Findings Of Fact Introduction Petitioner, Leesburg Regional Medical Center ("Leesburg"), is a 132-bed acute care private, not-for-profit hospital located at 600 East Dixie Highway, Leesburg, Florida. It offers a full range of general medical services. The hospital sits on land owned by the City of Leesburg. It is operated by the Leesburg hospital Association, an organization made up of individuals who reside within the Northwest Taxing District. By application dated August 13, 1982 petitioner sought a certificate of need (CON) from respondent, Department of Health and Rehabilitative Services (HRS), to construct the following described project: This project includes the addition of 36 medical/surgical beds and 7 SICU beds in existing space and the leasing of a CT scanner (replacement). The addition of the medical/surgical beds is a cost effective way to add needed capacity to the hospital. Twenty-four (24) beds on the third floor will be established in space vacated by surgery and ancillary departments moving into newly constructed space in the current renovation project. A significant portion of this area used to be an obstetric unit in the past; and therefore, is already set up for patient care. The 7 bed SICU unit will be set up on the second floor, also in space vacated as a result of the renovation project. Twelve additional beds will be available on the third and fourth floors as a result of changing single rooms into double rooms. No renovation will be necessary to convert these rooms into double rooms. It is also proposed to replace the current TechniCare head scanner with GE8800 body scanner. Based on the high demand for head and body scans and the excessive amount of maintenance problems and downtime associated with the current scanner, Leesburg Regional needs a reliable, state-of-the-art CT scanner. The cost of the project was broken down as follows: The total project cost is $1,535,000. The construction/renovation portion of the project (24 medical/surgical and 7 SICU beds) is $533,000. Equipment costs will be approximately $200,000. Architectural fees and project development costs total $52,000. The CT scanner will be leased at a monthly cost of $16,222 per month for 5 years. The purchase price of the scanner is $750,000 and that amount is included in the total project cost. The receipt of the application was acknowledged by HRS by letter dated August 27, 1982. That letter requested Leesburg to submit additional information no later than October 10, 1982 in order to cure certain omissions. Such additional information was submitted by Leesburg on October 5, 1982. On November 29, 1982, the administrator for HRS's office of health planning and development issued proposed agency action in the form of a letter advising Leesburg its request to replace a head CT scanner (whole body) at a cost of $750,000 had been approved, but that the remainder of the application had been denied. The basis for the denial was as follows: There are currently 493 medical/surgical beds in the Lake/Sumter sub-district of HSA II. Based upon the HSP for HSA II, there was an actual utilization ratio of existing beds equivalent to 2.98/1,000 population. When this utilization ratio is applied to the 1987 projected population of 156,140 for Lake/Sumter counties, there is a need for 465 medical/surgical beds by 1987. Thus, there is an excess of 28 medical/surgical beds in the Lake/Sumter sub-district currently. This action prompted the instant proceeding. At the same time Leesburg's application was being partially denied, an application for a CON by intervenor-respondent, Lake Community Hospital (Lake), was being approved. That proposal involved an outlay of 4.1 million dollars and was generally described in the application as follows: The proposed project includes the renovations and upgrading of patient care areas. This will include improving the hospital's occupancy and staffing efficiencies by reducing Med-Surg Unit-A to 34 beds and eliminating all 3-bed wards. Also reducing Med-Surg Units B and C to 34 beds each and eliminating all 3-bed wards. This will necessitate the construction of a third floor on the A wing to house the present beds in private and semi-private rooms for a total of 34 beds. There is also an immediate need to develop back-to-back six bed ICU and a six-bed CCU for shared support services. This is being done to fulfill JCAH requirements and upgrade patient care by disease entity, patient and M.D. requests. Another need that is presented for consideration is the upgrading of Administrative areas to include a conference room and more Administrative and Business office space. However, the merits of HRS's decision on Lake's application are not at issue in this proceeding. In addition to Lake, there are two other hospitals located in Lake County which provide acute and general hospital service. They are South Lake Memorial Hospital, a 68-bed tax district facility in Clermont, Florida, and Waterman Memorial Hospital, which operates a 154-bed private, not-for-profit facility in Eustis, Florida. There are no hospitals in Sumter County, which lies adjacent to Lake County, and which also shares a subdistrict with that county. The facilities of Lake and Leesburg are less than two miles apart while the Waterman facility is approximately 12 to 14 miles away. South Lake Memorial is around 25 miles from petitioner's facility. Therefore, all three are no more than a 30 minute drive from Leesburg's facility. At the present time, there are 515 acute care beds licensed for Lake County. Of these, 493 are medical/surgical beds and 22 are obstetrical beds. None are designated as pediatric beds. The Proposed Rules Rules 10-16.001 through 10-16.012, Florida Administrative Code, were first noticed by HRS in the Florida Administrative Weekly on August 12, 1983. Notices of changes in these rules were published on September 23, 1983. Thereafter, they were filed with the Department of State on September 26, 1983 and became effective on October 16, 1983. Under new Rule 10-16.004 (1)(a), Florida Administrative Code, subdistrict 7 of district 3 consists of Lake and Sumter Counties. The rule also identifies a total acute care bed need for subdistrict 7 of 523 beds. When the final hearing was held, and evidence heard in this matter, the rules were merely recommendations of the various local health councils forwarded to HRS on June 27, 1983 for its consideration. They had not been adopted or even proposed for adoption at that point in time. Petitioner's Case In health care planning it is appropriate to use five year planning horizons with an overall occupancy rate of 80 percent. In this regard, Leesburg has sought to ascertain the projected acute care bed need in Lake County for the year 1988. Through various witnesses, it has projected this need using three different methodologies. The first methodology used by Leesburg may be characterized as the subdistrict need theory methodology. It employs the "guidelines for hospital care" adopted by the District III Local Health Council on June 27, 1983 and forwarded to HRS for promulgation as formal rules. Such suggestions were ultimately adopted by HRS as a part of Chapter 10-16 effective October 16, 1983. Under this approach, the overall acute care bed need for the entire sixteen county District III was found to be 44 additional beds in the year 1988 while the need within Subdistrict VII (Lake and Sumter Counties) was eight additional beds. 2/ The second approach utilized by Leesburg is the peak occupancy theory methodology. It is based upon the seasonal fluctuation in a hospital's occupancy rates, and used Leesburg's peak season bed need during the months of February and March to project future need. Instead of using the state suggested occupancy rate standard of 80 percent, the sponsoring witness used an 85 percent occupancy rate which produced distorted results. Under this approach, Leesburg calculated a need of 43 additional beds in 1988 in Subdistrict VII. However, this approach is inconsistent with the state-adopted methodology in Rule 10- 5.11(23), Florida Administrative Code, and used assumptions not contained in the rule. It also ignores the fact that HRS's rule already gives appropriate consideration to peak demand in determining bed need. The final methodology employed by Leesburg was characterized by Leesburg as the "alternative need methodology based on state need methodology" and was predicated upon the HRS adopted bed need approach in Rule 10-5.11(23) with certain variations. First, Leesburg made non-rule assumptions as to the inflow and outflow of patients. Secondly, it substituted the population by age group for Lake and Sumter Counties for the District population. With these variations, the methodology produced an acute care bed need of 103 additional beds within Lake and Sumter Counties. However, this calculation is inconsistent with the applicable HRS rule, makes assumptions not authorized under the rule, and is accordingly not recognized by HRS as a proper methodology. Leesburg experienced occupancy rates of 91 percent, 80 percent and 73 percent for the months of January, February and March, 1981, respectively. These rates changed to 86 percent, 95 percent and 98 percent during the same period in 1982, and in 1983 they increased to 101.6 percent, 100.1 percent and 95.1 percent. Leesburg's health service area is primarily Lake and Sumter Counties. This is established by the fact that 94.4 percent and 93.9 percent of its admissions in 1980 and 1981, respectively, were from Lake and Sumter Counties. Although South Lake Memorial and Waterman Memorial are acute care facilities, they do not compete with Leesburg for patients. The staff doctors of the three are not the same, and there is very little crossover, if any, of patients between Leesburg and the other two facilities. However, Lake and Leesburg serve the same patient base, and in 1982 more than 70 percent of their patients came from Lake County. The two compete with one another, and have comparable facilities. Leesburg has an established, well-publicized program for providing medical care to indigents. In this regard, it is a recipient of federal funds for such care, and, unlike Lake, accounts for such care by separate entry on its books. The evidence establishes that Leesburg has the ability to finance the proposed renovation. HRS's Case HRS's testimony was predicated on the assumption that Rule 10-16.004 was not in effect and had no application to this proceeding. Using the bed need methodology enunciated in Rule 10-5.11(23), its expert concluded the overall bed need for the entire District III to be 26 additional beds by the year 1988. This calculation was based upon and is consistent with the formula in the rule. Because there was no existing rule at the time of the final hearing concerning subdistrict need, the witness had no way to determine the bed need, if any, within Subdistrict VII alone. Lake's Case Lake is a 162-bed private for profit acute care facility owned by U.S. Health Corporation. It is located at 700 North Palmetto, Leesburg, Florida. Lake was recently granted a CON which authorized a 4.1 million dollar renovation project. After the renovation is completed all existing three-bed wards will be eliminated. These will be replaced with private and semi-private rooms with no change in overall bed capacity. This will improve the facility's patient utilization rate. The expansion program is currently underway. Like Leesburg, the expert from Lake utilized a methodology different from that adopted for use by HRS. Under this approach, the expert determined total admissions projected for the population, applied an average length of stay to that figure, and arrived at a projected patient day total for each hospital. That figure was then divided by bed complement and 365 days to arrive at a 1988 occupancy percentage. For Subdistrict VII, the 1988 occupancy percentage was 78.2, which, according to the expert, indicated a zero acute care bed need for that year. Lake also presented the testimony of the HRS administrator of the office of community affairs, an expert in health care planning. He corroborated the testimony of HRS's expert witness and concluded that only 26 additional acute care beds would be needed district-wide by the year 1988. This result was arrived at after using the state-adopted formula for determining bed need. During 1981, Lake's actual total dollar write-off for bad debt was around $700,000. This amount includes an undisclosed amount for charity or uncompensated care for indigent patients. Unlike Leesburg, Lake receives no federal funds for charity cases. Therefore, it has no specific accounting entry on its books for charity or indigent care. Although Leesburg rendered $276,484 in charity/uncompensated care during 1981, it is impossible to determine which facility rendered the most services for indigents due to the manner in which Lake maintains its books and records. In any event, there is no evidence that indigents in the Subdistrict have been denied access to hospital care at Lake or any other facility within the county. Lake opines that it will loose 2.6 million dollars in net revenues in the event the application is granted. If true, this in turn would cause an increase in patient charges and a falling behind in technological advances. For the year 1981, the average percent occupancy based on licensed beds for Leesburg, Lake, South Lake Memorial and Waterman Memorial was as follows: 71.5 percent, 58.7 percent, 63.8 percent and 65.7 percent. The highest utilization occurred in January (81 percent) while the low was in August (58 percent). In 1982, the utilization rate during the peak months for all four facilities was 78 percent. This figure dropped to 66.5 percent for the entire year. Therefore, there is ample excess capacity within the County even during the peak demand months.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the application of Leesburg Regional Medical Center for a certificate of need to add 43 acute care beds, and renovate certain areas of its facility to accommodate this addition, be DENIED. DONE and ENTERED this 15th day of December, 1983, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of December, 1983.
Findings Of Fact Based upon the documents filed herein and the stipulations and arguments of counsel at the telephonic hearing, the following Findings of Fact are determined: Respondent, DePoo Memorial Doctor's Hospital (DEPOO) applied for a Certificate of Need for the establishment of a 15-bed short-term psychiatric service. CON #3248 was granted DEPOO for 15 short-term psychiatric beds on June 23, 1984, and noticed in the Florida Administrative Weekly of July 6, 1984. Petitioner Florida Keys Memorial Hospital (FKM) alleges issuance of CON #3248 to DEPOO affects their substantial interests. FKM admits that it did not, prior to receipt by DHRS of the DEPOO proposal being reviewed, formally indicate an intention to provide such similar services in the future, i.e. short-term psychiatric beds. FKM is an established acute care hospital which, among other obvious services of an acute care facility, currently provides psychiatric care as patients are admitted for that purpose or, if a patient is admitted for another purpose, FKM may provide additional care for a psychiatric condition tangential to the purpose or treatment for which that patient is initially admitted. No beds are allocated specifically for short-term psychiatric care at FKM. Indeed, FKM has no license to perform the health care services of a short- term psychiatric hospital and thus no short-term psychiatric beds. Its performance of any psychiatric services is, essentially, ad hoc and the extent thereof is fully described in Paragraph 4, above. It was stipulated among the parties that there was no licensed short- germ psychiatric facility in the Key West area of Monroe County, Florida at the time DEPOO's application for a CON for a 15 bed short-term psychiatric facility was reviewed; that FKM was granted a prior CON for short-term psychiatric beds, which CON of FKN had expired without being implemented by FKM prior to the agency's review of DEPOO's application; and that currently there still is no facility licensed in the Key West area of Monroe County for short-term psychiatric care. Rule 10-5.11(25), F.A.C. provides a methodology for short-term psychiatric bed need determination which is separate and distinct from that bed need methodology applicable to FKM as an acute care hospital. See Rule 10- 5.11(23), F.A.C. Further, application for acute care CONs and short-term psychiatric CONs are reviewed separately by DHRS. Since the services offered by FKM [acute care] and by those proposed by DEPOD [short-term psychiatric] are the subject of separate and distinct need methodologies, they are not "similar."
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that the petition for Formal Hearing be dismissed with prejudice. DONE and ORDERED this 29th day of October, 1984, in Tallahassee, Florida. ELLA JANE P. DAVIS Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29th day of October, 1984. COPIES FURNISHED: Donna H. Stinson, Esquire The Perkins House, Suite 100 118 N. Gadsden Street Tallahassee, Florida 32301 Douglas L. Mannheimer, Esquire 318 North Calhoun Street P. O. Box 11300 Tallahassee, Florida 32302-3300 Richard C. Klugh, Jr., Esquire Southeast Financial Center 200 South Biscayne Boulevard Miami, Florida 33131 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
The Issue Which of two competing applications for nursing home beds better meets the statutory and rule criteria to satisfy the numeric need for 79 additional beds in Agency for Health Care Administration District 7, Subdistrict 1, Brevard County.
Findings Of Fact The Agency For Health Care Administration ("AHCA") is the single agency responsible for the administration of certificate of need ("CON") laws in Florida. AHCA published a numeric need for an additional 79 beds in District 7, Subdistrict 1, for Brevard County for the July 1996 planning horizon. There was no challenge to the numeric need determination. After reviewing the applications of Holmes/VHA Long Term Care Joint Venture ("Holmes/VHA") and National Health Corporation d/b/a NHC of Merritt Island ("NHC"), among others, AHCA published its intent to approve the application of NHC and to deny that of Holmes/VHA. The State Agency Action Report ("SAAR") issued on March 13, 1994, for the July 1996 Planning Horizon, summarizes AHCA's review of the applications and the reasons for its decision. Holmes/VHA timely challenged AHCA's preliminary approval of CON 7527 to NHC and denial of CON 7539 to Holmes/VHA. In a pre-hearing stipulation, the parties agreed that the specific statutory criteria at issue, related to the contents of the letter of intent and application are subsections 408.037(2)(a), (2)(c), (4) and 408.039(2)(c), Florida Statutes. The parties also agreed that the CON review criteria at issue are subsections 408.035(1)(a), (b), (d), (e), (h), (i), (l), (m), (n) and (0), and 408.035(2)(e), Florida Statutes. The parties stipulated to the need for 79 additional community nursing home beds in the subdistrict. At the formal hearing the parties also agreed that quality of care is not at issue and that staffing schedules and proposals to fund or finance both projects are reasonable, thereby removing from consideration subsections 408.035(1)(c) and portions of (1)(h). HOLMES/VHA Holmes/VHA, the applicant for CON 7539, is a Florida general partnership formed between Holmes Regional Enterprises, Inc. ("Holmes Enterprises"), a Florida not-for-profit corporation, in Brevard County, Florida, and Vantage Health Systems, Inc., d/b/a VHA Long Term Care ("VHA"). The partnership, Holmes/VHA, owns and operates an existing 120-bed nursing home, Holmes Regional Nursing Center ("Holmes Nursing Center") in Melbourne. VHA is a division of Service Master Diversified Health Services of Memphis, Tennessee, which manages 106 facilities in 30 states. Holmes Enterprises operates Holmes Regional Medical Center ("Holmes Regional"), a 528-bed acute care hospital, with open heart surgery and neonatal intensive care services and approval for 30 skilled nursing beds. Sixty of Holmes Regional's licensed beds are located at Palm Bay Community Hospital in Palm Bay, approximately 8 to 15 miles south of Holmes Regional. Although it is a separate municipality, Palm Bay was described as a suburb of and contiguous to Melbourne. The site for the Palm Bay Center, which is across the street from Palm Bay Community Hospital, is in another community known as Mallibar. VHA has entered into similar partnerships with acute care hospitals in Jacksonville, Florida, and Greensboro, North Carolina, to operate nursing homes in those areas. The Service Master organization provides management and support services, including data processing, legal, personnel, dietary, and architectural and design services for nursing homes. Holmes/VHA, the joint venture general partnership, has a management committee of four people, two from the hospital and two from the VHA company. The management committee, functioning like a board of directors, adopted a resolution authorizing Holmes/VHA to file the Con application. When formed, the joint venture obtained an older 60-bed facility, and then constructed a replacement facility. During the construction, it obtained a 60-bed CON from another company and combined beds to build its existing 120-bed nursing home, Holmes Nursing Center. Holmes Nursing Center is rated superior and offers inpatient and outpatient rehabilitative and restorative services, including a head and spinal cord injury program. The rehabilitative services are directed by Holmes Regional, which is located a block and a half from the nursing home. The original CON for Holmes Nursing Center required that 35 percent of total patient days be provided to Medicaid. The requirement was increased to 45 percent with the 60-bed addition, which Holmes Nursing Center has exceeded. The 120 beds are divided into 20 percent Medicare certified, 50 percent Medicaid certified and 30 percent non-certified or private pay. Holmes Nursing Center also operates a 24-bed subacute unit for persons qualifying under Medicare criteria for skilled nursing care. Patients in the unit receive intensive assessments on each nursing shift and services which include pain, respiratory, and wound management. Holmes Regional Hospice, Inc. ("the hospice") is an affiliate of Holmes Enterprises, for which Holmes Regional holds the CON to take care of hospitalized hospice patients The current hospice census of over 200 patients includes 70 percent cancer, 9 percent AIDS, and 21 percent other terminal illnesses, such as heart disease and Alzheimers. Holmes/VHA applied for a CON to construct the 79-bed Palm Bay Nursing and Rehabilitation Center ("Palm Bay Center") conditioned on the provision of 61 percent of total patient days to Medicaid and the establishment of a 12-bed sub- acute unit, one room for hospice patients, inpatient and outpatient rehabilitative therapy, and respite care. The total gross square footage is 42,691 square feet. The Holmes Enterprises affiliates propose to provide support services for the Palm Bay Center, as they do for Holmes Nursing Center. The estimated total project cost for the Palm Bay Center is $4,732,790, of which the construction cost is $82,720,000 or $63.71 a square foot. An equity contribution of land valued at $420,000, will be provided by the hospital. Service Master will provide the funds or obtain financing for the project. The assumptions in the pro forma, including the expectation that interest may be due for a commercial loan, are reasonable. AHCA's expert's conclusion that the project is financially feasible is accepted. The financing by Service Master can be structured to avoid being treated as a related party transaction, which would adversely affect Medicaid and Medicare reimbursements. Holmes/VHA listed as capital projects three other pending CON and an additional $25,000 in annual capitalized routine expenses for furniture, fixtures and equipment attributable to Holmes Regional Nursing Center. The total of the capital projects listed on Schedule 2 of the application is $13,256,701. NHC National HealthCorp, L.P. ("NHC"), the applicant for CON 7527, began operations in 1986, with 14 nursing homes. Currently, NHC owns or manages 96 nursing homes primarily in the southeast United States. It manages 36 nursing homes in Florida, 6 of which are also owned by NHC. NHC proposes to add 60 beds to National Healthcare Center of Merritt Island ("NHC-Merritt Island"), a superior rated, 120-bed community nursing home on a 7 acre site in Merritt Island, Brevard County. NHC-Merritt Island has a 22-bed Alzheimers' unit. NHC's regional office provides support services, including speech, occupational, and physical therapies, nursing, dietary, and administrative services to NHC-Merritt Island. With the addition of 60 beds, NHC intends to provide respite care, a dedicated 20-bed subacute unit, and an additional 16-bed Alzheimers' unit. Without a subacute unit, NHC already has an average census of 9 subacute patients. NHC will triple the size of the therapy space and more than double the size of the building. The projected total capital expenditure is $3,891,850, with construction costs of $2,955,000, or $85.00 a square foot. To accommodate the addition, NHC has entered into a contract to purchase an additional 1.3 acres, adjacent to the current 7 acres, for a cost of $175,000. For the past few years, NHC has experienced 94 to 100 percent occupancy. Fifty-four people are on NHC's waiting list and an additional 16 are on the waiting list for the Alzheimers' unit. The projected annual fill-up rates for NHC's additional beds are supported by the demand for its service and its historical experience, even though the monthly fill-up rates in the application are not adjusted to reflect the specific number of days in each month. Medicaid resident days are 55 percent to 57 percent of the total at present, below the 60.31 percent average in the subdistrict and the current 60 percent CON condition. If the expansion CON is approved, NHC will commit to providing 60.31 percent Medicaid patient days and will increase the number of Medicaid certified beds from 77 to 108. NHC was profitable in 1992 and 1993, by approximately $100,000 and $250,000, respectively, but currently is not profitable, with an approximate deficit of $8,000. The deficit is attributable to (1) a decline in the Medicaid reimbursement rate, which was initially higher due to start up costs, (2) the expiration of a new provider exemption from Medicare cost limits, and (3) the transfer of assets by NHC, in exchange for stock, to a newly formed subsidiary, from which NHC-Merritt Island is now leased. Lease payments are $517,000 a year whether the facility has 120 or 180 beds, and profits are returned to stockholders, including NHC. Using Medicaid rates, calculated by the state, as inflated forward, and Medicare rates in excess of routine cost limits, based on the current experience of NHC-Merritt Island, NHC reasonably projected its costs and profit margin. NHC-Merritt Island has a positive cash flow and its expenses and revenues are at the goal set by NHC. With a total of 180 beds, the projections are reasonable that NHC-Merritt Island will be profitable. As AHCA's expert opined, NHC's proposal is financially feasible. Subsection 408.035(1)(a) - need in relation to district and state health plans The 1991 District 7 health plan has three preferences related to nursing homes, one favoring a section of Orange County, is inapplicable to the Brevard County applications. A second, for applicants proposing pediatric services, is inapplicable because both proposals in this batch are to provide adult services. The third preference favors applicants proposing to establish units providing psychiatric or subacute services, with emphasis on treating medically complex patients and AIDS/HIV positive patients. Holmes/VHA's health planner considers the subacute care and AIDS/HIV services proposed by Holmes/VHA superior to those proposed by NHC. NHC, however, proposes to provide specialized care in designated units for both subacute and Alzheimers's patients. Although Holmes/VHA argues that Alzheimers' care is required in every nursing home and is, therefore, not a specialized program, the physical design of a separate unit for such patients was shown to enhance their comfort. No AIDS/HIV positive patient has been treated at either Holmes Nusing Center or at NHC-Merritt Island. NHC-Merritt Island has accepted AIDS/HIV positive patients who did not come to the facility. The state health plan has twelve allocation factors for use in comparing nursing home applications. Both applicants comply with the factors favoring locations in a subdistrict in which occupancy levels exceed 90 percent, proposals to meet or exceed that average subdistrict Medicaid occupancy of 60.31 percent, proposals with respite care and innovative therapies, multi- disciplinary staffing, for staffing in excess of minimum state requirements, and which document means to protect residents' rights and privacy. Both Holmes/VHA and NHC also meet the preference for proposing charges that do not exceed the highest Medicaid per diem in the subdistrict. NHC asserted, but failed to demonstrate that its therapy services with in-house staff are superior to those provided to Holmes/VHA by contract staff from Holmes Regional. The state health plan factor number 3, for specialized services, is largely duplicative of district health plan preferences. Neither applicant meets the part of one preference for providing adult day care, or the preference for proposing lower than average administrative costs and higher than average resident care costs. The fifth state allocation factor, for maximizing resident comfort and the criterion of subsection 408.035(1)(m), Florida Statutes, related to the cost and methods of construction, are at issue. NHC questions the adequacy of three acres for the building proposed by Holmes/VHA and the design of the building. Holmes Regional Nursing Center has 120 beds and approximately the same building area as that proposed for Palm Bay Center. The architects of the building have constructed a 163-bed facility on four acres in Jacksonville, and a 240-bed facility in Memphis, Tennessee on approximately six acres. Homes/VHA expects to construct the building in half the time required for completion of NHC's proposed addition. AHCA's architect noted, however, that Holmes/VHA has no Alzheimers unit and that its subacute area is not separated from the areas used by other patients and their families. Holmes/VHA has showers only in the 13 private rooms. By contrast, NHC has an Alzheimers unit with its own lounge and courtyard and a subacute unit at the end of a wing with a separate waiting room. NHC's rooms are larger, with larger windows. NHC's costs are higher than Holmes/VHA's, but not above the high average cost guidelines for construction used by AHCA. NHC has one nursing station for 60 beds, which meets the state requirement while Holmes/VHA is better equipped with two nurses stations for 79 beds. In general, Holmes/VHA established that its building could be built on 3 acres, and that its interior spaces exceed the requirements to be licensed. NHC established that its building and grounds will be larger, higher quality construction with more non-combustible materials, and better meet the preference for maximizing resident comfort. The preference for superior resident care is met by both Holmes/VHA and NHC-Merritt Island. An NHC facility in Stuart was rated conditional for 80 days of the 36 months, prior to the filing of the application. NHC had just purchased the Stuart facility at the time of the conditional rating, and had, in total, many more months of superior operations. In addition, the parties stipulated to quality of care issues at the hearing. Subsection 408.035(1)(b) and (1)(d) - availability, accessibility, efficiency, extent of utilization of like and existing services; alternatives to the applicants' proposals Brevard County is 80 miles long from north to south, 22 miles wide at its widest point, with 62 percent of its population in the southern area of the county. Holmes/VHA contends that its application should be approved based on the greater need for nursing home beds in southern Brevard County. Using ratios of beds in existing or approved nursing homes as compared to the population ages 65 and older, and 75 and older, a need is shown for more beds in the southern area, including Palm Bay. In the central area, there are 31.52 beds per 1000 people over 65, as compared to 26.53 in the southern area of Brevard County. For the population over 75, the ratios are 82.53 in the central and 68.47 in the southern area. The over 75 population is also projected to increase by a greater percentage in the southern as contrasted to the central areas of the county. AHCA claims to reject the use of any "sub-subdistrict" analysis of need, other than the test for geographically underserved areas, as defined by Rule 59C-1.036, Florida Administrative Code. That test which applies to proposed sites more than 20 miles from a nursing home, is not met by Holmes/VHA or NHC. However, AHCA has, in at least one other case, considered geographic accessibility within the planning area in determining which applicant should be approved, without the applicants having to demonstrate that the proposed sites are geographically underserved areas. NHC takes issue with Holmes/VHA's data on bed availability in the southern and central portions of the county. NHC maintains that its central location better serves the entire county. NHC's expert also criticized the methodology used by Holmes/VHA for demonstrating need in the southern area. The comparison of existing beds to population, shows a lack of county-wide parity, but not necessarily need. Other factors related to the need for nursing homes were not presented, such as poverty, migration, mortality and occupancy rates. In addition, NHC's expert questioned Holmes/VHA's experts calculations of bed- to-population ratios. The ratios arguably were skewed by using beds for Wuesthoff Hospital Progressive Care in the central area data, but including the population of the zip code in which Wuesthoff is located in the southern area. Holmes/VHA noted that the majority of the population in the zip code is in the southern area. Subsection 408.035(1)(n) - past and proposed Medicaid/indigent care Holmes/VHA's expert criticized NHC because two of its facilities, Merritt Island and Stuart, have been below the subdistrict average for Medicaid occupancy. For 3 six month periods during the last 4 years, they also were below their CON Medicaid commitments. One other NHC facility, in Hudson, has been below the subdistrict average, but significantly above its CON condition. NHC claims that it treats its Medicaid condition as a minimum, while Holmes/VHA uses its conditions as an artificial ceiling or maximum. Subsection 408.035(1)(e),(1)(o) - cooperative or shared health care resources; continuum of care Holmes/VHA has established linkages to its various related companies to provide cooperative care and shared resources. Palm Bay Nursing Center would enhance the multi-level care provided by the Holmes Enterprises group and provide another integral step in the continuum, particularly in rehabilitative therapies. NHC, however, as an existing provider, is part of a well-established network of health care providers in the community. NHC has also purchased land to build an adult congregate living facility near or adjacent to NHC-Merritt Island. Subsections 408.039(2)(a), (2)(c) and 408.037(4), and Rule 59C-1.008, Florida Administrative Code - capital projects list; board resolutions; and impacts on costs AHCA interprets the requirements for the submission of a board resolution to allow an original resolution accompanying the letter of intent to be treated as a part of the complete application. A board resolution with an application, which the statute requires "if applicable," applies to expedited applications for which a letter of intent would not have been received, according to AHCA. NHC submitted an original board resolution with its letter of intent, and a copy of that resolution with its application for CON 7527. The authority of Holmes/VHA's management committee to authorize the construction of a new nursing home, and the authority to operate a nursing home outside the city of Melbourne was questioned. The testimony that the joint venture agreement authorizes the management committee to adopt a resolution authorizing the filing of CON 7539 was not refuted. In addition, the testimony that operations are restricted to the "Melbourne area" as opposed to some more specifically defined geographic area was not refuted. Repeatedly, witnesses described Palm Bay, although a separate municipal corporation, as a suburb of Melbourne. Holmes/VHA claims that NHC failed to disclose certain capital equipment leases from its schedule 2 list of capital projects and failed to evaluate the impact on costs, as required by subsection 408.037, Florida Statutes. In NHC's annual reports, the costs of capital equipment leases were $204,000 in 1991, $43,000 in 1992, and $88,000 in 1993. In fact, the NHC witness who prepared schedule 2 included a total of $21,653,468 for the category "Renovations (Including Furnishings and Equipment) 1994", taken from the capital expenditure budget of each NHC facility. The listing is consistent with the footnote indicating the budget items "are subject to final approval and cash reserves availability." In addition, $100,000 is also listed under "Other Capitalization" for equipment, for which a footnote explains "[a]mount included in an abundance of caution to cover any items unknown at the time of filing." NHC, according to Holmes/VHA, also failed to provide a detailed evaluation of the impact of the proposed project on the cost of other services it provides, as required by subsection 408.037(2)(c), Florida Statutes. NHC merely states that the impact is "nominal" and "negligible." NHC satisfied the impact analysis requirement in the notes to schedule 2 and in schedules 11, 13 and 14 of the application. The incremental pro forma analysis of the effect on costs with or without the proposed project, and projected financial ratios and costs, give detail support for the statements in the application. Assuming, arguendo, that Holmes/VHA omitted $50,000 in capital costs from schedule 2, the omission is not material or fatal to consideration of the application on the merits. Holmes/VHA's financial expert testified that $50,000 is less than on-half of one percent of the total project expenditures listed on schedule 2 and is, therefore, immaterial. As AHCA concedes, Holmes/VHA and NHC have the resources to establish their projects and to provide the services described in their applications. On balance, the demand for additional beds, the enhancement of a superior, existing physical plant and the expansion of specialized services at NHC outweigh the community linkages demonstrated by Holmes/VHA and the desirability of county- wide parity in the distribution of nursing homes beds, at this time.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency For Health Care Administration issue a Final Order approving CON No. 7527 for the construction of an additional 60 community nursing home beds by National Healthcorp, L.P., conditioned on the provision of 60.31 percent of total patient days to Medicaid patients. DONE AND ENTERED this 17th day of April, 1995, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of April, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-2393 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner NHC's Proposed Findings of Fact. Accepted in Findings of Fact 13. Accepted in Findings of Fact 3. Accepted in or subordinate to Findings of Fact 14-18. Accepted in or subordinate to Findings of Fact 14-18, except last phrase. Accepted in or subordinate to Findings of Fact 6 and 10. 6-17. Accepted in or subordinate to Findings of Fact 30 and conclusions of law. 18-21. Accepted in Findings of Fact 32. 22. Accepted in Findings of Fact 3. 23-30. Accepted in or subordinate to Findings of Fact 5 and 31. Rejected in Findings of Fact 6 and 31. Accepted in Findings of Fact 33. Rejected in Findings of Fact 33. Accepted in preliminary statement and Finding of Fact 1. 35-36. Accepted in part and rejected in part in Findings of Fact 21-25. 37-38. Accepted in Findings of Fact 21. 39. Rejected conclusion in Findings of Fact 20, 23 and 34. 40. Accepted in Findings of Fact 21 and 23. 41. Accepted in Findings of Fact 24. 42. Accepted in Findings of Fact 21. 43. Accepted in Findings of Fact 20. 44-45. Accepted in Findings of Fact 21. 46-48. Accepted in Findings of Fact 25. 49. Rejected in Findings of Fact 25. 50. Accepted in Findings of Fact 21. 51. Rejected in Findings of Fact 21. 52. Accepted in Findings of Fact 21. Accepted in Findings of Fact 21. Accepted in Findings of Fact 23. Accepted in Findings of Fact 19. 56-57. Accepted in Findings of Fact 20. Accepted in Findings of Fact 34. Accepted in Findings of Fact 27 and 28. Accepted in Findings of Fact 26 and 27. Rejected in Findings of Fact 26 and 27. Accepted in or subordinate to Findings of Fact 26 and 27. Accepted in Findings of Fact 19. Accepted in Findings of Fact 19, 26 and 27. Rejected in Findings of Fact 26-27 and conclusions of law. Rejected in Findings of Fact 26-27 and conclusions of law. Accepted in Findings of Fact 2. 68-77. Accepted in part and rejected in part in Findings of Fact 27. Accepted in Findings of Fact 20. Rejected in or subordinate to Findings of Fact 26. Accepted in Findings of Fact 22. Accepted in or subordinate to Findings of Fact 9 and 10. Accepted in or subordinate to Findings of Fact 9, 10 and 20. Accepted in or subordinate to Findings of Fact 20. 84-88. Accepted in or subordinate to Findings of Fact 10, and 20. 89-95. Accepted in or subordinate to Findings of Fact 15, and 20. 96-97. Accepted in Findings of Fact 10, 15, and 21. 98-100. Accepted in Findings of Fact 21-22. Accepted in or subordinate to Findings of Fact 15, 16 and 20. Accepted in or subordinate to Findings of Fact 16. Accepted in or subordinate to Findings of Fact 8 and 15. 104-108. Accepted in or subordinate to Findings of Fact 13 and 14. 109-110. Accepted in or subordinate to Findings of Fact 34. Subordinate to Finding of Fact 4. Accepted in or subordinate to Findings of Fact 34. 113-117. Accepted in Findings of Fact 21. Accepted in Findings of Fact 34. Accepted in Findings of Fact 11, 18 and 34. 120-123. Rejected conclusion in Findings of Fact 11. 124-130. Rejected in or subordinate to Findings of Fact 18. 131. Accepted in Findings of Fact 32. 132. Accepted in or subordinate to Findings of Fact 21. 133. Accepted in or subordinate to Findings of Fact 21. 134-136. Accepted in or subordinate to Findings of Fact 24. 137. Rejected first sentence in Findings of Fact 24. 138. Accepted in or subordinate to Findings of Fact 24. 139. Rejected as subordinate to Finding of Fact 24. 140. Accepted in or subordinate to Findings of Fact 15 and 24. 141-150. Accepted in or subordinate to Findings of Fact 24. 151. Rejected as not entirely supported by the record. 152-162. Accepted in or subordinate to Findings of Fact 24. 163-172. Accepted in or subordinate to Findings of Fact 21 and 28. 173-175. Accepted in or subordinate to Findings of Fact 29. 176. Rejected conclusion that "NHC better . . ." in or subordinate to Findings of Fact 29. 177. Accepted. Petitioner Holmes/VHA's Proposed Findings of Fact. 1-3. Accepted in or subordinate to Findings of Fact 3.. 4. Accepted in or subordinate to Findings of Fact 3 and 4. 5. Accepted in Findings of Fact 26. 6-8. Accepted in or subordinate to Findings of Fact 10 and 31. 9. Accepted in Findings of Fact 10. 10. Accepted in Findings of Fact 2. 11. Accepted in Findings of Fact 30 and 31. 12. Rejected in Findings of Fact 30 and 32. 13. Conclusion rejected in Findings of Fact 30 and conclusions of law 37-40. 14. Accepted in Findings of Fact 2. 15. Accepted in Findings of Fact 3 and 31. 16. Accepted in Findings of Fact 26. 17-21. Accepted in or subordinate to Findings of Fact 26 and 27. 22. Accepted, except last sentence, in Findings of Fact 27. 23-24. Accepted in or subordinate to Findings of Fact 26 and 27. 25. Conclusions cannot be reached in Findings of Fact 26 and 27. 26-29. Accepted in or subordinate to Findings of Fact 11. 30-36. Accepted in Findings of Fact 11, 12, 33 and 34. Rejected in Findings of Fact 18 and 34. Rejected in or subordinate to Finding of Fact 32. Accepted in or subordinate to Findings of Fact 16. Accepted in Findings of Fact 40. Rejected in Findings of Fact 16. Rejected conclusion in Findings of Fact 18. 43-44. Rejected in Findings of Fact 18. 45-48. Rejected conclusion in Findings of Fact 18. 49-51. Accepted in or subordinate to Findings of Fact 3-10 and 29. Accepted in Findings of Fact 24. Accepted in or subordinate to Findings of Fact 7 and 8. Accepted in Findings of Fact 20. Accepted in or subordinate to Findings of Fact 3. Accepted in or subordinate to Findings of Fact 3 and 24. Accepted in Findings of Fact 29. 58-59. Accepted in or subordinate to Findings of Fact 9 and 10. Accepted in Findings of Fact 29. Accepted in Findings of Fact 19. Accepted in Findings of Fact 20. 63-65. Accepted in or subordinate to Findings of Fact 21. Accepted, except conclusion, in Findings of Fact 21 and 28. Rejected conclusions in Findings of Fact 20. Accepted in Findings of Fact 21 and 22. Accepted in Findings of Fact 24. 70-71. Accepted in Findings of Fact 21. 72. Accepted as corrected in Findings of Fact 25. 73-74. Accepted in Findings of Fact 21. Accepted in Findings of Fact 23. Accepted in Findings of Fact 10 and 21. 77-78. Accepted in or subordinate to Findings of Fact 28. Rejected conclusion in Findings of Fact 28. Accepted in Findings of Fact 28. 81-89. Accepted in or subordinate to Findings of Fact 10, 21 and 29. 90-96. Accepted in or subordinate to Findings of Fact 9 and 10. 97. Accepted in Findings of Fact 20. 98. Accepted in Findings of Fact 21. 99. Accepted in Findings of Fact 20. 100. Accepted in Findings of Fact 8. 101. Accepted in or subordinate to Findings of Fact 20. 102. Accepted in Findings of Fact 8. 103-105. Accepted in or subordinate to Findings of Fact 20. 106. Accepted in or subordinate to Findings of Fact 10 and 21. 107-108. Accepted in or subordinate to Findings of Fact 21. 109. Accepted in or subordinate to Findings of Fact 4. 110-112. Accepted in or subordinate to Findings of Fact 21 and 25. 113-115. Accepted in or subordinate to Findings of Fact 21. 116-118. Accepted in or subordinate to Findings of Fact 20. 119-136. Accepted in or subordinate to Findings of Fact 24. 137. Accepted in Findings of Fact 10. 138-143. Accepted in or subordinate to Findings of Fact 11 and 24. COPIES FURNISHED: P. Timothy Howard, Esquire John F. Gilroy, Esquire Senior Attorney Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 Darrell White, Esquire Charles Stampelos, Esquire MCFARLAIN, WILEY, CASSEDY & JONES, P.A. 600 First Florida Bank Tower 215 South Monroe Street Tallahassee, Florida 32301 Robert M. Simmons, Esquire 5050 Poplar Avenue 18th Floor Memphis, Tennessee 38157 Gerald B. Sternstein, Esquire Frank P. Rainer, Esquire Ruden, Barnett, McClosky, et al. Monroe-Park Tower, Suite 815 215 South Monroe Street Tallahassee, Florida 32301 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Jerome W. Hoffman General Counsel Agency For Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303
The Issue Whether Rule 59C-1.038, the acute care bed need rule, is an invalid exercise of delegated legislative authority. Whether this rule challenge should be dismissed as an untimely attack on a published fixed need pool.
Findings Of Fact In August 1994, the Agency for Health Care Administration ("AHCA") published a numeric need of zero for additional acute care beds in AHCA District 9, Subdistrict 5, for southern Palm Beach County. Pursuant to Subsection 408.034(3), Florida Statutes, AHCA is the state agency responsible for establishing, by rule, uniform need methodologies for health services and facilities. In September 1994, NME Hospitals, Inc. d/b/a Delray Community Hospital, Inc. ("Delray") applied for a certificate of need ("CON") to add 24 acute care beds for a total construction cost of $4,608,260. AHCA published its intent to approve the application on January 20, 1995, in Volume 21, No. 3 of the Florida Administrative Weekly. By timely filing a petition, Bethesda Memorial Hospital, Inc. ("Bethesda") challenged AHCA's preliminary decision in DOAH Case No. 95-0730. Bethesda is also located in AHCA District 9, Subdistrict 5. On May 24, 1995, Bethesda also filed the petition in this case challenging Rule 59C-1.038, Florida Administrative Code, the acute care bed need rule. Pursuant to the acute care bed need rule, AHCA's August 1994 notice published its finding that zero additional acute care beds will be needed in the southern Palm Beach County subdistrict by July, 1999. The data, formulas, and calculations used in arriving at the number zero were not published. AHCA and Delray argue that the publication put persons on notice to inquire into the population data, occupancy rates, or the calculations leading to the published need number. An AHCA rule bars a person from seeking, and AHCA from making, any adjustments to the fixed need pool number if the person failed to notify AHCA of errors within ten days of publication. Still another rule defines "fixed need pool" as the " . . . numerical number, as published. " Bethesda is not contesting and, in fact, agrees that the fixed need pool number as published, zero, is correct. Using AHCA's definition of the fixed need pool, Bethesda's challenge is not barred because it failed to notify AHCA of an error in the fixed need pool number within 10 days of publication. Bethesda is challenging as irrational and invalid subsections (5), (6), and (7) of the acute care bed need rule. Subsection (5) directs the local health councils to determine subdistrict bed need consistent with the methodology for determining district bed need. Under that provision, total projected patient days of acute care needed in a district is calculated by adding together the projected patient care days needed in medical/surgical, intensive care, coronary care, obstetric, and pediatric beds. Each of these separate bed need projections is computed, in general, by multiplying projected population in the district for the appropriate age or gender group times a factor which is the product of the statewide discharge rate and the average length of stay for that particular type of care. After the total projected acute care patient days for district residents is computed, the number is adjusted to reflect historical patient flow patterns for acute care services, for out-of-state residents served in the district, for residents of other districts served in the district, and for residents of the district served outside the district. The rule includes specific percentages to apply for each patient flow group for each of the eleven districts. After the total number of beds needed in the district is derived, that number is decreased by the number of existing licensed or approved beds to get the number of additional acute care beds needed in the district, if any. Bethesda is challenging subsections (7)(a), (b), and (c) of the acute care rule, which authorize adjustments to the calculations from subsections (5) and (6) to achieve desired occupancy levels, based on historic utilization of acute care beds in a district. Bethesda is also seeking a determination that subsections 7(d) and (e) are invalid. Each of those subsections of the rule refer to (5)(b), although AHCA's expert witness testified that they should refer to (6)(b). Subsection (7)(d) requires at least 75 percent occupancy in all hospitals in the district before new acute care beds normally are approved, regardless of the net need projected by the formulas. Subsection (7)(e) allows approvals under special circumstances if net need is projected by the formulas and the applicant facility's occupancy rate equals or exceeds 75 percent. Subsection (7)(e), the provision directly related to the Delray application, is as follows: (e) Approval Under Special Circumstances. Regardless of the subdistrict's average annual occupancy rate, need for additional acute care beds at an existing hospital is demonstrated if a net need for beds is shown based on the formula described in paragraphs (5)(b), (7)(a), (b), (c), and (8)(a), (b), (c), and provided that the hospital's average occupancy rate for all licensed acute care beds is at or exceeds 75 percent. The determination of the average occupancy rate shall be made based on the average 12 months occupancy rate made available by the local health council two months prior to the beginning of the respective acute care hospital batching cycle. Phillip C. Rond, III, Ph.D., was the primary architect of the rule, beginning in 1981. The rule was initially published in 1982, and adopted in 1983. Constants in the rule formulas, including use rates, average lengths of stay, occupancy standards and patient flow patterns were taken from a 1979 survey of some state hospitals. Because data used for the constants in the formulas was expected to change, subsection (6) also provides, in pertinent part, that: Periodic updating of the statewide discharge rates, average lengths of stay and patient flow factors will be done as data becomes available through the institution of statewide utilization reporting mechanisms. Patient flow factors were updated in March 1984 to reflect a change in the realignment of counties in Districts 5 and 8. No other constants have been updated since the rule was adopted in June 1983. More current data is available. The Hospital Cost Containment Board ("HCCB") began collecting statewide hospital inpatient discharge data in the fourth quarter of 1987, which became available by the fall of 1988. AHCA now collects the data. Using the rule, the projected net need for acute care beds in 1999 in District 9 is 1,442 additional beds. By contrast, with the factors updated by Dr. Rond, the projected net need is a negative 723 or, in other words, District 9 has 723 more acute care beds than it will need in 1999. The updated formulas show a need for a total of 3,676 beds in District 9, which already has 4,399 licensed or approved acute care beds. Since 1983, hospital utilization has declined in both rates of admissions or discharges, and in average lengths of stay. Although the occupancy goals in the rule are 75 to 80 percent, depending on the type of hospital service, the occupancy rate achieved by using the number of beds projected by the rule methodology is 45 to 52 percent. The statewide occupancy rate in acute beds is approximately 50 percent in 49,215 licensed beds. The formulas in the rule show a statewide net need for 6,000 more beds in 1999, but updated constants in the same formulas result in a total statewide need for approximately 36,000 acute care beds in 1999, or 13,000 fewer beds than currently exist. Statewide utilization of acute care hospital beds declined from 1187.2 days per 1000 population in 1983 to 730.5 days per 1,000 in 1993, despite increases in the percentage of the elderly population. By 1987, AHCA's predecessor realized that the need methodology in the rule was grossly overestimating need and inconsistent with its health planning objectives. Subsection (7)(d) was added to the rule to avoid having a published fixed need based on the outdated methodology in subsections (5), (6) and 7(a)- (c). The occupancy data is also, as the 1987 amendment requires, that reported for the most recent 12 months, available 2 months before the scheduled application cycle. In August 1994, AHCA published a numeric need of zero for District 9, Subdistrict 5, rather than 1,442, the calculated net need predicted by the formulas in the rule, because all subdistrict hospital occupancy rates did not equal or exceed 75 percent. Elfie Stamm of AHCA, who is responsible for the publication of fixed need pools, confirmed that the 1987 amendment to the rule was an efficient and cost-effective way to avoid publishing need where there was no actual need. She confirmed Dr. Rond's conclusions that the formulas are no longer valid and produce excessive need numbers, as in projecting a need for 6,000 or 7,000 more acute care beds in the state. She also confirmed that none of the constants in the formula have been updated as required by subsection 6. Ms. Stamm claims that the information needed to update the formulas cannot be obtained easily from any statewide utilization reporting mechanism. One problem, according to Ms. Stamm, is the possibility of including patients in acute care beds with comprehensive rehabilitation, psychiatric, or substance abuse problems, although it is not lawful for acute care providers to place patients with these primary diagnoses in licensed acute care beds and all data bases have some miscoding of diagnoses. She also testified that some factors required in the formulas are not included in HCCB data base. In addition, she testified that AHCA is in the process of filing a notice to repeal the acute care bed need rule. The filing of the notice of repeal, published in Volume 21, Florida Administrative Week, pp. 4179-4180 (6/23/95) was confirmed by Bethesda's Request For Official Recognition, which was filed on July 20, 1995, and is granted. Ms. Stamm also noted that rules for other need-based health services have facility-specific special circumstances provisions, which are not tied to numerical need, otherwise the special circumstances are not really facility- specific. Need rules make no sense, according to Ms. Stamm, without an exception in the absence of a determination of need. Subsection (7)(e) of the acute care rule requires a finding of numeric need and a 75 percent occupancy rate at the applicant facility. Ms. Stamm's records indicate that AHCA's predecessor adopted the facility-specific provisions tied to net need at the same time it adopted the 75 percent average district occupancy standard to overcome the problems with the net need formula. AHCA asserts that the admittedly irrational need methodology when combined with the 1987 amendment achieves a rational result. Because the need methodology always over estimates numeric need, facilities exceeding 75 percent occupancy have an opportunity to demonstrate special circumstances. Daniel Sullivan, Delray's expert, also testified that problems exist in extracting acute care bed from specialty bed utilization data, in hospitals which have both. He also agreed with Ms. Stamm that the 1987 amendment corrects the erroneous projections of the formula to give a rational outcome from the rule as a whole when not all hospitals in a subdistrict equal or exceed 75 percent occupancy and when one hospital, over 75 percent occupancy, attempts to establish a special circumstance, despite the fact that the need methodology itself is always wrong in projecting numeric need. Ms. Stamm testified that one district is approaching 75 percent occupancy in all hospitals. Mr. Sullivan testified that, if and when that occurs, then the formula is intended to, but does not, reflect the number of additional beds needed. An alternative methodology is required to determine bed need. AHCA, with its responsibility for the data base formerly collected by the HCCB, receives discharge data and financial worksheets from every hospital in the state. The claim that AHCA cannot update the formulas because its data may be unreliable is rejected as not credible. The data now available is more reliable than the 1979 data used in developing the rule, which was not collected from a formalized statewide reporting system, but from a sample of hospitals. The claim that AHCA cannot use its data base from mandatory statewide reporting mechanisms to extract the data needed to update the formulas is also rejected. The rule contemplated ". . .the institution of statewide utilization reporting mechanisms." Dr. Rond's work to update the formulas before the final hearing began on May 23, 1995. Dr. Rond used a total of approximately 1.5 million acute care discharges from the AHCA (formerly, HCCB) data base for the 1992 calendar year. At the time of the final hearing, Dr. Rond had not separated days of care for medical/surgical, intensive and coronary care. The data can be taken from hospital financial data, including detailed budget worksheets which are submitted to AHCA. Separate data are anticipated in the formula because the computation of need for the different bed categories is based on different occupancy goals. For medical/surgical and intensive care beds, the goal is 80 percent occupancy, but it is 75 percent for coronary care for persons age 0 to 64. For persons 65 and older, the rule applies a combined occupancy standard of 79.7 percent for all three bed categories, which assumes that approximately 4 percent of the combined days of older patients will be spent in coronary care. Dr. Rond reasonably applied the 79.7 percent occupancy standard to the combined days for persons under 65, in arriving at the total district bed need for 3,676 beds. To check these results and to assume a worse case scenario of all patient days attributable to coronary care beds, for which more beds are needed to maintain a lower occupancy, Dr. Rond worked the formula using 75 percent occupancy as the goal for medical/surgical, intensive and care coronary care beds combined. Although the base number increased by 100, the calculations and adjustments in the rule yielded the same number of total acute care beds needed in the district, 3,676. That reliably confirms that the maximum number of acute care beds needed in District 9 is 3,676 by 1999. AHCA could use its data base to update formulas and achieve rational results in the rule by using the hospital financial data to distinguish coronary care days for patients 0-64 to include in the formula, or by using a rational blended occupancy standard in a rule amending the existing methodology. AHCA demonstrated that the 1987 amendment overrides the exaggerated numeric need number to yield a rational published fixed need pool in the absence of 75 percent occupancy in all acute care beds in a subdistrict. AHCA also demonstrated that because the projected need is always excessive under the formula, hospitals are allowed to demonstrate special circumstances, although it is absurd to include a requirement of numeric need in a provision for special circumstances. AHCA's claim that the excessive need projection is, therefore, irrelevant is rejected. Net need under the rule formula fails to give any rational indication of the number of beds needed when all hospitals in a subdistrict reach 75 percent occupancy.
Findings Of Fact CON APPLICATIONS HCR-CON No.7530 HCR is a publicly owned, for-profit corporation which operates approximately 25 nursing homes in Florida. HCR filed an application, CON No. 7530, to construct a 98-bed freestanding nursing home. HCR proposes to locate the nursing home in the northwest part of Orange County, Florida. HCR proposes that the entire 98-bed facility will be dedicated to the care of patients with Alzheimer's Disease and related dementias. The total cost of the HCR project is $7,132,000 for 47,750 square feet, or $472,776 per bed. The HCR proposal is modeled after an HCR 120-bed nursing home facility in Boynton Beach, Florida. The Boynton Beach facility is entirely dedicated to the treatment of patients with Alzheimer's Disease or related dementias. The proposed HCR facility in Orange County would be identical to the Boynton Beach facility less one patient wing. HCR's Boynton Beach facility, as well as HCR's existing Orange County nursing home facility, have superior licensure ratings. HCR's Boynton Beach facility received accreditation with commendation from the Joint Commission on the Accreditation of Health Care Organizations (JCAHCO), a national accreditation body which has established standards to measure the quality of care in dementia care units. Dementia is a complex of symptoms that can be caused by many different underlying diseases. Alzheimer's disease is one cause of dementia. Alzheimer's disease is the most common cause of dementia. Significant research is being conducted into the cause and treatment of Alzheimer's disease. Dementia is defined as a decline in intellectual function; global cognitive impairment, that is memory impairment and at least one of the following: impairment of abstract thinking; impairment of judgment; impairment of other complex capabilities such as language use, ability to perform complex physical tasks, ability to recognize objects or people, or to construct objects; and, personality change. The Reisberg Cognitive Rating Scale (RCS) classifies the stages of Alzheimer's disease from 1 to 7, with a rating of 7 being most severe. The rating scale is based on 10 axes: concentration, recent memory, past memory, orientation, functioning and self-care, speech, motor functioning, mood and behavior, practice of an art or skill, and calculation ability. The Global Deterioration Scale (GDS) for Age-Associated Cognitive decline and Alzheimer's Disease also defines seven stages of deterioration ranging from no cognitive decline to very severe cognitive decline. Persons suffering from Alzheimer's disease generally cannot survive without assistance upon reaching early dementia or level five on both the RCS and GDS. Approximately 50-58 percent of persons currently residing in community nursing homes suffer from some form of dementia. There is a need for community nursing home beds for persons suffering from the latter stages (levels 5-7) of Alzheimer's disease in Orange County. It is particularly difficult to place in nursing homes in Orange County, persons suffering from the latter stages of Alzheimer's disease (levels 5-7) who also have displayed a history of disruptive behavior patterns. Persons suffering from the latter stages of Alzheimer's disease have specific needs for care and treatment in nursing homes. Alzheimer's victims tend to wander and should have areas set aside for secured walking. The movement of Alzheimer's victims should also be carefully monitored. HCR's Boynton Beach facility, which is the prototype for HCR's proposed Orange County facility, has specific design features to accommodate the needs of patients suffering from the latter stages (levels 5-7) of Alzheimer's disease. HCR proposes a pod design of five residential pod units each with a central living area, also called the atrium area. The resident rooms open to the central living area. Each pod has an enclosed courtyard. Access to the courtyards is controlled. The two nursing stations are centrally located in each wing of the facility. Each central living area, or atrium, is visible from one or the other of the nursing stations. HCR provides specific staff training in the care and treatment of Alzheimer's disease and related dementias. A unit or a facility dedicated to the treatment of dementia patients may reduce the need for psychotropic medication of the patients. On a long-term basis, there may be some staff burnout in a facility or unit dedicated solely to the care and treatment of victims of Alzheimer's disease or related dementias. HCR proposes that its CON be conditioned upon locating in northwest Orange County, providing at least 30 percent of its patient days to Medicaid eligible persons, providing respite care, and dedicating all 98 beds to the care and treatment of persons suffering from Alzheimer's disease and related dementias. HCR currently meets its Medicaid commitment in the Boynton Beach facility. LIFE CARE CON Nos. 7534 and 7534P LIFE CARE is a for-profit corporation which owns and operates two nursing homes in Florida. LIFE CARE also operates three other nursing homes in Florida. As of September 1993, LIFE CARE had a net worth of approximately $50 million. LIFE CARE proposes to construct a freestanding 98-bed nursing home (CON No. 7534) in southwest Orange County, at a total cost of $5,988,000. The LIFE CARE 98-bed facility proposal includes a 20-bed unit dedicated to the care and treatment of persons suffering from Alzheimer's disease, a 20-bed subacute unit, an adult day care center, mental health services, and services to persons suffering from AIDS/HIV. LIFE CARE also made a partial request (CON No. 7534P) for a 60-bed facility which would be constructed at the same site and would include the same features. For economic reasons, patients are being released from acute care hospital settings at earlier stages of recovery and there is a need for subacute nursing home services in Orange County. The incidence of AIDS/HIV is increasing and there is a need for nursing home services for persons suffering from AIDS/HIV in Orange County. The 20-bed unit proposed by LIFE CARE for the care and treatment of Alzheimer's patients will be a distinct part of the facility, separate from other residents. The Alzheimer's unit has its own dining area and activity area, a centrally located bathing facility, and a secured courtyard for wandering space. The 20-bed LIFE CARE subacute unit will also be separate. The subacute unit will have two ventilator areas and be contiguous to a therapy area. The LIFE CARE design includes outdoor courtyards, a library, gift shop, and ice cream parlor. Pursuant to Sections 408.037(2)(a) and (b), Florida Statutes, one of the required elements of a CON application is the listing of capital projects, which is presented in Schedule 2 of the CON application. The Schedule 2 filed by LIFE CARE in these proceedings is identical to the Schedule 2 filed by LIFE CARE in the December 1993 batching cycle for LIFE CARE'S proposed Clay County Project, CON No. 7501. It has been held that Schedule 2 of the LIFE CARE Clay County Project CON application No. 7501 met minimum CON application content requirements. Life Care Centers of America, Inc. v. State of Florida, Agency for Health Care Administration, 20 F.L.W. 1435 (Fla. 1st DCA June 12, 1995). During November of 1993, a LIFE CARE nursing home located in Altamonte Springs was downgraded from a superior to a conditional licensure rating due to a deficiency related to outdated medication. The conditional rating given to the facility was in effect for approximately fifty days. The facility was then given a standard rating, and upon the annual survey in the fall of 1994, the facility has been recommended for a superior rating. All other LIFE CARE facilities have superior ratings. LIFE CARE proposes to condition its CON application upon providing Medicaid participation of 65 percent in the 98-bed facility, and 43 percent in the 60-bed facility. ADVENTIST CON No. 7528 ADVENTIST is a not-for-profit corporation that owns and operates nursing homes, hospitals, and other health care related enterprises. ADVENTIST is a wholly owned subsidiary of Adventist Health System/Sunbelt Health Care Corporation, which owns and operates hospitals and health care facilities throughout the United States. ADVENTIST has operated health care facilities in Orange County since the early 1900s when Florida Hospital was founded. ADVENTIST is the largest hospital system in Orange County, with more than 1,400 beds located on five campuses. ADVENTIST proposes to add 38 beds to an existing freestanding 80-bed community nursing home, Sunbelt Living Center-East Orlando (SLC), which is directly adjacent to Florida Hospital's East Orlando campus. The ADVENTIST proposal would include a 20-bed subacute unit and also an 18-bed skilled nursing unit. This addition to SLC would be accomplished by constructing two new wings to the existing facility. The projected cost of the ADVENTIST addition is $1,386,500, or approximately $36,000 per bed. SLC is an 80-bed skilled nursing facility which opened in January of 1993. SLC has a superior licensure rating. SLC provides nursing home service to a variety of residents, including persons with AIDS/HIV, as well as persons with a primary diagnosis of Alzheimer's disease and related dementia. SLC does not have a distinct Alzheimer's unit, but is equipped with security features to accommodate Alzheimer's patients. SLC staff is trained in the care and treatment of all its residents, including those with dementia. SLC reached an occupancy rate of 96 percent-97 percent capacity in its first ten months of operation. The SLC design is based on a residential model. The intent of the design is to create a residential community, and to encourage the interaction among the residents, and also between the residents and staff. The residential wings contain twelve rooms with private and semiprivate accommodations. Each room has its own toilet facilities. The support facilities, food service, therapy areas, administrative offices, visitor and welcoming areas, are located in the center of the facility. The residential wings are clustered on each side of the facility. The facility also features outdoor courtyards and walkways adjacent to the residential wings. ADVENTIST proposes to condition its CON application on providing a Medicaid commitment of 65 percent of total patient days in the non-subacute wing of the 38-bed expansion. The ADVENTIST proposal also features an AIDS program and respite care. ADVENTIST currently meets it Medicaid commitment at SLC. As indicated above, there is a need for subacute nursing home beds in Orange County. There is a need for nursing home beds for persons suffering from AIDS/HIV in Orange County. In the 20-bed subacute unit ADVENTIST proposes that each room will include wall-mounted suction and gases to accommodate ventilator dependent patients, which will enable ADVENTIST to provide more intensive subacute care. RHA/PRINCETON CON No.7538 RHA is the owner and operator of Princeton Hospital, located on the west side of Orlando. Princeton Hospital is situated on 32 acres bordering Lake Lawne. Princeton Hospital has 150 beds, including 24 psychiatric beds, a multipurpose intensive care unit, a 13-bed progressive care unit, a nursery, pediatric services, women's services, an obstetrical unit and an inpatient cardiac catheterization lab. The psychiatric unit at Princeton Hospital treats a wide range of mental disorders, including those afflicting the elderly population. The hospital also operates a senior psychiatric partial hospitalization program which serves geriatric patients, including persons suffering from Alzheimer's disease and related dementias. Princeton Hospital currently provides care and treatment to persons suffering from AIDS/HIV. Princeton Hospital is accredited by the Joint Commission on Accreditation of Health Care Organizations. On August 1, 1994, subsequent to the filing of CON application No. 7538, Princeton Hospital entered into a wide-ranging affiliation agreement with the University of Florida, College of Medicine and Shands Hospital. The agreement provides for extensive reciprocal training and educational programs between Princeton Hospital and the College of Medicine, as well as Shands Hospital. The agreement also provides for priority transfer of patients between Princeton and Shands hospitals. RHA proposes to include its nursing home facility within the scope of the affiliation agreement. The nursing home staff would benefit from the training and educational opportunities, and the nursing home patients would have access to priority reciprocity with the College of Medicine and Shands Hospital as provided for in the agreement. During fiscal years 1993 and 1994 Princeton Hospital had a Medicaid patient ratio of approximately 40 percent. Princeton Hospital also provides indigent care. RHA proposes to construct a freestanding 60-bed Medicaid certified skilled nursing facility on the campus of Princeton Hospital at a cost of $4,991,961 for 43,741 square feet, or $83,199 per bed. The services that are proposed include subacute care, a 15-bed unit for persons suffering from Alzheimer's disease and related dementias, long term care, and two pediatric beds. Respite care will also be provided. RHA proposes that its subacute care unit would provide step-down care for patients referred from acute care hospital settings. RHA also proposes to provide rehabilitative therapies to serve patients suffering from fractured hips and joint replacements as well as other patients needing more intensive physical therapy. Cardiac and respiratory patients will also be served in the subacute unit. As indicated above, there is a need for subacute nursing home beds in Orange County. RHA's proposed 15-bed Alzheimer's unit will be a distinct and secured part of the facility. The unit will have its own enclosed courtyard and activities area. As indicated above, there is a need for nursing home beds for persons suffering from Alzheimer's disease and related dementias in Orange County. RHA also proposes a program dedicated to the care and treatment of persons suffering from AIDS/HIV. This program will provide long-term care, and will include psychiatric, as well as subacute services. As indicated above, there is a need for nursing home beds for persons suffering from AIDS/HIV in Orange County. The RHA proposal includes two pediatric nursing home beds. It is not uncommon to provide pediatric nursing home beds in a small unit within a nursing home facility. These beds will provide subacute care to pediatric patients referred from acute care hospital settings. It is anticipated that the pediatric unit will serve patients with respiratory problems and other multiple system failures. RHA has experienced difficulty in placing pediatric patients discharged from Princeton Hospital. The RHA facility is designed in a series of modules. There are four patient wings located around a single nursing station. The Alzheimer's wing is distinct and secured. The pediatric beds are located in a single semiprivate room close to the nursing station. The subacute unit includes six beds with wall-mounted medical gases and vacuums. Each residential room has approximately 272 net square feet, and features its own handicapped toilet and bathing facilities. The facility includes a chapel, convenience store, laundry, ice cream shop, and beauty shop, designed in a mall concept. The corridors are ten feet in width instead of the standard eight feet. The intent of the design concept is to encourage social interaction. As designed, the location of the soiled utility room in the facility does not comply with applicable Florida code regulations; however, a proposed minor change in the design will move the soiled utility room approximately twenty feet to bring the facility into compliance with Florida code regulations. ALLOCATION FACTORS Relationship to District and State Health Plans Section 408.035(1)(a), Florida Statutes District Health Plan Allocation Factor 1 of the District Health Plan provides a priority for an applicant proposing to locate in the northwest Orange County population center. This preference will continue to be given applicants until a total of 120 beds is obtained. HCR is the only applicant proposing to locate in the northwest Orange County population center; however, in January of 1993, Sunbelt Living Center, a 120-bed community nursing home opened in Apopka, Florida, which is located in the northwest Orange County population center. Accordingly, the total bed number for this preference has been obtained, and this district allocation factor is inapplicable to these proceedings. Allocation Factor 2 of the District Health Plan provides a preference for applicants developing specific services for newborn and/or pediatric patients. RHA is the only applicant proposing specific services which include a unit for the care and treatment of pediatric patients. Accordingly, RHA is the only applicant which meets this allocation factor. Allocation Factor 3 of the District Health Plan provides a preference for an applicant proposing to develop a specific specialty service (or services), such as a unit for medically complex patients, a unit dealing with psychiatric disorders as a primary diagnosis, or services for persons suffering from AIDS/HIV. This preference is also provided to an applicant which commits to working with, or in conjunction with, an existing provider of a specialty service, such as hospices, or mental health providers. RHA is the applicant which best meets this allocation factor. The RHA proposal provides for specialty services for medically complex patients, provides for services to persons suffering from AIDS/HIV, and RHA specifically commits to working with mental health providers, including working with the psychiatric unit at Princeton Hospital. ADVENTIST and LIFE CARE also propose to provide specialty services to medically complex patients in subacute units; however, the ADVENTIST facility is better equipped in this regard and is designed with piped in medical gases, vacuum, and expanded electrical capacity will have the capability to provide more extensive services. LIFE CARE also proposes to treat persons suffering from AIDS/HIV and persons with mental disorders. The LIFE CARE proposal, however, is not as specific in this regard as that of RHA. HCR proposes to provide specialty services to persons suffering from Alzheimer's disease and related dementias, and is in general compliance with this allocation factor. State Health Plan Allocation Factors Each applicant meets the first State Health Plan allocation factor which provides a preference for an applicant proposing to locate in areas within the subdistrict with occupancy rates exceeding 90 percent. The occupancy rate in Orange County exceeds 90 percent. RHA and LIFE CARE meet the second State Health Plan allocation factor which provides a preference for an applicant proposing to serve Medicaid patients in proportion to the average subdistrict-wide percentage of nursing homes. In Orange County the average is 65 percent for Medicaid service. ADVENTIST meets this preference with regard to its non-subacute unit. HCR which proposes a 30 percent Medicaid service does not meet this preference. The third State Health Plan allocation factor provides a preference to an applicant proposing specialized services to special care residents, including AIDS residents, Alzheimer's residents, and the mentally ill. Each applicant generally complies with this allocation factor and offers specialty services; however, RHA with its broader spectrum of specialty services, including services to AIDS/HIV residents, Alzheimer's residents, and its specific commitment to working with residents suffering from psychiatric disorders best meets this preference. The fourth State Health Plan allocation factor provides a preference to an applicant proposing to provide a continuum of services to community residents including, but not limited to, respite care and adult day care. RHA and ADVENTIST best meet this preference. RHA and ADVENTIST have a history of providing quality health care service to the community. RHA and ADVENTIST have extensive ongoing relationships with acute care hospitals. HCR and LIFE CARE have also established relationships which will address providing a continuum of care, but not to the extent proposed by RHA and ADVENTIST. The fifth State Health Plan allocation factor provides a preference to an applicant proposing to construct facilities which provide maximum resident comfort and quality of care. Each applicant proposes facilities designed to provide resident comfort and quality care. Each design has comfortable resident rooms, spacious activities areas, recreation areas, courtyards, landscaping, therapy rooms, and staff lounge areas. Each applicant meets this preference. The sixth State Health Plan allocation factor provides a preference for an applicant proposing innovative therapeutic programs which have proven effective in enhancing the residents' physical and mental functioning level and which emphasize restorative care. Each of the applicants' proposals feature specific elements of innovative therapeutic programs. HCR has received an award for its innovative design of the Boynton Beach Alzheimer's unit. RHA offers a multi-discipline approach with a psychiatric program. ADVENTIST offers an intensive subacute care unit, and LIFE CARE offer a well-balanced approach with intensive staff training. The seventh State Health Plan allocation factor provides a preference for an applicant proposing charges which do not exceed the highest Medicaid per diem rate in the subdistrict. In this respect, HCR projects Medicaid charges of $96.20 per patient day in Year 1, and $93.32 in Year 2. LIFE CARE projects Medicaid charges of $104.74 per patient day in Year 1, and $106.20 in Year 2. ADVENTIST projects Medicaid charges of $106.00 per patient day in Year 1, and $111.30 in Year 2. RHA projects Medicaid charges of $107.02 per patient day in Year 1, and $109.24 in Year 2. While HCR projects the lowest Medicaid per diem charges and appears to best meet this allocation factor, all applicants have agreed to a specified Medicaid utilization rate, and will accept the appropriate Medicaid reimbursement levels. The eighth State Health Plan allocation factor provides a preference for an applicant with a history of providing superior resident care in Florida or other states. HCR has maintained superior licensure ratings, and its prototype Boynton Beach facility currently is rated superior. LIFE CARE in 1993 experienced a conditional rating for its Altamonte Springs facility; however, the facility, upon evaluation in the fall of 1994, is now recommended for a superior licensure rating. RHA does not currently operate nursing homes; however, RHA has a history of providing quality care in its Princeton Hospital. ADVENTIST is the only applicant proposing to add nursing home beds to an existing facility that currently has a superior licensure rating, and in this respect, ADVENTIST best meets this allocation factor. The ninth State Health Plan allocation factor provides a preference to an applicant proposing staff levels which exceed minimum staffing standards contained in licensure administrative rules. Applicants proposing higher ratios of RNs- and LPNs-to-residents shall be given preference. All applicants meet this factor; however a comparison of the nursing staffing patterns of the applicants reflects that HCR (45.40 nursing FTE) and LIFE CARE (45.30 nursing FTE) have a higher than the minimum required ratio of nursing staff to residents for their proposed 98-bed facilities. RHA has proposed 35.30 nursing FTE for its 60-bed facility. ADVENTIST proposes a total 62.40 nursing FTE for its facility after the proposed 38-bed addition. The tenth State Health Plan allocation factor provides a preference for an applicant who will use professionals from a variety of disciplines to meet the residents' needs for social services, specialized therapies, nutrition, recreational activities, and spiritual guidance. These professionals shall include physical therapists, mental health nurses, and social workers. All the applicants offer a wide range of social, spiritual, nutritional, and recreational services. RHA, however, also proposes specific utilization of mental health care professionals, and a specific affiliation with the psychiatric care professionals from Princeton Hospital, and best meets this factor. The eleventh State Health Plan allocation factor provides a preference for an applicant who ensures the residents' rights and privacy, and who implements a well-designed quality assurance and discharge planning program. Each applicant has documented specific plans for quality assurance and ensuring the residents' rights and privacy are protected. Accordingly, each applicant meets this factor. The final State Health Plan allocation factor provides for a preference to an applicant proposing lower administrative costs, and higher resident care costs compared to the average nursing home in the district. HCR has the lowest projected administrative and overhead costs ($18.28 per patient day as of Year 2), and best meets this allocation factor. Statutory Review Criteria, Section 408.035(1), F.S. Section 408.035(1)(b): The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, inadequacy of like and existing health care services and hospices in the service district of the applicant. HCR, LIFE CARE, and RHA each proposes a unit dedicated to the care and treatment of persons suffering from Alzheimer's disease and related dementias (HCR 98-bed facility, LIFE CARE 20-bed unit, and RHA 15-bed unit). ADVENTIST, while currently providing care for Alzheimer's patients at SLC, does not propose a distinct Alzheimer's unit in its 38-bed addition. There are currently at least five nursing homes in the service district, and two others in close proximity, which feature dedicated Alzheimer's units, with a total of at least 345 nursing home beds serving Alzheimer's patients. There is a high utilization rate of Alzheimer's nursing home beds in the district. While there is an established need for more beds to serve Alzheimer's patients, particularly Alzheimer's patients with a history of disruptive behavior, there are additional needs in the service district to provide care and treatment for subacute patients, and for persons suffering from AIDS/HIV. It is difficult to quantify the need for subacute nursing home beds due to the differing professional definitions of what constitutes subacute care; however, acute care hospitals in Orange County are, for cost-effective reasons, now releasing patients on an earlier basis, and there is an established need for nursing home beds to accommodate persons released from acute care hospitals. There is a high utilization rate of subacute beds in the district. There has also been an increase in the incidence of AIDS/HIV patients, and in the need for nursing home beds for persons suffering from AIDS/HIV in the service district. Section 408.035(1)(c): The ability of the applicant to provide quality of care and the applicant's record of providing quality of care. Each applicant has the ability to provide quality of care, and each applicant has a history of providing quality of care. The distinguishing factors in this regard are that LIFE CARE is the only applicant that has experienced a downgrading of a nursing home facility from a superior to a conditional licensure rating, and ADVENTIST is the only applicant that proposes to add nursing home beds to a facility that currently has a superior licensure rating. In comparison, ADVENTIST best meets this factor, and LIFE CARE least meets this factor. Section 408.035(1)(e): Probable economies and improvements in service that may be derived from operation of joint, cooperative, or shared health care resources. ADVENTIST and RHA both have specific proposals to work with, and share services with acute care hospitals. Both are in close proximity to acute care hospitals which will expedite sharing of medical resources. RHA will also share dietary services with Princeton Hospital. The freestanding facilities proposed by HCR and LIFE CARE do not have this advantage. Section 408.035(1)(f): The need in the service district for special equipment and services which are not reasonably and economically accessible in adjoining areas. This factor is inapplicable to the proposals. No specific need was established as to special services and equipment not reasonably and economically accessible in adjoining areas. There are dedicated Alzheimer's units and dementia services for persons in adjoining areas. Section 408.035(1)(g): The need for research and educational facilities, including but not limited to, institutional training programs and community training programs for health care practitioners. RHA has an extensive proposal for the participation and training of health care practitioners in conjunction with Princeton Hospital and best meets this criterion. RHA's affiliation with the University of Florida College of Medicine, Shands Hospital, and the Brain Institute at the University of Florida enhances this proposal. ADVENTIST shares a similar educational and training relationship with Florida Hospital, and with Florida Hospital's registered nurse baccalaureate degree program through Southern College. LIFE CARE proposes to establish relationships with local community colleges and education centers to sponsor nursing programs. Section 408.035(1)(h): The availability of resources, including health manpower, management personnel, and funds for capital and operating expenditures for project accomplishment As stipulated, each applicant meets this criterion. Each applicant also has substantial personnel and management resources available for project accomplishment. Section 408.035(1)(i): The immediate and long- term financial feasibility of the proposal. LIFE CARE, ADVENTIST and RHA meet this criterion, and reasonably project positive cash flows by the second year of operation. RHA a not-for- profit corporation, projects a net loss of $114,000 in Year 1 of operation, and an excess of revenues over expenses of $53,000 in Year 2 of operation. LIFE CARE projects a net loss of $440,496 in Year 1 and a net gain of $145,085 in Year 2 for the 98-bed facility, and a net loss of $259,971 in Year 1 and a net gain of $54,920 in Year 2 for the 60-bed facility. HCR projects an after-tax profit of $25,000 in Year 2; however, in order to attain a level of profitability HCR must meet its projected 65 percent private pay utilization. This is a very high private payor mix, and there is a significant question as to whether this payor mix is attainable in the subdistrict; however, as proposed, HCR meets this factor. Sections 408.035(1)(k)(l) and (m): Impact of the project on cost of health services; cost effective- ness; construction costs. ADVENTIST proposes the most cost-effective project by adding beds to an existing facility (SLC). The addition of 38 beds to SLC will promote and maximize the overall efficiency of the facility which was originally designed with core support features to accommodate 120 residents. The proposed 38-bed addition to SLC will also lower the costs per patient day of the entire facility. The ADVENTIST proposal adds nursing home beds at the lowest per bed cost ($36,000 per bed) of all applicants. Similarly, RHA is located on the campus of an existing acute care hospital owned by the applicant and, unlike HCR and LIFE CARE, projects no actual cash expenditure for land acquisition. Each applicant has proposed a reasonable design of its proposed facility and reasonable construction costs, and taken into consideration applicable costs and methods of energy provision and conservation. Each applicant meets this criterion. Each applicant has also proposed a very high quality of care facility that will foster competition and promote quality assurance and cost- effectiveness. Each applicant meets this criterion. Section 408.035(1)(n): The applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent. RHA, ADVENTIST and LIFE CARE have proposed providing health care services to Medicaid patients at rates at, or in excess of, the district average. HCR proposes the lowest Medicaid service rate at 30 percent. RHA also has a strong record of providing Medicaid services and service to the medically indigent at Princeton Hospital. All applicants except HCR meet this factor. Section 408.035(1)(o): The applicant's past and proposed provision of services which promote a continuum of care in a multilevel health care system. The RHA and ADVENTIST proposals best meet this criterion. Both the RHA and the ADVENTIST proposals are closely associated with existing hospitals, and emphasize a continuum of care from the acute hospital setting to a nursing home facility. The RHA and ADVENTIST proposals promote the interaction of health care professionals in a multilevel health care system. The HCR and LIFE CARE proposals do not reflect such an extensive interconnection with other aspects of the health care system, and do not promote a continuum of care to the extent proposed by RHA and ADVENTIST. Section 408.035(2)(b): Whether existing inpatient facilities providing inpatient services similar to those being proposed are being used in an appropriate and efficient manner. The evidence reflects that the existing inpatient facilities in, or adjacent to, the district which offer subacute and AIDS services, as well as services dedicated to the care and treatment of persons suffering from Alzheimer's disease and related dementias are operating at, or near, capacity, and are being used in an appropriate and efficient manner.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that: RHA's application for CON No. 7538 be APPROVED. ADVENTIST'S application for CON No. 7528 be APPROVED. HCR's application for CON No. 7530 be DENIED. LIFE CARE'S applications for CON Nos. 7534 and 7534P be DENIED. RECOMMENDED in Tallahassee, Leon County, Florida, this 27th day of July, 1995. RICHARD HIXSON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of July, 1995. APPENDIX HCR's Proposed Findings 1-5. Accepted in substance. 6. Rejected, insofar as quantification of need for subacute services, while not readily ascertainable, was demonstrated by other applicants.demonstrated need existed in district 7-8. Accepted in substance. 9. See Number 6. 10-14. Accepted in substance, but disposed of by ruling in Clay County case. 15-27. Accepted in substance. 28-36. Rejected insofar as quantification of need for subacute services is not readily accessible; however, need for such services was established. Accepted, except that need for 120 beds has been met. Accepted, except that RHA proposes specific pediatric services and is entitled to preference. Accepted in substance, except last sentence is rejected. Accepted. Accepted, except that ADVENTIST meets preference as to the non- subacute unit. 42-43. Accepted in substance. 44-45. Rejected. Accepted in substance. Accepted, except that ADVENTIST and RHA also meet this factor, and ADVENTIST is adding beds to an existing superior-rated facility. 48-50. Accepted in part, other applicants meet these factors. 51-65. Accepted in substance; however other services are also needed in the district. 66-67. Rejected. 68-73. Accepted in substance. 74-76. Accepted; however other services are also needed in the district. 77. Rejected. 78-86. Accepted in substance. 87-94. Accepted only to the extent that the HCR proposal meets the minimum requirements to demonstrate financial feasibility. 95-103. Accepted in substance; however each applicant's proposal also meets this factor. 104-112. Accepted in substance. 113. Rejected. 114. Accepted; however RHA proposes a minor change to correct this design. 115-116. Accepted only as to RHA design features. 117-122. Rejected. 123-127. Accepted in substance. 128-131. Rejected. LIFE CARE's Proposed Findings 1-3. Accepted in substance. 4. Accepted, except that district plan includes consideration of pediatric population. 5-7. Accepted; however other applicants also meet these factors. See Finding No. 4. Rejected to the extent that it is not uncommon for pediatric care to be provided in a nursing home setting. 10-38. Accepted in substance. 39-40. Rejected to the extent that RHA and ADVENTIST have competitive staff salaries and have experienced no difficulty in hiring qualified staff. 41-57. Accepted in substance. 58-59. Rejected. Accepted; however RHA proposes a minor change to correct this design. Rejected. 62-65. Accepted in substance. 66-69. Disposed of by Clay County case. Accepted; however ADVENTIST meets this factor in the non-subacute unit. Accepted in substance. ADVENTIST's Proposed Findings 1-4. Accepted in substance. 5. Accepted only to the extent that HCR does not propose a specific subacute care unit. 6-13. Accepted in substance. Rejected to the extent that HCR's proposal meets minimum financial feasibility requirements. Accepted. 16-17. Rejected. Accepted. Accepted to the extent that RHA and ADVENTIST best meet this criterion. 20-21. Accepted in substance. 22-26. Disposed of by Clay County case. 27-29. Accepted in substance 30-31. Rejected. 32-35. Accepted in substance. 36. Rejected; see No. 19. 37-106. Accepted in substance. 107. Accepted; see No. 19. RHA's Proposed Findings 1-21. Accepted in substance. 22. Accepted; however other applicants also meet these factors. 23-54. Accepted in substance. 55. Accepted to the extent that there are at least seven nursing homes with dedicated Alzheimer's units in or near the service area. 56-92. Accepted in substance. 93-96. Accepted; however HCR meets minimum financial feasibility requirements. 97-102. Accepted; however LIFE CARE meets minimum financial feasibility requirements. 103. Rejected. 104-122. Accepted in substance. 123. Rejected. 124-135. Accepted in substance. 136. Rejected to the extent that all applicants have met the design criterion. 137-140. Accepted in substance. 141. Rejected. 142-145. Accepted in substance. 146. Accepted to the extent that RHA and ADVENTIST best meet this criterion. COPIES FURNISHED: Stephen K. Boone, Esquire BOONE, BOONE & BOONE, P.A. Post Office Box 1596 Venice, Florida 34284 Alfred W. Clark, Esquire 117 South Gadsden, Suite 201 Tallahassee, Florida. 32301 R. Bruce McKibben, Jr., Esquire PENNINGTON & HABEN, P.A. 215 South Monroe Street, 2nd Floor Post Office Box 10095 Tallahassee, Florida 32301 Michael J. Glazer, Esquire MACFARLANE, AUSLEY, FERGUSON & MCMULLEN, P.A. Post Office Box 391 Tallahassee, Florida 32301 Samuel Dean Bunton, Esquire Senior Attorney, AHCA Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303-4131 Steven R. Bechtel, Esquire MATEER, HARBERT & BATES, P.A. Post Office Box 2854 Orlando, Florida 32802 James M. Barclay, Esquire COBB, C0LE & BELL 131 North Gadsden Street Tallahassee, Florida 32301
Findings Of Fact Petitioners' application for a certificate of need to construct a 60- bed skilled nursing home was recommended for approval by the Health Planning Council, the health systems agency (HSA) for the five counties of Martin, Palm Beach, Volusia, Okeechobee and St. Lucie, but was denied by the Department of Health and Rehabilitative Services (HRS), Office of Community Medical Facilities. The latter agency has the ultimate responsibility for granting certificates of need. In recommending the granting of a certificate of need, HSA considered available beds in existing facilities in lieu of licensed beds, found 89.6 percent occupancy of available beds equal to or greater than 90 percent occupancy of licensed beds prescribed by the State Plan for Hospitals and Related Medical Facilities (Exhibit 2), used its own population forecasts rather than State population forecasts, and failed to consider certificates of need approval recently granted to five nursing homes in Palm Beach County, some of which were already under construction. HSA, at the time of this application had Palm Beach County divided into four regions (which has now been expanded to five) and the proposed facility is located in region three. At the time of the application there were three existing nursing homes in region three and two additional facilities had been granted certificates of need in this region. HSA normally uses licensed beds to determine the percentage of occupancy, but for reasons not explained at this hearing, HSA used available beds to determine the percentage of occupancy. Using available beds HSA found the three nursing homes in region three of Palm Beach County to have an 89.6 percent rate of occupancy. Had licensed beds been used, the percentage of occupancy would have been 83. The Office of Community Medical Facilities, in determining the need for additional medical facilities, has divided the State into 60 health care service areas and Palm Beach County is one of those areas. No evidence was submitted to indicate that the service areas so established are not reasonable. At the time of Petitioners' application, there were 1981 licensed nursing home beds in Palm Beach County; and applications had been approved, or recommended for approval and subsequently approved, for an additional 460 beds in Palm Beach County. The projected need in the State Plan for 1977 (Exhibit 2) for nursing home beds for Palm Beach County by 1982 is 2038. Accordingly, at the time of this hearing, nursing homes in Palm Beach County had received approval for 2441 beds which is 403 more nursing home beds than the forecast need for the year 1982. In determining the need for medical and health provider facilities, the usage rate of existing facilities is first determined from actual usage of the facilities. The Projected Average Daily Census is then determined by multiplying the use rate by the forecast population and dividing by 365 days per year. From this figure the bed need is determined by dividing the Projected Average Daily Census by .85 and adding 10. In this manner, HRS determined in the 1977 State Plan for Construction of Hospitals and Related Medical Facilities that Palm Beach County would have a need for 2038 nursing home beds in 1982. At the time Petitioners' application was recommended for approval by HSA, additional certificates of need had been granted for an additional 160 nursing home beds in region three of Palm Beach County. These facilities are designated as Life Care Centers because they are attached to condominiums from which their primary source of patients is expected to come. However, these facilities are essentially nursing homes and provide the same services as nursing homes. Had these authorized additional beds been included in computing the percentage of occupancy of nursing homes in region three the rate would have been approximately 60 percent, assuming no population change when these facilities become operational.
The Issue Whether the Agency for Health Care Administration (AHCA or the Agency) should approve the application for certificate of need (CON) 7700 filed by Miami Beach Healthcare Group, LTD. d/b/a Miami Heart Institute (Miami Heart or MH).
Findings Of Fact The Agency is the state agency charged with the responsibility of reviewing and taking action on CON applications pursuant to Chapter 408, Florida Statutes. The applicant, Miami Heart, operates a hospital facility known as Miami Heart Institute which, at the time of hearing, was comprised of a north campus (consisting of 273 licensed beds) and a south campus (consisting of 258 beds) in Miami, Florida. The two campuses operate under a single license which consolidated the operation of the two facilities. The consolidation of the license was approved by CON 7399 which was issued by the Agency prior to the hearing of this case. The Petitioner, Mount Sinai, is an existing health care facility doing business in the same service district. On February 4, 1994, AHCA published a fixed need pool of zero adult inpatient psychiatric beds for the planning horizon applicable to this batching cycle. The fixed need pool was not challenged. On February 18, 1994, Miami Heart submitted its letter of intent for the first hospital batching cycle of 1994, and sought to add twenty adult general inpatient psychiatric beds at the Miami Heart Institute south campus. Such facility is located in the Agency's district 11 and is approximately two (2) miles from the north campus. Notice of that letter was published in the March 11, 1994, Florida Administrative Weekly. Miami Heart's letter of intent provided, in pertinent part: By this letter, Miami Beach Healthcare Group, Ltd., d/b/a Miami Heart Institute announces its intent to file a Certificate of Need Application on or before March 23, 1994 for approval to establish 20 hospital inpatient general psychiatric beds for adults at Miami Heart Institute. Thus, the applicant seeks approval for this project pursuant to Sections 408.036(1)(h), Florida Statutes. The proposed capital expenditure for this project shall not exceed $1,000,000 and will include new construction and the renovation of existing space. Miami Heart Institute is located in Local Health Council District 11. There are no subsdistricts for Hospital Inpatient General Psychiatric Beds for Adults in District 11. The applicable need formula for Hospital General Psychiatric Beds for Adults is contained within Rule 59C-1.040(4)(c), F.A.C. The Agency published a fixed need of "0" for Hospital General Psychiatric Beds for Adults in District 11 for this batching cycle. However, "not normal" circumstances exist within District which justify approval of this project. These circumstances are that Miami Beach Community Hospital, which is also owned by Miami Beach Healthcare Group, Ltd., and which has an approved Certificate of Need Application to consol- idate its license with that of the Miami Heart Institute, has pending a Certificate of Need Application to delicense up to 20 hospital inpatient general psychiatric beds for adults. The effect of the application, which is the subject of this Letter of Intent, will be to relocate 20 of the delicensed adult psychiatric beds to the Miami Heart Institute. Because of the "not normal" circumstances alleged in the Miami Heart letter of intent, the Agency extended a grace period to allow competing letters of intent to be filed. No additional letters of intent were submitted during the grace period. On March 23, 1994, Miami Heart timely submitted its CON application for the project at issue, CON no. 7700. Notice of the application was published in the April 8, 1994, Florida Administrative Weekly. Such application was deemed complete by the Agency and was considered to be a companion to the delicensure of the north campus beds. On July 22, 1994, the Agency published in the Florida Administrative Weekly its preliminary decision to approve CON no. 7700. In the same batch as the instant case, Cedars Healthcare Group (Cedars), also in district 11, applied to add adult psychiatric beds to Cedars Medical Center through the delicensure of an equal number of adult psychiatric beds at Victoria Pavilion. Cedars holds a single license for the operation of both Cedars Medical Center and Victoria Pavilion. As in this case, the Agency gave notice of its intent to grant the CON application. Although this "transfer" was initially challenged, it was subsequently dismissed. Although filed at the same time (and, therefore, theoretically within the same batch), the Cedars CON application and the Miami Heart CON application were not comparatively reviewed by the Agency. The Agency determined the applicants were merely seeking to relocate their own licensed beds. Based upon that determination, MH's application was evaluated in the context of the statutory criteria, the adult psychiatric beds and services rule (Rule 59C-1.040, Florida Administrative Code), the district 11 local health plan, and the 1993 state health plan. Ms. Dudek also considered the utilization data for district 11 facilities. Mount Sinai timely filed a petition challenging the proposed approval of CON 7700 and, for purposes of this proceeding only, the parties stipulated that MS has standing to raise the issues remaining in this cause. Mount Sinai's existing psychiatric unit utilization is presently at or near full capacity, and MS' existing unit would not provide an adequate, available, or accessible alternative to Miami Heart's proposal, unless additional bed capacity were available to MS in the future through approval of additional beds or changes in existing utilization. Miami Heart's proposal to establish twenty adult general inpatient psychiatric beds at its Miami Heart Institute south campus was made in connection with its application to delicense twenty adult general inpatient psychiatric beds at its north campus. The Agency advised MH to submit two CON applications: one for the delicensure (CON no. 7474) and one for the establishment of the twenty beds at the south campus (CON no. 7700). The application to delicense the north campus beds was expeditiously approved and has not been challenged. As to the application to establish the twenty beds at the south campus, the following statutory criteria are not at issue: Section 408.035(1)(c), (e), (f), (g), (h), (i), (j), (k), (m), (n), (o) and (2)(b) and (e), Florida Statutes. The parties have stipulated that Miami Heart meets, at least minimally, those criteria. During 1993, Miami Heart made the business decision to cease operations at its north campus and to seek the Agency's approval to relocate beds and services from that facility to other facilities owned by MH, including the south campus. Miami Heart does not intend to delicense the twenty beds at the north campus until the twenty beds are licensed at the south campus. The goal is merely to transfer the existing program with its services to the south campus. Miami Heart did not seek beds from a fixed need pool. Since approximately April, 1993, the Miami Heart north campus has operated with the twenty bed adult psychiatric unit and with a limited number of obstetrical beds. The approval of CON no. 7700 will not change the overall total number of adult general inpatient psychiatric beds within the district. The adult psychiatric program at MH experiences the highest utilization of any program in district 11, with an average length of stay that is consistent with other adult programs around the state. Miami Heart's existing psychiatric program was instituted in 1978. Since 1984, there has been little change in nursing and other staff. The program provides a full continuum of care, with outpatient programs, aftercare, and support programs. Nearly ninety-nine percent of the program's inpatient patient days are attributable to patients diagnosed with serious mental disorders. The Miami Heart program specializes in a biological approach to psychiatric cases in the diagnosis and treatment of affective disorders, including a variety of mood disorders and related conditions. The Miami Heart program is distinctive from other psychiatric programs in the district. If the MH program were discontinued, the patients would have limited alternatives for access to the same diagnostic and treatment services in the district. There are no statutes or rules promulgated which specifically address the transfer of psychiatric beds or services from one facility owned by a health care entity to another facility also owned by the same entity. In reviewing the instant CON application, the Agency determined it has the discretion to evaluate each transfer case based upon the review criteria and to consider the appropriate weight factors should be given. Factors which may affect the review include the change of location, the utilization of the existing services, the quality of the existing programs and services, the financial feasibility, architectural issues, and any other factor critical to the review process. In this case, the weight given to the numeric need criteria was not significant. The Agency determined that because the transfer would not result in a change to the overall bed inventory, the calculated fixed need pool did not apply to the instant application. In effect, because the calculation of numeric need was inapplicable, this case must be considered "not normal" pursuant to Rule 59C-1.040(4)(a), Florida Administrative Code. The Agency determined that other criteria were to be given greater consideration. Such factors were the reasonableness of the proposal, the ability to afford access, the applicant's ability to provide a quality program, and the project's financial feasibility. The Agency determined that, on balance, this application should be approved as the statutory and other review criteria were met. Although put on notice of the other CON applications, Mount Sinai did not file an application for psychiatric beds at the same time as Miami Heart or Cedars. Mount Sinai did not claim that the proposed delicensures and transfers made beds available for competitive review. The Agency has interpreted Rule 59C-1.040, Florida Administrative Code, to mean that it will not normally approve an application for beds or services unless the statutory and rule criteria are met, including the need determination criteria. There is no list of circumstances which are routinely considered "not normal" by the Agency. In this case, the proposed transfer of beds was, in itself, considered "not normal." The approval of Miami Heart's application would allow an existing program to continue. As a result, the overhead to maintain two campuses would be reduced. Further, the relocation would allow the program to continue to provide access, both geographically and financially, to the same patient service area. And, since the program has the highest utilization rate of any adult program in the district, its continuation would be beneficial to the area. The program has an established referral base for admissions to the facility. The transfer is reasonable for providing access to the medically under-served. The quality of care, while not in issue, would be expected to continue at its existing level or improve. The transfer would allow better access to ancillary hospital departments and consulting specialists who may be needed even though the primary diagnosis is psychiatric. The cost of the transfer when compared to the costs to be incurred if the transfer is not approved make the approval a benefit to the service area. If the program is not relocated, Medicaid access could change if the hospital is reclassified from a general facility to a specialty facility. The proposed cost for the project does not exceed one million dollars. If the north campus must be renovated, a greater capital expenditure would be expected. The expected impact on competition for other providers is limited due to the high utilization for all programs in the vicinity. The subject proposal is consistent with the district and state health care plans and the need for health care facilities and services. The services being transferred is an existing program which is highly utilized and which is not creating "new beds." As such, the proposal complies with Section 408.035(1)(a), Florida Statutes. The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing services in the district will not be adversely affected by the approval of the subject application. The proposed transfer is consistent with, and appropriate, in light of these criteria. Therefore, the proposal complies with Section 408.035(1)(b), Florida Statutes. The subject application demonstrates a full continuum of care with safeguards to assure that alternatives to inpatient care are fully utilized when appropriate. Therefore, the availability and adequacy of other services, such as outpatient care, has been demonstrated and would deter unnecessary utilization. Thus, Miami Heart has shown its application complies with Section 408.035(1)(d), Florida Statutes. Miami Heart has also demonstrated that the probable impact of its proposal is in compliance with Section 408.035(1)(l), Florida Statutes. The proposed transfer will not adversely impact the costs of providing services, the competition on the supply of services, or the improvements or innovations in the financing and delivery of services which foster competition, promote quality assurance, and cost-effectiveness. Miami Heart has taken an innovative approach to promote quality assurance and cost effectiveness. Its purpose, to close a facility and relocate beds (removing unnecessary acute care beds in the process), represents a departure from the traditional approach to providing health care services. By approving Miami Heart's application, overhead costs associated with the unnecessary facility will be eliminated. There is no less costly, more efficient alternative which would allow the continuation of the services and program Miami Heart has established at the north campus than the approval of transfer to the south campus. The MH proposal is most practical and readily available solution which will allow the north campus to close and the beds and services to remain available and accessible. The renovation of the medical surgical space at the south campus to afford a location for the psychiatric unit is the most practical and readily available solution which will allow the north campus to close and the beds and services to remain available and accessible. In totality, the circumstances of this case make the approval of Miami Heart's application for CON no. 7700 the most reasonable and practical solution given the "not normal" conditions of this application.
Recommendation Based on the foregoing, it is, hereby, RECOMMENDED: That the Agency for Health Care Administration enter a final order approving CON 7700 as recommended in the SAAR. DONE AND RECOMMENDED this 5th day of April, 1995, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH 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 5th day of April, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-4755 Note: Proposed findings of fact are to contain one essential fact per numbered paragraph. Proposed findings of fact paragraphs containing multiple sentences with more than one statement of fact are difficult to review. In reviewing for this case, where all sentences were accurate and supported by the recorded cited, the paragraph has been accepted. If the paragraph contained mixed statements where one sentence was an accurate statement of fact but the others were not, the paragraph has been rejected. Similarly, if one sentence was editorial comment, argument, or an unsupported statement to a statement of fact, the paragraph has been rejected. Proposed findings of fact should not include argument, editorial comments, or statements of fact mixed with such comments. Rulings on the proposed findings of fact submitted by Petitioner, Mount Sinai: Paragraphs 1 through 13 were cited as stipulated facts. Paragraph 14 is rejected as irrelevant. With regard to paragraph 15 it is accepted that Miami Heart made the business decision to move the psychiatric beds beds from the north campus to the south campus. Any inference created by the remainder of the paragraph is rejected as irrelevant. Paragraph 16 is rejected as irrelevant. Paragraph 17 is rejected as irrelevant. Paragraph 18 is accepted. Paragraph 19 is rejected as irrelevant. Paragraph 20 is rejected as contrary to the weight of the credible evidence. Paragraph 21 is rejected as contrary to the weight of the credible evidence. Paragraph 22 is accepted. Paragraph 23 is rejected as irrelevant. Paragraph 24 is accepted. Paragraph 25 is rejected as repetitive, or immaterial, unnecessary to the resolution of the issues. Paragraph 26 is rejected as irrelevant or contrary to the weight of the credible evidence. Paragraph 27 is rejected as comment or conclusion of law, not fact. Paragraph 28 is accepted but not relevant. Paragraphs 29 and 30 are accepted. Paragraphs 31 through 33 are rejected as argument, comment or irrelevant. Paragraph 34 is rejected as comment or conclusion of law, not fact. Paragraph 35 is rejected as comment or conclusion of law, not fact, or irrelevant as the FNP was not in dispute. Paragraph 36 is rejected as irrelevant. Paragraph 37 is rejected as repetitive, or comment. Paragraph 38 is rejected as repetitive, comment or conclusion of law, not fact, or irrelevant. Paragraph 39 is rejected as argument or contrary to the weight of credible evidence. Paragraph 40 is accepted. Paragraph 41, 42, and 43 are rejected as contrary to the weight of the credible evidence and/or argument. Paragraph 44 is rejected as argument and comment on the testimony. Paragraph 45 is rejected as argument, irrelevant, and/or not supported by the weight of the credible evidence. Paragraph 46 is rejected as argument. Paragraph 47 is rejected as comment or conclusion of law, not fact. Paragraph 48 is rejected as comment, argument or irrelevant. Paragraph 49 is rejected as comment on testimony. It is accepted that the proposed relocation or transfer of beds is a "not normal" circumstance. Paragraph 50 is rejected as argument or irrelevant. Paragraph 51 is rejected as argument or contrary to the weight of credible evidence. Paragraph 52 is rejected as argument or contrary to the weight of credible evidence. Paragraph 53 is rejected as argument, comment or recitation of testimony, or contrary to the weight of credible evidence. Paragraph 54 is rejected as irrelevant or contrary to the weight of credible evidence. Paragraph 55 is rejected as irrelevant, comment, or contrary to the weight of credible evidence. Paragraph 56 is rejected as irrelevant or argument. Paragraph 57 is rejected as irrelevant or argument. Paragraph 58 is rejected as contrary to the weight of credible evidence. Paragraph 59 is rejected as irrelevant. Paragraph 60 is rejected as contrary to the weight of credible evidence. Paragraph 61 is rejected as argument or contrary to the weight of credible evidence. Paragraph 62 is rejected as argument or contrary to the weight of credible evidence. Paragraph 63 is accepted. Paragraph 64 is rejected as irrelevant. Mount Sinai could have filed in this batch given the not normal circumstances disclosed in the Miami Heart notice. Paragraph 65 is rejected as irrelevant. Paragraph 66 is rejected as comment or irrelevant. Paragraph 67 is rejected as argument or contrary to the weight of credible evidence. Paragraph 68 is rejected as argument or irrelevant. Paragraph 69 is rejected as argument, comment or irrelevant. Paragraph 70 is rejected as argument or contrary to the weight of credible evidence. Rulings on the proposed findings of fact submitted by the Respondent, Agency: Paragraphs 1 through 6 are accepted. With the deletion of the words "cardiac catheterization" and the inclusion of the word "psychiatric beds" in place, paragraph 7 is accepted. Cardiac catheterization is rejected as irrelevant. Paragraph 8 is accepted. The second sentence of paragraph 9 is rejected as contrary to the weight of credible evidence or an error of law, otherwise, the paragraph is accepted. Paragraph 10 is accepted. Paragraphs 11 through 17 are accepted. Paragraph 18 is rejected as conclusion of law, not fact. Paragraphs 19 and 20 are accepted. The first two sentences of paragraph 21 are accepted; the remainder rejected as conclusion of law, not fact. Paragraph 22 is rejected as comment or argument. Paragraph 23 is accepted. Paragraph 24 is rejected as argument, speculation, or irrelevant. Paragraph 25 is accepted. Rulings on the proposed findings of fact submitted by the Respondent, Miami Heart: Paragraphs 1 through 13 are accepted. The first sentence of paragraph 14 is accepted; the remainder is rejected as contrary to law or irrelevant since MS did not file in the batch when it could have. Paragraph 15 is accepted. Paragraph 16 is accepted as the Agency's statement of its authority or policy in this case, not fact. Paragraphs 17 through 20 are accepted. Paragraph 21 is rejected as irrelevant. Paragraph 22 is rejected as irrelevant. Paragraphs 23 through 35 are accepted. Paragraph 36 is rejected as repetitive. Paragraphs 37 through 40 are accepted. Paragraph 41 is rejected as contrary to the weight of the credible evidence to the extent that it concludes the distance to be one mile; evidence deemed credible placed the distance at two miles. Paragraphs 42 through 47 are accepted. Paragraph 48 is rejected as comment. Paragraphs 49 through 57 are accepted. COPIES FURNISHED: Tom Wallace, Assistant Director Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 R. Terry Rigsby Geoffrey D. Smith Wendy Delvecchio Blank, Rigsby & Meenan, P.A. 204 S. Monroe Street Tallahassee, Florida 32302 Lesley Mendelson Senior Attorney Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 Stephen Ecenia Rutledge, Ecenia, Underwood, Purnell & Hoffman, P.A. 215 South Monroe Street Suite 420 Tallahassee, Florida 32302-0551
Findings Of Fact Harbour Shores Hospital is a 60-bed short-term psychiatric facility, with 36 adult beds and 24 adolescent beds. The facility opened in October 1985, and had an occupancy of 62 percent at the time of the final hearing in March 1986. T. 14, 20. The hospital is an integral part of Lawnwood Medical Center, Inc., located in Ft. Pierce, Florida, and Lawnwood is owned by Hospital Corporation of America. T. 13-14. Hospital Corporation of America now operates 5,000 psychiatric beds in the United States. T. 18. Lawnwood Medical Center, Inc. (Lawnwood), submitted an application for certificate of need number 3363 on June 14, 1984, for the conversion of 12 short-term psychiatric beds to 12 short-term inpatient hospital substance abuse beds. T. 15. No construction is needed to convert these 12 beds. T. 16. The Department of Health and Rehabilitative Services (HRS) initially denied the application. T. 106. All references in this order to Harbour Shores Hospital shall include the Petitioner, Lawnwood, unless specifically stated otherwise. The parties stipulated that the only issue in this case is need and any ancillary issue which is based upon need. T. 4-5. HRS has a rule governing short and long-term hospital inpatient hospital substance abuse beds, which is rule 10-5.11(27), Florida Administrative Code. Subparagraph (f)1 of the rule contains what HRS calls bed allocations" and calculates need for a health service district as a whole. Harbour Shores Hospital is located in St. Lucie County in Health District IX. District IX is composed of St. Lucie, Indian River, Martin, Okeechobee, and Palm Beach Counties. HRS Ex. 2, p.7. The District IX Local Health Council has identified two subdistricts for purposes of allocating short term psychiatric and substance abuse beds. Subdistrict 1 is St. Lucie, Martin, Indian River, and Okeechobee Counties, and subdistrict 2 is Palm Beach County. HRS Exhibit 2, p. 7; T. 110. HRS proposes to determine need as of January 1989 using the date of the application as the starting point for the five year period specified in rule 10- 5.11(27)(f)1, Florida Administrative Code. T. 107-6. The basis of this decision is a new policy by HRS to implement the Gulf Court decision. There is a need for only 1 additional short-term substance abuse bed in District IX by January 1989 based upon Rule 10-5.11(27)(f)1, Florida Administrative Code. T. 109. HRS Exhibit 1. HRS proposes also to refer to such need for short term substance abuse beds as indicated by local health council plans, relying upon rule 10- 5.11(27)(h)3, Florida Administrative Code. T. 110. The local health plan for District IX allocates needed beds based upon the subdistricts described above. HRS Exhibit 2, p. 6. Further, the local health plan has adopted the method of HRS found in rule 10-5.11(27), supra, for calculating need, and calculates such need using the HRS rule factor of .06 substance 3. All references in this order to Harbour Shores Hospital shall include the Petitioner, Lawnwood, unless specifically stated otherwise. The parties stipulated that the only issue in this case is need and any ancillary issue which is based upon need. T. 4-5. HRS has a rule governing short and long term hospital inpatient hospital-substance abuse beds, which is Rule 10-5.11(27), Florida Administrative Code. Subparagraph (f)1 of the rule contains what HRS calls bed "allocations" and calculates need for a health service district as a whole. Harbour Shores Hospital is located in St. Lucie County in Health District IX. District IX is composed of St. Lucie, Indian River, Martin, Okeechobee, and Palm Beach Counties. HRS Ex. 2, p.7. The District IX Local Health Council has identified two subdistricts for purposes of allocating short-term psychiatric and substance abuse beds. Subdistrict 1 is St. Lucie, Martin, Indian River, and Okeechobee Counties, and subdistrict 2 is Palm Beach County. HRS Exhibit 2, p.7; T. 110. HRS proposes to determine need as of January 1989 using the date of the application as the starting point for the five-year period specified in Rule 10-5.11(27)(f)1, Florida Administrative Code. T. 107-8. The basis of this decision is a new policy by HRS to implement the Gulf Court decision. There is a need for only 1 additional short-term substance abuse bed in District IX by January 1989 based upon Rule 10-5.11(27)(f)1, Florida Administrative Code. T. 109. Exhibit 1. HRS proposes also to refer to such need for short term substance abuse beds as indicated by local health council plans, relying upon rule 10- 5.11(27)(h)3, Florida Administrative Code. T. 110. The local health plan for District IX allocates needed beds based upon the subdistricts described above. HRS Exhibit 2, p. 6. Further, the local health plan has adopted the method of HRS found in rule 10-5.11(27), supra, for calculating need, and calculates such need using the HRS rule factor of .06 substance abuse beds per 1,000 population in each of the two subdistricts. HRS Exhibit 2, pp. 5 and 8, paragraph II. Using current estimates of the populations of each subdistrict in January 1909, HRS projects that subdistrict 1 will have a surplus of 15 substance abuse beds in 1989, and all net need (16 beds) will be in subdistrict 2, which is Palm Beach County. T. 111; HRS Exhibit 1. HRS has not adopted these subdistricts by rule. T. 128-29. There was no evidence to substantiate the reasonableness of the subdistricts adopted in the local health plan. T. 131. The following is a summary of the existing and approved short-term substance abuse beds in District IX, showing county of location, and occupancy rates for 1985: Humana Hospital 16 Licensed Indian River 8509 Sebastian Lake Hospital 16 Licensed Palm Beach 3558 Palm Beaches Fair Oaks 17 Licensed Palm Beach 3807 Savannas 20 Approved St. Lucie Hospital Beds Status County Patient Days Occupancy 145.7% 60.7% 60.7% The number of patient days at Fair Oaks, however, is for four months, August, October, November, and December 1985. Thus, the actual number of patient days, 1269, has been multiplied by 3 to obtain an estimate for an entire year. T. 23- 24, 61-62. The occupancy rate is the number of patient days divided by the product of the number of days in the year (365) and the number of licensed beds. Using the statistics in paragraph 10, the average occupancy rate for the three existing facilities in District IX was 88.8 percent. If one assumes, as did Petitioner's expert, that the utilization rates for short-term substance abuse beds will at least remain the same as in 1935, with the addition of the 20 new beds at Savannas Hospital, District IX may have an occupancy rate of 63.8 percent and subdistrict 1 may have an occupancy rate of 64.8 percent . The 20 new beds at the Savannas Hospital are those granted to Indian River Community Mental Health Center, Inc., and are projected to open in November 1986. T. 83. As discussed above, Harbour Shores Hospital had been in operation about five months by the time of the March 1986 hearing, and its 60 short term psychiatric beds were averaging 62 percent occupancy, which is about 15 percent above the occupancy projected in its certificate of need application. T. 38. Harbour Shores serves patients from the four counties of subdistrict 1, St. Lucie, Martin, Indian River, and Okeechobee, and serves a significant number of patients from Palm Beach County as well; three to four percent of its patients also come from Brevard and Broward Counties. T. 19. About 80 percent of the patients at Harbour Shores in the first five months of its operation had a substance abuse problem secondary to the primary diagnosis of mental illness. T. 30, 50, 63. This is consistent with experience throughout Florida. T. 63. Most of these "dually diagnosed" patients have been through a detoxification program before entering Harbour Shores Hospital. T. 30. In its beginning months of operation, Harbour Shores has had patients referred from the courts, law enforcement agencies, community and social agencies, physicians, and from HRS. T. 21-22, 59. Harbour Shores can expect to obtain substance abuse referrals from these agencies. Staff at Harbour Shores works with the DWI Board, Students Against Drunk Driving, and school administrative personnel. T. 39-40. In October and November 1985, Harbour Shores received 38 requests from physicians, the courts, law enforcement agencies, and social agencies, for admission of patients for substance abuse treatment. T. 22, 49. There is no evidence that Harbour Shores had any such requests in December 1985 or January 1986. In February 1986, it had 14 such requests, and in March to the date of the hearing, it had 5 requests. T. 48. There is no evidence as to whether these requests were for short or long-term substance abuse services, or whether these were requests from different patients or multiple requests from the same patient. There is also no evidence that the persons requesting substance abuse treatment were not adequately treated at existing facilities. Thus, the data from these few months is not an adequate basis for determining future need for short term substance abuse beds. Ms. Peggy Cioffi is the coordinator for the Martin County Alcohol and Drug Abuse Program. Deposition, Ms. Peggy Cioffi, p. 2. Ms. Cioffi testified as to the need for substance abuse services in her area. She did not testify as an expert witness. Her program is primarily designed to assist the County Court in referrals of misdemeanants and others within the Court's jurisdiction who need substance abuse services. Id. Ms. Cioffi has difficulty placing persons needing inpatient or residential treatment. Id. at p. 3. She related an example of a county prisoner who asked to be detained in jail three months for lack of an alcohol program. Id. at p. 4. Ms. Cioffi did not state whether this person needed residential or inpatient hospital care. She also had recently reviewed a 14 page county court docket and determined that 67 percent of those charged represented alcohol or drug related offenses. Id. Ms. Cioffi did not clearly show how she was able to infer this fact. Further, Ms. Cioffi was unable to tell from this statistic how many of these defendants needed short term inpatient hospital substance abuse treatment. Id. at p. 6. She stated that a very high percentage of these could benefit from some kind of services, but did not separate the kinds of services, Id. at p.7. Ms. Cioffi stated that she often had to wait to find a place for a person in the following facilities: Dunklin, CARP, and Alcohope. Id. at p. 5. Ms. Cioffi stated that these were "residential" facilities, but she did not state whether these facilities were the equivalent of short-term inpatient hospital substance abuse facilities. These facilities are located in District IX, Id. at p. 7, but are not short-term in patient hospital substance abuse beds licensed as such. See paragraph 10 above. See also T. 96-99. In summary, although Ms. Cioffi identified a generalized need for residential or hospital substance abuse treatment, she did not draw any distinction between the two services. If there was a similarity, she did not provide evidence of the similarity. Lacking evidence in the record that need for residential treatment programs can be used to show need for inpatient hospital beds, Ms. Cioffi's testimony is insufficient to show need for the services sought by the Petitioner. The Honorable Marc Cianca is a County Judge in St. Lucie County. Deposition, Judge Marc Cianca, p. 2. Judge Cianca was of the opinion that his area attracted semi-young people with substance abuse problems in greater numbers than the retirement population. Id. at 17-18. He frequently was frustrated in his efforts to find substance abuse services for defendants in his Court. Id. at 3-5. Judge Cianca felt that most of the people he saw needed long-term therapy, beginning with inpatient services, followed by long-term follow-up programs. Id. at 12-14. Like the testimony of Ms. Cioffi (which concerned the same group of persons before the County Court), Judge Cianca did not clearly distinguish need for short-term inpatient hospital substance abuse services from need for all other forms of substance abuse treatment, and the record on this point is silent as well. For this reason, Judge Cianca's opinion that 100 short-term inpatient hospital substance abuse beds are needed must be rejected. The testimony of Ms. Cioffi and Judge Cianca is insufficient as a predicate for determining need for the inpatient hospital beds sought by the Petitioner for another reason, and that is the lack of evidence that the persons identified as needing substance abuse services will have the ability to pay for such services at Petitioner's facility, or that third party payment will be available for them. The people in need in Ms. Cioffi's testimony normally do not have funds to pay for treatment. Cioffi, p. 8. Similarly, a substantial number of the people in need seen by Judge Cianca do not have insurance coverage and would not be able to use Harbour Shores unless they qualified for Medicaid and unless Harbour Shores took all of those qualified for Medicaid. Id. at 7, 15-16. A substantial number of the persons needing substance abuse treatment do not have jobs or insurance and must rely upon "welfare" for services. Id. at 15, 17. These persons cannot afford certain programs, and must rely upon state aid through programs such as those provided by Indian River Community Mental Health Center, and for these programs there is always a waiting list. Id. at There is no evidence that any of these persons are eligible for Medicaid. Ms. Sharon Heinlen, Director of Planning and Development for Harbour Shores Hospital, who testified for the Petitioner as an expert in health planning and hospital administration, had not studied the Medicaid population in the area to determine need. T. 76. Although Harbour Shores had about 15 percent of its psychiatric patient days devoted to Medicaid patients, T. 33, the validity of this percentage for substance abuse patients, or for the reasonably near future, was not established by other evidence. Petitioner's formal application for this certificate of need projects 5 percent of its gross revenues from Medicaid and another 5 percent devoted to bad debt, indigents, and Baker Act cases. Petitioner's Exhibit 1, p. 5. But the application does not state whether this percentage will be evenly distributed among psychiatric and substance abuse patients. In any event, the percentages of indigent care and Medicaid care are too small to satisfy the need identified by Judge Cianca and Ms. Cioffi. Stated another way, the need identified by those two witnesses is not relevant to Petitioner's application except with respect to a small percentage. Harbour Shores plans to have after care for substance abuse patients. T. 40. The Savannas Hospital is the name of the hospital to be completed in November 1986 to provide, among other services, 20 short term inpatient hospital substance abuse beds under the certificate of need granted to Indian River Community Mental Health Center, Inc. T. 82-83. The primary service area of the Savannas Hospital will be the same four counties as now served by Harbour Shores Hospital, as well as Palm Beach County. T. 84. The Savannas Hospital intends to be licensed. T. 84. The Savannas Hospital is located in Port St. Lucie, in St. Lucie County. T. 95-96. The service proposed is a comprehensive substance abuse service. T. 87. Five of the twenty substance abuse beds will be devoted to detoxification. T. 92. The Savannas Hospital will be operated by the Mediplex Group in partnership with Indian River Community Mental Health Center, Inc. T. 82. The land will be owned by Mediplex. T. 95. The Savannas Hospital will be a private, for profit, hospital, while the Mental Health Center will be a not-for- profit facility. T. 86. The Savannas Hospital publicly states that it will take five percent indigent patients, which does not include Medicare. T. 87. There is no commitment to provide more indigent care. T. 89. All other patients acre expected to be fully paying. T. 93. The actual figure for free or nonpaying patients has not yet been calculated. T. 94. The Savannas Hospital will not serve Medicaid substance abuse patients because it is a freestanding facility. T. 36, 86. Humana Hospital Sebastian is the closest facility to Harbour Shores currently in operation providing inpatient short-term hospital substance abuse services, and Humana Sebastian can accept Medicaid patients. T. 59. Ms. Elizabeth Dudek testified for HRS as an expert in health planning and certificate of need review in Florida. Ms. Dudek has reviewed all of the applications made in District IX for substance abuse beds since November 1983, and as a supervisor, has reviewed all of the applications in the state for substance abuse beds. T. 104. She has been in contact with the District Alcohol, Drug Abuse, and Mental Health Program Office and has attended public hearings, as well as administrative hearings, concerning substance abuse beds in District IX. T. 104-05. She also listened to all of the evidence presented at the final hearing. It was Ms. Dudek's opinion that there was no need for the substance abuse beds sought by the Petitioner. T. 127-28. Ms. Sharon Heinlen was also qualified as an expert in health planning, as well as hospital administration. T. 13. Ms. Heinlen has only recently moved to Florida, T. 11, 66, and stated that she did not know Florida well enough to know what might be the best thing to advocate in Florida with respect to whether all hospitals should provide all services. T. 65-66. She had conducted studies of District IX, however. T. 66. The average occupancy rates for District IX testified to by Ms. Heinlen were mathematically incorrect, and the correct lower rates do not support her opinion that additional short term substance abuse beds are needed. See FF 11. The fact that about 80 percent of the psychiatric patients now are at Harbour Shores Hospital also have a substance abuse problem does not necessarily support Ms. Heinlen's opinion as to need. See FF 12. This statistic is consistent with experience in all of Florida, and therefore should be accommodated by the HRS numeric need methodology. Moreover, it must be inferred that hospitalization of these patients as psychiatric patients was proper, rather than as substance abuse patients, and that even if additional substance abuse beds were available, these patients still would need to be in a psychiatric bed for treatment of the primary diagnosis. As discussed in FF 14, the data concerning recent requests for substance abuse services at Harbour Shores Hospital is not sufficient to conclude that a need exists for additional beds. As discussed in FF 17, Ms. Heinlen did not have an adequate basis for any opinion as to the need for short-term substance abuse beds for Medicaid patients in District IX. Finally, Ms. Heinlen testified that there was a waiting list for patients to be admitted to licensed short-term substance abuse beds at Fair Oaks and Lake Hospital, but the testimony was hearsay. T. 28. Since this evidence conflicts with the relatively low occupancy rates at these same facilities, and has not otherwise been corroborated by non-hearsay evidence, it must be rejected as a basis for a finding of fact. Further, due to the conflict with the low occupancy rates, it is rejected as a basis for Ms. Heinlen's expert opinion. In summary, Ms. Heinlen's expert opinion that there is a need for short-term, inpatient hospital substance abuse beds in District IX must be rejected. It is the position of HRS that even if the rule showed a need, the occupancy factor would be a factor in showing no need. T. 134. Conversely, if the rule showed no need, the occupancy factor would be one factor among others which night show need. Id.
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
