The Issue The issue is whether portions of a Medicaid provider agreement, monitoring instrument (including support coordination assurances), and support coordination guidebook are invalid as improperly promulgated rules.
Findings Of Fact A successor to the Department of Health and Rehabilitative Services, Respondent Children and Families (DCF) supervises the provision of community-based services to developmentally disabled clients. Also a successor to the Department of Health and Rehabilitative Services, Respondent Agency for Health Care Administration (HCA), as the administrator of the Florida Medicaid program, pays providers for these services with federal Medicaid and state funds. HCA has obtained a waiver from the federal Health Care Financing Administration (HCFA) for HCA’s Medicaid Home and Community Based Services (HCBS) program. The approved HCBS program supplies eligible persons with case management services, which are called “support coordination” services. The HCBS program defines “support coordination” as “services which will assist waiver recipients in gaining access to needed waiver and other State plan services, as well as needed medical, social, educational and other services, regardless of the funding source for the services to which access is gained.” Coordinating support services enables DCF clients to live as independently as possible. The HCBS program specifically describes the requirements for the approval of an individual or entity to coordinate support. The approval process requires that DCF certify that the individual or entity is an HCBS provider and that HCA or its fiscal agent enroll the individual or entity as a Medicaid provider. The HCBS program began in 1993. Petitioner’s personnel attended in-service training in April 1993 prior to the enrollment of Petitioner as a support coordinator in the HCBS program. Since the start of the HCBS program, Petitioner has provided services to DCF clients. Petitioner is in good standing, and DCF district staff determined in May 1996 that Petitioner was in general compliance with program requirements. Neither DCF nor HCA has ever suspended Petitioner or placed it on probation under the program. Petitioner coordinates support for certain developmentally disabled persons who have elected to participate in the HCBS program. As clients of DCF, these developmentally disabled persons either have selected Petitioner as their support coordinator or been assigned to Petitioner by the district DCF office. In coordinating support, Petitioner serves as an independent contractor to DCF; Petitioner is not a vendor or staff. HCA’s payment to an individual or entity coordinating support is conditioned upon the recipient’s execution and delivery of a Medicaid provider agreement and related documents. In 1996, HCA and/or DCF revised the Medicaid provider agreement, monitoring instrument (which includes the support coordination assurances), and support coordination guidebook (Revised Documents). On May 28, 1996, DCF informed Petitioner of the revisions to the Medicaid provider agreement and assurances and directed that Petitioner would have to sign the provider agreement and assurances for continued certification. The letter warns that DCF will withdraw Petitioner’s Medicaid certification and HCA’s fiscal agent will terminate Petitioner’s Medicaid enrollment if Petitioner does not return a signed Medicaid provider agreement and assurances within 30 days. Petitioner executed and delivered all Revised Documents under protest. On receipt of the executed Revised Documents, DCF certified that Petitioner was qualified to provide covered services and submitted to HCA all of Petitioner’s executed applications and agreements for enrollment in the Medicaid program. As fiscal agent of HCA, Unisys then issued Petitioner a Medicaid provider number. The Medicaid provider agreement authorizes HCA to compensate Petitioner for services provided under the HCBS program to clients determined by DCF to be eligible for such services. The Medicaid provider agreement and assurances do not specify districts or portions of districts in which Petitioner may provide services. DCF certifies providers as eligible to provide services in specific districts or portions of districts based on district-specific criteria. Presently, Petitioner provides services to DCF clients residing in specific locations in DCF District 4. Petitioner would have to execute and deliver a separate Medicaid provider agreement to provide compensated services at a location outside of District 4. The assurances impose upon the HCBS support coordinator standards of performance and operational requirements. The assurances are applicable statewide and are not subject to negotiation by individual DCF district offices. DCF personnel prepared the assurances, which were approved by HCA. In preparing the assurances, DCF did not negotiate directly with Petitioner, but negotiated with a statewide association of support coordinators. If a support coordinator does not sign the assurances, DCF will terminate the provider from the HCBS waiver program. DCF and HCA require providers of other services in the HCBS program--other than support coordination services--to sign and deliver different assurances from those signed by support coordinators. DCF annually negotiates and reduces to contract the required performance and operational requirements for some of these other providers.
Conclusions Having reviewed the administrative complaint dated June 12, 2009, and Notice of Intent dated July 9, 2009, attached hereto and incorporated herein (Ex. 1 and 2), and all other matters of record, the Agency for Health Care Administration (“Agency”) has entered into a Settlement Agreement (Ex. 3) with the other party to these proceedings, and being otherwise well- advised in the premises, finds and concludes as follows: 1 Filed November 20, 2009 10:37 AM Division of Administrative Hearings. ORDERED: 1. The attached Settlement Agreement is approved and adopted as part of this Final Order, and the parties are directed to comply with the terms of the Settlement Agreement. 2. The administrative fine against the Respondent in AHCA Case No. 2009001632 is withdrawn. 3. The Respondent's abortion clinic license is cancelled. 4. The initial application seeking laboratory licensure in Case No. 2009007700 is withdrawn. 5. The Respondent's request for formal hearing is dismissed. 6. Each party shall bear its own costs and attorney’s fees. 7. The above-styled cases are hereby closed. DONE and ORDERED this _// day of hover Ake , 2009, in Tallahassee, Leon County, Florida. El . Arnold, Secretary Y t Health Care Administration Thomas Agenc A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY, ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW OF PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. Copies furnished to: Jan Mills Facilities Intake Unit Agency for Health Care Admin. (Interoffice Mail) Thomas M. Hoeler, Esquire | Office of the General Counsel Agency for Health Care Admin. (Interoffice Mail) Laura MacLafferty, Unit Manager Hospital and Outpatient Services Unit Agency for Health Care Admin. (Interoffice Mail) Andrew T. Lavin, Esquire Navon & Lavin, P.A. Emerald Park Office Center 2699 Stirling Road, Suite B-100 Fort Lauderdale, Florida 33312 (U.S. Mail) Karen Rivera, Unit Manager ‘| Laboratory Unit Agency for Health Care Admin. (Interoffice Mail) CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of this Final Order was served on the above-named person(s) and entities by U.S. Mail, or the method designated, on this the /8 day of AGI A , 2009. Richard Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Building #3 Tallahassee, Florida 32308-5403 (850) 922-5873 Certified Mail Receipt (7003 1010 0000 9715 3702) STATE OF FLORIDA AGENCY FOR HEALTH CARE ADMINISTRATION STATE OF FLORIDA, AGENCY FOR HEALTH CARE ADMINISTRATION, Petitioner, AHCA No.: 2009001632 vs. COMMUNITY HEALTHCARE CENTER OF PENSACOLA, INC., Respondent. ADMINISTRATIVE COMPLAINT COMES NOW the Agency for Health Care Administration (hereinafter “AHCA”), by and through the undersigned counsel, and files this Administrative Complaint. against Community Healthcare Center of Pensacola, Inc. (hereinafter “Community Healthcare Center of Pensacola, Inc.”), pursuant to Section 120.569, and 120.57, Fla. Stat. (2008), alleges: NATURE OF THE ACTION 1. This is an action to impose one (1) administrative fine against Community Healthcare Center of Pensacola, Inc. in the amount of Four Hundred and Thirteen Thousand Dollars ($413.000), based upon one (1) deficiency, pursuant to Section 483.091, Fla. Stat. (2008). EXHIBIT 1. i \ JURISDICTION AND VENUE 2. This Agency has jurisdiction pursuant to 483, Part I and Section 120.569 and 120.57, Fla. Stat. (2008). 3. Venue lies in Escambia County, Pensacola, Florida, pursuant to Section 120.57 Fla. Stat. (2008); Rule 58A-5, Fla. Admin. Code (2008) and Section 28.106.207, Fla. Stat. (2008). PARTIES 4. AHCA, is the regulatory authority responsible for licensure and enforcement of all applicable statutes and rules governing clinical laboratory facilities pursuant to Chapter 483, -Part 1, Fla. Stat. (2008) and Rule 58A-5, Fla. Admin. Code (2008). 5. Community Healthcare Center of Pensacola, Inc. is a for-profit corporation, ABO Group + RH clinical laboratory facility is located at 6770 North Ninth Avenue, Pensacola, Florida 32504. Community Healthcare Center of Pensacola, Inc. is licensed as clinical laboratory facilities license # 800003116; certificate number #60474, effective November 21, 2005 through November 20, 2007. Community Healthcare Center of Pensacola, Inc. was at all times material hereto, licensed facility under the licensing authority of AHCA, and required to comply with all applicable rules, and statutes. COUNTI COMMUNITY HEALTHCARE CENTER OF PENSACOLA, INC. BASED ON RECORD REVIEW, OBSERVATIONS AND INTERVIEW WITH THE FACILITY ADMINISTRATOR ON JANUARY 7, 2009, AT APPROXIMATELY 9:30 A.M., IT WAS DETERMINED THAT THE LABORATORY LICENSE AND HAD CONTINUED TO PERFORM LABORATORY TESTING. STATE TAG L001-CLINICAL LABORATORY LICENSE Section 483.091, Fla. Stat. (2007) CLINICAL LABORATORY LICENSE 6. AHCA re-alleges and incorporates paragraphs (1) through (5) as if fully set forth herein. 7. On or about January 7, 2009, AHCA conducted a biennial survey at the Respondent’s facility. AHCA cited the Respondent based on the findings below, to wit: 8. On or about January 7, 2009, based on record review, observation, and interview with the facility administrator on January 7, 2009, at approximately 9:30 a.m., it was determined that the laboratory had not renewed the State of Florida clinical laboratory license and had continued to perform laboratory testing. 9. Review of state licensure records prior to the survey showed that the facility's laboratory license, number 800003116, had expired on November 20, 2007 and there was no pending application. 10. Review of Rh testing, hematocrit testing records, and pregnancy testing records showed documentation of test results for patient testing that had been performed between November 20, 2007 and January 6, 2009. ll. Observation of the Florida Clinical Laboratory license on display in a frame in the laboratory showed that the license had expired on November 20, 2007. 12. The administrator stated that the laboratory did not have a new state clinical laboratory license and did not realize they had not renewed the Florida license. The administrator stated that the facility had not received the renewal letter prior to the expiration of the license and had not received the "failed to renew" letter from the Agency for Health Care Administration following expiration of the license. Plan of Correction must be completed by February 21, 2009. 13. The regulatory provision of the Florida Statutes and Agency Rules (2008), that are pertinent to this alleged violation read as follows: 483.091 Clinical laboratory license A clinical laboratory may not send a specimen drawn within this state to any clinical laboratory outside the staté for examination unless the out-of-state laboratory has obtained a license from the agency. A new license may be secured for thé new location before the actual change, if the contemplated change complies with this part, part II of chapter 408, and the applicable rules. ek 483.221 Administrative fines.— In determining the penalty to be imposed, the Agency must consider, inter alia, the severity of the violation, actions taken by the licensee to correct the violation, any previous violations by licensee, and the financial benefit to the licensee of committing or continuing the violation. * ko ® 408.804 License required; display.— (1) It is unlawful to provide services that require licensure, or operate or maintain a provider that offers or provides services that require licensure, without first obtaining from the agency a license authorizing the provision of such services or the operation or maintenance of such provider. (2) A license must be displayed in a conspicuous place readily visible to clients who enter at the address that appears on the license and is valid only in the hands of the licensee to whom it is issued and may not be sold, assigned, or otherwise transferred, voluntarily or involuntarily. The license is valid only for the licensee, provider, and location for which the license is issued. 408.812 Unlicensed activity.— (3) It is unlawful for any person or entity to own, operate, or maintain an unlicensed provider. If after receiving notification from the agency, such person or entity fails to cease operation and apply for a license under. this part and authorizing statutes, the person or entity shall be subject to penalties as prescribed by authorizing statutes and applicable rules. Each day of continued operation is a separate offense. (5) When a controlling interest or licensee has an interest in more than one provider and fails to license a provider rendering services that require licensure, the agency may revoke all licenses and impose actions under s. 408.814 and a fine of $1,000 per day, unless otherwise specified by authorizing statutes, against each licensee until such time as the appropriate license is obtained for the unlicensed operation. 15. Despite being unlicensed, Respondent continued to conduct laboratory testing and continued to reap the financial benefit of conducting said testing. 16. The violation alleged herein constitutes a deficiency, and warrants a fine of $413,000. 17. The Respondent's history of failing to timely renew its license, coupled with Respondent’s performance of unlicensed clinical laboratory testing resulting in financial gain in the face of Agency notification advising of the expiration of the license and the consequences of unlicensed activity, serve as a basis for the instant action and are, inter alia, a consideration of the Petitioner in determining the penalty sought herein. 18. Unlicensed laboratory testing is testing without Agency oversight and may result in substandard laboratory protocols and results which place the health and welfare of Respondent’s patients in danger. 19. The violation alleged herein constitutes a deficiency, and warrants a fine of $413,000. WHEREFORE, AHCA demands the following relief: 1. Enter factual and legal findings as set forth in the allegations of this administrative complaint. 2. Impose a fine in the amount of $413,000. CLAIM FOR RELIEF WHEREFORE, the Petitioner, State of Florida Agency for Health Care Administration requests the following relief: 1. Make factual and legal findings in favor of the Agency on Count I. 2. Impose upon Community Healthcare Center of Pensacola, Inc. an administrative fine in the amount of $413,000 for the violation cited above. 3. Grant such other relief as the court deems is just and proper. Respondent is notified that it has a right to request an administrative hearing pursuant to Section 120.569, Florida Statutes (2008). Specific options for administrative action are set out in the attached Election of Rights (one page) and explained in the attached Explanation of Rights (one page). All requests for hearing shall be made to the Agency for Health Care Administration, and delivered to the Agency for Health Care Administration, Building 3, MSC #3, 2727 Mahan Drive, Tallahassee, Florida 32308; Michael O. Mathis, Senior Attorney. RESPONDENT IS FURTHER NOTIFED THAT THE FAILURE TO REQUEST A HEARING WITHIN 21 DAYS OF RECEIPT OF THIS COMPLAINT WILL REASULT IN AN ADMISSION OF THE FACTS ALLEGED IN THE COMPLAINT AND THE ENTRY OF A FINAL ORDER BY THE AGENCY. Florida. Michael O. Mathis Fla. Bar. No. 0325570 Counsel of Petitioner, Agency for Health Care Administration . Bldg. 3, MSC #3 2727 Mahan Drive Tallahassee, Florida 32308 (850) 922-5873 (office) (850) 921-0158 (fax) CERTIFICATE OF SERVICE L HEREBY CERTIFY, that a true and correct copy of the foregoing has been served by certified mail on pat day of ark , 2009 to Warren Do Taylor, Administrator, Community Healthcare Center of Pensacola, Inc., 6770 North Ninth Avenue, Pensacola, Florida 32504. Michael O. Mathis, Esq. STATE OF FLORIDA : AGENCY FOR HEALTH CARE ADMINIS: RATION RE: Case Name: COMMUNITY HEALTHCARE CENTER OF PENSACOLA, INC. CASE NO: 2009001632 ELECTION OF RIGHTS This Election of Rights form is attached to a proposed administrative action by the Agency for Health Care Administration (AHCA). The title may be Notice of Intent to Deny, Notice of Intent to Impose a Late Fee, Notice of Intent to Impose a Late Fine, Administrative Complaint, or some other notice of intended action by AHCA. An Election of Rights must be returned by mail or by fax within 21 days of the day you receive the attached Notice of Intent to Deny, Notice of Intent to Impose a Late Fee, Notice of Intent to Impose a Late Fine, Administrative Complaint or any other proposed action by AHCA. If an election of rights with your selected option is not received by AHCA within twenty-one (21) days from the date you received a notice of proposed action by AHCA, you will have given up your right to contest the Agency’s proposed action and a final order will be issued. PLEASE RETURN YOUR ELECTION OF RIGHTS TO: Agency for Health Care Administration Attention: Agency Clerk 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florida 32308. Phone: 850-922-5873 Fax: 850-921-0158. PLEASE SELECT ONLY 1 OF THESE 3 OPTIONS OPTION ONE (1) I admit to the allegations of facts and law contained in the Notice of Intent to Deny, the Notice of Intent to Levy a Late Fee, the Notice of Intent to Levy a Late Fine, the Administrative Complaint, or other notice of intended action by AHCA and I waive my right to object or to have a hearing. | understand that by giving up my right to a hearing, a final order will be issued that adopts the proposed agency action and imposes the penalty, fine or action. OPTION TWO (2) I admit to the allegations of facts contained in the Notice of Intent to Deny, the Notice of Intent to Levy a Late Fee, the Notice of Intent to Levy a Late . Fine, the Administrative Complaint, or other proposed action by AHCA, but I wish to be heard at an informal proceeding (pursuant to Section 120.57(2), Florida Statutes) where I may submit testimony and written evidence to the Agency to show that the proposed administrative action is too severe or that the fine should be reduced. OPTION THREE (3)___ I do dispute the allegations of fact contained in the Notice of Intent to Deny, the Notice of Intent to Levy a Late Fee, the Notice of Intent to Levy a Late Fine, the Administrative Complaint, or other proposed action by AHCA, and I request a formal hearing (pursuant to Section 120.57(1), Florida Statutes (2006) before an Administrative Law Judge appointed by the Division of Administrative Hearings. PLEASE NOTE: Choo ; OPTION THREE (3), by itself, i ‘OT sufficient to obtain a formal hearing. You musi file a written petition in order to obt. «a formal hearing before the ‘Division of Administrative Hearings under Section 120.57(1), Florida Statutes. It must be received by the Agency Clerk at the address above within 21 days of receipt of this proposed administrative action. The request for formal hearing must conform to the requirements of Rule 28-106.201, Florida Administrative Code, which requires that it contain: 1. The name and address of each agency affected and each agency’s file or identification number, if known; 2. Your name, address, and telephone number, and the name, address, and telephone number of your representative or lawyer, if any; 3. An explanation of how your substantial interests will be affected by the Agency’s proposed action; 4. A statement of when and how you received notice of the Agency’s proposed action; ; 5. A statement of all disputed issues of material fact. If there are none, you must state that there are none; . 6. A concise statement of the ultimate facts alleged, including the specific facts you contend warrant reversal or modification of the Agency’s proposed action; 7. A statement of the specific rules or statutes you claim require reversal or modification of the Agency’s proposed action; and 8. A statement of the relief you are seeking, stating exactly what action you wish the Agency to take with respect to its proposed action. Mediation under Section 120.573, Florida Statutes, may be available in this matter if the Agency agrees. Facility type: (ALF? nursing home? medical equipment? Other type?) Facility Name: License number: Contact person(or attorney or representative): Name Title Address: ; Street and number City Zip Code Telephone No. ; Fax No. Email Signed: Date: NOTE: If your facility is owned or operated by a business entity (corporation, LLC, etc.) please include a written statement from one of the officers or managers that you are the authorized representative. If you are one of the managers or officers, please state which office you hold. ‘Entity name: Name of office you hold: You, your attorney or representative may reply according Subsection 120.54 Florida Statutes (2006) and Rule 28, Florida Administrative Code or you may use this recommended form. Lee teoF 70d FLORIDA AGENCY FOR HEALTH CARE ADMINISTRATION RN on T Better Health Care for all Floridians Oana N July 9, 2009 CERTIFIED MAIL / RETURN RECEIPT REQUESTED WARREN TAYLOR MD COMMUNITY HEALTHCARE CTR OF PENSACOLA INC LICENSE NUMBER: 800003116 6770 NORTH NINTH AVENUE PENSACOLA, FL 32504-7346 CASE #: 2009007700 NOTICE OF INTENT TO DEEM APPLICATION INCOMPLETE AND WITHDRAWN FROM FURTHER REVIEW Your application for license RENEWAL is deemed incomplete and withdrawn from further consideration pursuant to Section 408.806(3)(b), Florida Statutes, which states that “Requested information omitted from an application for licensure, license renewal, or change of ownership, other than an inspection, must be filed with the agency within 21 days after the agency’s request for omitted information or the application shall be deemed incomplete and shall be withdrawn from further consideration and the fees shall be forfeited’’. You were notified by correspondence dated June 05, 2009 to provide further information addressing identified apparent errors or omissions within twenty-one days from the receipt of the Agency’s correspondence. Our records indicate you received this correspondence by certified mail on June 09, 2009. As this requested information was not timely received by the Agency, your application is deemed incomplete and withdrawn from further consideration. The outstanding issues remaining for licensure are: Failure to submit upon written request: e Health Care Licensing Application Addendum with ownership information in Section 2A. EXPLANATION OF RIGHTS Pursuant to Section 120.569, F.S., you have the right to request an administrative hearing. In order to obtain a formal proceeding before the Division of Administrative Hearings under Section 120.57(1), F.S., your request for an administrative hearing must conform to the requirements in Section 28-106.201, Florida Administrative Code (F.A.C), and must state the material facts you dispute. ECTION AND EXPLANATION OF RIGHTS FORMS. Karen Rivera, Manager — . Laboratory Licensure Unit Certified Article Number 7460 3901 9848 4334 8301 SENDERS. RECORD cc: Agency Clerk, Mail Stop 3 Legal Intake Unit, Mail Stop 3 2727 Mahan Drive,MS#32 Tallahassee, Florida 32308 h EXHIBIT STATE OF FLORIDA AGENCY FOR HEALTH CARE ADMINISTRATION STATE OF FLORIDA, AGENCY FOR DOAH No. 09-3585 HEALTH CARE ADMINISTRATION, Petitioner, vs. AHCA No. 2009001632 COMMUNITY HEALTHCARE CENTER OF PENSACOLA, INC., Respondent. COMMUNITY HEALTHCARE CENTER OF PENSACOLA, INC., Petitioner, vs. AHCA No. 2009007700 STATE OF FLORIDA, AGENCY FOR HEALTH CARE ADMINISTRATION, Respondent. / SETTLEMENT AGREEMENT The State of Florida, Agency for Health Care Administration (“the Agency”), and the licensee/applicant, Community Healthcare Center of Pensacola, Inc. (“the Provider”), pursuant to Section 120.57(4), Florida Statutes, enter into this Settlement Agreement (“Agreement”) and agree as follows: WHEREAS, the Provider is a licensed abortion clinic pursuant to Chapter 408, Part II, Chapter 390, Florida Statutes, and Chapter 59A-9, Florida Administrative Code, and is also an applicant for clinical laboratory licensure pursuant to Chapter 408, Part II, Chapter 483, Part I, Florida Statutes, and Chapter 59A-7, Florida Administrative Code; and WHEREAS, the Agency has jurisdiction by virtue of being the licensiy EXHIBIT Page 1 of 5 authority over the Provider pursuant to the above referenced provisions of law; and WHEREAS, the Agency served an Administrative Complaint dated June 12, 2009, on the Provider; and WHEREAS, the Agency served a Notice of Intent to Deem Application Incomplete and Withdrawn from Further Review (“NOIW”) dated July 9, 2009, on the Provider; and WHEREAS, the parties have agreed that a fair, efficient, and cost effective resolution of this dispute would avoid the expenditure of substantial sums to litigate the dispute; and WHEREAS, the parties have negotiated in good faith and agreed that the best interest of all the parties will be served by a settlement of this proceeding; NOW THEREFORE, in consideration of the mutual promises and recitals herein, the parties intending to be legally bound, agree as follows: 1. All recitals are true and correct, are incorporated into the Agreement and are binding findings of the parties. 2. Upon full execution of this Agreement, the Provider agrees to waive any and all appeals and proceedings to which it may be entitled including, but not limited to, an informal proceeding under Subsection 120.57(2), Florida Statutes, a formal proceeding under Subsection 120.57(1), Florida Statutes, appeals under Section 120.68, Florida Statutes; and declaratory and all writs of relief in any court or quasi-court (DOAH) of competent jurisdiction; and agrees to waive compliance with the form of the Final Order (findings of fact and conclusions of law) to which it may be entitled, provided, however, that no agreement herein shall be deemed a waiver by either party of its right to judicial enforcement of this Agreement. 3. Upon full execution of this Agreement, the Agency agrees to voluntarily dismiss the Administrative Complaint against the Provider with prejudice foregoing the administrative fine sought to be imposed against the Provider in its entirety, and the Provider agrees to: (1) the Page 2 of 5 voluntarily relinquishment of its abortion clinic license (License No. 821) and closure of the abortion clinic effective on or before October 31, 2009, (2) the surrender of the license certificate to the Agency at “Hospital and Outpatient Unit, Agency for Health Care Administration, 2727 Mahan Drive, MS #31, Tallahassee, Florida 32308” immediately upon the discontinuance of the operation of its clinic, (3) the withdrawal of its petition for formal hearing with regard to the pending Administrative Complaint, and (4) the withdrawal of its initial application for clinical laboratory licensure which is the subject of the NOIW. As part of the closure of its clinic, the Provider recognizes that it must comply with all statutes and rules regarding its closure, including but not limited to, Section 408.810 and Section 456.057, Florida Statutes. Until the license is voluntarily relinquished, the Provider recognizes that it must comply with all statutes and rules required by its licensure, including but not limited to, the reporting requirements under Section 390.0112, Florida Statutes, and Rule 59A-9.034, Florida Administrative Code. The Provider agrees to submit a final report for the final month or partial final month of operation, and if unable to do so through the Agency’s on-line system, may do so by United States mail at the above-referenced address. 4. Venue for any action brought to interpret, enforce or challenge the terms of this Agreement and its corresponding Final Order shall lie solely in the Circuit Court of Florida, in and for Leon County, Florida. 5. By executing this Agreement, the Provider does not admit the allegations raised in the Administrative Complaint and NOIW, but recognizes that the Agency continues in good faith to assert these allegations. 6. Upon full execution of this Agreement, the Agency shall enter a Final Order adopting and incorporating the terms of this Agreement and closing the above-styled cases. 7. Each party shall bear its own costs and attorney’s fees. Page 3 of 5 8. This Agreement shall become effective on the date upon which it is fully executed by all parties. 9. The Provider, for itself and any controlling interests, parent corporations, subsidiary corporations, successors, transferees, and any related entities, discharges the State of Florida, Agency for Health Care Administration, and its agents, representatives, and attorneys of and from all claims, demands, actions, causes of action, suits, damages, losses, and expenses, of any and every nature whatsoever, arising out of or in any way related to this matter and the Agency’s actions, including, but not limited to, any claims that were or may be asserted in any federal court, state court or administrative forum, including any claims arising out of this Agreement, by or on behalf of the Provider. 10. This Agreement is binding upon all parties and those identified in the above paragraph of this Agreement. 11. In the event that the Provider was a Medicaid provider at the time of the occurrences alleged in the administrative complaint, this Agreement does not prevent the Agency from seeking Medicaid overpayments related to the subject issues or from imposing any further sanctions pursuant to Rule 59G-9.070, Florida Administrative Code. 12, The undersigned have read and understand this Agreement and have the authority to bind their respective principals to it. The Provider’s representative has the legal capacity to execute the Agreement and has consulted with independent counsel. The Provider understands that counsel for the Agency represents solely the Agency and that counsel for the Agency has not provided any legal advice to, or influenced, the Provider in its decision to enter into the Agreement. 13. This Agreement contains and incorporates the entire understandings of the parties. This Agreement supersedes any prior oral or written agreements between the parties. This Page 4 of 5 Agreement may not be amended or supplemented except in writing. Any attempted assignment of this Agreement shall be void. 14. All parties agree that a facsimile signature suffices for an original signature. The following representatives acknowledge that they are duly authorized to enter into this Agreement. Elizabeth Deputy Se Agency for Health Care Administration Community Healthcare Center of Pensacola 2727 Mahan Drive, Bldg. #1 6770 North Ninth Avenue Tallahassee, Florida 32308 Pensacola, Florida 32504 DATED: Mf 7 2007 DATED: w\ | 04 COoUNAL 0 Grmun Reronice ht or nn : . Andrew T. Lavin, Esquj Office of the General Counsel Navon & Lavin, P.A. Agency for Health Care Administration Emerald Park Office Center 2727 Mahan Drive, Mail Stop #3 2699 Stirling Road, Suite B-100 Fort Lauderdale, Florida 33312 DATED: u/ 19]04 DATED: “4 Thomas M. Hoeler, Senior Attorney Office of the General Counsel Agency for Health Care Administration 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florig& 32708 DATED: Page 5 of 5
Conclusions THE PARTIES resolved all disputed issues and executed a Settlement Agreement. The parties are directed to comply with the terms of the attached settlement agreement. Based on the foregoing, this file is CLOSED. DONE and ORDERED on this the A Lay of Yk, , 2014, in Tallahassee, Florida. Agency for Health Care Administration 1 AHCA vs. MEHUL SHAH, M.D., P.A. d/b/a ANCHOR MEDICAL GROUP .., C.L. 12-0496-000 Final Order Filed November 3, 2014 4:27 PM Division of Administrative Hearings A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO A JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. Copies furnished to: Robert Antonie Milne, Esq., Assistant Attorney General Florida Bar No.: 622338 Office of the Attorney General The Capitol, Suite PL-01 Tallahassee, Florida 32399-1050 Telephone: (850) 414-3713 Facsimile: (850) 922-6425 Robert.Milne@myfloridalegal.com Richard M. Hanchett, Esq., Attorney for Respondent Florida Bar No.: 709212 Trenam Kemker, Scharf, Barkin, Frye, O’Neill & Mullis, P.A. Bank of America Plaza, Suite 2700, 101 E. Kennedy Boulevard, Tampa Florida 33602 Telephone (813) 223-7474 Facsimile (813) 229-6553 RHanchette@trenam.com Kelly Bennett, Chief Medicaid Program Integrity Finance and Accounting Health Quality Assurance Florida Department of Health 2 AHCA vs. MEHUL SHAH, M.D., P.A. d/b/a ANCHOR MEDICAL GROUP ., C.l. 12-0496-000 Final Order CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished to the above named addressees by U.S. Mail or other designated method on this the 27 ey of Axe 14. Richard J. Shoop, Esquiré Agency Clerk State of Florida Agency for Health Care Administration 2727 Mahan Drive, MS #3 Tallahassee, Florida 32308-5403 (850) 412-3630/FAX (850) 921-0158 3 AHCA vs. MEHUL SHAH, M.D., P.A. d/b/a ANCHOR MEDICAL GROUP ., C.1. 12-0496-000 Final Order
The Issue Whether the application of Wuesthoff Memorial Hospital, Inc. (CON 8740) for a 50-bed general acute care hospital in South Brevard County should be granted?
Findings Of Fact The Parties Wuesthoff The applicant for CON 8740 is Wuesthoff Memorial Hospital, Inc., a Florida not-for-profit corporation. Wuesthoff operates a general acute care hospital (the "Hospital" or the "Rockledge campus") in Rockledge, Florida. According to the division of the county into three areas (north, central, and south) ascribed to by Wuesthoff, Rockledge is in Central Brevard County. Wuesthoff's parent corporation is a not-for-profit corporation, Wuesthoff Health Systems, Inc. (the "Wuesthoff System"). The Wuesthoff System operates health care providers across the health care spectrum. Among the entities controlled by the Wuesthoff System is Wuesthoff Health Services, Inc., which operates a home health agency, a hospice, a durable medical equipment service and a 114-bed skilled nursing facility. The Wuesthoff Foundation, responsible for fundraising activities for all components of the Wuesthoff System and Care Span, a medical services organization which owns and operates physician practices, are also under the umbrella of the Wuesthoff System. The health care system operated by the Wuesthoff System serves residents in and around Brevard County and, to a limited extent, beyond. Examples of its service throughout Brevard County are the hospice, the durable medical equipment-company, and a reference laboratory. The hospice, for example, is licensed and serves all of Brevard County. The reference laboratory, located in Viera, provides services throughout Broward County and to other counties in Florida. The Wuesthoff System also owns a mobile health unit that travels throughout the county to provide health care services. The Wuesthoff System owns two outpatient clinics or "broad based diagnostic clinics" (Tr. 98) in Brevard County. One is on Merritt Island; the other is located in Sun Tree. Home health services are provided from a base of three different offices in the county. Similar to some of the other services offered by Wuesthoff, its home health services are provided throughout the county. Although it draws patients from throughout the county, most of Wuesthoff's hospital admissions come from Central Brevard County where the Hospital is located. If one defines "Central Brevard County" to include Port St. John and Sun Tree Viera, the sites of the northernmost and southernmost physician practices owned or operated by Care Span, then all of the practices in the Wuesthoff System are within Central Brevard County. Ownership of these practices does not restrict the physicians in them from referring patients for treatment outside the Wuesthoff System. But consolidation of the various services offered by the practices (diagnostic and radiology services, for example) enables Wuesthoff to strengthen its presence in Central Brevard County. The result is "additional volume" (Tr. 164) for the Hospital. The Hospital contains 268 acute care beds, 30 psychiatric beds, and five hospice beds, for a total of 303 beds. (It also contains 10 Level II Neonatal Intensive Care Unit beds.) If the project subject to CON review in this proceeding is ultimately approved, 100 of these beds will be de-licensed, leaving a 203-bed facility. HRMC Holmes Regional Medical Center ("HRMC") is a 528-bed regional, not-for-profit hospital, headquartered in Melbourne, Florida, operating on two acute care campuses under a single hospital license. One campus is the site of a 428-bed tertiary care facility in Melbourne; the other is a 60-bed general acute care community hospital in Palm Bay. Both facilities are in the southern portion of Brevard County. In addition to the 428 general medical and pediatric beds operated at the Melbourne facility, HRMC operates there a 10-bed Level II neonatal intensive care unit. HRMC is accredited by the Joint Commission for Accreditation on Health Care Organizations ("JCAHO"). It operates the only hospice program in the county accredited with commendation by the JCAHO; the only comprehensive community cancer program that has been accredited by the American College of Surgeons; the only American Sleep Disorders Association accredited sleep lab; the only American College of Radiology accredited respiratory therapist department; the only certified pulmonary function lab; and, the only life flight helicopter in Brevard County for hospital transports. As a regional medical center, HRMC provides open heart surgery, tertiary, orthopedic and neurosurgical referrals through a seven-county area, and provides trauma support for the central and south central Atlantic Coast in the State of Florida. It is the only designated trauma center in Brevard County. HRMC was founded 60 years ago by the community and has been a not-for-profit, community-based hospital ever since. The mission of HRMC is to improve, regardless of ability to pay, the health status of every member of the community through collaborative and cooperative agreements with other organizations and agencies it its service area. To represent the community's interests, HRMC's Board is composed of community leaders, educators, and employers. HRMC plays an active role in the community. The program denominated HOPE (Health Outreach Production and Education) is a collaborative effort by the Brevard County Public Health Unit, the American Cancer Society, the School Board, the County Commission and HRMC to solve community health problems. There are currently nine HOPE sites, and three HOPE centers. Among the purposes of the HOPE sites and centers is meeting the unique needs of children with developmental disabilities. Cape Canaveral Hospital, Health First and HFHP Cape Canaveral Hospital, Inc. ("CCH") is the licenseholder for a 150-bed hospital approximately five miles east of Wuesthoff in Cocoa Beach, Florida. Like Wuesthoff, Cocoa Beach is located in Central Brevard County. In August of 1995, HRMC entered into an agreement with CCH to create Health First, Inc. The presidents/chief operating officers of HRMC and CCH are employees of Health First. Similar to the Wuesthoff System, Health First controls the operations of its hospital facilities (HRMC and CCH) and owns and operates physician practices, health clinics, a home health agency, a hospice, and a skilled nursing facility. Health First is the sole shareholder of a Florida not- for-profit corporation known as Health First Health Plans, Inc. ("HFHP"). HFHP is the largest managed care organization in Brevard County operating both a traditional health maintenance organization ("HMO") and a Medicare HMO. Other Nearby Hospitals Parrish Medical Center, operated by a statutorily created tax district, is located in Titusville. If the county is considered to contain three distinct areas (north, central, and south) as proposed by Wuesthoff, Parrish is the only hospital in North Brevard County. Sebastian River Medical Center is located in Indian River County, south of Brevard County. Located in a relatively rural area, it is a small hospital. It provides no tertiary services. It draws some patients from South Brevard County. These patients would otherwise in all probability seek hospital services from a Brevard County hospital. Second Attempt by Wuesthoff Wuesthoff's CON application seeks to establish a new 50-bed general acute care hospital in South Brevard County. This is not the first time Wuesthoff has attempted to obtain such a CON. It applied earlier in CON 8597 for a 50-bed hospital in South Brevard County. In the first attempt, the Agency preliminarily denied the application. Wuesthoff petitioned for a formal administrative hearing. Following receipt of a Recommended Order entered in DOAH Case No. 97-0389 that CON 8597 be denied, Wuesthoff withdrew its application and dismissed its petition for a formal administrative hearing. The Agency entered a "final order" closing its file and dismissing Wuesthoff's petition in light of the application's withdrawal. (Legal proceedings which followed issuance of the order are briefly described in the Preliminary Statement of this Recommended Order.) No New Beds in the Subdistrict Proposed by the Application By the application subject to this proceeding, Wuesthoff does not propose the addition of new beds to Brevard County (the acute care subdistrict at issue, designated by the Agency as Subdistrict 7-1.) In fact, because of Wuesthoff's commitment to delicense 100 beds as a condition of the approval of its application, the granting of the application will result in a net loss of 50 hospital beds in the subdistrict. "[F]ixed need pool[s] only appl[y] to the addition of new beds to a subdistrict." (Tr. 3468). That the fixed need pool resulted in a published need of zero for general acute care hospital beds for the batching cycle in which Wuesthoff's application was filed, therefore, has "no bearing" (Id.) on the issues in this proceeding. For the same reason (that granting Wuesthoff's application will not result in the addition of new general acute care beds in the district) the applicant is not required to prove the existence of "not normal circumstances" to overcome any presumption created by the calculation of the fixed need pool as zero. The Proposed Project The site of the proposed hospital, 43 acres purchased by Wuesthoff for approximately $2.5 million, is on Wickham Road in the city of Melbourne. Twenty of the 43 acres will be devoted to a medical complex of which the 50-bed hospital will be a part. The complex will be "one building that has three very definite components." (Tr. 83). The three components are "an ambulatory and diagnostic center" (Id.), a medical office building, and the 50-bed hospital. The diagnostic center is CON- exempt and the medical office building has been issued a certificate-of-need. Although committed to construct the diagnostic facility and the medical office building at least since March of 1997, at the time of hearing, no construction permits for the property had been obtained nor had any activity on the two components been commenced. Nonetheless, Wuesthoff remains committed toward construction of the diagnostic center and the office building regardless of the outcome in this proceeding. Although the proposed hospital will not provide tertiary services, it will provide all services typically provided in a community hospital. These include obstetrics, pediatrics, and emergency services in a 24-hour emergency department. The services to be offered will not be unique in the subdistrict; all are presently available in the community. In other words, the services to be offered will duplicate services presently offered by existing providers. The estimated cost of the 50-bed hospital proposed in CON 8740 is $38,512,961, a cost that, in the case of a not-for- profit hospital, will ultimately be born by the public "one way or another." (Tr. 2402.) Wuesthoff's application included projections of revenues and expenses attributable to the proposal for the proposed construction period and the first two years of operation. It also included, as required, audited financial statements for two years and a listing of all Wuesthoff's capital projects planned, pending or underway at the time of the filing of the application. A Purpose of CON Law One of the purposes of CON review of an application for a new hospital is "to limit unnecessary, costly duplication of services that are available at other hospitals . . . at least where those services are being provided at reasonable costs." (Tr. 2401-02). Preliminary Agency Action Initially, AHCA Staff intended to recommend denial of Wuesthoff's application. After a meeting with the Director of AHCA, the decision was made to approve the application. The most important factor weighing in favor or approval was one related to competition and costs of hospital services to the ultimate consumer of the services, "[n]amely that . . . large HMO providers have no access to [HRMC] . . . or have been unable to get contractual relationships with [HRMC]." HRMC No. 75, p. 20. The meeting with the Director clarified the Agency's priorities. On July 11, 1997, AHCA issued its State Agency Action Report ("SAAR") containing its determination that the application should be approved. This proceeding was initiated on August 15, 1997, when HRMC filed its Petition for Formal Administrative Hearing on August 15, 1997, in order to challenge the Agency's decision. Need in Relation to the District Health Plan: Section 408.035(1)(a), F.S. The portion of the District 7 Local Health Plan governing the transfer of existing beds includes five parts. Preference is given to applicants that provide documentation of compliance with the five parts. The first part addresses need in the service area proposed to receive the beds. In addressing specific populations, access is one of the considerations. There was no published need for beds to be provided if the application is granted. "[A]t the time the application was filed the Agency's formula showed in excess of 342 beds. [At the time of hearing], the current formula shows an excess of 333 acute care beds for Brevard County." (Tr. 3385). There are no barriers (such as geographic barriers) typically associated with access to acute care services in the subdistrict. Every resident of Brevard County has access to a general acute care hospital within a drive time of 30 minutes usually and 40 minutes at the most. In South Brevard County, Holmes Regional at its two campuses provides high quality inpatient care and excellent medical services. Wuesthoff's hospital in Central Brevard County and Sebastian Medical Center in the adjacent county to the south also serve some of the residents of South Brevard County. Wuesthoff does not receive preference under the first part of the district plan applicable to this proceeding. The second part of the local health plan applicable to this proceeding governs impact to the parent facility including projected occupancy declines, curtailing of service effect on operating cost, use of vacated space at the main campus and charge changes. "[T]here would be minimal utilization decline at the Rockledge facility tied to some redirection of patients from Rockledge to south Brevard." (Tr. 1222). The space that will be vacated will be reused. Wuesthoff receives preference under this part of the district plan. The third part calls for documentation of improvement of access by at least 25 minutes to at least 10% of the population or a minimum of at least 35,000 people. While Wuesthoff's proposal will provide a competitive alternative to substantially more than 10% of the population of South Brevard County, a number in excess of 35,000 people, access to acute care hospital services is presently satisfactory in South Brevard County. Wuesthoff does not receive any preference under this part of the plan. The fourth part relates to the commitment of the applicant to the provision of charity care and care to the medically indigent. Wuesthoff meets this preference based on its commitment that 15% of the discharges from the proposed facility will be Medicaid and charity care. The fifth part addresses the applicant's participation in indigent care programs in the county. Wuesthoff participates in a significant number of community benefit and outreach programs that meet the concerns of this part: There is the We Care Program, . . . a distributed medical access point . . . [and]. . . the United Order of True Sisters, . . .a service group which Wuesthoff supports. Wuesthoff works with a CMS program to provide baby and young children support services. Wuesthoff was involved with the development of the Children's Advocacy Center . . . a community-based program. It's a participant in the Health Start Coalition. And Wuesthoff has also sponsored its own mobile health program with a specific focus and purpose to provide care to [the indigent]. (Tr. 1225). Wuesthoff clearly meets this preference. On balance, despite the lack of an access problem for residents of the subdistrict, Wuesthoff meets the need criteria identified in the applicable portion of the district plan. The Availability, Quality of Care, Efficiency, Appropriateness, Accessibility, Extent of Utilization, and Adequacy of Like and Existing Health Care Services in the Service District: Section 408.035(1)(b),F.S. There is an excess of capacity in acute care beds in Brevard County. Despite an increase in population from 1993 to 1997 of about 2% per year overall and about 3.5% per year in the populace over 65 years of age, the use rate of hospital services declined. In 1993, the use rate was 600 acute care patient days per thousand population. In 1997, the rate was 484 acute care patients per thousand. The occupancy rates for Brevard County hospitals, despite the population increase, is also trending downward. In 1990, overall occupancy of hospital beds in Brevard County was 63%. In 1997, it was approximately 53%. This is due to a number of factors. Managed care penetration has increased; managed care exerts influence to hold down admissions and inpatient days; and there has also been a shift from inpatient surgical procedures to outpatient surgical procedures. The SunTree/Viera area, mid-way between Wuesthoff and Holmes Regional, is the most rapidly growing area of its size in Brevard County. As opposed to areas south of the SunTree/Viera area, where the overwhelming majority of patients use Holmes Regional for hospital services, the SunTree/Viera area is subject to active competition between Wuesthoff and HRMC for patients. Holmes Regional has been shown to be a consistent low charge provider operating within the expected range of outcomes. Furthermore, HRMC has performed as one of the top five hospitals in Florida in reducing overall Cesarean-Section births and increasing vaginal births after Cesarean ("VBAC"). This is important because "unnecessary Cesarean Section presents a real risk for both the mom and the baby . . . [and] the cost to the State for Cesarean Sections performed when vaginal birth would be a desirable alternative added about $3,000 per delivery to the State funded [deliveries]." (HRMC No. 77, p. 1091). Holmes Regional has had the lowest Cesarean Section rate in the county and the highest VBAC rate in the County. The construction of the proposed facility would not significantly increase access to hospital services for Brevard County patients. Holmes Regional delivers the majority of Medicaid babies in the county and is also a contract provider for Children's Medical Services. Ten years ago or so, in recognition of a substantial portion of the population in Brevard County without health insurance, Holmes Regional collaborated with the school board, the public health unit, civic organizations and others to create two school-based community health clinics. "[T]argeted at young families and children" (HRMC No. 77, p. 1063), the clinics provide pro bono health care services. The collaboration was the genesis of the HOPE program. The HOPE program's agenda was expanded to include a mobile clinic to reach those in need of pro bono services who were without transportation to the school-based clinics. The agenda was again enlarged to provide integrated services for children with developmental and cognitive disabilities and delays. Holmes Regional provides direct funding of approximately $1.5 million per year through operational costs of the HOPE program. Holmes Regional not only provides funding to HOPE but it subsidizes salaries of nurses, midwives, and obstetricians directly employed by the Public Health Unit, whose duties include the provision of medical care to the indigent. Dr. Manuel Garcia, Medical Director of the Public Health Unit in Brevard County for over 20 years until his retirement in 1998 offered the following in his testimony in the hearing before Administrative Law Judge Johnston (admitted into evidence in this proceeding as HRMC No. 65) about Holmes Regional's support of the Public Health Unit: "Holmes has always been willing to go the extra mile to help the Health Department with other programs and activities." HRMC No. 65, p. 1211. With regard to the question of which hospital "in Brevard County sets the pace in providing indigent care" (Id.) Dr. Garcia answered: ll the hospitals do a pretty good job . . . [t]here is no doubt that Holmes has been more aggressive in terms of getting into the community to kind of use all the resources available and putting together different organizations and agencies in order to provide more services to the poor in the community. They have been going the extra mile . . . (HRMC Ex. No. 65, pgs. 1211, 1212.) Holmes Regional's efforts in support of the Public Health Unit have continued following Dr. Garcia's tenure. At the same time, "it is true" (Tr. 274) that Wuesthoff, Cape Canaveral, and Parrish Medical Center all "go the extra mile in providing services to the patients that come through the health department." (Id.) Holmes Regional works with the Brevard County Public Health Unit, whose duties include provision of medical care to the poor and indigent patients in the county to develop a better system for giving prenatal care to Medicaid and indigent mothers. In 1998, HRMC provided $10 million of free charity for indigent patients not admitted through HOPE. General community donations and contributions totaled $542,000 and in-kind contributions totaled $714,000. The HOPE program, funded entirely by Holmes Regional, paid $1.1 million in clinical services for staff, pharmacy, services, and supplies to operate its clinics. In addition to these direct dollars, HRMC contributed 2.1 million in uncompensated services to the HOPE program in 1998. The HOPE program has been honored for ground-breaking work in community health improvement and for improving life in Florida through the American Hospital Association's Nova Award and the Heartland Award from the Governor of Florida. Holmes Regional supports a variety of agencies to provide care to AIDS patients. One such clinic is the Comprehensive Health Clinic. In existence since 1991, it currently treats 400 AIDS patients. Its services are mostly paid for through federal programs. Without the assistance of HRMC, the clinic would not be able to provide the quality of services it offers these AIDS patients. Holmes Regional is involved with several children's health programs, including a Healthy Families Program providing in-kind screening assessment. Health Kids Plan subscribers are provided access to managed care insurance products by Health First Health Plans, the managed care company affiliated with Holmes Regional through its parent, Health First, Inc. The company loses "hundreds of thousands of dollars" (Tr. 2108) on the Health Kids segment of its business. There was no evidence presented that persons in need of quality, general acute care services are not able to obtain those services at existing providers in Brevard County. There is no lack of availability or access to general acute care services on either geographic or financial grounds. The ability of the applicant to provide quality of care and the Applicant's Record of Providing Quality of Care: Section 408.035(1)(c), F.S. Wuesthoff is capable of providing quality inpatient health care services and has done so in the past. The Availability and Adequacy of Other Health Care Facilities in the District which may serve as Alternatives to the Health Care Facilities and Health Services to be Provided by the Applicant: Section 408.035(1)(d), F.S. There are available alternatives to the inpatient services proposed by Wuesthoff. The existing providers of acute care services have excess capacity to absorb any increase in the utilization of acute care services in the county. Utilization of the services Wuesthoff proposes, moreover, have been in decline in relation to the earlier part of the decade of the nineties. From 1993 to 1997, inpatient surgery procedures conducted in Brevard County declined approximately 18.8%, a trend consistent with the statewide trend. In 1998, "the number of inpatient procedures pretty much level[ed] off." (Tr. 3410). In contrast, the number of outpatient procedures in the county rose in 1997 from the number conducted in 1993. For each year in the same time period, the number of outpatient surgical procedures conducted in the county far exceeded the number of inpatient ones. In 1997, for example, there were more than twice as many outpatient procedures as inpatient. The move toward outpatient procedures is the result of health care providers seeking alternatives to hospitalization. Among the alternatives in the case of surgical procedures are the provision of those procedures on an outpatient basis performed in physician offices and ambulatory surgical centers. There has been a decline in Brevard County in utilization of other services Wuesthoff proposes for its 50-bed hospital. During the period of 1993-1997, while the population of Brevard County was growing at a rate in excess of 2% per year, obstetric admissions as a percentage of admissions to Brevard hospitals declined. Pediatric admissions did likewise. Not surprisingly, therefore, there is excess capacity for pediatric and obstetrical beds in Brevard County. With 66 reported available beds in Brevard County, the average daily census is about 34 beds. The average daily census for the 86 pediatric beds in the county is about 32 to 35. At the time of hearing, available data for 1998 showed a continued decline in pediatric bed demand and "[b]ased on the annualized data . . . a very slight increase" (Tr. 3402) in obstetric bed demand. The excess capacity demonstrated for the period from 1993 through 1997 remains. Although alternatives are available, they are not adequate for one reason. That reason is a competitive problem which exists in South Brevard County, discussed in Findings of Fact Nos. 91-107, below. Probable Economies and Improvements in Service that May be Derived from Operation of Joint, Cooperative, or Shared Health Care Resources: Section 408.035(1)(e), F.S. Wuesthoff does not propose its new hospital operate a joint, cooperative, or shared program with any entity except its Rockledge facility. It proposes the sharing of resources with its main facility in Rockledge. "The services that are being proposed for the South Brevard hospital [the proposed hospital] are a subset of what's there now." (Tr. 1257). The proposed services, therefore, are a duplication of existing services. There are some economies of scale and benefits enjoyed by a second campus of a hospital by virtue of the first hospital's existence, but generally, it is less efficient for a hospital to operate two campuses. The Need in the Service District for Special Equipment and Services which are not Reasonably and Economically Accessible in Adjoining Areas: Section 408.035(1)(f), F.S. Wuesthoff does not intend to provide equipment that is not available within the county or in adjacent districts. The Need for Research and Educational Facilities, Health Care Practitioners, and Doctors of Osteopathy and Medicine at the Student, Internship and Residency Training Levels: Section 408.035(1)(g), F.S. This need is met in Brevard County. The Brevard County hospitals are active in community training programs in conjunction with Brevard County Community Hospital and the University of Florida. Holmes Regional has institutional training programs with the University of Florida, All Children's Hospital, the local vo-tech, and the University of Central Florida, in addition to other community programs. Immediate and Long-term Financial Feasibility of the Proposal: Section 408.035(1)(i), F.S. a. Immediate Financial Feasibility. Immediate financial feasibility is determined by whether the applicant has adequate financial resources to fund the capital costs of the project and the financial ability to fund short-term operation losses. The project costs projected in Schedule 1 of Wuesthoff's application, taking into account inflation and other factors arising from delays associated with this proceeding, are reasonable and appropriate. Wuesthoff proposes to finance the project with $10.5 million in existing funds and $28 million in debt financing. At the time of hearing, Wuesthoff had $51 million in cash assets on its balance sheet available to cover the $10.5 million proposed to come from existing funds. The $28 million in debt financing was proposed in the application to be provided by "proceeds from a fixed rate bond issue." (Wuesthoff No. 1, Vol. I of II, Schedule 3 Assumptions.) "The interest rate for the debt is expected to be approximately 6.5%." (Id.) As part of its case for immediate financial feasibility, Wuesthoff presented a letter from The Robinson- Humphrey Company, Inc., dated April 6, 1999. In support of the opinion that Wuesthoff would qualify for tax exempt financing, the company wrote: Based on our long relationship and thorough understanding of Wuesthoff and its strategic direction, we believe that the rating agencies, bond insurers and capital markets will react positively to the Hospital's project. In addition, based on the Hospital's ability to secure a competitive insurance bid on its Series 1996 Bonds, the Hospital will be able to secure a new competitive bond insurance policy as well as credit ratings in the "A" category from the rating agencies in conjunction with the financing to help fund a portion of the proposed facility. Based on today's market conditions, the average interest rates available on a 30-year tax-exempt bond issue would be in the range of 5.25% to 5.50% based on an "A" rating category issue and "AAA/Aaa" rated issue with bond insurance, respectively. Although it is difficult to anticipate the interest rate environment throughout 1999, we would expect rates to be in the 5.50% to 5.75% range , using recent interest history as a benchmark. (Wuesthoff No. 3, pgs. 1 and 2). After testimony with regard to the letter by Wuesthoff's witness Rebecca M. Colker, qualified as an expert in health care finance, the following colloquy between Ms. Colker and Wuesthoff's counsel took place at hearing: Now, based on your assessment of the marketplace and your investigation of the marketplace, do you have an opinion as to whether Wuesthoff has the ability to finance the project that it proposed in [its] application . . .? A. Yes, sir, I feel [Wuesthoff] has the ability to finance the project. (Tr. 179). During the hearing, but after Ms. Colker's testimony, allegations surfaced publicly that Wuesthoff had violated the law with respect to its tax-exempt status as a "501(c)(3) organization" under the Internal Revenue Code by engaging in political activity and obtaining private benefit. Proof of the violations exposes Wuesthoff to revocation of its tax-exempt status. At the time of hearing, the IRS had not determined the truth of the allegations. If the IRS determines that the violations occurred, there are penalty options available to the Service short of revocation of Wuesthoff's tax exempt status. These options are referred to as intermediate sanctions. In addition, the IRS may enter a closing agreement with the offender in which an intermediate sanction is accepted in lieu of revocation. Wuesthoff, moreover, can take certain steps in mitigation of any ultimate penalty imposed by the IRS. Wuesthoff presented evidence that "upon a resolution of the allegations of wrongdoing which falls short of revocation of Wuesthoff's tax exempt status, there will be no cloud upon Wuesthoff's ability to obtain the tax exempt debt financing it has proposed." Joint Proposed Recommended Order of Wuesthoff Memorial, Inc., and the Agency for Health Care Administration, p. 39. Such a resolution, if it is the one chosen by the IRS, can reasonably be expected to occur within a single year. In the meantime, whatever the outcome of the IRS' dealing with the allegations, their very existence jeopardizes Wuesthoff's ability to obtain tax exempt debt financing. Given what he had heard and read about the allegations, Mr. Todd Holder, an investment banker who provides "basically the same services that Robinson-Humphrey would provide to a hospital client" (Tr. 3337) testified: At this time, my firm would not underwrite these bonds [proposed by Wuesthoff] and I wouldn't imagine at this time any firm would underwrite these bonds . . . (Tr. 3339). If Wuesthoff's tax exempt status were revoked, its bonds would be in jeopardy of being called to cover loss to existing bond holders. Such action would affect its bond rating. A BBB rating would involve approximately a 3% rise in interest rates. If its rating were to fall below investment grade, the interest rate could rise 5% or more. Based on a $28 million issue, the amount Wuesthoff proposes for financing the new facility, each percentage point rise in interest rate equates to an annual debt service cost of $250,000. Furthermore, a loss of its tax exempt status would make it more difficult to obtain bond insurance. It is by no means certain that the IRS will revoke Wuesthoff's tax exempt status as explained above. When a charitable organization continues to fulfill its charitable obligations, "the IRS has, in practice, not revoked [its] tax- exempt status but tried to exact some other type of penalty." (Tr. 3600). Furthermore, when an offending organization has removed from authority the individuals responsible for the violations, the IRS considers such action to mitigate the penalty it imposes. At bottom, predicting the action of the IRS is speculative. If the IRS does revoke Wuesthoff's tax exempt status, Wuesthoff has enough cash assets on hand to build the proposed facility without resort to financing. If it comes to that, however, Wuesthoff's decision to carry the costs of construction and getting the facility off the ground in the first few years of operation without debt financing has implications for the project's long-term financial feasibility. b. Long-term financial feasibility. Historically, AHCA has defined long-term financial feasibility as at least breaking even, if not making a profit, by the end of the second year of operation. Among other matters Wuesthoff must prove in order to satisfy the test employed by AHCA historically, it must demonstrate that "projected revenues can be attained in light of the projected utilization of the proposed service and average length of stay." OR-1, p. 18. The processes used by Wuesthoff's expert to conclude that the project is financially feasible were conservative. But the processes contained flaws. Wuesthoff, for example, projects that it will have a volume of 8,327 patient days at its South Brevard campus in year one of operation and 11,224 patient days in year two. For the same time periods, it projects volumes of 50,000 patient days at its Rockledge facility for both year one and year two of operation, the same volume it projects at its Rockledge facility for the 12-month period during which the new facility will be built. The projections are not reasonable. Building the new hospital will not increase the demand for hospital services in Brevard County. Rather, patients will be reallocated. The proposed facility will receive patients who otherwise would be hospitalized at Holmes Regional or the Wuesthoff Rockledge campus. It is not reasonable, therefore, for Wuesthoff to project that its patient days at the Rockledge facility will remain the same in years one and two of operation of the new facility as during the year's period of construction. The Agency concurred with Holmes Regional's expert that Wuesthoff's utilization projections were overstated but did not see the overstatement as a problem because "while the applicant may not fully attain what is projected within the application . . . [it] will attain a level which will be successful, especially for a provider that is financially stable at this point in time and has the resources to carry out this project." (Tr. 3474). There are other flaws. Wuesthoff assumed that for the Rockledge facility pro forma all payors' reimbursement increased 4% a year for years one and two of operation resulting in a net revenue increase in excess of 9% for the two-year period. Managed care companies are typically not allowing a 4% per year increase to providers. Medicare reimbursement (the largest single payor source) was not likely to increase 4% per year prior to the Balanced Budget Act of 1997 (see finding of fact no. 86, below). Medicare is the largest payor source currently at Wuesthoff, accounting for in excess of 50% of operating revenues. It is also the largest payor source projected for the proposed project. In the wake of the Balanced Budget Act of 1997, Medicare margins have declined and are expected to continue to decline. Wuesthoff's Medicare revenue in year one of operation were overstated by 4.3% and in year two by 5.7%. Wuesthoff's expert did not assess the impact of the Balanced Budget Act on the Wuesthoff projections at the time they were made since they were made before the effective date of the Act. But he had not assessed the impact of the Act on the pro forma prepared for the new facility as of March 1999, after effects of the Act's impact were observable. Presumably, no such impact analysis was undertaken because Wuesthoff is a hospital that takes action to contain costs, a method for reducing the negative impact of the Act on a hospital's revenue. Other assumptions that underlie projections by Wuesthoff in the application are also not reasonable. Wuesthoff assumed that Medicare HMO would generate higher charges than traditional Medicare, but have a length of stay almost half the time such that the net reimbursement per case would be identical. On a per day basis, Weusthoff assumed that the Medicare and Medicaid HMO patient will generate a greater per diem reimbursement than a traditional Medicare and Medicaid patient, respectively. This is not a reasonable assumption. The assumption that commercial insurance remains a significant payor at the South Brevard campus is critical to the financial viability of the project. If the pro forma had shown a more reasonable managed care percentage and less commercial insurance in the payor mix, net revenue would decrease by approximately $280,000 in year two. The projected costs of operation at the South Brevard campus are unrealistically low because the projected salary expenses have been understated. The nursing staff will comprise almost one-third of the total hospital FTEs for years one and two at the South Brevard campus. There currently exists a nursing shortage such that hospitals in Brevard County are having to pay a several thousand dollar signing bonus when hiring nursing staff. Projected nursing salaries for the first and second year of operation were only minimally higher above what Wuesthoff was paying its nursing staff three years earlier. The Needs and Circumstances of those Entities which Provide a Substantial Portion of their Services or Resources or Both, to Individuals not Residing in the District: Section 409.035(1)(k), F.S. Wuesthoff's application does not address providing a substantial portion of its services or resources to individuals not residing in the District. The Probable Impact of the Proposed Project on the Costs of Providing Health Services Proposed by the Applicants, Including the Effect on Competition: Section 408.035(1)(l), F.S. Brevard County's Unusual Shape Brevard County is relatively narrow from East to West and extremely long from North to South, stretching 72 miles from its northern border to its southern one. Because of its unusual geographic shape, the county is easily divisible into three areas, north, central and south. North Brevard County's population was approximately 68,000 in 1998. Central Brevard County's population was approximately 168,000 and South Brevard County's was approximately 234,700. Since 1970, the share of total county growth has consistently been lowest in North Brevard County, peaking at 13% in 1990, with a projected share of total county growth in 2003 at 10.4%. Next in order, Central Brevard County's share of growth since 1970 has been on the rise but has remained substantially lower than South Brevard County's. Its share of growth in 2003 is expected to be about 38.8%. The County's "growth has been predominantly in [S]outh Brevard." (Tr. 375). In 1971, its share of total county growth was 71.1%. Although "the share of growth in [S]outh Brevard has declined over time . . . it is still about 50%." (Id.) In 2003, South Brevard County's share of total growth is projected to be 51.2%. Consistent with its higher share in total county growth, more than half of Brevard County housing starts have within recent years occurred in South Brevard County and more than half of Brevard County employers and employees are located in South Brevard County. South Brevard, for some time, has been the most populated of the county's three areas. It will continue to be the most heavily populated area for a considerable time in the future. North Brevard has one hospital: Parrish Medical Center. Central Brevard has two hospitals: Wuesthoff and Cape Canaveral Hospital. The two are operated by different hospital systems; Wuesthoff by the Wuesthoff Health System and Cape Canaveral by Health First. South Brevard has two hospital facilities: Holmes Regional Medical Center and Palm Bay Community Hospital. Unlike the situation in Central Brevard the two South Brevard facilities operate under a single hospital license and are part of one system: Health First. Markets, Monopolies, and the Exercise of Monopoly Power A great deal of evidence was introduced by both Wuesthoff and Holmes about whether or not South Brevard County, by itself, constitutes a market for purposes of economic analysis and, if so, whether Health First through its operation of the two South Brevard hospitals has a monopoly on hospital services within the market. Further evidence was introduced about whether Health First, in fact, exercises monopoly power. Wuesthoff posits that South Brevard County, in and of itself, is an economic market for purposes of economic analysis. While there was evidence that indicated that South Brevard County is a market for purposes of economic analysis, none of the experts who testified could ever recall a proceeding in which they had been involved in which an area smaller than a county had ever been found to constitute a market. Wuesthoff's approach, moreover, is problematic in a Certificate of Need proceeding (as distinguished from other types of proceedings that typically employ economic analysis, such as anti-trust proceedings.) Brevard County is one part of AHCA District VII, a district established by the Legislature for health planning purposes. The district is divided into subdistricts. Subdistrict 1 is composed of Brevard County, nothing more and nothing less. But the subdistricts are not further divided for health planning purposes. There is no question (nor any argument from Wuesthoff otherwise) that Health First does not have a monopoly on hospital services over the entire subdistrict, let alone the district. Assuming for the sake of argument that South Brevard County is a market for purposes of this proceeding and that Health First has a monopoly over hospital services in that market, Health First has not exercised its monopoly power as would typically be expected on the basis of net price. First of all, while one might expect that an entity with monopoly power would exercise it, that expectation cannot be assumed in the case of not-for-profit hospitals, such as Holmes Regional. The not-for-profit hospital "can't act like a profit- maximizing organization because of the way it is structured." (Tr. 2958). More importantly, "the economic hallmark of the exercise of monopoly power is a price above the competitive level, one that permits the earning of an above-competitive profit rate." (Tr. 2946). Holmes Regional's average net prices are 90.8% of what would be expected. In contrast, Wuesthoff's are 115.1% of what would be expected. Neither of these is "extraordinarily far from what you would expect." (Tr. 2971). In the final analysis, pricing data with regard to both list prices and net prices, no matter the payor source, does not indicate "the systematic exercise of monopoly power by Holmes . . ." (Tr. 2973), in "[S]outh Brevard County." (Tr. 2975). It is clear, however, that residents of South Brevard do not have convenient access to Brevard County hospitals other than the two Health First hospitals in South Brevard, Holmes Regional and Palm Bay Medical Center. The other Brevard County hospitals are either too far away in distance or require too much travel time to reach by automobile for most of the residents of South Brevard. Consistent with this convenience factor, 82% of the South Brevard County residents discharged from hospitals in the first six months of 1998 were discharged from Holmes Regional and Palm Bay Community. Of the remaining South Brevard County residents discharged from hospitals, the highest percentage (6%) of patients were discharged from Sebastian River Medical Center. Sebastian River, while close to some South Brevard County residents, does not provide a high enough level of services in many cases to be a reasonable substitute for Holmes Regional. Even if it is convenient to use hospital services that are close by, a patient will chose a more inconvenient hospital if the nearby hospital does not provide services of reasonable quality at reasonable prices. The two Health First hospitals provide services of reasonable quality at reasonable prices. Nonetheless, the establishment of Wuesthoff's proposed hospital would substantially increase the accessibility of South Brevard County residents to a non-Health First facility. The presence of Wuesthoff's proposed hospital in South Brevard County would offer residents of South Brevard more of a meaningful choice. In essence, granting Wuesthoff's application would produce a more competitive environment for the hospital services to be offered by Wuesthoff in South Brevard County, whether South Brevard County constitutes a market or not. Wuesthoff presents a greater question for resolution in this proceeding than whether granting the application would simply provide more competition. Even though Holmes Regional's net pricing in general does not indicate that it is exercising monopoly power in South Brevard County, is there, nonetheless, a need for a more competitive environment for hospital services in South Brevard County? The answer to that question is "yes" when one considers competition from the perspective of managed care payors. Need for Competition for Hospital Services in South Brevard County. In general, competition enhances the quality of health care services even when services being provided are of high quality. Competition also provides an incentive for hospitals, including non-profit hospitals to serve patients more efficiently. Competition lowers the costs consumers pay for hospital services. When managed care payors are able to reduce their payments to hospitals, they are able to lower the premiums paid by the "end purchaser." (Tr. 609). If the end purchaser is an employer, the "employer then makes [its] business decision internally as to how much of that cost is passed along to the individual employee." (Id.) This effect of competition is the basis for a number of managed care contractors and employers' vigorous support of Wuesthoff's application, the success of which will create competition in South Brevard County. Wuesthoff's proposed hospital will spur competition which will benefit consumers by lowering Holmes Regional's prices. Managed care helps contain costs and injects price sensitivity into the market. At the same time, higher levels of hospital concentration are associated with lower levels of discounting to managed care companies. Managed care penetration has been increasing in Brevard County. In South Brevard County, managed care penetration has increased but mainly due to increase in enrollment in HFHP, Health First's managed care plan. Managed care penetration in South Brevard County achieved by HFHP "in itself is not the issue." (HRMC No. 75, p. 32.) With only one active HMO in South Brevard County, there is no incentive to achieve better rates for the ultimate consumers especially if the main HMO is part of the same organization as the hospital as in this case. "[I]f you have several large commercial plans . . . they will be able to get better rates from Holmes Regional than if you only have one." (Id., p. 32-33). Commercial HMO inability to contract with HRMC was considered by the agency as the most important factor in approving Wuesthoff's application. Health maintenance organizations, other than HFHP, do not have meaningful competitive ability to compete with HFHP in South Brevard County. In recognition of their inability to use Central Brevard County hospitals or Sebastian River Medical Center as substitutes, and to avoid losses caused by the lack of hospital competition in South Brevard County, Aetna and United, two large managed care payors in Brevard County, have embarked on an exit strategy with regard to South Brevard County. It is difficult for managed care payors to steer south Brevard residents to central Brevard hospitals. Patients are generally unwilling to change physicians when it becomes necessary to enter a hospital. Discharge data demonstrates the lack of overlap in physician privileges between South and Central Brevard. The Central Florida Health Care Coalition, an organization comprised of businesses and formed to address health care issues which includes the largest of Brevard County employers, supports Wuesthoff's application because of the competition it will create and a number of consumers expressed support for the Wuesthoff application based on the need for competition in South Brevard County. In contrast, not a single employer, large or small, testified in support of opposition to the application. Wuesthoff's new hospital would provide an alternative for managed care payors to negotiate hospital prices in South Brevard County. More favorable hospital prices in managed care contracts, in turn, would lead to managed care premiums that would be lower for managed care customers. Lower health care premiums enable larger numbers of consumers to purchase health care coverage, thereby reducing the number of persons who have no source of payments for health care services. The ability of managed care plans to negotiate hospital prices is dependent upon ability to engage in selective contracting, the ability of a managed care plan to refuse to include a hospital in its network of providers. Selective contracting induces hospitals to offer discounted prices to assure participation in a managed care plan's network of hospitals in order to avoid losing the managed care plan's business to other competitive hospitals. Selective contracting can only be an effective strategy if managed care contractors have meaningful choices among hospital providers. In Brevard County, only in the central area do managed care plans have more than one hospital system from which to choose meaningfully and only in Central Brevard County has there been any real competition among hospitals for managed care contracts. Holmes Regional does not face the threat of a loss of business if it refuses to contract with any one managed care plan because South Brevard residents for the most part will not seek hospital services outside South Brevard County. Without the threat of a loss of business, Holmes Regional has little, if any, incentive to offer reduced prices to managed care plans. The lack of incentive for Holmes Regional to reduce prices to managed care plans was demonstrated by several analyses, including one showing that from 1995 through 1998, net prices paid by all managed care contractors to Holmes Regional were on average 32% higher per year than those paid to Wuesthoff, which has competition from another hospital in Central Brevard County Apart from pricing analyses, the lack of competition in the managed care arena for Holmes Regional was demonstrated by its ability to resist entry into any per diem managed care contracts despite efforts by some managed care contractors to negotiate such agreements with Holmes Regional. Per diem contracts are a favored from of contracting by managed care payors because they tend to enable managed care payors to predict the level of hospital payment to which they will be exposed. Such contracts are commonly found where there is competition among hospitals. In contrast, as is to be expected of a hospital in a competitive environment, most of Wuesthoff's contract with managed care payors are per diem contracts. The Applicant's Past and Proposed Provision of Health Care Services to Medicaid Patients and the Medically Indigent: Section 408.035(1)(n), F.S. Wuesthoff has "a history of providing care to the medically indigent population." (Tr. 1244). Its commitment to continue to provide such care at the proposed facility has been discussed. Whether Less Costly, More Efficient, or More Appropriate Alternatives to the Proposed Inpatient Services are Available: Section 408.035(2)(a), F.S. The greater weight of the evidence establishes that denial of the application is less costly and more efficient. The new facility will cost $38 million to build. At the same time, existing providers are operating efficiently and have unused capacity. In fact, there is insufficient utilization of the inpatient acute care services in existence in Brevard County. The subdistrict occupancy rate is "about 54% . . .[with] at least [hundreds of] beds that are unoccupied at any point in time with the county." (Tr. 3385). Whether the alternative of denying the application is more appropriate in light of the cost of the project and efficiency considerations turns on the weight to be given Wuesthoff's case for the need for competition in the managed care arena in South Brevard County. Whether the Existing Facilities Providing Similar Inpatient Services are being Used in an Appropriate and Efficient Manner: Section 408.035(2)(b), F.S. Existing facilities are being used in an efficient manner. Whether the status quo is appropriate, again, turns on the weight to be given Wuesthoff's case for the need for competition. That Patients Will Experience Serious Problems in Obtaining Inpatient Care of the Type Proposed in the Absence of the Proposed New Service: Section 408.035(2)(d), F.S. There was no evidence that patients will experience serious problems in obtaining inpatient care of the type proposed by Wuesthoff for its South Brevard County if the application is not granted. Rule Criteria Rule 59C-1.030, Florida Administrative Code, sets forth "health care access criteria . . . [i]n addition to criteria set forth in Section 408.035, Florida Statutes . . .". Among the criteria are [t]he contribution of the proposed service in meeting the health needs of members of such medically underserved groups, particularly those needs identified in the . . . State Health Plan as deserving of priority." The first State Health Plan preference favors an applicant that provides a disproportionate share of Medicaid and charity care patient days in relation to other hospitals within the subdistrict. Wuesthoff has provided its fair share of Medicaid and charity care patient days in the past and proposes to continue to do so at the new facility if approved. But Wuesthoff is not a disproportionate share provider. As to the second preference which considers the current and projected indigent inpatient case load, the proposed facility size, and the case and service mix, Wuesthoff's application partially complies with preference in that it proposes to provide indigent care. But, Medicaid and indigent members of the population were not shown to have been denied access to hospital services in Brevard County. Approval of the facility, moreover, will not improve access or increase the number of beds since approval will result in a net loss of 50 beds in the county. The fourth preference favors an applicant with a record of accepting indigent patients for emergency care. Wuesthoff meets the preference. The fifth preference favors applicants for a type of hospital project if the facility is verified as a trauma center. Holmes Regional will remain the only verified trauma center in the subdistrict, even if the application is approved. The sixth preference favors applicants who document that they provide a full range of emergency services. The new facility will provide emergency services but not a full range unless the emergency services provided by Wuesthoff at its Rockledge campus are considered. Because the 50-bed hospital will not provide tertiary services nor high-level trauma services, "[t]he complicated or trauma cases will . . . go to Holmes Regional Medical Center" (Tr. 3384), the hospital campus closest to the new facility. The seventh preference favors applicants not fined by AHCA for any violation of emergency service statutes. Wuesthoff meets this preference. The eighth preference favors applicants who demonstrate that the subdistrict occupancy rate is at least 75%, or in the case of exiting facilities, where the occupancy rate for the most recent 12 months is at least 85%. Wuesthoff did not show that it meets this preference. The ninth preference of the State Health Plan favors an applicant with a history of providing a disproportionate share of the subdistrict's acute care and Medicaid patient days and is a Medicaid disproportionate share provider. Wuesthoff does not meet this preference.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is recommended that the Agency for Health Care Administration enter a final order denying Wuesthoff Memorial Hospital, Inc.'s application for CON 8740. DONE AND ENTERED this 12th day of July, 2000, in Tallahassee, Leon County, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 12th day of July, 2000. COPIES FURNISHED: Richard A. Patterson, Esquire Agency for Health Care Administration Fort Knox Building Three, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Terry Rigsby, Esquire Blank, Rigsby & Meenan, P.A. 204 South Monroe Street Tallahassee, Florida 32301 Stephen K. Boone, Esquire Boone, Boone, Boone & Hines, P.A. Post Office Box 1596 Venice, Florida 34284-1596 David C. Ashburn, Esquire Smith & Ashburn, P.A. 1330 Thomasville Road Tallahassee, Florida 32303 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building Three, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Julie Gallagher, General Counsel Agency for Health Care Administration Fort Knox Building Three, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403
Findings Of Fact Notice of intended agency action was received by the Petitioner, Halifax Medical Center (Halifax), by a letter from HRS dated February 6, 1989. A Petition for Formal Administrative Hearing was filed timely by Halifax with HRS on March 3, 1989 requesting an administrative hearing on the agency's computation of its disproportionate share distribution (DSD). (See Petition, paragraph four and Exhibit "4".) Halifax operates a hospital at 303 North Clyde Morris Boulevard, Daytona Beach, Florida. Halifax is a Florida Medicaid provider which serves Medicaid recipients and is eligible for reimbursement under the Florida Medicaid program's hospital reimbursement plan. (See Petition, paragraph two and Pre- Hearing Stipulation, paragraph five.) The Respondent, Department of Health and Rehabilitative Services (HRS), is a state agency designated to administer Florida's Medicaid program pursuant to Chapter 409.266, et. seq., Florida Statutes. The Medicaid program is governed by state and federal laws, rules, and regulations. HRS and HCCCB are designated to administer the provisions of Chapter 88-294, Laws of Florida, (See Petition, paragraph one and Pre-Hearing Stipulation, paragraph four and Chapter 88-294, Laws of Florida.) The HCCCB, a state agency, was the Respondent in DOAH case number 89- 1143H, which was consolidated with this case number. Based on the representation that HCCCB would recompute the disproportionate share distribution based upon data received from HRS, the HCCCB was dismissed and Case No. 89-1143H was closed by order of the Hearing Officer dated April 14, 1989. (Order 4/14/89) Pursuant to the Federal Omnibus Budget Reconciliation Act of 1986 ("OBRA"), HRS is required to provide disproportionate share distributions of money to Medicaid hospital providers who provide a higher percentage of the Medicaid and charity days of care. (See Pre-Hearing Stipulation, paragraph six) OBRA allows flexibility by the states in payment methodology, but requires that hospitals meet federal minimum requirements to receive payments. If a hospital did not qualify under state law, but did qualify under OBRA, the Florida Disproportionate Share Program included those hospitals under the federal minimum criteria to satisfy federal requirements. (See transcript, pages 58-62 and 245-247.) Chapter 88-294, Laws of Florida, sets forth the methodology for calculating the disproportionate share distribution amount for hospitals meeting the state's eligibility requirements. Chapter 88-294, Laws of Florida, became effective on July 1, 1988 and provided that the disproportionate share distribution be calculated using data required to have been reported by hospitals for other purposes on or before July 1, 1988. (See Prehearing Stipulation, paragraph nine.) In the previous year, Section 12, paragraph five of Chapter 87-92, Laws of Florida, making distributions to hospitals from the Public Medical Assistance Trust Fund, allowed a ninety (90) day grace period in which a hospital could amend data after the effective day of the act. As a result of the ninety (90) day grace period in the 1987 legislation, an inordinate number of delays and problems were experienced in calculating hospital distributions. (See transcript, pages 72-73, 180, 196-197, 217-218, and 232-235, and Exhibit "20," and Chapter 87-92, Laws of Florida, Section 12, paragraph five.) Representatives from the Florida House of Representatives, Senate, HRS, HCCCB, and hospital associations met on July 12, 1988 and all agreed on the procedures for implementing the disproportionate share distribution. An important issue was avoidance of the prior years' delays. (See transcript, pages 193-196, 228-232, 263-264 and Exhibit "18".) It was determined at the July 12, 1988 meeting that neither HRS nor HCCCB would accept amended disproportionate share data from hospitals after June 30, 1988. (See transcript, pages 193-196, and 230-232.) The disproportionate share distribution for 1988 was calculated for Halifax utilizing HCCCB data and the per diem rate established by HRS for Medicaid. (Prehearing Stipulation) HRS determined Halifax's Medicaid per diem rate on May 31, 1988, from data submitted by Halifax on January 15, 1988. (Prehearing Stipulation; T-35; E-4-5) This was the most recent period reported and Halifax received notice of the per diem rate shortly after May 31, 1988. The per diem rate was effective July 1, 1988. (Prehearing Stipulation; T-27, 29; E-2, 5, 6) No one knew when the January 15, 1988 cost report was filed that the Medicaid per diem rate would be used for calculating the disproportionate share distribution. (T-125) Hospitals, including Halifax, were required by law to submit the cost report which is an audited report. Halifax admits it knew there was a problem with the Medicaid rate by no later than mid-June, because its rate had dropped. (T-124; E-5) Halifax had time to correct the data and resubmit it prior to July 1, 1988. The error in the data submitted by Halifax resulted from its failure to report cost data on psychiatric care on Schedule D-1. Halifax's cost report contained the correct number of Medicaid days, but its psychiatric unit days were not reported separately from its routine hospital days on its Schedule D-1. Halifax had broken out its psychiatric data on the S-3 worksheet but the data was not included in Schedule D-1 for Medicaid purposes. (T-126-138, 149-153; E- 6) Individual cost items cannot be identified without the appropriate schedules. (See transcript, page 159.) It is the provider's responsibility to put the costs and days in the schedules. It is not HRS's responsibility to pull costs and days from one place in a cost report and put them where they belong. (See transcript, page 153.) Accordingly, Halifax received the lower per diem for routine hospital days rather than the higher per diem for psychiatric days. (See transcript, pages 151-152 and Exhibits "6" and "7", Schedules D-1.) It is understood in the hospital industry that Schedule D-1 is the proper place to report hospital costs. (See transcript, page 160.) Unlike Chapter 88-294, Laws of Florida, Rule 10C-7.0391, Florida Administrative Code, allows a hospital to submit an amended cost report up to three years after the Medicaid reimbursement rate was established. HRS does not interpret this rule to create an extension of time in which to file or amend reports for disproportionate share distribution purposes. (See transcript, pages 50-51, 89, 285-286, and 305). Halifax submitted an amended cost report to HRS on July 21, 1988. (T- 30, 124; E-3, 7) The amended cost report was used for retroactive adjustment of Medicaid per diem rates (T-43, 139; E-8), a fact known to hospitals. (Prehearing Stipulation; T-43; E-1) For purposes of Medicaid reimbursement, Halifax's amended cost report was utilized by HRS to establish a Medicaid per diem rate of $465.82 for Halifax on August 31, 1988. (Prehearing Stipulation; T-26; E-1) Although HRS recalculated the Medicaid per diem rate using data in Halifax's amended report, Halifax was notified in February of 1989 that its DSD was $322,586 based upon a per diem rate of $347.93 computed on the basis of the data contained in its original report filed in January 1988. (T-140) If Halifax's DSD were calculated using the amended Medicaid per diem rate based upon data filed on July 21, 1988, the DSD would be $431,597. 1/ (See transcript, page 76 and Exhibits "1" and "5".) Medicaid cost reports are not normally reported to the HCCCB. (T-182, 183). HRS did not transmit Medicaid per diem rates to the HCCCB until August or September of 1988, and HRS received the amended cost report from Halifax before it transmitted the data to HCCCB. HRS interpreted Chapter 88-294, Laws of Florida, to preclude use of data received from the hospitals after July 1, 1988 to compute DSD. (T-37, 80- 81, 232, 257-259, 308-310; E-10) The HRS interpretation of Chapter 88-294, Laws of Florida, was based upon the need for administrative simplicity, the HRS understanding of legislative intent to avoid the prior year's delays, and the HRS reading of the statute. (T-307) Its interpretation is entitled to great weight. Section 30, Chapter 88-294, Laws of Florida, had an effective date of July 1, 1988; was approved by the Governor July 6, 1988; and filed in the Office of the Secretary of State on July 6, 1988. It would have been impossible for HRS to have noticed the public of the preclusion of data filed after July 1, 1988 prior to the effective date of the Disproportionate Share Program. (See Chapter 88-294, Laws of Florida, and transcript, page 276.) HRS published notice of its revised payment methodology for inpatient hospital services in the Florida Administrative Weekly on September 23, 1988. The rule became effective January 10, 1989 and is codified at 10C-7.0391, Florida Administrative Code. The rule incorporates by reference the Florida Title XIX Inpatient Hospital Reimbursement Plan, and uses basically the same language as Chapter 88-294, Laws of Florida. (See transcript, pages 89-91 and Exhibit "9".) The rule was effective before the first disproportionate share payments were made on February 6, 1989. HCCCB used data developed after July 1, 1988 in its calculations of the disproportionate share distribution (T-165; E-10, 11, 12, 14, 15) The HCCCB audited Desoto Hospital and Lake Wales Hospital after July 1, 1988 and utilized the audit findings instead of the data reported by HRS to determine the disproportionate share distribution for those hospitals. (T-166, 169-170, 174; E-14) The HCCCB settled a dispute with Palm Springs Hospital in DOAH Case Number 89-0633H involving issues similar to those involved in this case by agreeing to utilize data provided after July 1, 1988. (T-175-176; E-15) HRS made two "technical" adjustments by redistributing payments after the disqualification of previously participating hospitals and to correct its own mistakes. (T-235-236; E-11) George E. Weems Hospital was one of four hospitals which were Medicaid providers without a Medicaid per diem rate and the only one which met the state's qualifications for disproportionate share payments. HRS accidentally left Weems Hospital off the distribution list; however, when this was discovered, HRS corrected the error and posted a Medicaid per diem rate for Weems Hospital of $484.71. Weems Hospital submitted no amended data after July 1, 1988. Weems Hospital made no error in reporting its costs to HRS. (See transcript, pages 81-82, 84, 97, 104, and 114.) HRS credited St. Mary's Hospital with the wrong Medicaid per diem rate. Prior to July 1, 1988, St. Mary's Hospital had been granted an interim rate to be effective July 1, 1988. By oversight, HRS did not utilize the interim rate in computing DSD. When this was discovered, HRS corrected the error after July 1, 1988. St. Mary's Hospital made no error in reporting its costs to HRS and submitted no amended reports. (See transcript, pages 82, 84, 97, 104, 114, and 164.) When HRS became aware of a divergence in policy of the two agencies, HRS and the HCCCB discussed using data submitted after July 1, 1988 to compute the DSD. (T-178) Based upon his understanding of a meeting held between the executive director of the HCCCB and the head of the HRS Medicaid program, a representative of the HCCCB testified that the HCCCB intended to reverse its position on the changes made for Desoto, Lake Wales, and Palm Springs Hospitals. (T-188, 198- 199, 201) HCCCB attempted to settle two cases involving disputes over disproportionate share distributions. These settlements would have involved using data developed after July 1, 1988. HCCCB has withdrawn or attempted to withdraw from these settlements. HCCCB's action in at least one of these cases is currently being appealed to the appellate court. (Official Notice of Pending Court Proceedings) HRS realizes that its position means that some hospitals will not receive as great a disproportionate share distribution as they would have received and other hospitals, such as Halifax, will receive less. HRS refuses to use corrections of submitted data in computing DSD. (T-219, 316) HRS has authority to direct payment of disproportionate share distributions. HRS plans to cancel or prevent payment of the check that would have gone to DeSoto Hospital and to cut a check for Lake Wales Hospital that has never been sent but which was based on their pre-HCCCB audited data received prior to July 1, 1988. (See transcript, page 303.) HRS has attempted to treat all qualifying hospitals equally and has uniformly applied the statutory cutoff date for the application of data used to compute each such hospital's disproportionate share. (See transcript, pages 304-305. HRS will propose to the Legislature that it be the sole agency to determine the disproportionate share distribution and have the authority to recover over payments discovered by audits. (T-265, 266, 319)
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that the petition be denied and the disproportionate share distribution to Halifax not be altered DONE and ORDERED this 19th day of July, 1989, in Tallahassee, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of July, 1989.
The Issue The basic issue is whether the applicant meets the relevant statutory and regulatory criteria for award of a CON. In its prehearing statement and in its proposed recommended order, HRS stipulates that the following criteria are met: Section 381.705(1)(a), F.S., regarding compliance with the district health plan; Section 381.705(1)(c), F.S., regarding the applicant's capability and record of providing quality of care; Section 381.705(1)(h), F.S., regarding the sufficiency of applicant's resources; Section 381.705(1)(m), F.S., regarding the reasonableness of proposed costs and methods of construction; and Section 381.705(2)(c), F.S., regarding the consideration of alternatives to new construction. The following statutory criteria are deemed by HRS to be inapplicable to the proposed project: Section 381.705(1)(f), F.S., regarding the need for special equipment or services not available in an adjacent district; Section 381.705(1)(g) and (h), F.S., relating to the need for research, educational and training facilities; Section 381.705(1)(j), F.S., regarding the needs of health maintenance organizations. Section 381.705(1)(k), F.S., regarding entity providing most of its services to individuals residing beyond the service district; and Section 381.705(2)(e), F.S., regarding nursing homes. HRS also concedes the numeric need formulae found in the rules do not apply, and that no HRS rule is applicable to the need in this case. (HRS proposed Recommended Order, p. 2; transcript, pp 13-14.) The remaining criteria which HRS contends are not fully met relate to accessibility, efficiency, financial feasibility and cost effectiveness. HRS states in the SAAR and argued at the hearing that Holmes' application lacked information, and that attempts to supply the information were improper amendments to the application.
Findings Of Fact The Applicant Holmes Regional Health Care Systems, Inc. is a nonprofit corporation having among its subsidiaries a 528-bed acute-care, tertiary care non-profit hospital: Holmes Regional Medical Center (HRMC) located in Melbourne, Brevard County, Florida. HRMC is the largest hospital in the Brevard subdistrict of HRS planning district 7. It employs approximately 1900 full and part-time staff; approximately 210 physicians serve on the medical staff. It offers a wide range of services, including comprehensive cardiovascular programs, pediatrics, psychiatry, all specialties in internal medicine and surgery, and a high-risk neonatal intensive care unit. HRMC is the oldest hospital in Brevard County. It opened in 1937 with 27 beds. Although the figure fluctuates frequently, at the time of hearing approximately 480 of its licensed beds were in service. Holmes is governed by a 13-member board comprised of local business professionals who serve without compensation. The Project Holmes proposes to reduce the licensed capacity of HRMC by 60 beds and to transfer those beds to a satellite facility to be constructed south of Melbourne in Palm Bay, still within Brevard County. Total project costs for the new facility, including land (already purchased), construction and equipment is $11,656,812. The 60 beds will be acute care, "medical/surgical", in 36 private rooms and 12 semi-private rooms. Pediatric, obstetric, intensive care, and other speciality services will remain at HRMC. Access Melbourne, the site of HRMC, is in the southern end of Brevard, an elongated county on Florida's central east coast. The satellite hospital is proposed for a site approximately seven miles south and slightly west of HRMC. Palm Bay is a city which grew from five square miles to sixty-five square miles in the 1960's, when General Development Corporation (GDC) platted and began developing vast subdivisions west of the once-sleepy village lying along the Indian River. Wuesthoff, the next nearest hospital in the planning district is located north of HRMC, in Rockledge, in central Brevard County. The GDC development currently includes 74,000 or 75,000 platted lots throughout the city, although only approximately 15,000 have been built. The estimated population at full build-out in the year 2050 is projected at 257,000. In the meantime, the City of Palm Bay is the second largest city in Brevard County, population-wise, and is projected to be the largest city in the county by 1992. In 1980 the city had 18,560 persons; in 1988, the population is over 53,000. A water and sewer service agreement between Brevard County and General Development Utilities is contributing to the sprawl, as the agreement limits buildout to thirty percent of the lots on a block with wells and septic tanks. This has pushed growth from the northern and eastern boundaries of the subdivisions into the southern and western reaches of the city limits, and farther away from HRMC in Melbourne. The Palm Bay area suffers with congested traffic, as does most of South Brevard. The labyrinthine system of roads throughout the new section (the GDC development) is characterized by circles and dead end lanes calculated to promote residential integrity. An elaborate system of canals further limits access to a few through streets. The only planned major improvement to road capacity in Palm Bay is the four-laning of an approximate mile and a half strip of Babcock Street, a major north-south artery. Dr. Stanley K. Smith, an Associate Professor of Economics and Population Program Director at the University of Florida Bureau of Economic and Business Research, was qualified, without objection, as an expert in demographics, including population studies and projections. Dr. Smith and William Tipton, Holmes' traffic and transportation engineering expert, compiled data establishing that by the horizon year 1992, 14.4 percent of Palm Bay's population would live beyond a thirty minute drive to HRMC. Utilizing trips from HRMC in peak afternoon traffic, Mr. Tipton's traffic study found four 30 minute drive time points in the Palm Bay, South Brevard area, fanning out southward from HRMC along the primary roadways. Using census data and population projections developed by Brevard County planning staff, Dr. Smith calculated the population in Palm Bay that will be living beyond the 30 minute drive times in 1992. Although the drive times were established at peak hours, those hours in Palm Bay are unusually long because of the staggered work hours for Harris Corporation, which with 9,000 employees, is the largest industrial employer in Palm Bay. The Tipton study is also considered a reasonably conservative predictor of accessibility in 1992. By that horizon year the population will have expanded, and the 30-minute drive points will be closer to HRMC as a result of increased congestion and deterioration of traffic conditions. HRS' position that access to HRMC was not a problem for Palm Bay residents was based on a personal visit to the area by its staff CON reviewer, Dennis Halfhill. Mr. Halfhill drove from his motel, north along US1 to HRMC, around midmorning, and determined that his drive time was only twenty-five minutes. U.S. 1 runs north-south along the Indian River on the eastern edge of Palm Bay and South Brevard County. Unlike most of the main roads in South Brevard, US 1 is four-laned. It also is in the old established section of Palm Bay, rather than in the newer population center in the south and west. Mr. Halfhill did not travel in the southwest area and erroneously believed he was in the center of Palm Bay along its eastern edge. He estimated the circumference of the main part of the city to be approximately five miles and believed the western city limits were east of Interstate 95, when, in fact, a vast portion, approximately 80 percent of the city's 65 square mile area, lies west of Interstate 95. Geographical access by Palm Bay residents is decidedly enhanced by the creation of a satellite hospital in that community. Efficiency Holmes can provide acute-care services in its proposed 60 bed satellite more efficiently than another free-standing facility could, and more efficiently than Holmes is currently providing those same services in its large facility. The proposed facility will share with HRMC various support and ancillary services as purchasing, patient accounts, dietary, plant engineering, data processing, pharmacy, laboratory and radiology. All of Holmes' management systems will be shared with its satellite. Some equipment and staff will be transferred to the new facility. Because some wings of HRMC are old and outdated, the relocation to a newer, better-designed facility will result in improved utilization of nursing staff and a slightly lower staffing level overall. Holmes is considering converting the transferred beds into an observation unit for outpatient surgery and increasing its number of private rooms. In addition, if the beds are transferred, Holmes anticipates the ability to move back into the hospital certain activities for which it is paying over $100,000 per year in outside rent and utilities. Financial Feasibility/Cost Effectiveness Based on its long range planning conducted in 1981, Holmes determined there would be a future need for an acute care facility in Palm Bay. It purchased land for $315,800, and is currently operating an ambulatory care center and diagnostic center at the site. The total funds required for completion of the satellite facility will come from reserves established from the operation of Holmes, the corporate holding company. No borrowing will be necessary. Initially, in the first two years of operation of the satellite, there will be a slight negative impact on HRMC, but not on Holmes, the parent company, as the negative impact will be offset by the revenues at the satellite and by the cost savings shared by the two facilities. Holmes anticipates net revenue at the satellite will be $404,891 the first year of operation and $2,052,911 for the second year. Rick Knapp, a health care consultant, was qualified without objection as an expert in hospital and health care finance. In his opinion, the pro- forma/operating statement is realistic and achievable and the financial management of the existing facility is good. This latter opinion is based on his experience that relatively low-charge hospitals which generate an attractive bottom line, such as HRMC, are well managed hospitals. HRS has acknowledged that HRAC has done well in serving medicaid patients and indigents, typically considered chronically underserved. Holmes has committed that it will continue that service with the satellite facility. John Stephen Eavenson, Vice-President of Finance at HRMC and chief operating officer for Holmes, was qualified without objection as an expert in hospital and health care finance, hospital financial administration and hospital business venture analysis. In his opinion, the Palm Bay satellite hospital proposed by Holmes represents a sound financial decision. Holmes considers South Brevard, including Melbourne and Palm Bay, as its service area. Approximately 92 percent of the population of the service area in need of hospitalization currently utilize HRMC. This figure is likely slightly lower for Palm Bay, alone, as some patients in that area use a hospital in Sebastian, in Indian River County, south of Palm Bay, and beyond the HRS planning district VII. Other patients go to Orlando. Aside from the economies already discussed relating to the new streamlined facility, Holmes' willingness to expend $11 million to transfer beds is motivated by a desire to preserve its market share by enhancing access to an expanding community. Application Content The principal reason for HRS' denial, perhaps 75 percent, according to HRS Supervisor Reid Jaffe, was the lack of documentation in Holmes' application to support the proposed transfer. This reason is reflected in the cover latter to the SAAR and in comments throughout the SAAR. HRS objected throughout the formal hearing to the introduction of evidence relating to access, arguing that transportation studies were not part of the original application and would be an inappropriate amendment to the application. Holmes provided all information requested on the CON application form; in addition it responded in full to the three brief questions in HRS' May 15, 1987, omissions letter. Holmes' application was deemed "complete" by HRS, effective June 29, 1987. With regard to availability and access, the SAAR states: ...the applicant did not present any information about the future traffic and growth management plans to determine if accessibility to services would be impaired.... Yet, the SAAR found enough information to determine compliance with the following priority of the District 7 Health Plan: Priority 4 Priority for needed acute care services should be given to those applicants who transfer unutilized beds/or establish hospital facili- ties in regions of the District where access to service can be substantially improved by at least 25 minutes for 10 percent of the popula- tion of the subdistrict or a minimum of 35,000 residents. Joint Exhibit #1, p. 3 The SAAR comments provides: Priority 4-Applicant complies, Holmes Regional proposes to transfer underutilized beds. Although the area might now be within 25 minutes of Holmes and Humana Sebastian, increased congestion is expected as Palm Bay and the area along US1 are developed. Joint Exhibit #1, p. 4 The foregoing comment possibly reflects Mr, Halfhill's personal tour of Palm Bay, a tour which the record amply reveals missed the truly congested and developed areas of this deceptively vast community. An HRS reviewer with personal knowledge of a geographical area will bring his or her experience to the application review process and will not question the lack of such information in the packet, according to Reid Jaffe. In other instances the reviewer uses the omissions process to question presumptions or to flesh out the necessary information. For example, in March 1988, HRS approved a CON for the transfer of 100 beds from Martin Memorial Hospital in Martin County to create a satellite facility in Port Salerno. Prior to that approval Martin Memorial submitted a revised application, responding to at least 17 omission questions, including such questions as: Omission #10 What accessibility problems were experienced by residents of the proposed satellite area in obtaining acute inpatient services? How far is it to Okeechobee and Stuart? Northern Palm Beach County? and Omission #11 What is the breakdown of the 100 med/surg beds to be transferred from Martin Memorial and the breakdown established at the satellite facility; i.e. ICCU, pediatrics, OB, etc.? How will the transfer affect health services at Martin Memorial? How will vacated space be utilized? Petitioner's Exhibit #15 In another similar case involving a transfer of beds by Lee Memorial Hospital, which CON application was in the same batching cycle as Holmes, HRS permitted the applicant to submit an extensive packet of information in March 1988, addressing the questions and issues raised by the SAAR. The packet included a travel time study completed well after the SAAR was issued. The Lee Memorial project was approved. Holmes also attempted to present additional information, including its travel time study prepared in December 1987. It was told that additional information would be considered an inappropriate amendment to the application. Although the travel time study was not included in Holmes' application, access was discussed throughout the application with references to the high growth portions of the service area, the inadequate roads and traffic congestion, and Dr. Smith's projections of population increases. The application was complete, as its narrative, tables and attachments sufficiently addressed the relevant criteria of the statute and rules. Weighing the Criteria The parties agree that numerical need is not an issue when no net increase in beds is proposed. HRS has no rule specifically governing the transfer of beds and, according to Sharon Gordon-Girvin, the HRS Administrator of Community Health Services and Facilities, the agency policy was still under consideration at the time that Holmes' current application was being reviewed. A policy framework had been discussed, but HRS conceded that the policy required patient origin data that was not available to the applicant or the department. In the absence of a specific rule or policy, HRS' review and comments on the Holmes application reflect a general concern that, if no additional services are being offered, and no additional beds are needed or proposed, there must be some direct, positive health care benefit to be derived from the expenditure of $11 million to transfer beds. Concomitantly, there should also be no negative effect on the existing services. These general concerns must still be translated into the statutory criteria found in section 381.705, F.S. The SAAR found that Holmes' proposal at least partially met every relevant criteria. In its evidence explaining and supporting its application, Holmes proved that its satellite project will significantly improve access to the population of a phenomenally fast-growing community. The reduction in beds at HRMC will increase the utilization rate at that facility, which, although underutilized at less than 80 percent, is experiencing a constant increase and a better rate than the other area hospitals. The loss of revenue will not negatively impact HRMC in the long-term and will positively impact the parent company, Holmes. HRMC and Holmes have a reputation for quality care, reasonable costs and a commitment to serve the indigent and underserved patients in South Brevard. The same management will assure these attributes are maintained at the satellite facility. Holmes' forecasts for patient mix and utilization rates are based on a long experience in providing wide range health care services in South Brevard. Its management decision to utilize $11 million of on hand resources to create the satellite is a sound business decision based on a projected need for the horizon year 1992, the growth patterns in the south west county, and a calculated desire to maintain its market share. The shared services and resources make the satellite facility economically preferable to a new separate free-standing facility of 60 beds. The removal of beds from HRMC will result in more efficient use of space in that hospital. In summary, there is a need for the facility proposed by Holmes.
Recommendation Based on the foregoing, it is, hereby RECOMMENDED: That HRS award a Certificate of Need to Holmes Regional Healthcare Systems Inc., for a 60-bed satellite hospital in Palm Bay, Florida, by virtue of a transfer of 60 licensed beds from Holmes Regional Medical Center in Melbourne, Florida. DONE and RECOMMENDED this 8th day of November, 1988, in Tallahassee, Florida. MARY CLARK 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 8th day of November, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-0394 The following constitute my specific rulings on the findings of fact proposed by the parties. Petitioner's Proposed Findings Adopted in paragraphs 1 and 5. Adopted in paragraph 22. 3-7. Rejected as unnecessary. 8. Adopted in the background statement and in summary in paragraph 21. 9-10. Rejected as unnecessary. 11-13. Adopted in substance in paragraph 26, although the fact that the Lee application was originally denied was not clearly established. 14-15. Addressed in the background statement. 16. Addressed in the statement of issues. 17-18. Adopted in paragraph 31. Adopted in paragraph 9. Adopted in substance in paragraph 7. Adopted in paragraph 8. 22-24. Adopted in substance in paragraph 9. 25. Adopted in substance in paragraph 23. 26-28. Adopted in paragraph 10 and paragraph 24. Rejected as argument. Rejected as unnecessary. Addressed in the statement of issues. Adopted in paragraph 31. Addressed in the statement of issues. Rejected as unnecessary. Adopted in substance in paragraphs 15 and 18. 36-37. Rejected as unnecessary. 38. Adopted in paragraph 16. 39-40. Rejected as unnecessary. Adopted in substance in paragraph 20. Rejected as cumulative and unnecessary. Rejected as unnecessary. Adopted in substance in paragraphs 12 and 13. Adopted in paragraph 21. 46-47. Rejected as unnecessary. Adopted in substance in paragraph 22. Rejected as unnecessary. Adopted in paragraph 25. 51-52. Rejected as argument. 53-55. Rejected as unnecessary. 56. Adopted in part in paragraph 26, otherwise rejected as unnecessary. 57-59. Rejected as argument. Respondents Proposed Findings 1. Adopted in Paragraphs 1 and 3. 2-3. Addressed in background statement. 4-5. Addressed in statement of issues. Rejected as unnecessary, although the access issue is addressed in paragraphs 6-11 and paragraph 23. Rejected as unsubstantiated by the evidence. Rejected in part as unnecessary. No criteria requires proof that the population is not predominately located within an average 30-minute drive time. Also rejected as inconsistent with the evidence. The study involved two-way drives (see transcript pp 309-310). The cited portion of the transcript does not support the finding suggested, that the study was manipulated. 9-10. Rejected as unnecessary. Rejected as unnecessary. This was not an issue in the proceeding. Adopted in part in paragraph 5. 13-19. Rejected as unnecessary or irrelevant. 19-21. Rejected as contrary to the weight of evidence. 22-23. Rejected as unnecessary. Rejected as immaterial. The application was not amended at hearing. Addressed in conclusions of law, paragraph 4. Rejected as immaterial. Occupancy rates are not at issue. 27-28. Rejected as contrary to the weight of evidence. Rejected as unnecessary. Rejected as cumulative and unsupported by the evidence. Rejected as immaterial. The witness was credible. 32-34. Rejected as unnecessary. 35. Rejected as contrary to the weight of evidence. 36-39. Rejected as immaterial. 40. Rejected as contrary to the weight of evidence. COPIES FURNISHED: Lee Elzie, Esquire MacFarlane, Ferguson, Allison & Kelly 215 South Monroe Street Tallahassee, Florida 32302 E. G. Boone, Esquire Jeffrey A. Boone, Esquire Boone, Boone, Klingbeil & Boone, P. A. Post Office Box 1596 Venice, Florida 34284 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, Esquire Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32399-0700
