Knox Building, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308 Richard Shoop, Agency Clerk Agency for Health Care Administration Fort Knox Building, Mail Station 3 2727 Mahan Drive Tallahassee, Florida 32308
The Issue Whether the certificate of need application to convert 30 acute care beds to 30 adult psychiatric beds at Broward General Medical Center meets the statutory and rule criteria for approval.
Findings Of Fact The North Broward Hospital District (NBHD) is a special taxing district established by the Florida Legislature in 1951 to provide health care services to residents of the northern two-thirds of Broward County. NBHD owns and operates four acute care hospitals: Coral Springs Medical Center, North Broward Medical Center, Imperial Point Medical Center (Imperial Point), and Broward General Medical Center (Broward General). NBHD also owns and/or operates primary care clinics, school clinics, urgent care centers, and a home health agency. FMC Hospital, Ltd., d/b/a Florida Medical Center (FMC) is a 459-bed hospital with 74 inpatient psychiatric beds, 51 for adults separated into a 25-bed adult unit and a 26-bed geriatric psychiatric unit, and 23 child/adolescent psychiatric beds. FMC is a public Baker Act receiving facility for children and adolescents and operates a mental health crisis stabilization unit (CSU) for children and adolescents. FMC also operates separately located facilities which include a partial hospitalization program, an adult day treatment program, and a community mental health center. At Florida Medical Center South, FMC operates another day treatment program and partial hospitalization program. The Agency for Health Care Administration (AHCA) is the state agency which administers the certificate of need (CON) program for health care services and facilities in Florida. The NBHD applied for CON Number 8425 to convert 30 acute care beds to 30 adult psychiatric beds at Broward General. Broward General operates approximately 550 of its total 744 licensed beds. It is a state Level II adult and pediatric trauma center and the tertiary referral center for the NBHD, offering Level II and III neonatal intensive care, pediatric intensive care, cardiac catheterization and open heart surgery services. Broward General has 68 adult psychiatric beds and is a public Baker Act receiving facility for adults. Public Baker Act receiving facilities have state contracts and receive state funds to hold involuntarily committed mental patients, regardless of their ability to pay, for psychiatric evaluation and short-term treatment. See Subsections 394.455(25) and (26), Florida Statutes. Although they serve different age groups, both FMC and Broward General are, by virtue of contracts with the state, public Baker Act facilities. When a Baker Act patient who is an indigent child or adolescent arrives at Broward General, the patient is transferred to FMC. FMC also typically transfers indigent Baker Act adults to Broward General. At Broward General, psychiatric patients are screened in a separate section of the emergency room by a staff which has significant experience with indigent mental health patients. If hospitalization is appropriate, depending on the patient's physical and mental condition, inpatient psychiatric services are provided in either a 38-bed unit on the sixth floor or a 30- bed unit on the fourth floor of Broward General. In July 1995, Broward General also started operating a 20-bed mental health CSU located on Northwest 19th Street in Fort Lauderdale. Prior to 1995, the County operated the 19th Street CSU and 60 CSU beds on the grounds of the South Florida State Hospital (SFSH), a state mental hospital. Following an investigation of mental health services in the County, a grand jury recommended closing the 60 CSU beds at SFSH because of "deplorable conditions." In addition, the grand jury recommended that the County transfer CSU operations to the NBHD and the South Broward Hospital District (SBHD). As a result, the SBHD assumed the responsibility for up to 20 CSU inpatients a day within its existing 100 adult psychiatric beds at Memorial Regional Hospital. The NBHD assumed the responsibility for up to 40 CSU inpatients a day, including 20 at the 19th Street location. The additional 20 were to be redirected to either the 68 adult psychiatric beds at Broward General or the 47 adult psychiatric beds at Imperial Point. CSU services for adult Medicaid and indigent patients in the NBHD service area were transferred pursuant to contracts between the NBHD and Broward County, and the NBHD and the State of Florida, Department of Children and Family Services (formerly, the Department of Health and Rehabilitative Services). Based on the agreements, the County leases the 19th Street building in which Broward General operates the CSU. The County also pays a flat rate of $1.6 million a year in monthly installments for the salaries of the staff which was transferred from the County mental health division to the NBHD. The County's contract with the NBHD lasts for five years, from December 1995 to September 2000. Either party may terminate the contract, without cause, upon 30 days notice. The State contract, unlike that of Broward County, does not provide a flat rate, but sets a per diem reimbursement rate of approximately $260 per patient per day offset by projected Medicaid revenues. The State contract is renewable annually, but last expired on June 30, 1997. The contract was being re-negotiated at the time of the hearing in November 1997. Based on actual experience with declining average lengths of stay for psychiatric inpatients, the contract was being re-negotiated to fund an average of 30, not a maximum of 40 patients a day. If CON 8425 is approved, NBHD intends to use the additional 30 adult psychiatric beds at Broward General to meet the requirements of the State and County contracts, while closing the 19th Street CSU and consolidating mental health screening and stabilization services at Broward General. NBHD proposes to condition the CON on the provision of 70 percent charity and 30 percent Medicaid patient days in the 30 new beds. By comparison, the condition applicable to the existing 68 beds requires the provision of 3 percent charity and 25 percent Medicaid. When averaged for a total of 98 beds, the overall condition would be 23.5 percent charity and 26.5 percent Medicaid, or a total of 51 or 52 percent. The proposed project will require the renovation of 10,297 gross square feet on the fourth floor of Broward General at a cost of approximately $450,000. The space is currently an unused section of Broward General which contains 42 medical/surgical beds. Twelve beds will be relocated to other areas of the hospital. The renovated space will include seclusion, group therapy, and social rooms, as well as 15 semi- private rooms. Twelve of the rooms will not have separate bathing/showering facilities, and seven of those will also not have toilets within the patients' rooms. Need in Relation to State and District Health Plans - Subsection 408.035(1)(a), Florida Statutes The District 10 allocation factors include a requirement that a CON applicant demonstrate continuously high levels of utilization. The applicant is given the following evidentiary guidelines: patients are routinely waiting for admissions to inpatient units; the facility provides significant services to indigent and Medicaid individuals; the facility arranges transfer for patients to other appropriate facilities; and the facility provides other medical services, if needed. Broward General does not demonstrate continuously high utilization by having patients routinely waiting for admission. Broward General does meet the other criteria required by allocation factor one. The second District 10 allocation factor, like criterion (b) of the first, favors an applicant who commits to serving State funded and indigent patients. Broward General is a disproportionate share Medicaid provider with a history of providing, and commitment to continue providing, significant services to Medicaid and indigent patients. In fact, the NBHD provides over 50 percent of both indigent and Medicaid services in District 10. See also Subsection 408.035(1)(n), Florida Statutes. Allocation factor three for substance abuse facilities is inapplicable to Broward General which does not have substance abuse inpatient services. Allocation factor 4 for an applicant with a full continuum of acute medical services is met by Broward General. See also Rule 59C-1.040(3)(h), Florida Administrative Code. Broward General complies with allocation factor 5 by participating in data collection activities of the regional health planning council. The state health plan includes preferences for (1) converting excess acute care beds; (2) serving the most seriously mentally ill patients; (3) serving indigent and Baker Act patients; (4) proposing to establish a continuum of mental health care; (5) serving Medicaid-eligible patients; and (6) providing a disproportionate share of Medicaid and charity care. Broward General meets the six state health plan preferences. See also Rule 59C-1.040(4)(e)2., Florida Administrative Code, and Subsection 408.035(1)(n), Florida Statutes. Broward General does not meet the preference for acute care hospitals if fewer than .15 psychiatric beds per 1000 people in the District are located in acute care hospitals. The current ratio in the District is .19 beds per 1,000 people. Rule 59C-1.040(4)(3)3, Florida Administrative Code, also requires that 40 percent of the psychiatric beds needed in a district should be allocated to general hospitals. Currently, approximately 51 percent, 266 of 517 licensed District 10 adult inpatient psychiatric beds are located in general acute care hospitals. On balance, the NBHD and Broward General meet the factors and preferences of the health plans which support the approval of the CON application. See also Rule 59C- 1.040(4)(e)1. and Rule 59C-1.030, Florida Administrative Code. Numeric Need The parties stipulated that the published fixed need pool indicated no numeric need for additional adult inpatient psychiatric hospital beds. In fact, the numeric need calculation shows a need for 434 beds in District 10, which has 517 beds, or 83 more than the projected numeric need. In 1994- 1995, the District utilization rate was approximately 58 percent. The NBHD asserts that the need arises from "not normal" circumstances, specifically certain benefits from closing the 19th Street CSU, especially the provision of better consolidated care in hospital-based psychiatric beds, and the establishment of a County mental health court. The NBHD acknowledges that AHCA does not regulate CSU beds through the CON program and that CSU beds are not intended to be included in the calculation of numeric need for adult psychiatric beds. However, due to the substantial similarity of services provided, NBHD contends that CSU beds are de facto inpatient psychiatric beds which affect the need for CON- regulated psychiatric beds. Therefore, according to the NBHD, the elimination of beds at SFSH and at the 19th Street CSU require an increase in the supply of adult psychiatric beds. The NBHD also notes that approval of its CON application will increase the total number of adult psychiatric hospital beds in Broward County, but will not affect the total number of adult mental health beds when CSU and adult psychiatric beds are combined. After the CSU beds at SFSH closed, the total number of adult mental health beds in the County has, in fact, been reduced. NBHD projected a need to add 30 adult psychiatric beds at Broward General by combining the 1995 average daily census (ADC) of 48 patients with its assumption that it can add up to 10, increasing the ADC to 58 patients a day in the existing 68 beds. Based on its contractual obligation to care for up to 40 CSU inpatients a day, the NBHD projects a need for an additional 30 beds. The projection assumed that the level of utilization of adult inpatient psychiatric services at Broward General would remain relatively constant. With 40 occupied beds added to the 48 ADC, NBHD predicted an ADC of 88 in the new total of 98 beds, or 90 percent occupancy. The assumption that the ADC would remain fairly constant is generally supported by the actual experience with ADCs of 48.1, 51.5, and 45.8 patients, respectively, in 1995, 1996, and the first seven months of 1997. NBHD's second assumption, that an ADC of 40 CSU patients will be added is not supported by the actual experience. Based on the terms of the State and County contracts, up to 20 CSU patients have already been absorbed into the existing beds at the Imperial Point or Broward General, which is one explanation for the temporary increase in ADC in 1996, while up to 20 more may receive services at the 19th Street location. In 1996 and 1997, the ADC in the 19th Street CSU beds was 15.3 and 14.2, respectively, with monthly ranges in 1997 from a high of 17 in April to a low of 12 in June. The relatively constant annual ADCs in psychiatric and CSU beds are a reflection of increasing admissions but declining average lengths of stay for psychiatric services. The NBHD also projects that it will receive referrals from the Broward County Mental Health Court, established in June 1997. The Court is intended to divert mentally ill defendants with minor criminal charges from the criminal justice system to the mental health system. Actual experience for only three months of operations showed 7 or 8 admissions a month with widely varying average lengths of stay, from 6 to 95 days. The effect of court referrals on the ADC at Broward General was statistically insignificant into the fall of 1997. Newspaper reports of the number of inmates with serious mental illnesses do not provide a reliable basis for projecting the effect of the mental health court on psychiatric admissions to Broward General, since it is not equipped to handle violent felons. One of Broward General's experts also compared national hospital discharge data to that of Broward County. The results indicate a lower use rate in Broward County in 1995 and a higher one in 1996. That finding was consistent with the expert's finding of a growth in admissions and bed turnover rate which measures the demand for each bed. The expert also considered the prevalence of mental illness and hospitalization rates. The data reflecting expected increases in admissions, however, was not compared to available capacity in the County nor correlated with declining lengths of stay. The District X: Comprehensive Health Plan 1994 includes an estimate of the need for 10 CSU beds per 100,000 people, or a total of 133 CSU beds needed for the District. FMC argues that the calculation is incorrect because only the adult population should be included. Using only adults, FMC determined that 116 CSU beds are needed which, when added to 434 adult psychiatric beds needed in the February 1996 projection, gives a bed need for all mental health beds of 550. That total is less than the actual combined total number of 567 mental health beds, 517 adult psychiatric beds plus 50 CSU beds in 1995. Whatever population group is appropriate, the projection of the need for CSU beds is not reliable based on the evidence that, since the end of 1995, CSU services have been and, according to NBHD, should continue to be absorbed into hospital- based adult psychiatric units. For the same reason, the increase in adult psychiatric bed admissions from 1995 to 1996 does not establish a trend towards increasing psychiatric utilization, but is more likely attributable to the closing of CSU beds at SFSH. FMC's expert's comparison of data from three selected months in two successive years is also not sufficient to establish a downward trend in utilization at the 19th Street CSU, neither is the evidence of a decline in ADC by one patient in one year. Utilization is relatively static based on ADCs in existing Broward County adult psychiatric beds and in CSU beds. FMC established Broward General's potential to decrease average lengths of stay by developing alternative non-inpatient services as FMC has done and Broward General proposes to do. See Finding of Fact 37. Based on local health council reports, FMC's data reflects a rise in the ADC at Broward General to 52.7 in 1996, and a return to 46 in the first seven months of 1997. Using a 14.2 ADC for the 19th Street CSU, FMC projects that Broward General will reach an ADC of approximately 60 in the first year of operations if the CON is approved, not 88 as projected. Broward General acknowledged its capacity to add 10 more patients to the ADC without stress on the system. Having already absorbed 20 of up to 40 CSU patients at Imperial Point and Broward General in 1996 and 1997 resulting in an ADC of 48, and given the capacity to absorb 10 more, the NBHD has demonstrated a need to accommodate an ADC of 10 more adult psychiatric patients at Broward General, or a total ADC of 68 patients. The need to add capacity to accommodate an additional 10 patient ADC was not shown to equate to a need for 30 additional beds, which would result in an ADC of 68 patients in 98 beds, or 69 or 70 percent occupancy. Special Circumstances - Rule 59C-1.040(4)(d) The psychiatric bed rule provides for approval of additional beds in the absence of fixed numeric need. The "special circumstance" provision applies to a facility with an existing unit with 85 percent or greater occupancy. During the applicable period, the occupancy at Broward General was 74.15 percent. However, occupancy rates have exceeded 95 percent in the CSU beds on 19th Street. If up to 20 patients on 19th Street are added to the 48 ADC at Broward General, the result is that the existing 68 beds will be full. A full unit is operationally not efficient or desirable and allows no response to fluctuations in demand. Therefore, the state has established a desirable standard of 75 percent occupancy for psychiatric units, a range which supports the addition of 10 to 15 psychiatric beds at Broward General. Available Alternatives - Subsection 408.035(1)(b) and (d), Florida Statutes, and Rule 59C-1.040(4)(e)4., Florida Administrative Code The psychiatric bed rule provides that additional beds will "not normally" be added if the district occupancy rate is below 75 percent. For the twelve months preceding the application filing, the occupancy rate in 517 adult psychiatric beds in District 10 was approximately 58 percent. FMC's expert noted that each day an average of 200 adult psychiatric beds were available in District 10. Broward General argues that the occupancy rate is misleading. Five of the nine facilities with psychiatric beds are freestanding, private facilities, which are ineligible for Medicaid participation. Historically, the freestanding hospitals have also provided little charity care. One facility, University Pavilion, is full. Of the four acute care hospitals with adult psychiatric beds, Memorial Hospital in the SBHD, is not available to patients in the NBHD service area. Imperial Point, the only other NBHD facility with adult psychiatric beds, is not available based on its occupancy rate for the first seven months of 1997 of approximately 81 percent, which left an average of 9 available beds in a relatively small 47-bed unit. That leaves only Broward General and FMC to care for Medicaid and indigent adult psychiatric patients. FMC is the only possible alternative provider of services, but Broward General was recommended by the grand jury and was the only contract applicant. The occupancy rate in FMC's 51 adult beds was approximately 80 percent in 1995, 73 percent in 1996, and 77 percent for the first seven months in 1997. FMC has reduced average lengths of stay by having patients "step down" to partial hospitalization, day treatment and other outpatient services of varying intensities. The same decline in average lengths of stay is reasonably expected when Broward General implements these alternatives. Adult psychiatric services are also accessible in District 10 applying the psychiatric bed rule access standard. That is, ninety percent of the population of District 10 has access to the service within a maximum driving time of forty- five minutes. The CSU license cannot be transferred to Broward General. Broward County holds the license for CSU beds which, by rule, must be located on the first floor of a building. Although Broward General may not legally hold the CSU license and provide CSU services on the fourth floor of the hospital, there is no apparent legal impediment to providing CSU services in psychiatric beds. Quality of Care - Subsection 408.035(1)(c), Florida Statutes and Rule 1.040(7), Florida Administrative Code Broward General is accredited by the Joint Commission on Accreditation of Health Care Organizations. The parties stipulated that Broward General has a history of providing quality care. Broward General provides the services required by Rule 59C-1.040(3)(h), Florida Administrative Code. Services Not Accessible in Adjoining Areas; Research and Educational Facilities; Needs of HMOs; Services Provided to Individuals Beyond the District; Subsections 408.035(1)(f),(g),(j), and (k), Florida Statutes Broward General does not propose to provide services which are inaccessible in adjoining areas nor will it provide services to non-residents of the district. Broward General is not one of the six statutory teaching hospitals nor a health maintenance organization (HMO). Therefore, those criteria are of no value in determining whether this application should be approved. Economics and Improvements in Service from Joint Operation - Subsection 408.035(1)(e), Florida Statutes The consolidation of the psychiatric services at Broward General is reasonably expected to result in economies and improvements in the provision of coordinated services to the mentally ill indigent and Medicaid population. Broward General will eliminate the cost of meal deliveries and the transfer of medically ill patients, but that potential cost-saving was not quantified by Broward General. Staff and Other Resources - Subsection 408.035(1)(h), Florida Statutes The parties stipulated that NBHD has available the necessary resources, including health manpower, management personnel, and funds to implement the project. Financially Feasibility - Subsection 408.035(1)(h) and (i), Florida Statutes The parties stipulated that the proposed project is financially feasible in the immediate term. The estimated total project cost is $451,791, but NBHD has $500,000 in funds for capital improvements available from the County and $700,000 from the Florida Legislature. As stipulated by the parties, NBHD has sufficient cash on hand to fund the project. Regardless of the census, the County's contractual obligation to the NBHD remains fixed at $1.6 million. The State contract requires the prospective payment of costs offset by expected Medicaid dollars. If the number of Medicaid eligible patients decreases, then state funding increases proportionately. The state assumed that 20 percent of the patients would qualify for Medicaid, therefore it reimburses the per diem cost of care for 80 percent of the patients. One audit indicated that 30 percent of the patients qualified for Medicaid, so that State payments for that year were higher than needed. The State contract apparently makes no provision to recover excess payments. The application projects a net profit of $740,789 for the first year of operations, and a net profit of $664,489 for the second year. If the State contract with NBHD is renewed to contemplate an average of 30 patients per day as opposed to up to 40 patients per day, then annual revenue could be reduced up to $400,000. Projected net profit will, nevertheless, exceed expenses when variable expenses are reduced correspondingly. If 20 state funded patients are already in psychiatric beds, and 20 more could be transferred from 19th Street, the result is an ADC of 68. Based on the funding arrangements, there is no evidence that the operation of a total of 98 beds could not be profitable, even with an ADC of 68, although it would be wasteful to have 30 extra beds. Impact on Competition, Quality Assurance and Cost-Effectiveness - Subsection 408.035(1)(l), Florida Statutes With a maximum of 68 inpatients or more realistically, under the expected terms of a renegotiated State contract, 58 to 60 inpatients in 98 beds, Broward General will reasonably attempt to expand the demand for its inpatient psychiatric services. Within the NBHD's legal service area, one-third of adult psychiatric patients not admitted to Broward General are admitted to FMC. Assuming a proportionate impact on competitors, FMC's expert projected that one-third of approximately 30 unfilled beds at Broward General will be filled by patients who would otherwise have gone to FMC. The projection of a loss of 9 patients from the ADC of FMC is reasonably based on an analysis showing comparable patient severity in the most prevalent diagnostic category. Given the blended payor commitment of approximately 51 or 52 percent total for Medicaid and charity in 98 beds, Broward General will be able to take patients from every payor category accepted at FMC. The loss of 9 patients from its ADC can reduce revenues by $568,967 at FMC. The impact analysis is reasonably based on lost patient days since most payers use a per diem basis for compensating FMC. For example, although Medicare reimbursement is usually based on diagnosis regardless of length of stay, it is cost-based for the geriatric psychiatric unit. Net profit at FMC, for the year 1996-1997, was expected to be approximately $4.5 million. FMC will also experience increased costs in transporting indigent patients from FMC to Broward General for admission and treatment. Because of the additional distance, the cost to transfer indigent patients is $20 more per patient from FMC to Broward General than it is from FMC to the 19th Street CSU. FMC typically stabilizes indigent adult psychiatric inpatients, then transfers them to either the 19th Street CSU or Broward General. From March through September of 1997, FMC transported approximately 256 indigent patients from FMC to the 19th Street CSU. In terms of quality assurance, the consolidation of psychiatric services at Broward General will allow all patients better access to the full range of medical services available at Broward General. The NBHD's operation of the 19th Street CSU is profitable. Approval of the CON application should reasonably eliminate all costs associated with operation of the 19th Street facility, and shift more revenues from the State and County contracts to Broward General. Some savings are reasonably expected from not having meal deliveries to 19th Street or patient transfers for medical care. The NBHD did not quantify any expected savings. Costs and Methods of Construction - Subsection 408.035(1)(m), Florida Statutes Broward General will relocate 12 of 42 medical/surgical beds and convert 30 medical/surgical beds to 30 adult psychiatric beds on one wing of the fourth floor, which is currently unused. Fifteen semi-private medical/surgical patient rooms will be converted into semi-private adult psychiatric rooms. Existing wards will be converted to two social rooms, one noisy and one quiet. With the removal of the walls of some offices, the architect designed a group therapy room. An existing semi-private room will be used as a seclusion room. Of the fifteen semi-private rooms, twelve will not have bathing or showering facilities and seven will not have toilets within the patients' rooms. At the time the hospital was constructed, the state required only a lavatory/sink in each patient room. AHCA's architect agreed to allow Broward General to plan to use central bathing and toilet facilities to avoid additional costs and diminished patient room sizes. Because the plan intentionally avoids construction in the toilets, except to enlarge one to include a shower, there is no requirement to upgrade to Americans With Disabilities Act (ADA) standards. Therefore, the $23,280 construction cost contingency for code compliance is adequate. Although the projected construction costs are reasonable and the applicable architectural code requirements are met, the design is not the most desirable in terms of current standards. Patient privacy is compromised by the lack of toilets for each patient room. Past and Proposed Provision of Services to Promote a Continuum of Care in a Multi-level System - Subsection 408.035(1)(o), Florida Statutes Broward General is a tertiary acute care facility which provides a broad continuum of care. Because it already operates the CSU and provides CSU services in adult psychiatric beds, the proposal to relocate patients maintains but does not further promote that continuum of care. Broward General's plan to establish more alternatives to inpatient psychiatric care does promote and enhance its continuum of care. Capital Expenditures for New Inpatient Services - Subsection 408.035(2), Florida Statutes Broward General is not proposing to establish a new health service for inpatients, rather it is seeking to relocate an existing service without new construction. The criteria in this Subsection are inapplicable. Factual Conclusions Broward General did not establish a "not normal" circumstance based on the grand jury's findings and recommendations. The grand jury did not recommend closing 19th Street facility. Broward General did generally establish not normal circumstances based on the desirability of consolidating mental health services at Broward General to provide a single point of entry and to improve the quality of care for the 19th Street facility patients. Broward General failed to establish the need to add 30 beds to accomplish the objective of closing the 19th Street facility. Although the existing beds at Broward General may reasonably be expected to be full as a result of the transfer of 19th Street patients, the addition of 30 beds without sufficient demand results in an occupancy rate of 69 or 70 percent, from an ADC of 68 patients in 98 beds. Broward General has requested approximately twice as many beds as it demonstrated it needs. Broward General's CON application on balance satisfies the local and state health plan preferences. In general, FMC is the only alternative facility in terms of available beds, but is not the tax-supported public facility which the grand jury favored to coordinate mental health services. Broward General meets the statutory criteria for quality of care, improvements from joint operations, financial feasibility, quality assurance, cost-effectiveness, and services to Medicaid and indigent patients. The proposal is not the most desirable architecturally considering current standards. More importantly, Broward General did not demonstrate that it can achieve its projected occupancy without an adverse impact on FMC. The NBHD proposal will add too many beds to meet the targeted state occupancy levels in relatively a static market. Broward General's application does not include a partial request for fewer additional beds which would have allowed the closing of 19th Street, while maintaining some empty beds for demand fluctuations and avoiding an adverse impact on FMC.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration deny the application of the North Broward Hospital District for Certificate of Need Number 8425 to convert 30 medical/surgical beds to 30 adult psychiatric beds at Broward General Medical Center. DONE AND ENTERED this 21st day of April, 1998, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 21st day of April, 1998. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Paul J. Martin, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Paul Vazquez, Esquire Agency For Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Stephen A. Ecenia, Esquire R. David Prescott, Esquire Rutledge, Ecenia, Underwood, Purnell & Hoffman, P.A. Post Office Box 551 Tallahassee, Florida 32302-0551 David C. Ashburn, Esquire Gunster, Yoakley, Valdes-Fauli & Stewart, P.A. 215 South Monroe Street, Suite 830 Tallahassee, Florida 32301
The Issue Whether there is a need for an additional 31 short-term psychiatric beds for Broward County?
Findings Of Fact I. General. History of Case. In June of 1984, the Petitioner filed an application with the Respondent for a certificate of need to add 31 short- term psychiatric beds to its existing facility. The certificate of need sought by the Petitioner was assigned certificate of need #3372 by the Respondent. The Respondent denied the Petitioner's application for certificate of need #3372. On October 25, 1984, the Petitioner filed a Petition for Formal Administrative Hearing with the Respondent challenging its proposed denial of the Petitioner's application. The Petition was filed with the Division of Administrative Hearings by the Respondent and was assigned case number 84-4037. Biscayne, Memorial and Charter were granted leave to intervene by Orders dated January 28, 1985, April 26, 1985 and July 9, 1985, respectively. The final hearing was held on November 19 and 21, 1985 in Ft. Lauderdale, Florida and February 24 and 25, 1986 in Tallahassee, Florida. The Petitioner's Proposal. The Petitioner originally sought to add 31 short-term psychiatric beds to its existing facility. If approved, the additional beds would have increased its current licensed beds from 334 to 365 beds. The Petitioner proposed to meet projected need for short-term psychiatric beds in Broward County for 1989. In its original application, the Petitioner proposed to provide services to children, adolescents, adults and the elderly. No distinct psychiatric units were proposed. The total cost of the original proposal was estimated to be $209,368.00. At the final hearing, the Petitioner proposed to relinquish 31 medical/surgical beds and to add 31 short-term psychiatric beds to meet projected need for short-term psychiatric beds in Broward County for 1989. The Petitioner will end up with a total of 334 licensed beds, the same number it now has, if its application is approved. The total cost of the proposal presented at the final hearing was $337,169.00, which is accurate and reasonable. The 31 proposed beds will be divided into a 15-bed dedicated adolescent unit and a 16-bed dedicated geropsychiatric unit. Adults will generally not be treated by the Petitioner. Involuntary admissions will be treated by the Petitioner, although there was some evidence to the contrary. The sixth floor of the Petitioner's existing facility will be converted into space for the new psychiatric units. The Petitioner changed the estimated staffing for its proposal between the time it filed its original application and the final hearing. The changes were not significant. During the 1985 legislative session, the Florida Legislature enacted Section 394.4785(1)(b), Florida Statutes (1985). This,, Section requires that most adolescents be separated from other patients for purposes of psychiatric treatment. Some of the modifications of the Petitioner's application which were made at the final hearing were made in order to conform with this Section. The changes in the Petitioner's proposal which were made between the time it filed its original application with the Respondent and the time of the final hearing are not substantial enough to require that the Petitioner's application, as modified, be remanded to the Respondent for further consideration. The Parties; Standing. The Petitioner is a 334-bed, for-profit, general acute-care hospital. The Petitioner is a full service hospital providing general medical services. The Petitioner has a medical staff of more than 400 physicians, including a department of psychiatry. The Petitioner is owned by National Medical Enterprises, one of the largest health care providers in the country. The Petitioner is located in Hollywood, Florida, which is located in the southern portion of Broward County, Florida. Broward County is the only County in the Respondent's service district 10. The Petitioner's primary service area consist of the southern portion of Broward County from State Road 84 in the North to the Broward-Dade County line in the South. Memorial is a not-for-profit general acute care hospital located in southern Broward County. Memorial holds License #1737, issued on June 1, 1985, which authorizes Memorial to operate 74 short-term psychiatric beds. This license is valid for the period June 1, 1985 to May 31, 1987. Memorial was also authorized to operate 74 short-term psychiatric beds in its license issued for the 2-year period prior to June 1, 1985. Memorial is located a short distance from where the Petitioner is located in southern Broward County. Memorial and the Petitioner share the same general primary service area. Most of the physicians on the staff at Memorial are also on the Petitioner's staff. Memorial is subsidized by tax revenues for providing indigent care for southern Broward County. About 17 percent of Memorial's revenue is attributable to bad debt and indigent care. If the Petitioner's application is approved it is likely that the Petitioner will take patients from Memorial. It is also likely that the patients taken from Memorial will be other than indigent patients. If the Petitioner were to achieve a 75 percent occupancy rate and 50 percent of its patients come from Memorial, Memorial would lose a little over $1,000,000.00 in terms of 1985 dollars. It is unlikely, however, that the Petitioner will achieve an occupancy rate of 75 percent and, more importantly, it is unlikely that 50 percent of the Petitioner's patients will come from Memorial. The loss of patients from Memorial which would be caused by approval of the Petitioner's application will, however, result in a financial loss to Memorial which may effect its ability to provide quality care. Additionally, the loss in paying patients could increase the percentage of indigent patients at Memorial and, because a portion of the cost of caring for indigents is covered by paying patients at Memorial, could result in a further loss in revenue and an increase in tax support. The public may have difficulty accepting a public hospital, such as Memorial, as a high-quality hospital if the public hospital is perceived to be a charity hospital. It is therefore important for a public hospital to attract a significant number of paying patients to its facility to avoid such an image. It is unlikely that the number of patients which may be lost to the Petitioner by Memorial is sufficient to cause the public to perceive that Memorial is a charity hospital. Biscayne is a 458-bed, general acute-care hospital located on U.S. 1 in northern Dade County, Florida, just south of the Broward County line. Biscayne's facility is located within about 5 miles of the Petitioner's facility. Biscayne is about a 5 to 10 minute drive from the Petitioner. Dade County is not in service district 10. It is in service district 11. Of the 458 licensed beds at Biscayne, 24 are licensed as short-term psychiatric beds and 24 are licensed as substance abuse beds. The rest are licensed as medical/surgical beds. Ten of the medical/surgical beds at Biscayne are used as a dedicated 10-bed eating disorder (anoxeria nervosa and bulimirexia) unit. These 10 beds are not licensed for such use. A separate support staff is used for the 10-bed eating disorder unit. Approximately 60 percent of Biscayne's medical staff of approximately 400 physicians are residents of Broward County. Most of these physicians are also on the medical staff of other hospitals, principally the Petitioner, Memorial and Parkway Regional Medical Center, which is located in northern Dade County. Most of its staff have their business offices in southern Broward County. Biscayne's service area includes southern Broward County and northern Dade County. Approximately 60 percent of Biscayne's patients are residents of southern Broward County. Biscayne markets its services in southern Broward County. Eighty percent of Biscayne's psychiatric patients are elderly. Many types of psychotic and psychiatric disorders are treated at Biscayne. Biscayne offers psycho-diagnostic services, crisis stabilization services, shock therapy services, individual therapy services and group therapy services. Biscayne has had difficulty in recruiting qualified staff for its psychiatric unit. Biscayne currently has 4 vacancies for registered nurses, 4 vacancies for mental health assistants and 1 vacancy for an occupational therapist in its psychiatric unit. Biscayne recruits nurses who are certified in mental health nursing. They have not always been successful in finding such nurses. Therefore, Biscayne provides educational programs to help train its nursing staff. These programs are necessary because of the unavailability of experienced nurses for its psychiatric unit. The Petitioner has projected that most of its patients for its proposed psychiatric units will come from southern Broward County, where Biscayne gets approximately 60 percent of its patients. The Petitioner plans to try to convince psychiatrists currently using existing providers, except Hollywood Pavilion, to refer their patients to the proposed psychiatric units. Since Biscayne and the Petitioner share some of the same physicians, it is likely that many of the patients cared-for by the Petitioner will come form Biscayne and other providers in southern Broward County, including Memorial. The loss of patients at Biscayne, if the Petitioner's proposal is approved, will result in a loss of revenue to Biscayne which may affect its ability to provide quality care. Charter was an applicant for a certificate of need to construct a free-standing psychiatric facility in Broward County. In its application Charter sought approval of long-term and short-term psychiatric beds. Charter's application was filed with the Respondent in August of 1983. It was filed for review by the Respondent in a batching cycle which preceded the batching cycle in which the Petitioner's application was filed. In December of 1983, the Respondent proposed to approve Charter's application and authorize a project consisting of 16 short-term adolescent psychiatric beds, 16 long-term adolescent psychiatric beds, 16 long-term substance abuse beds and 12 long-term children's psychiatric beds. The Respondent's proposed approval of Charter's application was challenged. Following an administrative hearing, it was recommended that Charter's application be denied. Final agency action had not been taken as of the commencement of the hearing in this case. Subsequent to the date on which the final hearing of this case commenced, the Respondent issued a Final Order denying Charter's certificate of need application. This Final Order is presently pending on appeal to the First District Court of Appeal. Charter does not have an existing facility offering services similar to those proposed by the Petitioner in Broward County or anywhere near the Petitioner's facility. When the Orders allowing Memorial, Biscayne and Charter to intervene were issued by Hearing Officer Sherrill, Mr. Sherrill determined that if the Intervenor's could prove the facts alleged in their Petition to Intervene they would have standing to participate in this case. Memorial and Biscayne have in fact proved the allegations contained in their Petitions to Intervene. Based upon all of the evidence, it is therefore concluded that Memorial and Biscayne have standing to participate in this proceeding. Both Memorial and Biscayne will probably lose patients to the Petitioner if its proposal is approved resulting in a loss of revenue. This loss could affect quality of care at Memorial and Biscayne. Also, it is possible that both would lose some of their specialized nursing personnel to ;the Petitioner to staff its proposed psychiatric units. Charter has failed to establish that it has standing to participate in this proceeding. The potential injury to Charter is too speculative. II. Rule 10-5.11(25), F.A.C. A. General. Whether a certificate of need for short-term psychiatric beds should be approved for Broward County is to be determined under the provisions of Section 381.494(6)(c), Florida Statutes (1985), and the Respondent's rules promulgated thereunder. In particular, Rule 10-5.11(25), F.A.C., governs this case. Under Rule 10-5.11(25)(c), F.A.C., a favorable determination will "not normally" be given on applications for short-term psychiatric care facilities unless bed need exists under Rule 10-5.11(25)(d), F.A.C. B. Rule 10-5.11(25)(d) , F.A.C. Pursuant to Rule 10-5.11(25)(d)3, F.A.C., bed need is determined 5 years into the future. In this case, the Petitioner filed its application with the Respondent in 1984, seeking approval of additional short-term psychiatric beds for 1989. The Petitioner did not change this position prior to or during the final hearing. Therefore, the planning horizon for purposes of this case is 1989. Under Rule 10-5.11(25)(d)3, F.A.C., bed need is determined by subtracting the number of "existing and approved" beds in the service district from the number of beds for the planning year based upon a ratio of .35 beds per 1,000 population projected for the planning year in the service district. The population projection is to be based on the latest mid-range projections published by the Bureau of Economic and Business Research at the University of Florida. Bed need is determined under the Respondent's rules on a district-wide basis unless the service district has been sub- divided by the Respondent. District 10 has not been subdivided by the Respondent. Therefore, bed need for purposes of this case under Rule 10-5.11(25)(d), F.A.C., is to be determined based upon the population projections for all of Broward County for 1989. The projected population for Broward County for 1989 is 1,228,334 people. Based upon the projected population for Broward County for 1989, there will be a need for 430 short-term psychiatric beds in Broward County in 1989. The evidence at the final hearing proved that there are currently 427 licensed short-term psychiatric beds in Broward County. During the portion of the final hearing held in November of 1985, evidence was offered that proved that there were also 16 approved short-term psychiatric beds for Broward County. These short-term beds were part of the application for the certificate of need sought by Charter. Subsequently, however, a Final Order was issued by the Respondent denying Charter's application. Therefore, the 16 short-term psychiatric beds sought by Charter do not constitute "existing and approved" short-term psychiatric beds in Broward County for purposes of this case. Subsequent to the conclusion of the final hearing in this case, the First District Court of Appeal reversed a Final Order of the Respondent denying an application for a certificate of need for a free-standing 10 -bed psychiatric facility, including 80 additional short-term psychiatric beds, for Broward County. Balsam v. Department of Health and Rehabilitative Services, So.2d (Fla. 1st DCA 1986). As indicated in Finding of Fact 23, Memorial is licensed to operate 74 short-term psychiatric beds. Memorial is in fact operating all 74 of these licensed beds. Memorial filed an application with the Respondent for certificate of need #1953 in October of 1981 in which Memorial indicated that it planned to reduce the number of short-term psychiatric beds it had available by 24 beds. Memorial's certificate of need application involved an expenditure of capital and did not specifically involve an application for a change in bed inventory at Memorial. Memorial also represented that it would reduce the number of its available short-term psychiatric beds by 24 in a bond prospectus it issued in September of 1983. The Respondent approved Memorial's certificate of need application. Despite Memorial's representations that it would reduce its short-term psychiatric bed inventory, the beds are still in use in Broward County. Memorial has no plans to close any beds and the Respondent does not plan to take any action against Memorial to require it to stop using 24 of its short-term psychiatric beds. Hollywood Pavilion is licensed to operate 46 short- term psychiatric beds in Broward County. In 1985, 475 patients were admitted to Hollywood Pavilion and its occupancy rate was 62.3 percent. In fact, Hollywood Pavilion had more admissions than Florida Medical Center had to its psychiatric unit. It therefore appears that other physicians find Hollywood Pavilion acceptable. Hollywood Pavilion is accredited by the Joint Commission on Accreditation of Hospitals. The Petitioner presented the testimony of a few physicians who questioned the quality of care at Hollywood Pavilion. These physicians indicated that they did not use Hollywood Pavilion. At least one of the physicians indicated, however, that he did refer patients to other physicians whom he knew admitted patients to Hollywood Pavilion despite his feeling that the quality of care at Hollywood Pavilion was poor. This action is inconsistent with that physician's opinion as to the lack of quality of care at Hollywood Pavilion. His opinion is therefore rejected. The other physicians' opinions are also rejected because very little evidence was offered in support of their opinions and because of the contrary evidence. Based upon a consideration of all of the evidence concerning the quality of care at Hollywood Pavilion, it is concluded that the Petitioner failed to prove that the 46 short-term psychiatric beds licensed for use and available for use at Hollywood Pavilion should not be counted as existing short- term psychiatric beds in Broward County. Coral Ridge Hospital is licensed to operate 74 short- term psychiatric beds in Broward County. The average length of stay at Coral Ridge Hospital during 1984 and 1985 was almost 80 days. The average length of stay at Coral Ridge Hospital has been in excess of 40 days since 1980 and in excess of 60 days since 1983. The average length of stay at Coral Ridge Hospital is in excess of the average length of stay for which short-term psychiatric beds are to be used under the Respondent's rules. Rule 10-5.11(25)(a), F.A.C., provides that short-term beds are those used for an average length of stay of 30 days or less for adults and 60 days or less for children and adolescents under 18 years of age. Rule 10-5.11(26)(a), F.A.C., provides that long-term beds are those used for an average length of stay of 90 days or more. The psychiatric beds at Coral Ridge Hospital, based upon an average length of stay for all of its beds, falls between the average length of stay for short-term beds and long-term beds. The occupancy rate at Coral Ridge Hospital for 1985 was between 40 percent and 50 percent. Therefore, it is possible that a few patients at Coral Ridge Hospital with a very long length of stay could cause the overall average length of stay of the facility to be as long as it is. Coral Ridge Hospital will probably take short-term psychiatric patients because of its low occupancy rate. Therefore, there are at least 29 to 37 short-term psychiatric beds available for use as short-term psychiatric beds at Coral Ridge Hospital. The Petitioner failed to prove how many of the licensed short-term psychiatric beds at Coral Ridge Hospital are not being used for, and are not available for use by, short-term psychiatric patients in Broward County. It cannot, therefore, be determined how many, if any, of the licensed short-term beds at Coral Ridge Hospital should not be treated as existing short-term psychiatric beds in Broward County. Based upon the foregoing, the 427 licensed short-term psychiatric beds in Broward County should be treated as "existing" beds for purposes of determining the need for short- term psychiatric beds under Rule 10-5.11(25)(d), F.A.C. There is a net need for short-term psychiatric beds in Broward County for 1989 of only 3 additional beds under Rule 10- 5.11(25)(d)3, F.A.C. If the 80 short-term psychiatric beds approved by the First District Court of Appeal in Balsam are taken into account, there will be a surplus of 77 short-term psychiatric beds in Broward County for 1989 under Rule 10- 5.11(25)(d)3, F.A.C. Based upon an application of Rule 10-5.11(25)(d)3, F.A.C., there is no need for the additional 31 short-term psychiatric beds sought by the Petitioner. Rule 10-5.11(25)(d)1, F.A.C., provides that a minimum of .15 beds per 1,000 population should be located in hospitals holding a general license to ensure access to needed services for persons with multiple health problems. Some patients who need psychiatric care also need other medical services which can better be obtained in an acute care hospital. This fact is taken into account by the requirement of Rule 10-5.11(25)(d)1, F.A.C. Based upon the projected population for Broward County in 1989, there should be a minimum of 184-short-term psychiatric beds in hospitals holding a general license in Broward County. There are currently 243 short-term psychiatric beds in hospitals holding a general license in Broward County. Therefore, the standard of Rule 10-5.11(25)(d)1, F.A.C., has been met without approval of the Petitioner's proposal. There is no need for additional short-term psychiatric beds in general hospitals in Broward County for 1989. Rule 10-5.11(25)(d)4, F.A.C., provides that applicants for short-term psychiatric beds must be able to project an occupancy rate of 70 percent for its adult psychiatric beds and 60 percent for its adolescent and children's psychiatric beds in the second year of operation. For the third year of operation, the applicant must be able to project an 80 percent adult occupancy rate and a 70 percent adolescent and children's occupancy rate. The beds sought by the Petitioner will be managed by a professional psychiatric management company: Psychiatric Management Services (hereinafter referred to as "PMS"). PMS is owned by Psychiatric Institutes of America, a subsidiary of National Medical Enterprises. Because of the lack of need for additional short-term psychiatric beds in Broward County, it is doubtful that the Petitioner can achieve its projected occupancy rates as required by Rule 10-5.11(25)(d)4, F.A.C. Rules 10-5.11(25)(d)5 and 6, F.A.C., require that certain occupancy rates normally must have been met in the preceding 12 months before additional short-term psychiatric beds will be approved. The facts do not prove whether the occupancy rates provided by Rule 10-5.11(25)(d)5, F.A.C., have been met because the statistics necessary to make such a determination are not available. The evidence failed to prove that the occupancy rates of Rule 10- 5.11(25)(d)6, F.A.C. have been met. The average occupancy rate for short-term psychiatric beds in Broward County for 1985 was between 64.8 percent and 68.4 percent. Occupancy rates in Broward County for short-term psychiatric beds have not reached 71 percent since 1982. These rates are well below the 75 percent occupancy rate provided for in Rule 10-5.11(25)(d)6, F.A.C. This finding is not refuted by the fact that Florida Medical Center added 59 beds in 1984 and the fact that occupancy rates at most general hospitals exceeded 75 percent in 1985. Based upon the average occupancy rate in Broward County for 1985, there were approximately 100 empty short-term psychiatric beds in Broward County on any day. Rule 10-5.11(25)(d)7, F.A.C. requires that short-term psychiatric services provided at an inpatient psychiatric hospital should have at least 15 designated beds in order to assure specialized staff and services at a reasonable cost. The Petitioner's proposal to add 31 short-term psychiatric beds meets this requirement of the rule. C. Rule 10-5.11(25)(e), F.A.C. Rule 1O-5.11(25)(e)1, F.A.C., requires that an applicant prove that its proposal is consistent with the needs in the community as set out in the Local Health Council plans, local Mental Health District Board plans, State Mental Health Plan and needs assessment data. The Petitioner has failed to meet this requirement. The Petitioner's proposal is inconsistent with the District 10 Local Health Plan, the Florida State Health Plan and State and Local Mental Health Plans. In particular, the Petitioner's proposal is inconsistent with the following: The District 10 Local Health Plan's recommendation that applications not be approved if approval would result in an excess number of beds under the Respondent's bed need methodology; The District 10 Local Health Plan's recommendation concerning occupancy standards for the district (75 percent during the past 12 months); The position of the Florida State Health Plan that inpatient psychiatric services are a setting of last resort; The recommendation of the District 10 Mental Health Plan that alternatives to hospitalization for psychiatric services should be encouraged; and The recommendation of the Florida State Mental Health Plan that less restrictive treatment alternatives should be encouraged. Rule 10-5.11(25)(e)3, F.A.C., requires that applicants indicate the amount of care to be provided to underserved groups. The Petitioner's representations concerning its plans to provide indigent care contained in its application are misleading, in that the Petitioner represented that it would not turn away indigents. At the final hearing, the Petitioner indicated that it will generally provide care to indigents only on an emergency basis. Patients who need indigent care on a non-emergency basis will be referred to Memorial. Also, once an indigent patient who needs emergency care has stabilized, that patient will be transferred to Memorial for care. The Petitioner accepts few Medicaid and indigent patients. During 1985, the Petitioner treated 21 Medicaid patients out of a total of 6,800 patients. Only 1.5 percent of its total revenue was for uncompensated care. During 1984, the Petitioner treated 22 Medicaid patients out of a total of 7,321 patients. Only 1.2 percent of its total gross revenue was for uncompensated care. Memorial is subsidized by tax revenues for providing indigent care, or southern Broward County. Because Memorial provides indigent care, indigent patients are usually referred to Memorial if they do not need emergency care or are transferred to Memorial after they stabilize if they do need emergency care. There are other hospitals in northern Broward County which provide similar indigent care. It is therefore common practice to refer patients to those hospitals. Rule 10-5.11(25)(e)5, F.A.C., provides that development of new short- term psychiatric beds should be through the conversion of underutilized beds in other hospital services. The Petitioner's proposal to convert 31 medical/surgical beds for use as short-term psychiatric beds meets this provision. Rule 10-5.11(25)(e)7, F.A.C., provides that short- term psychiatric services should be available within a maximum travel time of 45 minutes under average travel conditions for at least 90 percent of the service area's population. There is no geographic access problem in Broward County. At least 90 percent of the population of Broward County is within a maximum of 45 minutes driving time under average driving conditions to existing short-term psychiatric services in Broward County. The Petitioner's proposal will not significantly enhance geographic access in Broward County. III. Statutory Criteria. Need for Services. The Respondent has approved two certificates of need authorizing the addition of a total of 135 long-term psychiatric beds for Broward County. The addition of 135 long-term beds probably means that additional short-term beds in Broward County which have been used for patients requiring longer treatment will be available. If the additional long-term beds free up short-term beds, the occupancy rate of short-term psychiatric beds in Broward County would be even less than it has been during the past 12 months, if other things remain equal. Both Memorial and Florida Medical Center have been using short-term psychiatric beds for the care of long-term patients. Once the new long-term psychiatric beds are operational, more short-term psychiatric beds will be available in Broward County. Existing Providers. In addition to the short-term psychiatric beds available at Coral Ridge Hospital and Hollywood Pavilion, short- term psychiatric beds are available at the following existing facilities in the service district: Ft. Lauderdale Hospital: 64 beds Florida Medical Center: 74 beds Imperial Point: 47 beds Broward General Medical Center: 48 beds There is no geographic distribution problem in district 10. Generally, the Petitioner did not prove that existing short-term psychiatric beds in Broward County are not available, efficient, appropriate, accessible, adequate or providing quality of care. The Petitioner also did not prove that existing facilities are over-utilized. No new services are proposed by the Petitioner. The evidence did prove that there is usually a waiting list for short-term psychiatric beds at Memorial and that physicians have resorted to various devices to get their patients into short-term psychiatric beds at Memorial. Specialized adolescent psychiatric services are available in the service district at Ft. Lauderdale Hospital and at Florida Medical Center. Ft. Lauderdale Hospital has 24 short- term psychiatric beds dedicated to the treatment of adolescents. Florida Medical Center has 20 short-term psychiatric beds dedicated to the treatment of adolescents. Broward General Medical Center and Imperial Point also provide children/adolescent services. Treatment for eating disorders is provided and available at Imperial Point and Florida Medical Center. Florida Medical Center solicits patients from all parts of the service district. Geropsychiatric short-term psychiatric beds are available in the service district at Hollywood Pavilion, Imperial Point and Ft. Lauderdale Hospital. Florida Medical Center has a closed adult psychiatric unit and often treats persons over 60 years of age. It also has a 26-bed adult short-term psychiatric unit with 2 specialized treatment programs: one for eating disorders and the other for stress and pain management. The Petitioner has proposed to provide a dedicated geropsychiatric unit to meet the needs of geriatric patients which are different from those of adults generally. Although there are no such dedicated geropsychiatric units in the service district, the Petitioner failed to prove that geriatrics are not receiving adequate care from existing providers. Quality of Care. The Petitioner is accredited by the Joint Commission on Accreditation of Hospitals. The Petitioner has established adequate quality control procedures, including educational programs and a quality assurance department. These quality control procedures will also be used to insure quality of care in the proposed psychiatric units. The psychiatric units will be managed by PMS. PMS specializes in the management of psychiatric units in acute care hospitals. PMS has programs for adolescents and geriatrics. These programs will be available for use in the proposed psychiatric units. PMS also has a large variety of programs, services and specialists available to establish and maintain quality of care at the Petitioner. The Petitioner will be able to provide quality of care. Alternatives. The Petitioner did not prove that available and adequate facilities which may serve as an alternative to the services it is proposing do not exist in Broward County. Economies of Scale. The Petitioner's parent corporation, National Medical Enterprises has purchasing contracts available for use by the Petitioner in purchasing items needed for the proposed psychiatric units. These contracts can result in a reduction of costs for the proposed project. Staff Resources. PMS will help in recruiting staff for the proposed psychiatric units. Recruiting will be done locally but the Petitioner also has the ability to recruit specialized staff on a broader geographic scale. There is a shortage of nursing personnel for psychiatric services in southern Broward County and northern Dade County. Since the Petitioner plans to recruit locally, this could cause existing providers to lose specialized nursing personnel to the Petitioner. If the Petitioner causes vacancies at existing facilities, this could adversely affect quality of care. Financial Feasibility. The total projected cost of the project ($337,169.00) can easily be provided by National Medical Enterprises, the parent corporation of the Petitioner. The Petitioner's financial projections are unrealistic to the extent of the projected utilization and revenue for the proposed psychiatric units. Based upon the projected need of only 3 short-term psychiatric beds (or possibly a surplus of 77 beds) for 1989, the Petitioner's projected utilization and revenue for its proposal is rejected. The Petitioner has proved immediate financial feasibility but has failed to prove the proposal is financially feasible in the long-term. Impact of Proposal. The Petitioner's proposal could adversely effect the costs of providing health services in Broward County. This is especially true in light of the lack of need for additional short-term psychiatric beds in Broward County. Because of the high quality of the services the Petitioner proposes to provide, competition in Broward County could be enhanced and ultimately benefit consumers, if there was a need for the proposed additional beds. If a hospital has an image of being a charity hospital serving the needs of underserved groups, the hospital can experience difficulty in attracting paying patients and have difficulty in getting consumers to accept the high quality of the services of the hospital. Although it is likely that the Petitioner will take paying patients away from Memorial, it is unlikely that the number of patients lost could substantially affect the public's image of Memorial. The effect the Petitioner's proposal will have on Memorial is limited by the fact that the Petitioner is only seeking 31 beds and they are only short-term psychiatric beds. Memorial provides a variety of services and psychiatric services are only a small part of those services. I. Construction. It the Petitioner's proposal is approved, 11,500 square feet on the sixth floor of the Petitioner's hospital will be renovated and converted for use for the two proposed psychiatric units. The renovations can be made quickly. There will be space for 16 beds in a geropsychiatric unit and 15 beds in an adolescent unit. There will be a separate lobby for the psychiatric units and the elevators to the lobby will be strictly controlled. The two units will be separated and adequate security precautions will be taken to keep the two units separate. The ceilings in both units will be modified to insure security. Nurse stations will be provided for both units. Visibility from the nurse stations will be fair. Space is provided for a dayroom for each unit and there will be a class room and four rooms for therapy. These spaces will barely be adequate to meet the various needs of patients. With adequate planning and coordination, patients' needs can be met. There is inadequate space in the proposed facility for physical activities for patients.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the certificate of need application filed by the Petitioner for certificate of need #3372 should be denied. DONE and ENTERED this 15th day of May, 1986, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of May, 1986. COPIES FURNISHED: Michael J. Glazer, Esquire AUSLEY, McMULLEN, McGEHEE, CAROTHERS & PROCTOR Post Office Box 391 Tallahassee, Florida 32302 Lesley Mendelson, Esquire Assistant General Counsel Department of Health and Rehabilitative Services Building One, Suite 407 1323 Winewood Boulevard Tallahassee, Florida 32301 James C. Hauser, Esquire MESSER, VICHERS, CAPARELLO, FRENCH & MADSEN Post Office Box 1876 Tallahassee, Florida 32302 Kenneth G. Oertel, Esquire Eleanor A. Joseph, Esquire OERTEL & HOFFMAN, P.A. Post Office Box 6507 Tallahassee, Florida 32313-6507 Cynthia S. Tunnicliff, Esquire CARLTON, FIELDS, WARD, EMMANUEL SMITH & CUTLER, P.A. Post Office Drawer 190 Tallahassee, Florida 32302 Mr. William Page, Jr. Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
The Issue The issue to be presented is whether Respondent violated section 458.331(1)(t), Florida Statutes (2005), and if so, what penalty should be imposed?
Findings Of Fact The Department is the state agency charged with regulating the practice of medicine pursuant to section 20.43 and chapters 456 and 458, Florida Statutes. Respondent, John Lee, M.D., is a licensed physician in the State of Florida, having been issued license number ME 50043. Dr. Lee specializes in obstetrics and gynecology, but is not board certified at this time. He has a solo practice. Dr. Lee has had one prior final order imposing discipline against him. On November 7, 1996, the Board of Medicine entered a Final Order approving an amended Consent Agreement entered between the Agency for Health Care Administration (the Department's predecessor with respect to regulation of health care professionals) and Dr. Lee. The Final Order imposed a letter of concern, a fine of $2,000, and 20 hours of continuing medical education. On or about November 2, 2005, patient R.R. first saw Respondent with a complaint of chronic pelvic pain and an inability to function. Based upon his examination of R.R., Respondent recommended that R.R. undergo a bilateral salpingo- oophorectomy (removal of both ovaries and fallopian tubes). R.R. decided to have the recommended surgery and on December 13, 2005, Respondent performed a bilateral salpingo- oophorectomy, as well as an appendectomy, lysis of adhesions and partial omentectomy. There are three layers to the bowel: the serosa is the thin outer protective layer; under the serosa is the muscularis; a third layer below the muscularis called the mucosa. Dr. Lee's surgical notes indicate that there was some serosal denuding of the sigmoid colon, but with no luminal extravasion (no leakage from the bowel). Dr. Lee described the serosal denuding as an irritation of the serosa from removal of adhesions, and not a complication of the surgery. In any event, there are no allegations in the Administrative Complaint claiming that either Dr. Lee's decision to perform the surgery or the performance of the surgery itself deviated from the appropriate standard-of- care, and no findings to that effect are found. R.R. was discharged from the hospital on December 15, 2005. At that time, she was ambulatory, tolerating liquids, had passed flatus and had a small bowel movement. At that time she had no documented fever and a normal white count. The next day, Friday, December 16, 2005, R.R.'s husband called Dr. Lee's office at approximately 3:00 p.m. According to R.R., she spoke to Brandi Melvin, now known as Brandi Harper (Ms. Harper), the medical assistant for Dr. Lee, and told her that she was running a fever of 101.8 degrees, did not feel well and wanted Dr. Lee to call her. She testified that at that time, she did not feel well, was achy all over, had pain in her abdomen and had chills. R.R. testified that Ms. Harper told her to increase her Dilaudid in accordance with her prescription and to continue rotating Tylenol and Motrin. She denies being told to go to the emergency room if her fever did not go down, and denies being instructed to pick up a prescription for an antibiotic. Brandi Harper is a medical assistant in Dr. Lee's office, and has been since 2004. She is a certified nurse's assistant and has completed a year and a half toward her registered nursing degree. Part of Ms. Harper's duties include screening calls that come in from patients post-surgery. In doing so, she follows a set protocol that has been established in that office. In accordance with Dr. Lee's preferences, she inquires not only about the symptoms the patients report having, but also about symptoms they may not be having. Consistent with that protocol, she testified that, with respect to the call from R.R. and her husband, she asked whether R.R. was having any drainage from the incision; any abdominal pain; or was experiencing any other symptoms. Ms. Harper testified that R.R. did not report having any abdominal pain above expected soreness, and did not report difficulty breathing or shortness of breath; drainage from the incision; vomiting; bloating or distension of the abdomen. Ms. Harper's testimony is credited. After receiving the telephone call from R.R., Ms. Harper wrote a note to Dr. Lee which referenced R.R. and stated, "[t]aking the cephalexin you gave her on discharge. Is running 102 temp, just sore. She has been rotating Tylenol and nothing has brought it down. Informed her to drink plenty of fluids. Do you want to add anything?" Neither Ms. Harper's notes nor her testimony reflect that she told the patient to increase pain medication. Nor does the note reflect that R.R. wanted to speak with Dr. Lee. Because Dr. Lee was seeing patients, Ms. Harper placed the note on his desk for his review. After reviewing the note, Dr. Lee wrote "Levaquin 500mg, #10, 1 a day." Ms. Harper then called the patient to tell her that a prescription was being called in for her and confirmed the pharmacy the patient used. At that time, consistent with the protocol established by Dr. Lee, she told R.R. or her husband that if the fever did not go down after two hours, to go to the emergency room at West Florida Hospital. She did not tell her to call the office back because, at the time of the return phone call, it was approximately 3:30 p.m. on a Friday afternoon, and in two hours the office would be closed. Ms. Harper then called the prescription in to Burklow's Pharmacy, as identified by the patient, and noted the prescription in patient's medication log. She noted the time of the call and the name of the pharmacist with whom she spoke. Ms. Harper did not note in the medical record that she advised the patient to go to the emergency room if her fever did not go down, and did not specifically note the return call to the patient. However, she plausibly explained that she could not call in the prescription to Burklow's without speaking to the patient, because there were two different pharmacies noted in her file previously. She also credibly testified that she always calls the patient back in conjunction with the call to the pharmacy, and gives standard instructions to post-operative patients regarding further action (in this case, going to the West Florida Hospital emergency room) should their condition not change. She does not necessarily document the return call because she does it so many times daily. Dr. Lee also testified that instructions to call back if the office is open or go to the emergency room if symptoms do not improve in a few hours is part of the standard protocol. Ms. Harper's and Dr. Lee's testimony is credited. R.R. did not go to the emergency room over the weekend and there was no evidence that she ever called Dr. Lee's office back after the 3:00 Friday afternoon call. She continued to not feel well, however, and on Monday morning, December 19, 2005, at approximately 5:00 a.m., she woke up in intense pain between her shoulder blades. She went by ambulance to Santa Rosa Medical Center (SRMC). R.R. went to SRMC as opposed to West Florida Hospital because it was much closer to her home. Dr. Lee does not have privileges at SRMC. Although R.R. went to the emergency room early December 19, 2005, there was no determination that first day that she had a bowel perforation, and she was not admitted to the hospital until approximately 8:30 that evening. At the time of admission, she had a white blood count of 3.3, with a differential count of 12 neutrophil bands. The history and physical taken at the hospital and signed by Dr. Michael Barber, M.D., states in part: HISTORY OF PRESENT ILLNESS: [R.R.] is a 33- year-old, . . . who underwent abdominal surgery six days ago by Dr. John Lee at West Florida Hospital. She had bilateral salpingo-oophorectomy, partial omentectomy, appendectomy, and extensive adhesiolysis. . . . She states that although this surgery was prolonged and reportedly difficulty (sic), she tolerated the surgery well and by the second postoperative day was ambulating and voiding freely, tolerating a regular diet with a bowel movement and positive flatus. She stated her pain was well managed with 4 mg of Dilaudid q4h as needed. She was sent home on Cephalexin 500 mg q6h, Phenergan 25 mg q6h and Dilaudid 4 mg q6h. She was also on Hydrochlorothiazide for chronic hypertension, Klonopin and Effexor for anxiety and depression. She states that after going home she had some anorexia that was doing well until the morning of admission. She was awakened from her sleep at approximately 6 a.m. with remarkable abdominal distention and severe diffuse abdominal pain. She developed nausea as the pain progressed but has had no vomiting. She states that other than the bowel movement immediately post surgery, she had not had any bowel activity since discharge in six days. After several hours and worsening of pain, she presented to the emergency room at Santa Rosa Medical Center. On admission, a CT scan of the abdomen was accomplished and revealed a moderate volume loss infiltrate in the left lung base, apparent present to a lesser extent on the right. There was free air noted within the abdomen and also noted to be some free fluid. This was felt to be due to the patient's prior surgery, however, a more acute process could not be ruled out. There were also some distended loops of small bowel with apparent decompression of the distal small bowel which suggested at least a partial small bowel obstruction, although again, the diagnosis included ileus. A CT of the pelvis was unremarkable except as noted on the CT scan. There was some free fluid and free air within the pelvis. Since transfer to West Florida Hospital and the patient's attending physician could not be arranged, decision was made to admit to Dr. Barber on GYN service. * * * IMPRESSION: Severe abdominal pain 6 days post exploratory surgery with bilateral salpingo-oophorectomy, partial omentectomy, appendectomy and adhesiolysis. No signs at this time of active infection or perforation. The most likely diagnosis is a severe postoperative ileus, however, the patient warrants close observation. An ileus occurs when the bowel is "asleep" and not moving. Dr. Barber transferred R.R. to the Intensive Care Unit overnight for close observation. R.R.'s temperature at the time of admission was 96.8. The History of Present Illness taken from R.R. does not mention the rise in temperature following discharge from West Florida Hospital, or the phone call to Dr. Lee's office. On December 20, 2005, Dr. Althar saw R.R. in consultation. At that time, her white count was 8.4 with 48 bands, indicating overwhelming sepsis. Dr. Althar took her immediately to surgery. Surgery revealed a bowel perforation of the sigmoid colon, and Dr. Althar performed a sigmoid colectomy, end colostomy, and Hartmann procedure. R.R. suffered some complications after surgery, which were not unexpected, and remained in the hospital until her discharge January 16, 2006. The Department presented the expert testimony of Robert W. Holloway, M.D. Dr. Holloway graduated from Vanderbilt University Medical School; completed his residency in Obstetrics and Gynecology at the University of Alabama at Birmingham; and completed a fellowship in gynecology oncology at Georgetown University Hospital. Dr. Holloway has been licensed as a medical doctor in Florida since 1990, and is board certified in obstetrics and gynecology, and gynecologic oncology. He is currently the co-Medical Director of the Gynecologic Oncology program at the Florida Hospital Cancer Institute in Orlando, Florida, and a clinical instructor for the Obstetrics and Gynecology Residency Program at Orlando Regional Medical Center. Dr. Holloway is in an office on the Florida Hospital campus, where there are four attending physicians and three follows in training. Fifty to 60 percent of his patients are oncology patients, with the remainder having benign issues. Dr. Holloway opined that in this case, the bowel perforated most likely late Sunday evening or early Monday morning, probably 6-12 hours before R.R. woke up in extreme pain. He found no violation of the standard-of-care regarding the denuding of the serosa in the original surgery, viewing it as an anticipated outcome with a difficult case of endometriosis. However, he opined that Dr. Lee fell below the appropriate standard-of-care when he failed to evaluate the patient on Friday afternoon when she had a temperature of 102 degrees. Dr. Holloway indicated that the most common indications of bowel perforation in post-operative patients are abdominal pain and fever. He knew of no cases where a perforation occurred with the patient presenting with fever alone. He also agreed that it is common for physicians to rely on their staff to triage patients, and to relay information back to patients. It is common, according to Dr. Holloway, for doctors to train staff to tell the patient to call back or go to the emergency room if a problem does not resolve itself, and staff normally does the majority of charting. With respect to the directions to the patient to call back or go to the emergency room, Dr. Holloway could not say that those directions are always noted in the chart for patients in his office, although they frequently are. Most importantly, Dr. Holloway could not conclude that Ms. Harper did not give the instructions to R.R. because it was not specifically noted in the chart, and he would be apt to give the staff the benefit of the doubt. He could not conclude from the absence of the note that proper instructions were not given. Dr. Holloway also indicated that he did not believe the bowel had perforated as of Friday afternoon when the call was made to Dr. Lee's office. Respondent presented the testimony of John Douglas Davis, M.D., who serves as the Director of Gynecology and Associate Residency Director of the Department of Obstetrics and Gynecology at the University of Florida College of Medicine. Dr. Davis graduated from medical school at Wake Forest University and received his post-doctoral training at the University of Florida. Dr. Davis is licensed as a medical doctor in the State of Florida, and has been board certified in obstetrics and gynecology since 1992. Ninety-five percent of his patients are gynecological patients. Dr. Davis did not believe that Respondent violated the appropriate standard-of-care in his treatment of R.R. He opined that it is reasonable to rely on staff to perform triage functions with respect to calls from patients, and would interpret the note from Ms. Harper as not being indicative of bowel perforation. He testified that it was more likely to assume that the fever was caused by a pulmonary source, and the prescription for Levaquin was consistent with that assumption. In addition, the CT scan upon admission to SRMC was consistent with findings of pneumonia, and in Dr. Davis' view, the eventual determination that the bowel perforated does not mean that pneumonia was not also present. Like Dr. Holloway, Dr. Davis testified that bowel perforation does not present without severe abdominal pain, which was not reported to Dr. Lee. Dr. Davis opined that R.R.'s fever of 102 degrees must be interpreted in light of the patient's situation at discharge from the hospital, which Dr. Lee already knew. Most importantly, Dr. Davis testified that not seeing R.R. on Friday afternoon did not have an impact on her subsequent clinical course. His testimony is credited. In summary, it is found that Ms. Harper did instruct the patient to go to the emergency room at West Florida Hospital should her symptoms not improve after a couple of hours with the new medication. Dr. Lee's reliance on her to give that instruction is within the standard-of-care for a reasonably prudent similar physician under similar conditions and circumstances.
Recommendation Upon consideration of the facts found and conclusions of law reached, it is RECOMMENDED that the Florida Board of Medicine enter a Final Order dismissing the Administrative Complaint in its entirety. DONE AND ENTERED this 23rd day of September, 2011, in Tallahassee, Leon County, Florida. S LISA SHEARER NELSON 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 23rd day of September, 2011. COPIES FURNISHED: Elana J. Jones, Esquire Ian Brown, Esquire Department of Health 4052 Bald Cypress Way, Bin C-65 Tallahassee, Florida 32399-3265 Brian A. Newman, Esquire Pennington, Moore, Wilkinson, Bell and Dunbar, P.A. 215 South Monroe Street, Second Floor Post Office Box 10095 Tallahassee, Florida 32302 Nicholas W. Romanello, General Counsel Department of Health 4052 Bald Cypress Way, Bin A02 Tallahassee, Florida 32299-170 Joy A. Tootle, Executive Director Board of Medicine Department of Health 4052 Bald Cypress Way Tallahassee, Florida 32399
Findings Of Fact HCR initially applied for a CON to construct a 120-bed nursing home facility in Lee County, DHRS District VIII. DHRS assigned this application CON Action 3854, which it denied. Manor Care also initially applied for a CON to construct a 120- bed nursing home facility in Lee County, DHRS District VIII. DHRS assigned this application CON Action No. 3850, which it denied. Manor Care and HCR timely filed petitions for formal administrative hearings which resulted in the DOAH Consolidated Case Nos. 85-2937 and 85-3240. During the hearing, Manor Care and HCR offered updated CON applications (respectively MCI and HCRS). While the Manor Care proposal is a "scale-down" to 60 beds (HCR still proposes 120 beds. both applications propose nursing home beds be set aside to offer a therapeutic environment for patients with Alaheimer's Disease and patients with related disorders. Manor Care's update also provides for an attached 60-bed adult congregate living facility (ACLF), which does not require a certificate of need. DHRS objected to the admission in evidence of the respective applications but did not move for relinquishment of jurisdiction to the agency for consideration by its experts of the updated material in lieu of formal hearing (Vol. III p. 54). Both applications had been submitted to the DHRS attorney prior to hearing. Upon the Hearing Officer's own motion, an evidentiary hearing was conducted prior to the taking of other evidence solely on the propriety of consideration of the updated applications without resubmittal to DHRS. The HCR update did not change the number of beds, nor the patient mix. The Manor Care update was downsized to 60 beds, and this is permitted as a matter of law. Neither update requires amendment of the District Health Plan or the same fixed pool; neither attempts to alter the January 1988 planning horizon contemplated by the original January 1985 applications. The other changes contained in the updated applications relate to a description of the Alzheimer's Disease (AD) program and design of the AD unit for each application, or other changes such as increase or decrease in costs due to inflation and the passage of time, including particularly, the fact that subsequent to the filing of the original application there was a recognition in the District Health Plan and the State Health Plan of the special needs of AD patients, which was contained in the 1985-87 State Health Plan, Vol. III, p. 109. (T-73-74, Vol. II - testimony of HCR expert, Milo Bishop; DHRS Exhibit 5), and the subsequent Local District VIII Health Plan also identified the concern of availability of beds for Medicaid patients. Specifically, the District VIII Health Plan recommends priority consideration for nursing home beds to be given to applicants that will propose to accept a proportion of Medicaid eligible patients that is at least equal to the most recent quarterly figure of Medicaid occupancy in the district. (T-75, Vol. III, DHRS Exhibit 5). The updated application of HCR was filed to reflect these recently identified needs of the AD patients, sub- acute patients and Medicaid patients. The update of each Petitioner also clarifies assurances of Medicaid availability. The updated applications of both Manor Care and HCR proposed special programs for AD patients and a separate wing which appears now to be a treatment of choice for these types of patients. Awareness of AD and its ramification has increased significantly in the recent past. Recognition of the special needs of these patients in the respective updated CON applications constitutes refined material describing the current state of knowledge in medical care. The proposals by Manor Care and HCR to designate separate units and programs for AD patients does not constitute a substantial change in the applications for all of the foregoing reasons but also because any nursing home may admit and treat AD, related disorders, and sub-acute care patients without obtaining a specialized CON and because these types of patients could have been treated in the nursing homes described in the original applications. As far as the identification of newly available information on AD and related disorder patients are concerned, the updates are clearly encouraged within the purview of Balsam v. Department of Health and Rehabilitative Services, 486 So. 2d 1341 (Fla. 1st DCA 1986). Over all, none of the amendments of the Petitioners are substantial and the updated applications of both Manor Care and HCR are proper amendments permitted in these de novo proceedings pursuant to McDonald v. Department of Banking & Finance, 346 So. 2d 569 (Fla. 1st DCA 1977); and Gulf Court Nursing Center v. DHRS, 483 So. 2d 700 (Fla. 1st DCA 1985), Motion for Rehearing (Feb. 14, 1986). The ruling that both amended applications were not substantial amendments and therefore no remand to the agency was necessary was entered on the record (Vol. III, p. 103 and is accordingly reiterated and confirmed here, within the Recommended Order. During the hearing, all the parties stipulated to the reasonableness of construction (and equipment) cost, and financial feasibility of both projects. DHRS (but not the Petitioners) stipulated that both Petitioners projects satisfied all quality of care considerations. Upon all the evidence (oral, documentary, and demonstrative) including but not limited to the testimony of Loma Overmeyer, Charlotte Young, Tal Widdes, and John Lee, it is found that both Petitioners have affirmatively demonstrated their respective abilities to provide satisfactory quality of care to their patients through these respective proposed projects. Rule 10-5.11(21), Florida Administrative Code, contains DHRS' methodology for computing nursing home bed need. The need methodology provides that the need for proposed new community nursing home beds is to be determined 3 years into the future. Here, the applicable planning horizon is January, 1988, which is 3 years from the time the initial applications were filed. Applications for new community nursing home beds will not normally be approved if such approval would cause the number of community nursing home beds in an area to exceed the bed need calculated pursuant to Rule 10-5.11(21)(b) 1-10 Florida_ Administrative Code. Applications for community nursing home facilities are normally approved for a minimum of 60 beds. All need experts utilized current population figures provided July 1, 1986 by the Office of the Governor. However, DHRS has arrived at a 37 bed surplus. The DHRS expert, Joyce Farr, testified she used the date of hearing (July 1986) as a basis and current population figures, rendering a gross need of 1,089 beds. If current population figures are used and the January 1985 (initial application date) is used, there is a gross bed need of 1,204 beds. There are 996 licensed nursing home beds in Lee County as of June 1, 1986. Applying the rule to either gross bed need leaves 93 (1089 minus 996) net need or 208 (1204 minus 996) net need. Manor Care calculated both ways and would qualify by either method if it were the sole applicant, but the net bed need by either calculation greatly exceeds the beds proposed by Manor Care. The latter calculation, based on January 1985 instead of the 1986 population projections is urged by HCR as preserving the sanctity and logic of batching cycles and planning horizons. Such an application of the rule's methodology would clearly permit a CON for 60 nursing home beds to be issued to Manor Care and also permit a CON for 120 nursing home beds to be issued to HCR, with a surplus of 28 beds. This solution of awarding a total of 180 beds (60 plus 120) would not offend DHRS established policy that applications for community nursing home facilities are normally approved for a minimum of 60 beds. Nonetheless, HCR's reading of the rule mixes 1985 and current figures without adequate justification in the record and is neither literal nor in conformity with the agency policy and interpretation which witness Farr testified has been applied by her on behalf of DHRS in at least 100 contested CON formal hearings. Further, it is clearly logical and in the best interests of the public and the health planning professions, and in accord with the intent of Chapter 381 F.S. to apply those figures which will most accurately reflect the bed need at the projected (January 1988) planning horizon. In this instance, that set of figures renders the net general community nursing home bed need as 93. However, Joyce Farr also testified that she had been instructed by her supervisor not to apply the rule as promulgated but instead to reserve 143 beds for Lee County and to subtract these beds as if they were already approved. The "reserved" 143 beds represent DHRS' interpretation of Gulf Court v. DHRS. Pursuant to directions in the opinion of the First District Court of Appeal in that case, DHRS has received, for comparative review, CON applications from the three party applicants in that case. Those parties' applications were originally filed in 1981 and 1982, and are for nursing home beds in Lee County. As of date of formal hearing in the instant cause, none of the "Gulf Court" parties' applications had been approved. The Department's stated intention regarding the three "Gulf Court" applications is to award 143 beds to one or more of the party applicants in that case. This intention is based upon the Department's interpretation of the Gulf Court case, and not upon any calculation of need for a planning horizon. As of date of hearing, DHRS had not given any consideration to the effect of changed statutes, regulations, facts, or circumstances on the "fixed pool" of beds applied for by the "Gulf Court" applicants. In her calculation of net need for the sub-district of Lee County, the DHRS witness counted the 143 beds set aside for the "Gulf Court" applicants as "approved" beds. Other than those beds, there are no other approved beds, nor any applications pending from prior batches. The DHRS methodology used to subtract 143 beds is not consistent with the provisions of Rule 10-5.11(21), Florida Administrative Code. (See Conclusions of Law). If the DHRS bed need formula contained in Rule 10- 5.11(21), Florida Administrative Code, is used, the correct number of beds needed for the planning horizon of January 1985 through January 1988 is 93 general community nursing home beds. Each applicant has included, in the updated applications presented at hearing, a number of beds set aside in a unit for Alaheimer's Disease (AD) patients. Manor Care has indicated that 18 beds would be so designated. HCR proposes to establish a 30 bed unit for both "Alzheimer's and the related disorders"' including 15 beds "just for wanderers." AD "is a degenerative process of the brain, characterized by memory impairment and impairment in several mental and physical functions." The disease progresses at certain levels or stages. There are four progressively worsening stages of this disease. In the first stage, the patient starts to forget names and facts in the recent past, and also begins to be unable to perform some complex tasks that the patient was able to perform before the disease began. In stage two, the impairment in memory increases. The patient starts to forget common names of objects usually used in daily living, and the patient starts to wander. There are often behavioral problems, such as agitation or depression. In stage three, there is. physical impairment, including incontinency, speech disturbances, and problems with communication. In stage four, the patient most of the time is confined to a bed, and largely unaware of his_ environment. He is incontinent. Without adequate care, he has sores on his back. He is nearing death at that point. AD is irreversible and the cause is unknown. Diagnosis is very difficult. The only positive method of diagnosis is by brain biopsy. The most common method of diagnosis is by a process of elimination and this often fails in the early stages of AD. Incidence of AD increases in the over 65 population but there are cases of some patients as young as 30. A large percentage of any nursing home is suffering from some form of dementia. The estimated need of "irreversible dementia" patients in nursing homes in Lee County for the year 1988 is 2,189. Out of this number of patients, 60% would be specifically AD patients or 1,313. Dr. Baquero presently has 100 AD patients in existing area nursing homes. AD patients are cared for in almost all nursing homes, but usually there is no separate area or program. There are no specialized programs or units for AD patients currently established in Lee County. The existing facilities in Lee County do not provide adequate care to persons suffering from AD. Because of the lack of facilities, AD patients are often kept at home until families are to the pint of desperation. Care of the AD patient is an enormous, 24 hour-a-day burden on the care-givers. Additional stress is caused by personality changes that often accompany the disease. Most facilities in Lee County will not accept a difficult patient. Families of AD patients have placed patients in facilities out of country, out of state, and out of country, because of the lack of facilities in Lee County. Dr Baquero, practicing medical physician in Ft. Myers, who is experienced in treating AD patients and who has knowledge gained as Medical Director for two existing nursing homes, was qualified as an expert in the care and treatment of AD patients. Upon his evidence and upon evidence of the representatives of the Alzheimer's Disease and Related Disorders Association (ADRDA), it is found that AD patients frequently have to be placed outside Lee County, as far as 60 to 70 miles from home. Approximately 50% of AD patients consulting ADTDA return to northern home states or go to foreign countries rather than awaiting long- delayed Lee County placement. Placement of AD patients also on Medicaid or needing sub-acute care is even more difficult. The Petitioners further demonstrated that other patients in addition to AD patients are not adequately served by the existing facilities in Lee County. It is extremely difficult in Lee County to place a patient who is in need of high technology or "sub-acute" care. Such patients include those in need of intravenous antibiotic therapy, ventilators, oxygen, feeding tubes or pumps, decubitus ulcer care (bed sores), etc. Feeding pumps and bed sores may eventually become a way of life for AD patients. AD patients may also require other forms of sub acute care and can be on Medicaid. Many of the existing nursing homes are not capable of handling such patients who often must be placed out of county. These difficult patients are frequently placed out of county or at great distance from their homes within the county, creating added burdens on elderly spouses and family members. The burden of out of county placement has created or intensified "separation syndrome" accidents and death for such patients elderly spouses. Implementation of the Diagnostic Related Grouping (DRG) system of Medicare reimbursement has been an incentive for hospitals to release patients as soon as they are no longer in need of "acute care," but due to the inability to place these patients, they stay in hospitals longer than necessary, resulting in a much higher expense than would be the case if a nursing home placement could be achieved. Additionally "cost shifting' to private and third party insurance payments may be inferred from the DRG statistics admitted. Both Lee Memorial Hospital and Ft. Myers Community Hospital experience difficulty in placing sub-acute care patients, especially those on Medicaid. Fifty per cent or more of Ft. Myers Community Hospital referrals are of sub-acute care patients. Ft. Myers Community Hospital records reflect an increase in hold-overs due to unavailability of nursing home beds. Since October, 1984, Lee Memorial Hospital has had to place 75 out of 941 discharge patients out of county. Only one of these patients was private pay. The majority of Lee Memorial discharges to nursing homes are Medicaid and Medicare patients; 48.3% are Medicare and 22.6% are Medicaid patients for a total of 70.9% of the total discharges to nursing homes. Only 29% of Lee Memorial discharges-to nursing homes are private pay patients. Twenty per cent of all of Lee Memorial's Medicaid discharges to nursing homes are required to be placed out of county and 11.2% of their Medicare discharges are placed out of the County. Mary Shell, the DHRS District Human Services Coordinator confirmed the difficulty of placing Medicaid patients in the county as sub-district and testified to a serious but unquantified shortage of both Medicaid and sub-acute nursing home beds in Lee County. Mr. Dennis Eskew, Supervisor of the DHRS Adult Payments Unit, which determines the eligibility for Medicaid nursing home programs, presented a chart (HCR 15) showing 20% of 203 approved Medicaid patients (41) had to be placed out of county during the immediately preceding six months because of unavailability of such beds in Lee County. Existing nursing homes in Lee County are almost always full. Hospital discharge planners, families, and medical physicians seeking placement of patients uniformly testified that there is a shortage of beds and long waiting periods, even for non-problematic patients and that there is a need for additional nursing home beds for all types of patients including Medicare/Medicaid patients, sub-acute patients, AD patients and routine nursing home patients. However, these witnesses did not attempt to quantify the number of beds needed. There is strong evidence that recently opened nursing homes are not making available promised Medicaid beds and there have been no DHRS enforcement procedures. Although minimally demonstrated, it may be inferred from the foregoing type of testimony that the absence of competition has reduced the incentive of existing local nursing homes to accept those out of the "walkie talkie" category, those still cognitive, ambulatory patients who are able to feed and care for themselves to a large degree. Both Petitioners meet the guidelines in the local health plan that applicants should provide at least 33 1/3% of beds available to Medicaid patients. HCR agreed to provide 46% Medicaid beds (55 beds out of 120) which was the prevailing district rate. The plan gives priority to those applicant who meet this percentage. Manor agrees only to provide 35% Medicaid beds. Both Petitioners indicate a willingness to treat sub- acute patients, but neither seeks a specific number of beds for this purpose. Sub-acute care is considered within the designation of skilled care. Manor Care's emphasis on rehabilitation in its existing facilities has had significant results. Manor Care's historical Medicare percentage is above the industry average. Both Petitioners are in the forefront of developing programs for the diagnosis and treatment of AD disease. Manor Care is prepared to totally commit 18 beds exclusively to AD and related diseases and 21 beds to Medicaid. These may overlap. HCR is prepared to totally commit 32 beds exclusively to AD and related diseases and 55 beds to Medicaid. These may overlap. The special attributes of each proposed AD unit (30 beds by HCR and 18 beds by Manor Care) include a higher staff-to- patient ratio, which is needed to supervise and assist confused and wandering patients and a great deal of attention to the physical environment, from a home-like atmosphere and certain relaxing shades of pink, to special furnishing and fixtures. Particular care is necessary in preparation and serving of food, to allow patients with AD and related disorders to eat adequately and without assistance and to prevent considerable weight loss in the wandering stage which can result in further rapid debilitation. One of the goals of AD programs is to reduce the need for traditionally utilized physical restraints or heavy sedation, and to promote prolonged individual functioning. There is no competent expert testimony contrary to the theme that AD patients require special care and special programs designed to meet their unique medical and custodial needs. The experts with any personal background in the area also uniformly agreed that a separate wing or another isolated area of the nursing home facility is most desirable because of the wandering tendencies of these patients, their hostile, unpredictable, and bizarre behavior, and the other special needs specific to this type of brain degeneration. HCR's Wander Guard security system is viewed as superior by some witnesses.
Recommendation Based on the foregoing, it is RECOMMENDED: That DHRS enter a Final Order approving HCR's updated application for a 120 nursing home bed facility in Lee County limited and conditioned upon HCR's updated application's specific provision for 46% Medicaid beds and upon 30 beds being dedicated as set out in the application and evidence at formal hearing for the specific for treatment of AD patients, and denying the application of Manor Care for a 60 bed facility. DONE and Ordered this 23rd day of December, 1986 in Tallahassee, Florida. ELLA JANE P. DAVIS Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32309 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of December 1986. COPIES FURNISHED: Jean Laramore, Esquire Kenneth A. Hoffman, Esquire 325 North Calhoun Street Tallahassee, Florida 32302 Donna H. Stinson, Esquire The Perkins House, Suite 100 118 North Gadaden Street Tallahassee, Florida 32301 John Rodriguez, Esquire Department of Health and Rehabilitative Services 1323 Winewood Blvd. Building One, Room 407 Tallahassee, Florida 32399-0700 William Page, Jr., Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 APPENDIX_ The following paragraphs constitute specific rulings upon the parties' respective proposed findings of fact as required by Section 120.59(2) F.S. Petitioner Manor Care's Proposals: Covered in Findings of Fact 1, 3. Covered in Findings of Fact 3 and 12. Covered in Finding of Fact 8. Covered in Findings of Fact 3, 9-12. Sentence 1 is covered in Finding of Fact 4; remainder rejected as taken out of context and not clear from the record as a whole. Covered in Finding of Fact 9. Covered in Finding of Fact 12. Covered in Finding of Fact 9-12. Covered in Findings of Fact 9-12. Up to the comma covered in Findings of Fact 12; after the comma accepted but not adopted as unnecessary. Covered in part in Finding of Fact 12; remainder accepted but unnecessary. Covered in Findings of Fact 12. 16-19. Covered in Finding of Fact 6. 20. Covered in Findings of Fact 9-12. Proposals 9, 14, and 15 are accepted but not adopted because subordinate and unnecessary. Petitioner Health Care and Retirement Corporation of America's_ Proposals: Covered in Finding of Fact 1. Covered in Findings of Fact 2. sentence 1 is covered in Finding of Fact remainder rejected as subordinate and unnecessary. Covered in Finding of Fact 3. Covered in Finding of Fact 3. Covered in Finding of Fact 3. Covered in Finding of Fact 3 Covered in Finding of Fact 3. 10-12. Covered in Findings of Fact 3 and 12. Covered in Finding of Fact 12.a. Covered in Findings of Fact 3 and 10. 16. Covered in Finding of Fact 3. 19. Covered in Finding of Fact 3. 20-22. Covered in Finding of Fact 4; rejected in part as not supported by the record. 23-24. Covered in Finding of Fact 4. Covered in Findings of Fact 8 and 9. Covered in Finding of Fact 12. 27-32. Covered in Finding of Fact 8. Covered in Findings of Fact 5 and 6. Covered in Finding of Fact 8. 38-39. Are accepted in principle but rejected in their specificity as subordinate, unnecessary and cumulative. To a large degree the same subject matter is covered in Findings of Fact 8-12. Covered in Findings of Fact 9 and 12. Covered in Finding of Fact 8. Covered in Findings of Fact 9 and 12. 43-49. Covered in Findings of Fact 9-12. What is not covered is rejected as subordinate, unnecessary, and cumulative. Covered in Findings of Fact 9-10. Covered in Findings of Fact 9-12, particularly lOe. Covered in Findings of Fact 10-11. Accepted in principle but as stated is too broad and applies to situations outside of nursing home beds. Rejected in part as taken out of context and with insufficient predicate and in part as subordinate and unnecessary. What is accepted is covered in Finding of Fact 11. 60. Covered in Findings of Fact 10-11, particularly 10. 64. Covered in Findings of Fact 10-11, particularly 10. 66. Covered in Findings of Fact 9-12, particularly lOd. 67-69. Covered in Findings of Fact 10-11, what is rejected is rejected as unnecessary, subordinate and/or cumulative. 70. Covered in Finding of Fact 11. 71-73. Covered in Findings of Fact 10-11, what is rejected is rejected as unnecessary, subordinates and/or cumulative. Covered in Findings of Fact 10-11. Covered in Findings of Fact 9-12. Covered in Findings of Fact 6 and 11-12. 77-90. Covered in Finding of Fact 6. Matters rejected are rejected as not supported by the record or as contrary to the appropriate application of law and incipient policy. See Conclusions of Law. Represents the sum total of all the Findings of Fact made and is more in the nature of a conclusion of law. See Conclusions of Law. Rejected as covered in Finding of Fact 6, and the Conclusions of Law. 93-95. Accepted and incorporated in Finding of Fact 12. 96. Covered in Findings of Fact 6, 11, and 12. Proposals 3, 15, 17, 18, 35, 36, 37, 55, 56, 57, 58, 59, 61, 62, 63, 65, are accepted but not adopted because subordinate and unnecessary. Respondent Department of Health and Rehabilitative Services' Proposals: 1-2. Covered in Finding of Fact 1. 3. Covered in Finding of Fact 2. 4. Covered in Finding of Fact 4. 5. Covered in Findings of Fact 3 and 12. 6. Covered in Finding of Fact 3. 7-9. Covered in Findings of Fact 3, 5, and 6._ 10. Covered in Finding of Fact 6. 11. Accepted but not specifically set out in Findings of Fact. Sentences 1-2 are accepted and sentence 3 is rejected in Finding of Fact 6 and in the Conclusions of Law. Rejected for the reasons set out in Finding of Fact 6 and Conclusions of Law. Covered in Findings of Fact 5 and 6 and Conclusions of Law. Rejected as set out in Findings of Fact 6, and 9-12 and as a conclusion of law. Rejected as out of context and immaterial to the facts as found. Similar material is covered in Findings of Fact 6 and 9-12. Rejected as set out in Findings of Fact 6, and 9-12 and as a conclusion of law. ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES MANOR CARE, INC., Petitioner, CASE NO. 85-2937 vs. CON NO. 3850 DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Respondent. / HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA, d/b/a HEARTLAND OF LEE, Petitioner, vs. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Respondent. / CASE NO. 85-3240 CON NO. 3854
Findings Of Fact The Parties FRTC is a wholly-owned subsidiary of Charter Medical Corporation which proposes to construct and operate a 60 bed intensive residential treatment program (IRTP) in Bradenton, Florida, which is located in the Department's District VI. The Department is the state agency with the authority and responsibility to consider CON applications. Manatee Palms is an existing residential treatment center in Manatee County, Florida which opened in January, 1987 and is currently operating without a CON. It provides services similar or identical to those proposed by FRTC. Manatee Palms was developed by, and is a subsidiary of, Psychiatric Institutes of America. Its primary service area extends beyond District VI from Orlando to Naples. Manatee Palms is a sixty bed facility providing psychiatric, substance abuse and educational services for juveniles up to 18 years of age, and is licensed by the Department as a child caring facility, as a provider of services to the Department, and for subspecialties involving drug and alcohol programs. It is accredited by the Joint Commission on Accreditation of Hospitals as a residential treatment center. The average length of stay for patients is six months. Occupancy rates have been consistently above projections and have been as high as 97 percent in May, 1987. Manatee Memorial is a full-service acute care hospital and an existing provider of short-term psychiatric services in Bradenton, Florida, with 25 licensed short-term psychiatric beds, nine of which comprise a children's and adolescent unit. It is the Manatee County contract provider of in-patient psychiatric services to the medically indigent, and provides approximately 91 percent of the indigent care in Manatee County. Manatee Memorial does not have, and has never sought, a CON as an IRTP, but does have earlier-batched applications pending for additional short and long term psychiatric beds. Its average length of stay is 35-40 days, and its utilization rate is approaching 100 percent. Manatee Memorial provides services similar or identical to those proposed by FRTC, and its program also utilizes a "levels system" similar to that used by FRTC. The Application and Project On September 15, 1986 FRTC filed a Letter of Intent notifying the Department of its intent to file a CON application for an IRTP for children and adolescents in Bradenton, Florida. On October 14, 1986 FRTC filed CON application number 4825 to obtain specialty hospital licensure as an IRTP. This application was initially approved by the Department on March 10, 1987, after the filing of a completeness response on or about December 23, 1986 at the request of the Department. Manatee Palms and Manatee Memorial timely filed petitions for formal administrative hearings challenging the Department's intent to issue the CON. The project at issue in this case is a 60 bed IRTP situated on a 9.35 acre site. The proposed building will have total gross square footage of approximately 32,000 and has been adapted from a prototype short-term psychiatric hospital design which has been used in approximately 50 locations. The floor plan submitted by FRTC provides for 28 semi-private rooms, three of which are designed to accommodate the handicapped, and one 4- bed assessment unit. Additionally, reasonable and sufficient space is provided for five classrooms, occupational therapy, a gymnasium, three group rooms, three day rooms, a seclusion area, three consult rooms, laundry and storage rooms, a nurses' station, dining room, and an administrative wing. A parking area, multi-purpose court, pool, activities field and drainage retention area are also provided. The parties have stipulated that the building will be energy efficient. Total project cost is reasonably estimated at $4,303,020. As a result of design modifications, the square footage of the project has increased by approximately 1,000 gross square feet and project costs have increased by approximately $69,000 from FRTC's completed application. The Department's Deputy Assistant Secretary for Regulation and Health Facilities, John Griffin, testified that for a project of this size these changes are not considered to be "amendments" to the application. The changes in facility design identified at hearing represent refinements and permissible modifications, rather than application amendments. There is no architectural significance to the changes. Rather, they make the design more appropriate for an IRTP. Specifically, a multi-purpose area was converted to a half-court gymnasium, the occupational therapy and interior mechanical spaces were slightly increased for more storage area, a seclusion room was deleted, the nurses' station was reduced, a 4-bed assessment unit was added, and other minor changes were made. FRTC proposes to offer 24-hour psychiatric services to children and adolescents under the age of 18, who are severely emotionally disturbed, and who are admitted voluntarily, after screening, with a history of prior treatment. Its program elements will include occupational therapy, recreational therapy, group and individual therapy, nursing care, an educational component, psychological testing, counseling and family therapy. The FRTC program will be initiated as a locked intensive program whose goal is to return the patient to his family and to life in a natural setting. Patients who are severely retarded, autistic, or with an active diagnosis of substance abuse will not be admitted. The average length of stay for patients is reasonably projected to be one year, with a range of from 6 months to two years. There are no licensed intensive residential treatment programs (IRTP) for children and adolescents in Manatee County, Florida or in the Department's District VI, which includes Manatee County as well as Hardee, Highland, Hillsborough and Polk Counties. There are also no licensed IRTPs in adjoining Districts V and VIII. Stipulations The parties have stipulated that FRTC has the ability to recruit physicians for this project, and also has funds available for FRTC's capital and operating expenditures. In addition, the parties have stipulated that review criteria concerning the need for research and educational facilities, the extent to which the services will be accessible to schools for health professional, and the special needs and circumstances of health maintenance organizations are not applicable to this CON application. Non-Rule Policy For IRTP The Department currently has no rule governing the approval of IRTP applications for a CON. However, since February 1987 the Department has followed a non-rule policy which presumes there is a need for at least one licensed IRTP of reasonable size in each Departmental service district, and which does not consider the existence of unlicensed residential treatment beds in a district in determining if the presumed need has been met. No changes or revisions in this non-rule policy of the Department are under review. The Department applied this non-rule policy in initially approving the CON application. Based upon the testimony of John Griffin, the Department's Deputy Assistant Secretary who administers the CON program and is responsible for health planning, an IRTP applicant does not have to establish "need" in a particular service district where it wants to locate a facility because the non- rule policy presumes there is a need for one IRTP of reasonable size per district. The applicant must, however, establish that there is not presently a licensed IRTP in the district and that it proposed to establish an IRTP of reasonable size. Griffin was not able to explicate this non-rule policy based upon health planning concerns, considerations or factors. Sharon Gordon-Girvin, Administrator of the Department's Office of Community Medical Services and Facilities, was also unable to articulate or explicate a health planning basis for this policy. Rather, the only basis enunciated at hearing by the Department for this non-rule policy was its statutory interpretation of Sections 395.002(8) and 395.003(2)(f), Florida Statutes, as renumbered by Section 34, Chapter 87-92, Laws of Florida. Need And Consistency With State And Local Health Plans There are no licensed IRTPs in District VI. Manatee Palms is a residential treatment center for children and adolescents located in Manatee County, but it is not licensed by the Department as an IRTP. Relevant issues identified in the District VI Local Health Plan are stated as follows: As a general policy, the least restrictive, most cost effective setting and programs should be used. The State of Florida, as a major purchaser of mental health and substance abuse services, can continue to lead the way by encouraging the development of non-hospital alternatives and by purchasing services from them preferentially. Another important issue in psychiatric care is the trend toward hospitalization of children who have behavior and conduct disorders, and who should more appropriately be served through non-hospital alternatives. . . At the present time, the severe emotionally disturbed or emotionally handicapped (SED/EH) child or adolescent is served in a broad range of programs. There are crisis stabilization units (CSUs) for stabilizing the adult client in acute crisis. Currently CSU services for children and adolescents are not adequate throughout the District. Intensive residential, day/night program, group and foster homes are for the client requiring close supervision. Relevant policies set forth in the District Local Health Plan are as follows: The multi-modality approach as expressed in the community mental health (and substance abuse) system should be considered a model of programming, staffing, facility requirements, costs, etc., against which applications for inpatient services should be reviewed. Review of applications for inpatient psychiatric and substance abuse services should include comment from the Alcohol, Drug Abuse and Mental Health Program Offices of DHRS. No additional psychiatric and/or substance abuse beds should be granted approval unless the capacity of current hospital providers is being fully utilized (75 percent occupancy rate annual). Additional psychiatric and/or substance abuse beds should be through conversion of existing beds. The State Health Plan sets forth the following relevant policies and statements: The goal of (mental health) services is (to) . . . provide educational; mental health treatment; and when needed, residential services for severely emotionally disturbed students. It is the intent of the Legislature that the least restrictive means of intervention be employed based on the individual needs of each patient within the scope of available services . . . The program goals for each component of the network are . . . to provide programs and services as close as possible to the child's home in the least restrictive manner consistent with the child's needs. Sufficient funding for the development of residential treatment and community support services is necessary if the state is to fulfill its commitment to providing services for long term mentally ill persons. These services provide, in the long run, a more humane and cost effective means of meeting the mental health needs of Florida residents. Continued development of long and short term inpatient hospital programs for the treatment of adolescents and children is contrary to current treatment practices for these groups and is, therefore, inappropriate without local data to support the need for these services. Such development can contribute to inappropriate placement, unnecessary costs of treatment, and divert scarce resources away from alternative uses. In addition, the following relevant goals are contained in the State Health Plan: Promote the development of a continuum of high quality, cost effective private sector mental health and substance abuse treatment and preventive services. Bring about changes in third party reimbursement policy for psychiatric and substance abuse care which would promote the development of the most appropriate, cost-effective treatment settings . . . Develop a network of residential treatment settings for Florida's severely emotionally disturbed children by 1989 . . . Develop residential placements within Florida for all SED children currently receiving treatment in out of state facilities by 1990. The FRTC application is consistent with the above cited relevant portions of the state and local health plans. It is consistent with the State Health Plan which reflects and emphasizes the trend toward deinstitutionalization and the current emphasis on education, treatment and residential services for severely emotionally disturbed students rather than what has been the traditional approach to treatment in an institutional setting, a generally more costly approach from a capital cost and staffing perspective. The FRTC application promotes treatment within the State and will assist in reducing out of state placements. Through the report and testimony of Ronald T. Luke, Ph.D., J.D., and despite the testimony of Jay Cushman, both of whom were accepted as experts in health planning, FRTC established the need for, and reasonableness of, its 60 licensed IRTP beds in District VI, with 50 percent occupancy in the first year and 60 percent in the second year, using two bed need assessment methodologies. First, using the ratio of licensed IRTP beds in other service districts to population ages 0-17 years old, a range of .07 to 1.33 beds per 1,000 population is identified. Using 1991 population projections for District VI, the 60 bed FRTC facility would result in a bed to population ratio of .17 per 1,000 population aged 0-17 years. Since there are no licensed beds in the current inventory, no adjustment of this ratio must be made to account for existing beds. Thus, the FRTC application is within the range of ratios of currently licensed IRTPs in other districts, and is therefore reasonable. Second, a utilization methodology identifies an intensive residential treatment bed need of 90 in 1987 to 95 in 1991, with target occupancy rates of 90 percent. This methodology is based upon 1987 and 1991 population projections. Using a census rate per 100,000 population of 21.58 which is appropriately and reasonably derived from national data for residential treatment patients aged 0-17, an average daily census of 74 in 1987 and 78 in 1991 is derived. Thus, FRTC has established a need for its facility in District VI, given its projected occupancy levels, and given that there are no licensed beds currently in the District. It is important to recognize that the bed ratio analysis is based upon licensed intensive residential treatment beds in Florida, and is therefore clearly relevant and credible to the issues in this case. The utilization methodology supports and confirms the need found thorough the bed ratio analysis, although it is noted that this methodology, by using national data, is not based upon licensed beds in Florida, and would therefore not be sufficient, in itself, to establish need. It is, however, persuasive and credible in confirming the bed ratio analysis. Accessibility To All Residents FRTC projects only 1.5 percent indigent care and 8 percent bad debt. Its projection for private pay patients is 25 percent and for insurance covered care is 65.5 percent. This is a marginal and insignificant indigent load. There is no provision for services to state-funded patients. FRTC's projected utilization by class of pay is reasonable. The clear purpose of this application is to enable FRTC to become licensed as a hospital under Section 395.002, Florida Statutes, and thereby enable it to be called a "hospital". It was established through the testimony of Dwight Hood, who was accepted as an expert in health care finance and health care third party payments, that if a facility is licensed as a hospital it has a significant advantage for reimbursement from third parties who more readily reimburse for care in a licensed facility than in an unlicensed residential treatment center. Therefore, accessibility will be increased for those children and adolescents in need of this care whose families have insurance coverage, since it is more likely that payments under such third party coverage will be made at an IRTP licensed as a "hospital" than otherwise. Quality of Care The applicant has clearly demonstrated its ability to provide quality care to its patients, based upon the testimony of C. Hal Brunt, M.D., Robert Friedel, M.D. and G. L. Tischler, M.D., who were accepted as experts in psychiatry, and notwithstanding the testimony of Howard Goldman, M.D., and Glen Lewis, M.D., who were also accepted as experts in psychiatry. FRTC is a wholly owned subsidiary of Charter Medical Corporation which has experience in the operation and management of a residential treatment center, Charter Colonial Institute in Virginia, and also has extensive experience in providing quality health care at five hospitals in Florida, including Charter Hospital of Tampa Bay. The treatment program at FRTC will be adapted to local community needs. In providing quality care, FRTC will assign patients to the correct level of care within the facility by insuring that they are seen by a psychiatrist within 24 hours of admission, and by having each case reviewed by an independent utilization review committee, completing appropriate patient assessments and developing integrated treatment programs which are regularly updated, making appropriate treatment outcome assessments, and providing for continuity of care for patients leaving the IRTP through the development of a community-wide continuum of care. Charter has six out-patient counselling centers located within two hours of the FRTC proposed facility. It is both reasonable and appropriate to structure psychiatric treatment and care in a hospital setting within a "levels system" that rewards and reinforces desired behavior, and FRTC will utilize a "levels system" in its highly goal oriented patient treatment programs. Quality of care is not dependent upon a hospital's environment and physical facilities, according to Dr. Goldman. The floor plan proposed by FRTC is functional and is a proto- typical design used by Charter in approximately fifty locations, although not as an IRTP. The criticisms of the floor plan and facility design to which Maxine Wolfe, Ph.D., and Glen Lewis, M.D., testified do not establish that the applicant will be unable to provide quality care in this facility. While the Petitioners might design a facility differently, and specifically provide for a different orientation of the nurses' station relative to the patient wings, a different location for the dining room, more rooms where a patient can have privacy, and more opportunity for individualized treatment, these preferences do not establish that FRTC's floor plan and design will impair the quality of care rendered at this proposed facility. It is also noted that Dr. Wolfe testified critically about residential treatment in general, and expressed the opinion that residential treatment in a hospital is not beneficial and that children should never be treated in a large facility of any kind under any circumstance. Her testimony clearly establishes her bias and impairs her own credibility and the weight to be given to her testimony in this case. Availability and Adequacy of Alternatives Although there are no licensed IRTPs in District VI residential treatment and/or psychiatric services are currently available to children and adolescents through Manatee Memorial (9 beds), Manatee Palms (60 beds), Glenbeigh (14-16 beds), Sarasota Palms (60-70 beds), Sarasota Memorial Care Center (30 beds), Children's Home in Tampa (68 beds) and Northside Center in Tampa (12 beds). The average of length of stay at the significant majority of these facilities is up to 90 days, and they also attract patients from outside District VI. FRTC proposes to serve patients who require an average length of stay of a year. Some of these facilities serve patients with a dual diagnosis that includes substance abuse whereas FRTC will not. Therefore, these facilities do not offer adequate alternatives for the patients which FRTC is seeking to serve. Further, it was not established that outpatient or ambulatory services represent an adequate and appropriate alternative to an IRTP. Availability of Resources The total project cost of $4,303,020 will be funded through an equity contribution from Charter Medical Corporation and through a conventional loan. Assuming a 50 percent occupancy rate (30 beds) in its first year of operation, the proposed facility will have a staff of 43 positions, 27 of which will represent personnel who will be direct nursing or staff support for the patients, including social workers, psychologists, staff registered nurses, mental health workers, patient care coordinator, nursing supervisors, occupational and recreational therapists and special education teachers. A part-time medical director will also be available. This results in a ratio of 1.4 positions per patient. In comparison, Manatee Palms has a 1.8 staffing ratio based on a census of 55 patients. FRTC has proposed a reasonable and adequate staffing pattern and ratio to treat 30 patients. FRTC will recruit personnel through direct advertising, community contacts, posted notices, job fairs, and school visits. It will compete with unlicensed residential treatment centers, as well as short and long term psychiatric hospitals, in attracting staff for its facility. Although only six mental health workers are identified in FRTC's list of manpower requirements, and it would be beneficial to the level of treatment and care to increase this number, nevertheless, the staffing patterns proposed by FRTC will allow it to render quality care to patients at its facility, based upon 50 percent occupancy in its first year of operation. Staff salaries proposed by FRTC are reasonable and realistic, although its proposed salaries for nurses and mental health workers are higher than that available at Manatee Memorial. Existing facilities may have to increase their salaries to the levels proposed by FRTC to continue to retain and attract qualified staff, particularly nurses and mental health workers. Recruitment difficulties have been experienced in the District VI area for nurses, social workers, mental health workers and occupational therapists. However, it appears that FRTC will be able to attract qualified applicants for all positions due to the level of salaries offered and quality of care provided. Financial Feasibility Net revenues from the first year of operation are projected to be $100,000, which represents 2.3 percent of the capital expenditure as a return on investment. In the second year of operation, net revenues are projected to be $302,000, a 7 percent return on investment. Both years show a fair return on investment, and the pro forma establishes the financial feasibility of this project. In preparing the pro forma for this project, William S. Love, who was accepted as an expert in health care finance, used the reasonable assumption of 50 percent occupancy in the first year of operation and 60 percent in the second year. Despite the testimony of Jay Cushman, who was accepted as an expert health planner, it was not established that FRTC's location will preclude these occupancy rates. Love also assumed patient revenues of $300 per day and an average length of stay of one year. Utilization by class of payor was estimated to be 65 1/2 percent insurance, 25 percent private pay, 8 percent bad debt and 1 1/2 percent indigent care. It was assumed there would be no Medicare or Medicaid. Assumptions regarding patient revenues and utilization by class of payor are reasonable based on the testimony of Love, Luke and Dwight Hood, as well as a survey of insurance benefits available through employers, and despite the testimony of Christopher Knepper, who was accepted as an expert in health care finance. Knepper's testimony is applicable to unlicensed residential treatment centers rather than an IRTP. Therefore, his criticism of the pro forma as underestimating bad debt and overestimating the private pay portion is not persuasive since it disregards the fact that a licensed IRTP, due to its status as a specialty hospital, will have an increased ability to attract patients with insurance and with an ability to pay deductibles and other unreimbursed costs for care. It was established that a residential treatment center licensed as a specialty hospital has a significant advantage in terms of an improved payor mix over unlicensed facilities because of its recognized status with insurance companies. In addition, Knepper's testimony at hearing concerning the financial feasibility of this project conflicted with estimates made during discovery, and his explanation of such discrepancy was not credible. This conflict in Knepper's position at hearing and during discovery reduces the weight to be given to his testimony. FRTC assumed it would not be subject to the indigent care tax, but even if it were subject to the tax this would only add $29,000 in expenses, and therefore not affect the financial feasibility of the project. A management fee will be charged by Charter Medical Corporation, although this is not separately shown on the pro forma. It is the position of FRTC that this fee is associated with home office costs which will exist without regard to this facility. However, this fee, as well as additional construction costs of approximately $70,000, will not affect the financial feasibility of this project since salary costs associated with administration, as well as data processing costs have been separately shown and included on the pro forma as expenses, even though they are sometimes included in a management fee. FRTC's estimate of gross patient revenue of $300 per day for the first year of operation is substantially higher than other facilities offering like services. Net revenues per day during the first year of operation are estimated to be $265.30. Total direct expenses are estimated to be $198.70 for the first year, with total expenses per patient day estimated at $250.50 in the first year. A 7 percent inflation factor was used for the second year of operation, and this is a reasonable inflation factor. Impact On Costs and Competition As previously noted, salary estimates for nurses and mental health workers for this project are above those provided at Manatee Memorial, and therefore could reasonably be expected to increase salaries in these categories for some facilities in the area. The all inclusive charge of $300 per day proposed by FRTC is greater than Manatee Palm's average gross charge of between $270 - $280 per day. It is likely that paying patients, including patients with insurance coverage, who would otherwise be treated at Petitioners' facilities, will be treated at FRTC if this application is approved. However, the extent of such a loss in paying patients due to FRTC is unclear since Manatee Palms is recently receiving greater acceptance by insurers for reimbursement purposes, and Manatee Memorial's estimates of patient losses were based upon impact from both Manatee Palms and FRTC. Reasonableness of Costs The equipment cost estimate of $360,015 is reasonable. This finding is based on the testimony of Susan Hickman, who was accepted as an expert in health care facility equipment. The equipment and beds are appropriate for an IRTP of this size. The total cost of $707,897 for telephones, signage, graphics, interior design and equipment is also reasonable. The construction cost estimate of $2,010,823 is reasonable. This finding is based on the testimony of Patrick A. Regan, who was accepted as an expert in health care facility construction budgeting. Due to the conservative nature of the cost figures, a 2 1/2 percent contingency is adequate, rather than the normal 5-6 percent contingency. The contingency could be used for unbudgeted items such as stucco siding and hard ceilings. FRTC owns the facility site, which was purchased for $664,000.
Recommendation Based upon the foregoing, it is recommended that the Department enter a Final Order approving FRTC's application for CON 4825. DONE AND ENTERED this 22nd day of December, 1987 in Tallahassee, Florida. DONALD D. CONN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of December, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 87-2036, 87-2049 Rulings on the Joint Proposed Findings of Fact filed by FRTC and the Department: 1 Adopted in Findings of Fact 1, 27. 2-4 Adopted in Finding of Fact 6. 5 Rejected as irrelevant and unnecessary. 6-9 Adopted in Findings of Fact 8, 29, but otherwise rejected as cumulative and unnecessary. 10-11 Adopted in Finding of Fact 8. Adopted in Finding of Fact 47. Adopted in Findings of Fact 8, 47. Adopted in Finding of Fact 8. 15-16 Adopted in Finding of Fact 46, Adopted in Finding of Fact 27. Adopted in Finding of Fact 28, but otherwise rejected as irrelevant and unnecessary. Adopted in Findings of Fact 9, 10 but otherwise rejected as unnecessary. Rejected as irrelevant and unnecessary. 21-22 Adopted in Finding of Fact 9. Adopted in Finding of Fact 28, but otherwise rejected as unnecessary. Rejected as unnecessary. Adopted in Findings of Fact 9, 10, 27. Adopted in Finding of Fact 9. 27-30 Adopted in part in Findings of Fact 27, 28, but otherwise rejected as unnecessary. 31 Adopted in Finding of Fact 9. 32-34 Adopted in Findings of Fact 27, 28, but otherwise rejected as unnecessary. Adopted in Finding of Fact 12. Rejected as unnecessary. Adopted in part in Finding of Fact 33, but otherwise rejected as unnecessary. Adopted in Findings of Fact 33, 35. Adopted in Finding of Fact 34. Adopted in Finding of Fact 37. Adopted in Finding of Fact 12. Rejected as unnecessary. Adopted in part in Finding of Fact 39, but otherwise rejected as unnecessary. Adopted in Finding of Fact 40. Adopted in Finding of Fact 42. Adopted in Finding of Fact 39. Adopted in Finding of Fact 40. Adopted in Finding of Fact 38. Adopted in Finding of Fact 39. 50-57 Adopted in Findings of Fact 26, 39, but otherwise rejected as cumulative and unnecessary. 58 Rejected as unnecessary. 59-61 Adopted in Finding of Fact 15, but otherwise rejected as irrelevant, unnecessary or as a conclusion of law. 62 Adopted in Finding of Fact 16. 61 Adopted in Findings of Fact 6, 15, 16. Rejected as unnecessary and irrelevant. Rejected in Finding of Fact 17. Rejected in Finding of Fact 17, but adopted in part in Finding of Fact 26. Rejected as irrelevant and unnecessary. Rejected as unnecessary. 69-72 Adopted in part in Finding of Fact 24, but otherwise rejected as irrelevant since the Department's non-rule policy was not explicated and therefore cannot be relied upon. Rejected as unnecessary and irrelevant since the "reasonableness" of the facility's size is not at issue, the Department having failed to explicate its non-rule policy. Adopted in Finding of Fact 24, but otherwise rejected as cumulative and unnecessary. Adopted in Findings of Fact 9, 31, but otherwise rejected as unnecessary. Rejected in Findings of Fact 24, 33, 35, 39. The proposed average length of stay of one year is found to be reasonable in Finding of Fact 10. Adopted in Findings of Fact 21, 22. 79-81 Adopted in Findings of Fact 19, 23, but otherwise rejected as unnecessary and cumulative. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 11, 18, but otherwise rejected as unnecessary. Adopted in Finding of Fact 31. Rejected as unnecessary. Adopted in part in Findings of Fact 11, 26 but otherwise rejected as unnecessary. 87-88 Adopted in Finding of Fact 3. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 3, 44, but otherwise rejected as unnecessary and cumulative. Rejected as simply a summation of testimony and therefore unnecessary. Adopted in part in Finding of Fact 4, but otherwise rejected as unnecessary. Rejected as simply a summation of testimony and not a Finding of Fact. Rejected as unnecessary and simply a summation of testimony. 95-96 Rejected as irrelevant, unnecessary and in part simply a summation of testimony. 97-98 Rejected as a summation of testimony and otherwise as speculative and irrelevant. 99 Rejected as simply a summation of testimony. 100-103 Rejected as irrelevant. 104 Rejected as a summation of, and argument on, the evidence rather than a Finding of Fact. Rulings on the Proposed Findings of Fact filed by Manatee Palms: Adopted in Findings of Fact 1, 27. Adopted in Finding of Fact 2. Adopted in Finding of Fact 3. Adopted in Finding of Fact 4. Adopted in Finding of Fact 5. Adopted in Finding of Fact 6, but otherwise rejected as irrelevant. Adopted in part in Finding of Fact 7. Rejected as unnecessary, and as simply a statement of position. 9-11 Rejected as unnecessary and as otherwise covered in preliminary procedural matters. Adopted in Finding of Fact 8. Adopted in Finding of Fact 5, but otherwise rejected as unnecessary. Adopted in Finding of Fact 8. Adopted in Findings of Fact 9, 31, but otherwise rejected as simply a summation of testimony and position of the parties. Adopted in Finding of Fact 8. Adopted in Findings of Fact 10, 25, 39, 44. Adopted in Finding of Fact 14, but rejected in Finding of Fact 24. Adopted in Finding of Fact 17, but rejected in Finding of Fact 24. Rejected in Findings of Fact 21, 22, 23. Rejected as simply argument and a statement of position rather than a Finding of Fact. Adopted in part in Findings of Fact 25, 39. Rejected in Findings of Fact 21, 22, 23. 24-26 Rejected in Findings of Fact 19, 20, 23. Adopted in Findings of Fact 19, 44, but rejected in Finding of Fact 23. Rejected in Findings of Fact 23, 24. Adopted in Finding of Fact 17. Adopted in Findings of Fact 16, 17. Adopted in Finding of Fact 17. Rejected as unnecessary. Adopted in Finding of Fact 17. 34-42 Rejected as irrelevant and unnecessary. This is a de novo proceeding through which final agency action will be taken, and therefore preliminary agency findings are irrelevant to a determination of the issues in this case which must be decided based upon evidence presented at hearing. Rejected as simply a statement of position without any citation to the record. Adopted in Finding of Fact 24. 45-46 Rejected in Finding of Fact 24. 47-48 Adopted and rejected in part in Finding of Fact 24. 49-60 Rejected in Finding of Fact 24. Rejected as simply a conclusion of law. Rejected as without citation to the record and as simply a statement of position rather than a Finding of Fact. Rejected as irrelevant. Adopted in part in Finding of Fact 3. Adopted in Finding of Fact 3. 66-70 Rejected as unnecessary and cumulative, since it is established that services are similar or identical to those proposed by FRTC. Adopted in Findings of Fact 3, 44. Rejected as unnecessary and cumulative. Adopted in Finding of Fact 3, but otherwise rejected as cumulative and unnecessary. Rejected in Findings of Fact. 26, 39 and otherwise as irrelevant. Rejected as irrelevant and otherwise not based on competent substantial evidence. Rejected as irrelevant. Adopted in Finding of Fact 30. Rejected as simply a statement of position, without citation to the record. Rejected as simply a conclusion of law. 80-81 Adopted in part in Finding of Fact 8, but otherwise rejected as not based on competent substantial evidence. 82 Rejected as unnecessary. 83-84 Rejected in Findings of Fact 33 and 35, and otherwise as irrelevant. Rejected as simply a conclusion of law. Rejected in Finding of Fact 34. Adopted in Finding of Fact 37. Adopted in Findings of Fact 34, 36. 89-90 Rejected in Findings of Fact 35, 37. Rejected as simply a conclusion of law. Adopted in Finding of Fact 39. Rejected as irrelevant. Rejected in Findings of Fact 38, 39, 42. Adopted in Finding of Fact 39. Rejected as irrelevant. Adopted in part in Finding of Fact 39, but otherwise rejected as irrelevant and unnecessary. 98-100 Adopted in Finding of Fact 39. 101-102 Adopted in Findings of Fact 38, 39. 103-109 Rejected in Finding of Fact 39, and otherwise as not based on competent substantial evidence. Rejected in Findings of Fact 26, 29. Rejected in Finding of Fact 39. Rejected in Finding of Fact 35, and otherwise as irrelevant. Rejected in Findings of Fact 38, 39, 42. Adopted in Finding of Fact 39. 115-117 Adopted and rejected in part in Finding of Fact 40, but otherwise rejected as irrelevant. Adopted and rejected in part in Findings of Fact 8, 40, but otherwise rejected as not based on competent substantial evidence. Rejected in Findings of Fact 38-42. Rejected as a conclusion of law. Rejected as not based on competent substantial evidence. Adopted in Findings of Fact 34, 37. Adopted in Finding of Fact 36. Rejected as not based on competent substantial evidence. Adopted in part in Finding of Fact 45. Rejected as not based on competent substantial evidence and without citation to the record. Rejected as a conclusion of law. 128-129 Rejected as simply a comment on the evidence and not a Finding of Fact. Adopted in part in Finding of Fact 8. Rejected in Finding of Fact 47. Rejected as irrelevant. Adopted in part in Finding of Fact 8, but otherwise rejected as irrelevant and not based on competent substantial evidence. Rejected as simply a statement of position and argument. Rulings on Proposed Findings of Fact filed by Manatee Memorial: 1-2 Adopted in Finding of Fact 1. 3-4 Rejected as irrelevant. 5 Adopted in Findings of Fact 8, 29. 6-7 Rejected as irrelevant to a determination of the issues in this case. 8-10 Adopted in Finding of Fact 3. Adopted in part in Findings of Fact 34, 36, 45. Adopted in Finding of Fact 2. 13-22 Adopted in Finding of Fact 4, but otherwise rejected as irrelevant or unnecessary. Rejected in Finding of Fact 24 and otherwise rejected as not based on competent substantial evidence. Rejected as cumulative and unnecessary. Adopted in Findings of Fact 34, 36. Rejected as speculative and not based on competent substantial evidence. Rejected as irrelevant. Adopted in Finding of Fact 6. Adopted in Findings of Fact 1, 5, 10, but rejected in in Finding of Fact 44. 30-32 Adopted in Finding of Fact 6. 33 Adopted in Finding of Fact 7. 34-39 Rejected as unnecessary. Adopted in Finding of Fact 15. Adopted in Finding of Fact 14. Adopted in Finding of Fact 17. 43-45 Adopted in Finding of Fact 16. Rejected as unnecessary and irrelevant. Since Mr. Griffin is the highest level departmental representative who testified at hearing, his statement of the non-rule policy is presumed to be correct. Rejected in Finding of Fact 16. Rejected in Finding of Fact 16 and otherwise as unnecessary and irrelevant. 49-51 Rejected as irrelevant since this is a de novo hearing by which final agency action will be taken. Rejected as simply a conclusion of law. Rejected in Findings of Fact 21-23. Adopted in Finding of Fact 39. 58-60 Rejected in Findings of Fact 21-23 and otherwise as irrelevant. 61-63 Rejected in Findings of Fact 19, 20, 23. Adopted in Finding of Fact 30, but rejected in Finding of Fact 31. Rejected in Finding of Fact 39 and otherwise as irrelevant. Adopted in Finding of Fact 25 and rejected in Finding of Fact 26. Rejected in Findings of Fact 26, 39, 42. Adopted in part in Findings of Fact 38, 39, 44. Rejected in Findings of Fact 24 and 39. Rejected as speculative, and not based on competent substantial evidence. 71-79 Rejected in Findings of Fact 26, 38, 39 and otherwise rejected as not based on competent substantial evidence. 80-83 Rejected in Findings of Fact 33, 35. Rejected in Findings of Fact 33, 35, 38, 39, 42. Rejected in Findings of Fact 39, 40. Rejected in Findings of Fact 38-42. Rejected in Finding of Fact 37. Adopted in Finding of Fact 33. Rejected in Finding of Fact 33. Rejected in Finding of Fact 35. Rejected in Findings of Fact 27, 33, 35. Rejected in Finding of Fact 37. Rejected as unnecessary. 94-95 Rejected in Finding of Fact 37. 96 Adopted in Finding of Fact 36. 97-100 Rejected in Findings of Fact 28, 29. 101-102 Adopted in Finding of Fact 8. 103-105 Rejected in Finding of Fact 29. 106 Rejected in Finding of Fact 8. 107-109 Rejected in Findings of Fact 27, 28, 29 and otherwise not based on competent substantial evidence. 110 Rejected as irrelevant. 111-112 Rejected in Finding of Fact 9. Rejected in Findings of Fact 9, 27, 28, 29. Adopted in Finding of Fact 8. 115-116 Rejected as irrelevant. Adopted in Finding of Fact 8. Adopted in Finding of Fact 47. Adopted and rejected in Finding of Fact 47. Adopted in Finding of Fact 8 and rejected in Finding of Fact 47. Rejected as irrelevant. Adopted and rejected in Finding of Fact 47. Adopted in part in Findings of Fact 3, 4. Adopted in Findings of Fact 25, 39, 45. 125-127 Rejected as speculative and not based on competent substantial evidence. 128-130 Rejected as irrelevant and unnecessary. COPIES FURNISHED: John Rodriguez, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Michael J. Glazer, Esquire Post Office Box 391 Tallahassee, Florida 32302 Jean Laramore, Esquire Anthony Cleveland, Esquire Bruce A. Leinback, Esquire Post Office Box 11068 Tallahassee, Florida 32302 William Hoffman, Esquire Deborah Winegard, Esquire 2500 Trust Co. Tower 25 Park Place Atlanta, Georgia 30303 Fred W. Baggett, Esquire Stephen A. Ecenia, Esquire Post Office Drawer 1838 Tallahassee, Florida 32302 John T. Brennan, Jr., Esquire 900 Seventeenth Street, N.W., Suite 600 Washington, DC 20006 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 John Miller, Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Fl 32399-0700 =================================================================
Findings Of Fact The parties present at the hearing stipulated to the following facts which are hereby entered as findings of fact: All letters of intent submitted by the applicants involved herein with the exception of FCC were timely filed on or before December 15, 1984 and the relating applications by these applicants were timely filed on or before January 15, 1985. As a result, these applications addressed a January, 1988 bed need planning horizon. All applications, as mentioned above, were deemed complete by DHRS and were reviewed under a January, 1988 bed need planning horizon. All applications as cited above, were preliminarily denied by DHRS based on a lack of need and notice of these denials were timely published in the Florida Administrative Weekly. All unsuccessful applicants herein thereafter timely filed petitions for formal administrative hearing to contest the denial of their applications. The application filed by FCC for CON number 2738, filed by the applicant in July, 1983, and addressing a July, 1986 bed need was initially denied by DHRS in November, 1983. FCC thereafter timely filed a petition for formal, administrative hearing contesting the denial of this application and on January 10, 1985, DHRS and FCC entered into a stipulated settlement in which DHRS agreed to grant CON Number 2738 to FCC. This CON was issued to FCC on January 19, 1985, for 91 community nursing home beds and on March 15, 1985, a Final Order was entered by DHRS confirming the grant off CON Number 2738 to FCC. FCC's original application under CON Number 2738 was for a 120 bed community nursing home to be located in Indian River County, Florida. DHRS's initial denial of FCC's application was based on a lack of bed need at the time. When DHRS entered into the stipulation with FCC reversing its position and granting a CON to FCC for 91 community nursing home beds, it did so on the basis of bed need figures utilizing statistics relating to the subsequent January, 1988 bed need planning horizon even though FCC's application did not pertain to that planning horizon. In fact the beds taken and awarded to FCC came from the fixed pool of beds that, under the DHRS rule in effect at the time, was reserved for applicants in the January, 1985 batching cycle with a planning horizon of January, 1988. Rule 10-5.11(21)(b), F.A.C., sets out the bed need rule methodology for determining projected need for new or additional community nursing home beds. Pursuant to this rule, need is projected three years into the future. The methodology provided in this rule is clear and reasonable. If this methodology is followed precisely as set forth in the rule and utilizing the DHRS statistics available to personnel in the health care professions, such as its semi-annual nursing home census report as well as the Florida population estimates and projections by DHRS district and county, a net bed need of 116 additional beds in Indian River County is established for the period January, 1988. This figure does not, however, include an award of 91 beds to FCC under CON Number 2738 by DHRS under the terms of its settlement and those 91 beds are included within the 116. The expert testifying for the applicants herein concluded that the award of the 91 beds to FCC outside its planning horizon was erroneous and improper and based on no calculation of bed need appropriate to the applicant's original July, 1986 planning horizon and it was so found. In this case, DHRS, by awarding beds to FCC from a subsequent planning horizon is implementing a bed need policy which establishes a "planning horizon" three years from the date the Petitioners' applications were filed but updating all available data to that existing as of the date of the final hearing. This would include July, 1986 population data, current licensed beds, current approved beds, and the latest occupancy rate. The procedure followed by DHRS here is, however, a DHRS policy interpretation rather than a literal interpretation of the rule and the DHRS expert was unable to establish or in any way justify DHRS' policy of updating all data to the date of hearing in contravention of the terms of its own rule. If the unjustified and unsubstantiated DHRS policy were accepted and utilized here, calculations would reflect a surplus of 70 nursing home beds in Indian River County for the January, 1988 planning horizon as opposed to the more reasonable and rational bed need of 116.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED THAT Certificate of Need Number 2733, previously issued to Florida Convalescent Centers be rescinded and that the 91 beds relating thereto be returned to the January, 1988 planning horizon fixed pool. It is further recommended that the Secretary, Department of Health and Rehabilitative Services remand the case to the Division of Administrative Hearings for the conduct of a comparative hearing to evaluate the pending applicants within that batching cycle. RECOMMENDED this 28th day of January, 1987, at Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of January, 1987. APPENDIX The following constitutes my specific ruling pursuant to Section 120.57(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties in this case. Rulings on Proposed Findings of Fact Submitted by National Health Corporation, FMSC and Forum 1. Incorporated in Finding of Fact 4 except for the actual calculations outlined in the formulas which are incomplete. 2 & 3 Incorporated in Finding of Fact 5. 4-6 Incorporated in Finding of Fact 5. 7-13 Incorporated in Finding of Fact 6. 14 Not a Finding of Fact. Rulings on Proposed Findings of Fact Submitted by Health Care and Retirement Corporation Incorporated in Finding of Fact 4 except for the citation of the rule which is incomplete. Accepted. Accepted. Accepted and incorporated. 5-9 Accepted. 10 & 11 Accepted. 12 Rejected as not the best analysis. Rulings on Proposed Findings of Fact Submitted by Beverly Enterprises 1-3 Accepted. 4-6 Incorporated into Findings of Fact. 7 & 8 Accepted. Rejected as legal argument and not a Finding of Fact. & 11 Accepted. Rejected as legal argument and not a Finding of Fact. Cumulative to other findings. Rejected as legal argument and not a Finding of Fact. Incorporated in Finding of Fact. 16-20 Legal Argument not a Finding of Fact. 21-22 Cumulative to other evidence of record. Rulings on Proposed Findings of Fact Submitted by DHRS 1-3 Accepted. 4-8 Rejected as not supported by the weight of the evidence. 9 Accepted as to the calculation including the 91 beds available to FCC. Rejected as to the propriety of the award and the reason. Copies Furnished: William Page, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Robert D. Newell, Jr., Esquire 200 South Monroe Street Tallahassee, Florida 32301 Kenneth A. Hoffman, Esquire Alfred W. Clark, Esquire 325 North Calhoun Street Tallahassee, Florida 32301 Stephen K. Boone, Esquire Post Office Box 1596 Venice, Florida 34284 R. Terry Rigsby, Esquire Post Office Box 10555 Tallahassee, Florida 32302 John Rodriguez, Esquire, Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
The Issue The issue presented is whether the applications for certificates of need filed by Petitioners Beverly Enterprises-Florida, Inc. d/b/a Beverly Gulf Coast- Florida, Inc.; JFK Medical Center, Inc.; and Manor Care of Boynton Beach, Inc., should be granted.
Findings Of Fact Petitioner Beverly Enterprises-Florida, Inc., d/b/a Beverly Gulf Coast- Florida, Inc. (hereinafter "Beverly"), is a wholly-owned subsidiary of Beverly- California Corporation which is a wholly-owned subsidiary of Beverly Enterprises, Inc., one of the largest providers of long-term care services in the country. Beverly operates 41 nursing homes in the state of Florida, with all of these facilities receiving substantial financial, managerial, operational, and program support from Beverly's Florida regional office. Three of those nursing homes are located in Palm Beach County, Florida. Beverly proposes in its certificate of need (hereinafter "CON") application #7372 to construct a 120-bed community nursing home in zip code 33414, which is the Wellington area of Palm Beach County, to be known as Wellington Terrace. The facility would provide high acuity nursing services with an emphasis on rehabilitation. The proposed special programs include an adult day care program, respite care services, and an Alzheimer's unit, and the facility will accept patients with AIDS. The proposed facility will encompass 53,348 square feet and will have a total project cost of approximately $5.6 million. The facility is designed to minimize institutional effects and emphasize a home-like atmosphere for residents, featuring such amenities as a large day room with an aquarium and wide-screen television and VCR, a screened gazebo, and a greenhouse. Quality of life enhancements will be a consideration in all aspects of the facility. The building will meet or exceed all licensure requirements for construction and safety codes. Beverly's goal is to achieve a superior-rated facility. Beverly has agreed, if it is awarded a CON in this proceeding, that its CON for this facility will be conditioned upon the facility having a 25-bed Medicare-certified sub-acute unit which will include 4 beds dedicated to ventilator-dependent care. Wellington Terrace's CON will also be conditioned upon the provision of 56 percent of its annual patient days to Medicaid patients, and Beverly will give Florida State University's Institute on Aging a grant in the amount of $10,000 to be used for gerontological research. Petitioner Manor Care of Boynton Beach, Inc. (hereinafter "Manor Care"), is a Florida-based operating subsidiary of Manor Care Healthcare Corporation, one of the largest operators of nursing homes in the country. Manor Care Healthcare Corporation is a wholly-owned subsidiary of Manor Care, Inc., a publicly-traded company listed on the New York Stock Exchange. Through its corporate structure, Manor Care, Inc., devotes substantial financial, manpower, and other resources to its individual nursing homes. The individual facilities are directed by corporate policies in the areas of finance, quality of care, quality assurance, prototype services, structural design, and all areas of nursing home operations. Manor Care's parent owns 10 nursing homes and 4 adult congregate living facilities in Florida. Two additional nursing homes are under construction in Florida, including one in Palm Beach County. In the last 4 years, Manor Care has constructed and opened 2 nursing homes in Florida, and both received superior-rated licenses as soon as they were eligible. Manor Care seeks in its CON application #7375 to construct a 120-bed community nursing home in the Lake Worth area of Palm Beach County. The facility is a one-story fully equipped nursing center, using a design which conforms with all federal, state, and local regulations. It incorporates residential features to meet the physical, social, and psychological needs of the residents and promote independence. The space-efficient design emphasizes a home-like atmosphere which ensures quality of care and quality of life. The design is patterned after Manor Care's "prototype" facility and is very similar to Manor Care's two newest Florida nursing centers in Hillsborough and Pinellas Counties. The facility encompasses approximately 49,500 square feet and has a total project cost of approximately $6.8 million. The facility will contain 16 private rooms and 52 semi-private rooms. The proposed facility includes a 30-bed self-contained unit for residents with Alzheimer's disease and a 15-bed self-contained sub-acute unit. The sub-acute unit will be adjacent to speech, physical and occupational therapy/rehabilitation/dining spaces to facilitate patient recovery. The therapy spaces are 50 percent larger than Manor Care's standard therapy spaces to better accommodate the sub-acute patients. Like Beverly's, the proposed facility will offer skilled care, intermediate care, rehabilitative care, respite care, restorative care, sub- acute care, and specialized care for Alzheimer's disease and related dementia. It will also provide the following support services: pre-admission screening, appropriateness review, resident care plans, discharge plans, quality assurance, pharmacy, consulting (for physician visits, and dental, radiology, podiatry, and other diagnostic evaluations), community outreach, family programs, and chaplaincy. Beverly offers similar support services. Manor Care has agreed, if it is awarded a CON in this proceeding, to condition its CON on its 30-bed dedicated, secured Alzheimer's unit and its 15- bed sub-acute unit. Manor Care has also agreed to condition its project on providing a minimum of 55.5 percent of its total patient days to Medicaid residents, and on providing an adult Alzheimer's day-care program, a respite care program, and 2.8 nursing hours per patient day for the Alzheimer's unit. Petitioner JFK Medical Center, Inc. (hereinafter "JFK"), is a general acute care hospital located in the Atlantis/Lake Worth area, in central Palm Beach County. It is licensed to operate 369 beds. JFK enjoys tax-exempt status under Section 501(c)(3) of the Internal Revenue Code. JFK provides services to patients of high acuity. Its overall case mix index, which serves to measure acuity, is 1.56. The normal case mix for acute care hospitals is 1.0. JFK's case mix index places it among the top five percent of all hospitals in the state. JFK focuses its acute care services in three specific areas. It serves as a regional referral center for cardiovascular services. It serves as a regional referral center for oncology and is the only hospital in Palm Beach County accredited by the American College of Surgeons as a comprehensive cancer center. JFK also has a large orthopedic surgery program. JFK serves predominantly an elderly patient population. Approximately 75 percent of its patients exceed 65 years of age. JFK's patient population includes many patients with multiple system medical problems. Such patients are more difficult to care for than patients with single system problems. In addition to acute care services, JFK provides a full range of outpatient and ambulatory services. JFK operates a diagnostic breast institute, an ambulatory surgery center, an outpatient cancer center, and a home health agency. JFK also employs twenty-three primary care physicians. JFK's outpatient and physician services constitute a portion of JFK's continuum of care, as do its acute care services. Sub-acute services are the only link missing from JFK's continuum of care. By its CON application #7374, JFK seeks authority to convert 26 existing adult psychiatric and substance abuse beds to establish a 20-bed sub- acute skilled nursing unit. JFK proposes to treat patients: (1) who have experienced an episode of acute care; (2) who no longer have need for acute care; and, (3) whose medical needs require higher intensity of care than is provided in a community nursing home. These "sub-acute care" patients fit somewhere in the continuum between acute care and nursing home care. The project involves 14,100 square feet of renovated space, a capital expenditure of $633,285 to be funded from internal sources, and the conversion of underutilized beds to a highly-utilized service. Sub-acute care is a comprehensive inpatient care program designed for patients who have experienced an acute illness or injury. Sub-acute care is designed to treat complex medical conditions through coordinated complex medical treatments. The rendition of sub-acute care requires an interdisciplinary team of professionals and paraprofessionals. In order to render sub-acute care to its patient population, the JFK program will provide the following staffing and service components: 24-hour registered nurse coverage; 5-6 hours of hands-on nursing care daily per patient, which is twice the care required of a community nursing home; and, 7 day/week, 24-hour access to all of JFK's ancillary services, including laboratory, pharmacy, respiratory therapy, blood transfu- sions, emergency services, and physician services. The JFK program will provide a full range of rehabilitative, restorative, and therapeutic services to patients, including radiation therapy, intravenous therapy, chemotherapy, complex tracheotomy, ventilator, and hyperalimentation care. JFK will provide services to the following patient groups: orthopaedic patients including joint replacement, fracture or amputation patients, cerebrovascular patients including stroke and other CVA accident patients, post-operative open-heart surgery patients requiring transitional care, oncology/radiation therapy patients requiring high level sub-acute care, pulmonary disorder patients including respiratory/ventilator dependent or other chronic pulmonary disease patients, patients with drug resistant infections including MRSA or tuberculosis patients, HIV-infected patients, patients with severe decubitus ulcers, and psychiatric patients with skilled medical care requirements. The JFK program is not designed to compete with community nursing homes. JFK proposes in its application a condition that 90 percent of the patients served in the sub-acute unit will originate from within JFK. JFK also proposes a condition that 90 percent of the patient days provided in the unit be provided to Medicare patients, or non-Medicare patients requiring physician certified rehabilitative or restorative care. JFK also proposes a condition that it serve high acuity or "heavy care" patients. In order to be awarded a CON, an application must be evaluated to determine compliance with the priorities or preferences stated in the appropriate District or Local Health Plan and in the State Health Plan. The District 9 Local Health Plan includes 3 allocation factors to be used in evaluating nursing home applications. The first states that priority should be given to applicants for new nursing homes or expansion of existing homes who agree to provide a minimum of 30 percent Medicaid days to their patients. Both Manor Care and Beverly comply with this priority in that they have committed to a minimum of 55.5 percent and 56 percent, respectively. The slight difference in their commitments does not give Beverly an advantage. JFK is not specifically proposing to provide care to Medicaid patients in its sub-acute unit. JFK's proposal is to serve primarily Medicare patients with the remaining patients being without resources or having other insurance. Medicaid-eligible patients occasionally need sub-acute services, and Medicaid does reimburse currently for nursing services provided in hospital-based skilled nursing beds. However, at the time that JFK filed its CON application, Medicaid did not reimburse hospitals for such services. More importantly, the allocation factor does not apply to JFK's application since it only applies to applicants for new nursing homes or expansion of existing homes, and JFK is neither. The second allocation factor in the District 9 Local Health Plan provides that priority shall be given to applicants who demonstrate (a) a documented history of providing good residential care; (b) staffing ratios, particularly for registered nurses and aides, that exceed the minimum requirements; (c) provision for the treatment of residents with mental health problems; and (d) the inclusion of intensive rehabilitation services for those short-stay patients who require rehabilitation below the level of an acute care hospital. Manor Care meets this allocation factor better than Beverly. As to the first criterion in the second allocation factor, during some of the 36 months prior to the filing of its application, two of Manor Care's ten Florida nursing homes held a conditional license. Currently, nine of those ten nursing homes hold superior licenses, and the other holds a standard license. Manor Care's two nursing homes opened most recently received superior licenses as soon as they were eligible. On the other hand, during some of the 36 months prior to the filing of its application, 17 of Beverly's 41 Florida facilities held a conditional license. Beverly's most recent composite shows that 31 of its 41 Florida facilities are superior-rated, with three of those 41 facilities rated conditional. Hospitals do not provide residential care, and JFK, therefore, has no history of "residential care" to evaluate; however, JFK has met stringent quality of care requirements by obtaining accreditation by the Joint Commission on Accreditation of Healthcare Organizations. The second criterion in the second allocation factor is met by the staffing ratios of all three applicants. Similarly, all three applicants will treat residents with mental health problems, the third criterion. The last criterion of the second allocation factor seeks applicants offering intensive rehabilitation services below the level of an acute care hospital. All three applicants comply with this criterion since JFK's application is for a sub-acute unit including intensive rehabilitation services, and Manor Care and Beverly each include such a unit within their proposed nursing home facilities. The Local Health Plan's third allocation factor seeks applicants proposing to serve a distinct population that is currently not being served within the subdistrict, Palm Beach County. As written, none of the applicants meets the third allocation factor since none has identified a distinct patient population that is not being served. However, the Agency interprets this allocation factor as being fulfilled by an applicant who addresses a distinct population which is being underserved rather than unserved. As interpreted by the Agency, all three applicants meet this allocation factor, Manor Care and Beverly with their Alzheimer's units, and all three applicants with their sub- acute units. Both services are greatly needed by Palm Beach County residents. Beverly suggests that it meets the third allocation factor as it is written because it will provide Jewish services, Kosher food, care to AIDS patients, and bi-lingual services. However, there are facilities with bi- lingual and multi-lingual employees, and patients with AIDS are receiving services. Further, there are dedicated Jewish nursing homes in Palm Beach County, and Beverly's project design does not include a Kosher kitchen. Beverly also suggests that its application is more consistent with the Local Health Plan than Manor Care's. Beverly relies on language within the Plan which states an interest in increasing access to nursing home services to the westernmost region of Palm Beach County. First, that language is not contained in any of the allocation factors utilized by the Agency in reviewing CON applications. Second, Beverly does not include the westernmost regions of the county in its primary service area for the proposed facility. Third, Beverly's Royal Manor facility is already serving the area which Beverly proposes as the primary service area for its Wellington Terrace facility. The State Health Plan contains 12 allocation factors. The first states that preference shall be given to applicants proposing to locate a nursing home in areas within the subdistrict with occupancy rates exceeding 90 percent. Palm Beach County has an occupancy rate in excess of 90 percent, and all applicants meet this preference. The second allocation factor states that preference shall be given to an applicant who proposes to serve Medicaid residents in proportion to the average subdistrict-wide percentage of the nursing homes in the same subdistrict. It further provides that exceptions shall be considered for applicants who propose to exclusively serve persons with similar ethnic and cultural backgrounds, or who propose the development of multi-level care systems. The average percentage of nursing home Medicaid patients in the Palm Beach County subdistrict is 55.44 percent. Since Manor Care proposes a minimum of 55.5 percent and Beverly proposes a minimum of 56 percent, they both meet this preference. Beverly's reliance on a higher state-wide average to obtain an advantage over Manor Care as to this factor is misplaced since the factor does not call for any statewide average but rather speaks to the Medicaid commitment of the specific facility being proposed. Although JFK, as a hospital, does not meet the average subdistrict-wide percentage of Medicaid usage, JFK is still entitled to preference under this allocation factor since its proposal is specifically for the development of a multi-level care system. JFK specifically proposes its sub-acute unit to fill in the only gap in its vertical continuum of care. The third allocation factor in the State Health Plan gives preference to an applicant proposing to provide specialized services to special care residents, including AIDS residents, Alzheimer's residents, and the mentally ill. All applicants meet this allocation factor. JFK meets this factor with its unique hospital-based sub-acute unit proposal. Manor Care meets this factor with its dedicated, secured Alzheimer's unit, sub-acute unit, and comprehensive rehabilitation program. Beverly meets this factor with its sub-acute unit and comprehensive rehabilitation program and its Alzheimer's unit. Further, all three applicants will provide services to AIDS patients and to the mentally ill. Factor four gives preference to applicants proposing a continuum of services to community residents including, but not limited to, respite care and adult day care. Manor Care will provide Alzheimer's adult day care, respite care, a 30-bed Alzheimer's unit, and a 15-bed sub-acute unit. It will provide skilled and intermediate care, rehabilitative care, hospice care, restorative care, telephone re-assurance, referral and counseling services, and various community outreach programs. Manor Care meets this allocation factor. Beverly proposes a continuum of services, including its sub-acute unit, Alzheimer's unit, adult day care, and respite care. Beverly proposes an outpatient adult day care program for up to eight guests, with services available five days a week. The Wellington Terrace design allocates 735 square feet to multi-purpose space for adult day care. Direct care staff, consisting of a nursing assistant and a part-time activity aide along with volunteer programs staff, meals, and snacks will be offered in conjunction with the full array of recreational, personal care, therapeutic, and social services activities available at the facility. Manor Care also offers a full array of services to the participants in its Alzheimer's day care program. Although Manor Care has fewer slots available, its program will operate seven days a week. The respite care programs offered by both Beverly and Manor Care provide short-term nursing and therapeutic care for elderly adults who require care currently provided by family and other caretakers but whose caretakers require relief from their care-giving activities. All of the services available to in-patients will be available to respite residents. Although JFK's proposal does not include respite care or day care, its proposal would result in a continuum of services to community residents ranging from acute care services through home health care services. JFK, accordingly, also meets this preference. The fifth allocation factor gives preference to applicants proposing to construct facilities which provide maximum residents' comfort and quality of care. The factor states that the special features may include, but are not limited to, larger rooms, individual rooms, temperature control, visitors' rooms, recreation rooms, outside landscaped recreation areas, physical therapy rooms and equipment, and staff lounges. This allocation factor envisions services offered in a traditional community nursing home rather than services provided in a hospital-based skilled nursing unit. JFK, like any hospital, cannot meet the portion of this preference which evaluates the level of comfort in a residential, custodial setting, but it does meet the portion relating to quality of care. Beverly's facility seeks to minimize the effects of institutionalization on residents through patient rooms which exceed state requirements, private toilets in each room, a physical therapy suite with a physical therapy gym and hydrotherapy area, an outdoor ambulation court, outside courtyard with screened gazebo, and a solarium/greenhouse. Private dining space and separate areas for visitation are provided, and thermostat controls are placed in every room. Its Wellington Terrace facility will feature 50 semi- private rooms and 20 private resident rooms in a single-story structure. Manor Care's facility would have many of these amenities. Its design incorporates residential features that support the physical, social, and psychological needs of the residents and which emphasizes a comfortable atmosphere that ensures quality of care and quality of life for the residents. Both Beverly and Manor Care meet this factor. The sixth allocation factor in the State Health Plan gives preference to applicants proposing to provide innovative therapeutic programs which have been proven effective in enhancing the residents' physical and mental functional level and which emphasize restorative care. All three applicants meet this preference. Beverly's comprehensive rehabilitation program at Wellington Terrace will encompass physical therapy, occupational therapy, and speech/language pathology. Rehabilitation programs will be offered seven days per week in order to provide continuity, decrease the time associated with recovery and rehabilitation, and serve the increased needs for rehabilitation services attendant to the sub-acute patient. Upon admission, every resident will be screened by all therapies to assess the need for specific services with periodic screenings during all stays. Out-patient rehabilitation services will be offered to the community in a physical therapy suite with a separate entrance. Manor Care envisions a similar comprehensive rehabilitation program offering the same therapies with the same intended results. Its rehabilitation program for its sub-acute unit offers one advantage not proposed by Beverly, i.e., the patients in the sub-acute unit will receive care under the supervision of a physiatrist. Manor Care's physical and occupational therapy will be designed to increase tolerance and maximize function in relation to the disease process. The frequency and duration of therapy will increase as the patient's tolerance, skill level, and confidence improve. Manor Care will provide a restorative and normalizing program to enable each resident to achieve maximum functioning and independence. An inter- disciplinary team of specialists will develop an individualized resident care plan. Restorative care for sub-acute patients will incorporate the same approach and will focus on achieving medical stability and discharging patients to their homes. Beverly's Wellington Terrace will provide therapeutic programs which enhance the residents' physical and mental functioning and emphasize restorative care. Specialized rehabilitation programs, a restorative nursing program, and normalizing activities are three main components of Beverly's approach. Its therapists work as a team to develop a treatment program designed to improve the residents' ability. Training is provided in the use of prostheses, pain management, rehabilitative dining, and other restorative therapies. Allocation factor number seven gives preference to applicants proposing charges which do not exceed the highest Medicaid per diem rate in the subdistrict. Exceptions shall be considered for facilities proposing to serve upper income residents. Both Manor Care and Beverly meet this preference. JFK has not proposed a specific charge for Medicaid patients since it expects to serve few of them, and it is anticipated that its Medicaid charges would be higher than those in a community nursing home. JFK does not meet this factor in that it will be serving Medicare patients, and the cost of providing care to Medicare skilled patients is higher than the cost of providing services to Medicaid patients. Allocation factor number eight gives preference to applicants with a record of providing superior resident care programs in existing facilities in Florida or other states and calls for consideration of the current licensure ratings of Florida facilities. Nine of the ten Manor Care facilities in Florida are rated superior, and its two newest facilities received superior ratings as soon as they were eligible. Accordingly, Manor Care has a documented history of providing superior resident care programs to its residents in Florida. On the other hand, Beverly has a superior rating for 31 of its 41 Florida facilities, and three of the facilities are rated conditional. Manor Care better meets this allocation factor than Beverly. JFK does not have a record of providing residential nursing home care, but JFK does provide a high quality of patient care as evidenced by its accreditation by the Joint Commission on Accreditation of Healthcare Organizations. The ninth allocation factor gives a preference to applicants proposing staffing levels which exceed the minimum staffing standards contained in licensure administrative rules and further provides that applicants proposing higher ratios of RNs and LPNs to residents than other applicants shall be given preference. All three applicants propose staffing levels exceeding state minimum standards. As to the higher ratios, Manor Care's Schedule 6 for Year 2 shows 8.4 RNs and 14.9 LPNs. In comparison, Beverly's schedule 6 for Year 2 shows 8 RNs and 10 LPNs. Thus, Manor Care has a greater number of RNs and LPNs even though Beverly projects more utilization than Manor Care, and Manor Care is entitled to preference over Beverly on this factor. Allocation factor number ten gives preference to applicants who will use professionals from a variety of disciplines to meet the resident needs for social services, specialized therapies, nutrition, recreation activities, and spiritual guidance. It provides that the professionals used shall include physical therapists, mental health nurses, and social workers. All three applicants propose an interdisciplinary approach to meet the residents' needs in nursing, all therapies, nutrition, social services, and spiritual guidance, and JFK is likely to have a wider variety of professionals available than the two community nursing home applicants. The eleventh allocation factor of the State Health Plan states that preference shall be given to an applicant who provides documentation as to how it will ensure residents' rights and privacy, use resident councils, and implement a well-designed quality assurance and discharge planning program. All three applicants ensure residents' rights and privacy, and all have a well- designed quality assurance program in addition to a detailed discharge planning program. All three applicants meet this preference. The twelfth allocation factor gives preference to an applicant proposing lower administrative costs and higher resident care costs compared to the average nursing home in the district. This factor is difficult to accurately assess because the terms "administrative costs" and "resident care costs" are not defined, and there is no uniformity in reporting by county nursing homes. For example, some facilities such as Manor Care include salary benefits as an administrative cost, while others such as Beverly include that considerable expense as a resident care cost. Although it is also unknown how those costs are reported by the "average nursing home" or even what an average nursing home is, it is apparent that this factor seeks to encourage nursing homes to devote resources for direct delivery of care. Manor Care and Beverly comply with this preference. However, their applications in Schedule 6 reflect that Manor Care will have more staff for nursing, ancillary, and dietary services than Beverly and that Manor Care will have overall more full-time employees than Beverly. JFK will have higher resident care costs than the average nursing home, but any hospital-based program will have higher administrative costs than a free-standing nursing home because of the infrastructure required to operate a hospital. To the extent that this factor is intended to apply to a hospital-based skilled nursing unit, JFK cannot meet this factor. There is a need for the proposed Manor Care facility in Palm Beach County. First, Manor Care proposes to locate its facility in the west Lake Worth area of Palm Beach County. This area has a very high concentration of elderly people. In zip code 33467 (the western Lake Worth area), 14.7 percent of the projected 1997 population will be 75 years of age or older. It is good health planning to locate a new facility there. Second, there is a great need for additional Alzheimer's nursing home beds in a dedicated, secured unit. While the demand for Alzheimer's beds is substantially increasing, there are only a few dedicated Alzheimer's units in the entire county. Manor Care's 30- bed unit would help meet this need. Third, there is a need for additional sub- acute beds. Manor Care's proposed 15-bed unit will help meet this need particularly where Manor Care proposes to locate its facility. Fourth, Manor Care's commitment to provide a minimum of 55.5 percent Medicaid will enhance access to nursing home services. Fifth, Manor Care's application includes many letters of support from health care providers and practitioners, which substantiate the need and demand for another Manor Care nursing home in the county. It is not required for a CON applicant to propose a specific site for its facility. However, Beverly's application asserts that its proposed facility, Wellington Terrace, will be located in zip code 33414, which is the zip code for Wellington, a planned unit development. Beverly's witnesses also asserted that the facility would be built in Wellington, and Beverly's vice president in charge of nursing home development offered in his testimony to add as a condition for the award of a CON in this proceeding that Beverly would build its facility in Wellington. Beverly's proposed facility is not needed in the Wellington area of Palm Beach County. First, Beverly's proposed facility would not promote Medicaid access. Zip code 33414 has the highest income per elderly resident in Palm Beach County. Locating nursing home beds in the wealthiest elderly section of the county does not promote Medicaid access. Second, the small elderly population in Wellington does not show need for a new nursing home. The 75+ age cohort is that population group which truly demands nursing home services. Only 2.5 percent of the zip code 33414 residents are 75+. In comparison, the Palm Beach County average is 10.8 percent and the Lake Worth area where Manor Care proposes to locate is 14.7 percent. The other four zip codes in Beverly's primary service area (33414, 33411, 33470, 33467, and 33413) do not show need for the facility in Wellington. Zip codes 33470 and 33413 are scantly populated. Zip code 33411 is where Beverly's Royal Manor facility is located. Zip code 33467 is where Manor Care proposes to locate. Third, the closest nursing home to the proposed Beverly facility is Beverly's Royal Manor facility, which is only five miles from the proposed facility. Royal Manor already serves the Wellington area. The two Beverly facilities would be inappropriately competing with each other and duplicating each other's services, which is not logical given the limited elderly population in that area of the county. Fourth, Beverly is currently developing a sub- acute unit at Royal Manor and has indicated that unit might include ventilator- dependent beds. Royal Manor, therefore, already serves the limited sub-acute care and ventilator-dependent needs of elderly patients in that area. There is no need for an additional 25-bed sub-acute unit just five miles from Royal Manor. Also, Royal Manor currently has in place the same rehabilitative program proposed by Beverly in its new facility. Fifth, maximizing the resources at Royal Manor is a better alternative than building a new facility in zip code 33414. Notably, Beverly's application includes letters of support for a bed addition at Royal Manor, not the new proposed facility at Wellington. Beverly proposes a condition of a 25-bed Medicare-certified sub-acute level unit as a integral part of its project, following a company-wide focus which began in 1991. The goal for sub-acute residents is functional improvement rather than wellness. The majority of sub-acute patients will be discharged home or into an assisted living center. Beverly describes its sub-acute program as a level of medical/rehabilitative health services rendered to individuals who have completed the acute phase of recovery. The individual is medically stable, but continues to require complex medical intervention from nurses and therapists. Frequent diagnoses/conditions include post-operative fractured hip, renal failure (dialysis), cardiac rehabilitation, spinal cord injury, and respiratory conditions. Many patients will need IV therapy, parenteral nutrition and chemotherapy. A physician specializing in pulmonary medicine serves as medical director of the unit. That physician supervises a unit staff consisting of an RN, clinical coordinator, licensed nurses with critical care experience, and respiratory services contractual staff. As a condition to the award of a CON in this proceeding, Beverly will dedicate four of its sub-acute beds to a respiratory recovery program for ventilator-dependent patients. An RN with critical care/ventilator experience and a respiratory therapist will be on duty at the facility seven days per week, 24 hours per day. The ventilator-dependent residents will be those with a strong potential for being weaned from the respirator, with an average length of stay from four to six months. The goal is to discharge these patients to their homes or to a setting offering a lower level of care. The four rooms in the sub-acute unit closest to the nursing station will be equipped with headwall units, containing oxygen, vacuum, and compressed air systems. Four beds for ventilator-dependent patients is a good aspect of Beverly's application but does not approach the need of Palm Beach County residents for ventilator beds. The proposed 15-bed sub-acute unit at Manor Care is patterned on its "prototype" sub-acute program. This prototype provides a progressive therapeutic environment for patients who require medical monitoring along with an aggressive rehabilitation program. The interdisciplinary approach establishes measurable functional outcomes while avoiding re-hospitalization. The program is individualized and geared toward assisting patients and their families in coping with traumatic injury and disease to assist them in their return home. There are six primary features to Manor Care's prototype. First is a special physical layout of the unit, including a separate entrance, which creates an atmosphere for short-term stay. The second is a separate unit director who has both clinical and administrative experience. The third feature is the staffing model of the unit, which provides a minimum of 5.0 nursing hours per patient day. Most of the nursing hours are provided by licensed staff. The fourth feature is a case manager who is assigned to insure individualized treatment for each resident. The fifth feature is a dedicated staff for the unit, who have specific education and background in sub-acute care. The sixth feature is a physiatrist who oversees the operation of the unit. Manor Care's clinical profile of diagnoses to be treated in its sub- acute include: cardiac disorders, wound/skin care, renal disorders, general rehabilitation needs, pulmonary disease, brain injury, neurological disorder, medical, post-surgical, and orthopedic. Manor Care's prototype has been very successful; 83 percent of all sub-acute residents are discharged directly home. Many of Manor Care's sub- acute units are accredited by the Commission for Accreditation of Rehabilitation Facilities. On the other hand, Beverly's witnesses did not even know that CARF accreditation was available for comprehensive rehabilitation services in nursing homes. Further, while Beverly is still in the development stages of its sub- acute program, Manor Care has an established prototype with measured outcome. Lastly, Beverly's prototype does not include a physiatrist, and Manor Care's does. Alzheimer's disease affects the ability to remember, to communicate properly, and to perform activities of daily living. The needs of Alzheimer's patients are distinct from other nursing home residents. Their special needs require them to be treated in specialized units. Beverly will offer Alzheimer's services in an 18-bed area specifically designed for Alzheimer's patients. The unit includes separate dining and activity areas with an enclosed courtyard. This design allows for controlled wandering, with Wanderguard alarms placed on all exit doors throughout the facility. The goal of the program is to maintain the resident's sense of dignity and improve his or her quality of life. Mealtimes and therapeutic activities will be focused in small groups and will allow for individual assistance and partialization of activities. The program will have its own dedicated staff, trained to understand the symptoms and manifestations of Alzheimer's residents. Beverly currently operates similar Alzheimer's programs in Florida. Manor Care created a task force which lead to the development of Manor Care's prototype Alzheimer's unit. Currently, the Manor Care group operates over 90 dedicated units throughout the country. Manor Care's prototype encompasses five components: environment, staffing and training, programming, specialized medical services, and family support. The proposed 30-bed unit is self-contained, with its own dining room, activities room, lounge, quiet/privacy room, nurses' sub-station, director's office, day care lounge, and outdoor courtyard. A separate lounge area is provided for family visits. The enclosed, outdoor courtyard allows residents to walk outside freely. The unit is especially designed to reduce environmental stress. Manor Care's Alzheimer's unit has specialized staff including a unit director, activities director, and nursing staff. The unit is staffed with a high "nurse to resident" ratio. The staffing patterns emphasize continuity to ensure that residents receive individualized care. The goal of programming and activities is to improve quality of life. This specialized programming results in reducing the use of medications and restraints necessary to manage these residents. The activity program is success-oriented. The use of consultant medical specialists is an integral part of Manor Care's program. Specialists provide diagnostic treatment services for the Alzheimer's resident upon admission to the unit and thereafter when deemed medically appropriate. Families are very supportive of the unit programming and have benefited from the understanding and support available to them. The benefits of Manor Care's prototype Alzheimer's unit include: minimizing the use of physical restraints, decreasing the use of medications, improvement in residents' nutrition, reduction in agitation and combative behavior, a freer and safer living environment, an increase in independence and functional abilities, enhancement of family involvement, and better guarantor satisfaction. The uncontroverted medical evidence is that Manor Care's Alzheimer's unit is state-of-the-art and Beverly's is not. In addition to being dedicated and self-contained, Manor Care's unit is secured, i.e., the doors are locked, preventing the Alzheimer's patients from leaving that unit unaccompanied. On the other hand, Beverly proposes to use the Wanderguard system which sounds an alarm when an Alzheimer's patient leaves the unit or facility. The alarm alerts staff that they must stop what they are doing and go after the Alzheimer's resident to return the patient to the proper location. Although other nursing homes use the Wanderguard system, such is done only when Alzheimer's patients are distributed throughout the facility. It is not used in conjunction with a dedicated unit where all the Alzheimer's residents are located in one area. Accordingly, Manor Care's Alzheimer's unit is superior to Beverly's. Manor Care establishes links with state and local health care providers to maintain a continuum of care for admissions, treatment, referral, and discharge coordination. In addition to building upon the linkages already established by Manor Care's two facilities in Palm Beach County, Manor Care will pursue working relationships, referral arrangements, and transfer agreements with advocacy groups, adult day care groups, home health services, hospitals, recreational and senior citizen organizations, and respite care centers. Beverly establishes similar links and can utilize the linkages already established by its nearby Royal Manor facility. Manor Care will affiliate with local nursing schools, such as the South County Vocational Technical Center, Palm Beach County Community College, and the North County Vocational Technical Center to promote clinical rotations and internship programs at its facility. Through working relationships with health professional training programs, students will benefit from the training and practical experience gained within an operating facility. The proposed facility will offer the advantage of training in specialty Alzheimer's care and sub-acute care programs. Additionally, the research programs at Manor Care's parent company will assist the proposed facility in its provision of nursing home services, particularly in the areas of Alzheimer's care and sub-acute care, by developing new programs and services for its nursing centers. Manor Care has a team of staff, outside consultants, and other research entities conducting studies of health care needs, including studies on rehabilitation programs, sub-acute programs, diabetes programs, wound care management, adult day care, and Alzheimer's disease. This multi-disciplinary task force researches new technologies, with the ultimate goal of providing the highest quality of care. Beverly will also use Wellington Terrace as a clinical rotation training site for long-term care nursing students. Arrangements for training rotations have been made with the Institute on Aging and School of Nursing at Florida State University. Further, if Beverly is awarded a CON in this proceeding, it will establish a research fund of $10,000 allocated to a long- term care issue to be determined in conjunction with the Institute on Aging. Manor Care's project cost of $6,835,130 is reasonable. The costs and methods of construction, including energy provision, are reasonable and appropriate. There are no less costly or more effective methods of construction available. Its project cost is similar to the cost of a 120-bed facility that Manor Care currently has under construction in Palm Beach County, which gives Manor Care a credible benchmark for estimating its project cost. The estimated project cost is broken out by cost items, which, in turn, are reasonable. Manor Care estimates a total land cost of $1.42 million. Of this, $900,000 is for the purchase of land, and $520,000 is for land improvement costs. In evaluating land, Manor Care considers the distribution of other Manor Care nursing homes in the county, whether there are utilities available to service the land, and whether there is sufficient zoning and land use approval to develop the land for a nursing home. There are several available 5-acre sites in the west Lake Worth area that meet these land eligibility requirements, all in the range of $900,000. The estimate of $520,000 for land improvement is based on Manor Care's experience in Palm Beach County. These improvement costs include water and sewer hook-up. Manor Care estimates approximately $3.87 million for the building cost and $840,000 for total equipment costs: $150,000 for fixed equipment and $690,000 for movable equipment. These costs are reasonable and based on Manor Care's experience in Florida, including the facility under construction in Palm Beach County. Equipping a sub-acute unit is more expensive than regular residents' rooms. It requires more expensive beds, diagnostic machines, special support tables, and expensive nurse station equipment. Manor Care's total equipment cost includes appropriate equipment for its 15-bed sub-acute unit. Manor Care reasonably projects $67,000 for development costs and $339,000 for construction interest. It estimates $300,000 in start-up costs: $125,000 for pre-opening salaries and recruitment, $125,000 for marketing, and $50,000 for pre-opening inventories and miscellaneous costs. The expenses are reasonable and consistent with Manor Care's recent experience in opening two nursing homes in Florida. To the contrary, Beverly's projected project cost is likely understated due to the questionable reasonableness of several components. First, Beverly commits to locating its facility in zip code 33414. There is no land available in that zip code with the necessary zoning and the necessary land use designation for nursing home development. Beverly would have to obtain a change in zoning and may also have to obtain a change in the land use designation which requires a modification of the Palm Beach County Comprehensive Land Use Plan, which requires approval of both the county and the state. Beverly's chances for success are speculative. Further, of the four sites which Beverly has considered for locating its facility, one of those sites is smaller than the five acres which Beverly requires to develop its facility. Another of those sites does not have utilities in place to service the site, an expense Beverly has not included in its projected costs. Two of the sites are not located in zip code 33414. Even if land is available in Beverly's selected zip codes, Beverly's estimate of $350,000 for the purchase of land is unreasonably low. Second, Beverly underestimated its land development costs. For example, Beverly included no monies for water, sewer, or utility hook-up. In comparison, Manor Care assumed $165,000 for such hook-ups. Third, Beverly's total equipment cost appears understated. Equipping a sub-acute room is substantially more expensive than a normal room. Beverly proposed ten more sub- acute beds than Manor Care, yet its total equipment cost is almost $200,000 less. Fourth, Beverly's building cost per square foot is significantly less than Manor Care's. In three applications for a CON filed six months later than the one involved in this proceeding, Beverly estimates its construction cost as being $400,000 greater than the instant project for the same nursing home design. In explanation of this disparity, Beverly presented evidence that the subsequent applications were for an improved facility which would have a steel frame instead of the wood frame to be utilized at Wellington Terrace, and the HVAC system would be enhanced. Constructing its intended facility at Wellington rather than using the improved construction materials Beverly will use elsewhere is not a reason to approve Beverly's CON application in this proceeding. Fifth, Beverly's start-up cost of $75,000 is unreasonably low. That figure does not represent a calculation of specific items; rather, it is simply an aggregate figure which Beverly used. Beverly did not adequately explain the disparity between its start-up cost and Manor Care's $300,000 start-up cost, which is a reasonable figure. Finally, Beverly's construction period interest has not been shown to be reasonable and its application is not consistent with regard to financing and equity contribution. Although the Agency can authorize a cost overrun of up to 10 percent of an applicant's project cost, it is uncertain that Beverly has underestimated its project cost by only 10 percent. It is not good health planning to approve a project which will, in turn, require further Agency approval to implement. Further, this proceeding is a comparative review of the applications filed and the representations made therein. It would be inappropriate to approve an application containing projections which are suspect. Since both Manor Care and Beverly are able to secure the financing necessary for project accomplishment, both of their proposals have immediate financial feasibility. Manor Care's proposal also has long-term financial feasibility. The financial projections for Years 1 and 2 are based on reasonable utilization, revenue, and expense assumptions. Manor Care reasonably projects that it will be profitable in Year 2 of operation. Beverly is a large corporation with substantial resources. Because of this, it can be expected that Beverly's project, which will likely cost substantially more than Beverly projected, will be financially feasible in the long term although perhaps not as early as Year 2. Either Manor Care's or Beverly's project would enhance the existing long-term care system in Palm Beach County by providing needed skilled nursing services, services for Alzheimer's and related dementia disorders, sub-acute services, respite care, and adult day care. Both applicants have a corporate quality assurance program which is utilized and implemented at all nursing homes operated by that applicant. Those programs are intended to promote quality of life and quality of care for the residents. Both facilities would enjoy high utilization, and both proposed charges which are reasonable. Both projects will utilize corporate resources in a cost-efficient and cost-effective manner. Both Manor Care and Beverly have committed as a condition to the award of a CON to provide more Medicaid patient days than the nursing home average for Palm Beach County. Thus, both proposals promote access to Medicaid residents for nursing home services. Although Beverly's county-wide and statewide Medicaid averages are higher than Manor Care's, each facility of either applicant has met its CON condition regarding its Medicaid commitment. As required, JFK's application has been reviewed against the state and local health plan allocation factors as set forth in this Recommended Order. Its application meets the majority of those allocation factors. Moreover, some of those factors require that preference be given to programs which are of the specific nature proposed by JFK. Patients with a documented need for sub-acute skilled nursing services of the type proposed by JFK have been denied access to licensed but unoccupied skilled community nursing home beds in Palm Beach County. Those patients' needs for sub-acute skilled nursing services are documented in physician orders and plans of care contained in the patients' medical records. Generally, patients requiring a high level of nursing and restorative care have been denied access. Further, there are several specific categories of patients who have been unable to obtain timely discharges to skilled nursing facilities in Palm Beach County. These categories include: patients with chronic illness; patients who are ventilator dependent; diabetic patients; terminally ill patients; patients who require chemotherapy; AIDS patients; and patients with chronic obstructive lung disease. The difficulty in discharging these patients is a "daily to weekly" issue at JFK. Ventilator-dependent patients requiring skilled nursing care are routinely denied access to licensed but unoccupied skilled nursing beds in Palm Beach County. There are no long-term care beds in Palm Beach County that provide ventilator services, although some purport to do so. Palm Beach County patients who require long-term ventilator care must seek admission to Vencor Hospital in Fort Lauderdale, which is approximately forty-five miles from JFK. During peak season, Vencor generally does not have beds readily available. Patients who require long-term ventilator care often remain in acute care beds at JFK longer than warranted by their medical condition because there are not available appropriate facilities in Palm Beach County for their post-acute care. Patients discharged from JFK to Vencor for long-term ventilator care lose contact with their attending physicians, which impairs the continuity of care rendered to those patients. Patients placed at Vencor are further compromised by their family and friends' inability to travel to Fort Lauderdale to visit them. The support of family and friends is important in helping ventilator-dependent patients to wean themselves from the ventilator. JFK has experienced and anticipates it will continue to experience a significant increase in the number of its patients whose care is reimbursed under managed care plans. JFK's 1995 budget projects that 33 percent of the hospital's patient days will be attributable to managed care patients. Managed care plans have exerted pressure on JFK physicians to discharge patients as quickly as possible. Accordingly, patients discharged from JFK are often in a more acute phase of illness or injury than were comparable patients in past years. Patients discharged from JFK who require a heavier level of care have not, as a rule, been adequately served by Palm Beach County skilled nursing facilities. Community nursing homes in Palm Beach County do not offer sub-acute care of the nature proposed by JFK. As a result of patients being discharged "quicker and sicker" from JFK to community nursing facilities, JFK has experienced an increase in the rate of readmissions from community nursing facilities to JFK. The number of readmissions has grown from 115 in JFK's fiscal year 1991 to greater than 200 during its fiscal year 1993. This evidence confirms that existing community nursing home facilities do not serve as adequate or appropriate discharge alternatives for many JFK patients who require sub-acute care. JFK has the ability to provide a high quality of care to patients requiring sub-acute services. The Agency has determined JFK's quality assurance, utilization review, and resident care plans to be acceptable. JFK proposes a substantially higher number of nursing hours than required by licensure rules. Moreover, JFK proposes to provide RNs on a 24-hour basis, and to make available on a 24-hour basis to sub-acute patients its full panoply of ancillary and support services. The development of JFK's sub-acute unit will enhance the post-acute care provided to patients discharged from JFK's acute care beds. JFK has available the financial resources necessary to implement its sub-acute program and will be able to recruit the nursing and technical staff necessary. There is sufficient demand for the JFK program to assure that the program will be highly utilized. JFK's project will be financially feasible in the immediate and in the long-term. JFK's program will result in several cost related benefits, both to JFK and to the community it serves. First, because JFK will be able to discharge certain patients more rapidly to the sub-acute unit, it will avoid substantial operational expenses associated with caring for those patients in acute care beds. Based solely on the sample of patients referenced in JFK Exhibit 5, JFK would have avoided approximately $600,000 in annual operational expenses had a sub-acute unit been available at the hospital during 1992 and 1993. A contractual adjustment is the difference between the amount a hospital charges for a service and the amount it actually receives in payment for the service. The contractual adjustment is exacerbated where a patient's acute care length of stay extends beyond the number of days necessary to care for the acute needs of the patient. During the period March 1992-March 1994, JFK experienced a contractual adjustment of approximately $3,000,000 relative to the sample of 287 patients reflected in JFK Exhibit 5. That contractual adjustment is significant from a health care reimbursement perspective. JFK's contractual adjustments relative to patients who require post-discharge sub- acute care would be reduced if JFK were to establish a sub-acute unit, which would ameliorate JFK's financial losses associated with that category of patients. The development of a sub-acute program at JFK will benefit the Palm Beach County health care delivery system. The marginal or operational cost per day of providing acute care services at JFK is $350-$400 higher than the projected marginal cost per day of providing sub-acute care services. For every day that a JFK patient receives services in JFK's sub-acute unit, rather than in an acute care unit, the health care delivery system will save money. As JFK will incur significantly less expense in providing services to patients in a sub-acute unit, JFK will not have to subsidize the care it currently provides to sub-acute patients in the acute care setting. Accordingly, the development of JFK's sub-acute unit will have a downward pressure on future JFK rate increases, promoting cost containment, and will lower the cost of providing the sub-acute care services proposed by JFK. The development of JFK's sub-acute unit will allow the hospital to allocate its resources more efficiently, which further promotes cost containment. Further, the development of JFK's sub-acute unit constitutes an innovation in the delivery of health care services, which innovation will have a positive effect on competition. JFK is a not-for-profit hospital. It is JFK's policy to care for all persons regardless of financial condition, and JFK has outreach programs for persons with limited financial resources. While JFK's general admissions policy will apply to the sub-acute unit, JFK does not propose to serve a large number of Medicaid and indigent patients in that unit. JFK anticipates that Medicare will be the primary payor for approximately 90 percent of the patients served in the unit, given the unit's emphasis on restorative and rehabilitative care. Beverly or Manor Care will provide a majority of its services to Medicaid patients, thereby complementing JFK's proposal. JFK provides a full array of inpatient and outpatient health care services, including a diagnostic breast institute, an ambulatory surgery center, an outpatient comprehensive cancer center, primary care physician services, and home health services. Each of those services constitutes part of JFK's continuum of care. Sub-acute care services are the only link missing. The approval of its application will allow JFK to achieve full "vertical integration" i.e., a multi-level health care system, in that JFK will be able to provide its patients with services appropriate to their needs from pre-admission to JFK through post-discharge. Achieving vertical integration will enhance JFK's ability to contract with managed care companies, who endeavor to contract with organizations that offer a full continuum of care. JFK's establishment of a sub-acute unit will allow it to meet managed care companies' demand for capitated relationships, wherein the insurer pays an organization a flat amount, per covered life, to provide complete health care to its insured. The establishment of a sub-acute unit at JFK will allow the organization to reduce the cost of providing health care services to patients throughout its multi-level health care system and allow it to respond to the growing capitation market. Placing patients in the sub-acute environment, where they will consume fewer resources, will enable JFK to decrease the cost of providing health care to managed care companies and their subscribers. Finally, approval of JFK's application will allow JFK's patients to be followed by the same physicians who attended to them during their acute care hospitalization. Those patients who are capable of being transported elsewhere and are transferred to a sub-acute unit at a nursing home will seldom receive follow-up care from the physicians who performed their surgeries and otherwise attended to them during their acute episode. The overwhelming support of JFK's proposed sub-acute unit by the primary care and other specialized physicians at JFK, as evidenced by their testimony during the final hearing or by deposition admitted in evidence, is based upon their concern for their inability to follow up on their patient's care if those patients are elsewhere than in JFK. Those doctors who run office practices and work at JFK cannot spend a great deal of their day traveling around Palm Beach County from nursing home to nursing home to assure that their patients' recovery is progressing in addition to the time they spend visiting patients in the hospital and performing surgery and otherwise treating patients. Those physicians do not favor retaining the patients in acute care beds longer than is necessary, and that concern is not a result of concern for their personal incomes as was suggested by the Agency. Physicians are reimbursed at a higher rate for hospital visits than for visits to patients in skilled nursing units. Both continuity of care and successful outcome for the patient relate to continued care by the same physician.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered Granting Manor Care's CON application # 7375; Denying Beverly's CON application # 7372; and Granting JFK's CON application # 7374. DONE and ENTERED this 7th day of March, 1995, at Tallahassee, Florida. LINDA M. RIGOT 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 7th day of March, 1995. APPENDIX TO RECOMMENDED ORDER Beverly's proposed findings of fact numbered 5, 6, 8, 9, 13-19, 21, 23, 25-27, 31, 32, 34-43, 45-47, 51-54, 57, 60, 61, and 81 have been adopted either verbatim or in substance in this Recommended Order. Beverly's proposed findings of fact numbered 1, 3, 4, 63, and 67 have been rejected as not constituting findings of fact. Beverly's proposed findings of fact numbered 2, 24, 28, and 80 have been rejected as being irrelevant. Beverly's proposed findings of fact numbered 7, 22, 44, 48, 59, 64-66, 69-72, 75, 76, 82, and 84 have been rejected as not being supported by the weight of the evidence. Beverly's proposed findings of fact numbered 10, 11, 20, 29, 30, 33, 49, 50, 55, 56, 58, 62, 68, 73, 74, 77, and 78 have been rejected as being subordinate to the issues to be determined. Beverly's proposed findings of fact numbered 12, 79, and 83 have been rejected as being unnecessary. JFK's proposed findings of fact numbered 14-59 have been adopted either verbatim or in substance in this Recommended Order. JFK's proposed findings of fact numbered 1-13 have been rejected as being unnecessary. Manor Care's proposed findings of fact numbered 1-6, 13-42, 44-57, 59- 78, 82, 83, 89-114, 116, 118-120, 122-125, and 128-131 have been adopted either verbatim or in substance in this Recommended Order. Manor Care's proposed findings of fact numbered 8-12, 43, 115, and 117 have been rejected as not constituting findings of fact. Manor Care's proposed findings of fact numbered 7, 79, 80, 87, and 88 have been rejected as being unnecessary. Manor Care's proposed finding of fact numbered 58 has been rejected as not being supported by the weight of the evidence. Manor Care's proposed findings of fact numbered 81, 84-86, 121, 126, and 127 have been rejected as being subordinate to the issues to be determined. The Agency's proposed findings of fact numbered 1-6, 9-26, 28, 34, 38, 39, 53, 54, 57-61, and 65-69 have been adopted either verbatim or in substance in this Recommended Order. The Agency's proposed findings of fact numbered 7, 41, 55, 62, and 63 have been rejected as being subordinate to the issues to be determined. The Agency's proposed finding of fact numbered 8 has been rejected as being unnecessary. The Agency's proposed findings of fact numbered 27, 29-33, 35-37, 40, 42-46, 48-52, 56, and 70 have been rejected as not being supported by the weight of the evidence. The Agency's proposed finding of fact numbered 47 has been rejected as not constituting a finding of fact. The Agency's proposed finding of fact numbered 64 has been rejected as being irrelevant. COPIES FURNISHED: James C. Hauser, Esquire Parker, Skelding, Labasky, Corry, Eastman & Hauser, P.A. 318 North Monroe Street Tallahassee, Florida 32301 Douglas L. Mannheimer, Esquire Broad & Cassel 215 South Monroe Street, Suite 400 Post Office Drawer 11300 Tallahassee, Florida 32302 Robert A. Weiss, Esquire 118 North Gadsden Street, Suite 200 The Perkins House Tallahassee, Florida 32301 Lesley Mendelson, Esquire Agency for Health Care Administration The Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303-4131 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303-4131
Findings Of Fact On November 17, 1987, Petitioner was awarded CON 3746 to construct a 60-bed addition to its existing facility, Suwannee Health Care Center, in Live Oak, Florida. On July 14, 1988, Petitioner filed the application in the instant case. Petitioner proposes to transfer the 60 beds authorized by CON 3746 to Florida Land Trust Number Seven (the Land Trust). The Land Trust is the owner of a 60-bed nursing home in Live Oak, Florida, called Surrey Place Nursing Center of Live Oak (Surrey Place). Surrey Place is operated by Health Care Associates (HCA), which is owned by the beneficiaries of the Land Trust. The construction of Surrey Place was authorized by CON 3395 and Surrey Place opened in January, 1988. The application for CON 3395 was filed on July 16, 1984. Petitioner's proposal is for the 60 beds to be constructed as a 60-bed addition to Surrey Place. By letter dated August 11, 1988, HRS returned the application for expedited review of the transfer to Petitioner. The letter states that the proposal by Petitioner "is not merely a transfer of a CON, but rather an addition of beds to an existing facility which would change the scope and operation of the existing nursing home. Therefore, the addition of beds requires a full batched review." Petitioner's Exhibit 3. HRS did not review the application on its merits prior to issuing the August 11, 1988 letter. Suwannee Health Care Center and Surrey Place are both located in the same planning subdistrict and are located within one-half mile of each other. Transfer It is HRS's policy that a "transfer" occurs only when a new owner agrees to take over a project and implement it exactly as originally approved. Also, it is HRS's policy that the transferee should be the applicant for a transfer. In the past, however, HRS has accepted for review and approved transfers where the application was filed by the transferrer. Also, HRS in the past has approved transfers which involved more than just a mere change of ownership. These transfers resulted in the combination of the beds approved by the CON to be transferred with the beds approved by other CONs with the end result being the construction of a larger nursing home facility than was contemplated under either CON. Combination During the 1988 Session of the Florida Legislature, Health Quest Corporation (Health Quest) advocated to the Legislature that certain legislation amending Chapter 381, Florida Statutes, be enacted. Health Quest drafted the proposed legislation and lobbied for its enactment. Health Quest wanted the amendment because it had a CON for a 180-bed nursing home to be built in Sarasota County which it wanted to divide into a 120-bed freestanding facility and a 60-bed addition to an existing facility in Sarasota County. During the 1988 Legislative Session, HRS and Health Quest entered into an Agreement. The entire Agreement provides that: AGREEMENT This Agreement is made between Health Quest Corporation ("Health Quest") and the Department of Health and Rehabilitative Services ("HRS") this 31st day of May, 1988. RECITALS Health Quest holds CON No. 3278 ("the CON") authorizing a 180-bed nursing home in Sarasota County. Health Quest operates a 53-bed nursing home ("the Facility") adjacent to the Lake Pointe Woods retirement complex in Sarasota. On September 29, 1987, Health Quest filed with HRS an application seeking expedited review for its proposal to divide the CON into a 60-bed component and a 120-bed component. As set forth in the application, the 60-bed component is for an addition to the Facility and the 120-bed component is for a freestanding facility. Since on or before September 4, 1987, it has been the Department's position that such division or consolidation could be accomplished only through batched comparative review. Currently pending before the Division of Administrative Hearings ("DOAH") is a Section 120.57(1) petition filed by Health Quest contesting the refusal of HRS to review Health Quest's September 29, 1987 application as a project subject to expedited review. The Florida Legislature is considering the enactment of the Affordable Health Care Assurance Act of 1988 ("the Act"). The Act would amend Section 381.706(2), Florida Statutes, to add subsections (j) and (k), providing for expedited review of applications to divide a single approved facility or to consolidate two or more approved certificates of need into a single facility. The Act would also add Section 381.705(3) to limit the criteria for review of certain applications filed under Section 381.706(2)(j) or 381.706(2)(k) and would add Section 381.710(2)(d) providing for extension of the validity period of CONs for which applications under Section 381.706(2)(j) or 381.706(2)(k) are filed. Contingent upon passage of the Act, HRS and Health Quest wish to settle the DOAH proceeding and other litigation involving the September 29, 1987 application to divide CON 3278. TERMS HRS acknowledges that an applicant would be entitled, under the Act, to expedited review of applications not only to divide or consolidate CONs but to do both at the same time, e.g., divide 60 beds from CON 3278 and consolidate these beds into the existing beds at the Facility now operated by Health Quest. At such time as the Act becomes law and Health Quest files an application substantially similar to its September 29, 1987 application, HRS agrees that the validity period of CON 3278 shall, due to litigation involving the division and consolidation of CON 3278 commenced on February 17, 1988, be extended 168 days to January 17, 1989. This Agreement does not constitute a waiver on the part of Health Quest of any right to additional extension of the validity period after August 2, 1988 if the Department fails to approve the application on or before said date. Upon approval of the application, Health Quest shall dismiss the DOAH proceeding and the District Court of Appeals proceeding involving the division of CON 3278. The Agreement was signed by J. Robert Griffin, M.A., J.D., HRS's Deputy Assistant Secretary for Regulation and Health Facilities, and Charles M. Loeser, Health Quest's Vice President and General Counsel. The amendments referred to in the Agreement were enacted by the Legislature and are now codified in Sections 381.706(2)(j) and (k), 381.705(3) and 381.710(2)(d), Florida Statutes (1988 Supp.). On July 1, 1988, Health Quest submitted to HRS a second application for expedited review of its proposal to divide 60 beds from a 180-bed CON and add the 60 beds to an existing 53-bed facility which it owned. HRS reviewed the application using the review criteria set forth in Section 381.705(3), Florida Statutes (1988 Supp.), approved it, and issued CON 5655 on August 5, 1988. Notwithstanding the passage of the 1988 Amendments, the Agreement, and the issuance of CON 5655, HRS's interpretation of Section 381.706, Florida Statutes (1988 Supp.), is that the addition of beds to an existing facility requires full comparative batched review and, therefore, cannot be approved by expedited review. HRS interprets the provisions of Section 381.706(2)(j) as requiring that at least two CONs be in existence at the time of the proposed combination. In HRS's view two CONs can only exist if the two facilities approved by the CONs have not been built, since it is HRS's policy that a CON ceases to exist when a license is issued for the facility to begin operation. Review Criteria The proposed addition of 60 beds to Surrey Place is financially feasible. The Land Trust and its principals have the financial resources to complete the project and are capable of developing and managing the project. The Land Trust and its principals have previous experience successfully operating nursing homes in Florida and have a history of providing quality care. Surrey Place was built with the expectation that it would eventually consist of 120 beds. Except for the addition of the 60 beds, the scope and operation of Surrey Place will not change.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health and Rehabilitative Services issue a Final Order approving Petitioner's application. DONE and ENTERED this 14th day of March, 1989, in Tallahassee, Leon County, Florida. JOSE DIEZ-ARGUELLES Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 FILED with the Clerk of the Division of Administrative Hearings this 14th day of March, 1989. APPENDIX Rulings on Petitioner's Proposed Findings of Fact 1.-10. Accepted. Some of these proposed findings of fact are subordinate to facts found. 11. Irrelevant. 12.-27. Accepted. Some of the proposed findings of fact are subordinate to facts found. 28.-30. Accepted, except to the extent they imply that the approval was for the addition of beds to an existing facility. 31-34. Rejected as irrelevant; what final action HRS would have taken is unknown. Irrelevant. True but irrelevant; HRS is free to change its policy if it can explicate it at hearing. 37.-39. Accepted. 40.-42. Accepted, except last sentence of 42 which is rejected. The Careage transfer was for an addition of beds to a facility not yet built. 43.-47. Rejected as irrelevant. 48-54. Accepted. 55.-59. Accepted. 60.-61. Accepted, but the policy manual describes HRS's past unwritten policy. 62. Rejected as argument. Rulings on HRS'S Proposed Findings of Fact Accepted. Accepted, but subordinate to facts found. Accepted. However, there is sufficient evidence to conclude that the Land Trust through its trustee and beneficiaries will be able to fund the project. Accepted. 5.-6. Accepted that this is HRS's policy and interpretation of the statutes. However, see Conclusions of Law. Accepted. Accepted that this is HRS's basis for its interpretation. However, in this case, the competitive environment is not changed. Rejected. The Department was directed to issue the CON because there was need in the area and not because of the uniqueness of the facility. First sentence accepted to the extent that Petitioner did not specifically mention Section 351.706 in its application. However, by the time of hearing the applicability of the statute was not in question and an issue in the case was whether the proposal met the language of the statute. Rest of paragraph accepted as HRS's policy. 11.-14. Accepted as HRS's policy. True, but irrelevant. Rejected as argument. Irrelevant, since no final action on the merits was taken. Accepted that this is HRS's policy, but see Conclusions of Law. Accepted that this is HRS's current policy. However, HRS has in the recent past accepted and approved transfer applications filed by the transferee. First two sentences accepted. Last sentence rejected; HRS knew enough to enter into the agreement and failed to present any evidence that what it knew then somehow changed. Accepted. Rejected as irrelevant and argument. Rejected as argument. COPIES FURNISHED: Boone, Boone, Klingbeil and Boone, P.A. Stephen K. Boone, Esquire 1001 Avenida del Circle Venice, Florida 34284 Lesley Mendelson, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 2727 Mahan Drive Tallahassee, Florida 32308 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 R. S. Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
