The Issue The issue is whether Winter Haven Hospital, Inc.`s application for a certificate of need to establish an open heart surgery program at its health care facility in Winter Haven, Florida should be granted.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Background On September 26, 1988 respondent/applicant, Winter Haven Hospital, Inc. (WHH), filed its application for a certificate of need (CON) with respondent Department of Health and Rehabilitative Services (HRS), seeking authorization to establish an adult open heart surgery program at its facility located at 200 Avenue F, Northeast, Winter Haven, Florida. According to the application, WHH proposed to implement an open heart surgery program in an existing operating room with a project expenditure of $714,000. After reviewing the application, HRS found certain items to be either incomplete or missing and requested WHH to furnish such data by November 20, 1988. After such items were timely submitted, HRS deemed the application to be complete on November 14, 1988. A further review of the application followed, and, despite noting at least ten deficiencies in the application, HRS issued its state agency action report and letter of intent to grant the application on January 13, 1989. This preliminary action was followed by a notice of intention to grant the CON published in the Florida Administrative Weekly on February 3, 1989. After notice of HRS's preliminary decision was published, petitioner, Hillsborough County Hospital Authority d/b/a Tampa General Hospital (TGH), a 947-bed acute care hospital located at Davis Island, Tampa, Florida, filed a petition for formal hearing challenging the proposed agency action. A similar petition was also filed by petitioner, Lakeland Regional Medical Center (LRMC), a 897-bed acute care hospital in Lakeland, Florida. Both petitioners contended that WHH's request, if approved, would adversely affect their existing open heart surgery programs in contravention of state law and agency rules. The parties have stipulated to the standing of petitioners. The Omissions Process When WHH filed its application with HRS on September 26, 1988, it inadvertently failed to submit (a) one page of the balance sheet of the financial statements and (b) the opinion letter of the certified public accounting firm that prepared the financial statements. During the initial review of the application, HRS noted that the financial statements were incomplete and requested WHH to file such data during the so-called omissions process. This process is authorized by statute and rule and affords an applicant the opportunity to supply missing or incomplete information after the initial application has been filed. Pursuant to HRS's request, WHH supplied the two missing documents, and other requested information, by the specified due date. After receipt of this data, the agency deemed the application to be complete. According to agency personnel, when the application was filed HRS had a policy of permitting this type of information to be routinely filed during the omissions process. Shortly thereafter, HRS changed its policy and required complete financial statements to be filed with the initial application. If complete financial statements were not initially filed, the application was deemed to be incomplete and rejected without further review or opportunity to supply the missing data. However, this policy was recently ended, and the agency has now reverted to the policy in effect at the time WHH filed its application. Thus, the filing of such data by WHH during the omissions process was consistent with then existing agency policy as well as HRS's governing rules and statutes. The Parties The Department of Health and Rehabilitative Services is the state agency charged with the responsibility of administering the Health Facility and Services Development Act, also known as the Certificate of Need (CON) law. In this proceeding, and consistent with its proposed agency action, HRS supported WHH's application. Winter Haven Hospital, Inc. is a non-profit community hospital licensed for 579 long-term and psychiatric beds. Of that total, 259 are designated as medical/surgical beds while 36 are classified as intensive care unit (ICU) beds. Established more than fifty years ago, WHH has two campuses, a 160-member medical staff with a broad range of medical specialties, and provides all major medical services with the exception of open heart surgery, comprehensive burn treatment, and Level III neonatal intensive care. In August 1988 WHH opened a cardiac catherization laboratory with the intention of later adding an open heart surgery unit. The facility treats Medicaid and Medicare patients and indigents and has contracts with local health management and preferred provider organizations and other groups. Although not disclosed in the letter of intent, WHH is a subsidiary corporation of Mid-Florida Medical Services, Inc., a holding company for WHH and various other affiliated entities. Hillsborough County Hospital Authority is a public agency created in 1980 by the Florida Legislature for the express purpose of operating Tampa General Hospital. Licensed for 947 beds, the facility serves as a major teaching and tertiary referral hospital providing a complete range of services twenty four hours per day, including open heart surgery. In addition, TGH is the primary teaching hospital for the University of South Florida medical school. By law, TGH is required to provide indigent care. Lakeland Regional Medical Center operates a large, regional referral acute care facility at 1324 Lakeland Hills Boulevard, Lakeland, Florida. Of its licensed 897 beds, approximately 700 are licensed medical/surgical and ICU beds. LRMC has historically provided a wide range of acute care services, including open heart surgery and diagnostic and therapeutic cardiac catherization, and is a major tertiary referral center. According to Health Care Cost Containment Board data, LRMC treats twice as many patients, including those acutely ill, as does WHH and has a substantially larger operating budget. District 6 Open Heart Programs The facilities of WHH, LRMC and TGH are located in district 6, a geographic area composed of Hillsborough, Polk, Manatee, Hardee and Highlands Counties and artificially created by HRS for, among other things, the purpose of determining need for new or additional health facilities within that area, including open heart surgery programs. In addition to TGH and LRMC, there are four other existing adult open heart surgery programs in district 6. These include St. Joseph's Hospital in Tampa, a well established program, and Manatee Memorial Hospital (Bradenton), L. W. Blake Hospital (Bradenton) and University Community Hospital (Tampa). The latter three programs opened in February 1988, March 1989 and June 1989, respectively. None have intervened in this proceeding. When WHH's application was reviewed, a seventh open heart surgery program within the district (Humana- Brandon) had been preliminarily approved, but that approval was subsequently withdrawn. Therefore, for purposes of this proceeding, Humana- Brandon will not be considered as an existing or approved program. According to the state agency action report made a part of this record, the programs and number of open heart procedures performed during the twelve month period ending June 30, 1988 were as follows: Program Procedures St. Joseph's 933 TGH 1230 University Community Hospital 0 L. W. Blake 0 Manatee Memorial 70 LRMC 503 Total 2736 For the twelve months ending September 30, 1988, there were 2,672 procedures performed by district 6 programs, or a decline of 64 procedures when compared to the total performed during the year ending June 30, 1988. Of that amount, 1614 procedures were performed on district 6 residents while 1058 procedures were performed on non-district 6 residents. The latter number included 541 residents from district 5 of whom 473 were Pasco County residents. The service area of TGH's open heart surgery program encompasses a nine-county area with a range of seventy miles. It receives 42% of its open heart patients from district 6, with 34% from Hillsborough County and 5% from Polk County. As to the patients from outside district 6, TGH receives 33% from district 5 and 14% from district 3. Approximately 75% of LRMC'$ open heart surgery patients are Polk County residents. Indeed, of 496 Polk County residents having open heart surgery during the year ending September 30, 1988, approximately 73% of those residents had surgery at LRMC. The remainder used facilities outside the county, such as TGH. In 1986 approximately 200 patients came to LRMC from locations outside of the City of Lakeland but within Polk County, and some 67 cases per year have been referred by WHH to LRMC. The service area of WHH is not as clearcut. In its application, WHH designated all of Polk County as its primary service area, and Highlands and Hardee Counties as the secondary service area for its proposed program. However, in its answers to interrogatories, WHH represented that its primary service area was eastern Polk County. At hearing, the service area was redesignated as eastern Polk County, Hardee County and Highlands County. Since over 90% of WHH's patients reside in Polk County, it is found that Polk County is its primary service area. For the year ending September 30, 1988 one hundred twenty-five residents of Highlands County had open heart surgery. Only 8% used LRMC while 74% went to a facility in Orlando. For the same time period, sixteen Hardee County residents had open heart surgery, of whom approximately 63% used LRMC's facility. Applicable Statutory and Rule Criteria By prehearing stipulations the parties agreed that, except for the criteria contained in Subsections 381.705(1)(g), (j), and (2)(e), Florida Statutes (Supp. 1988), all other relevant statutory criteria must be satisfied. These include subsections 381.705(1)(a)-(f), (h) and (i), (k)-(n), and (2)(a)- (d). 1/ In addition, the criteria in Rule 10-5.011(1)(f), Florida Administrative Code (1987) are in issue. Of special concern in this proceeding is the appropriate manner in which to satisfy the requirements of subpart 11.a.(I) of the rule. To demonstrate compliance or noncompliance with the criteria, the parties presented a number of expert witnesses. As might be expected, the testimony on this issue is sharply conflicting. In resolving these conflicts, the undersigned has accepted the more credible and persuasive testimony on the issue, and that testimony is embodied in the findings below. Subsection 381.705(1)(a), F. S. - The first statutory criterion requires that HRS consider "the need for the health care facilities and services . . . being proposed in relation to the applicable district plan arA state health plan." In this regard, the parties have offered into evidence copies of the relevant portions of the two plans. The 1988 District VI Health Plan has application in this proceeding. That plan requires, among other things, that (a) all existing programs in a particular service area must be operating at 350 procedures per year, (b) the proposed unit must be able to reach a level of 200 procedures within three years, and (c) the proposed program cannot reduce the average utilization in the applicant's service area below 350 procedures per year. In addition, the plan expresses a preference for applicants which have an historical commitment to the provision of indigent care and those hospitals with documented status as major regional referral centers. Finally, the plan expresses a preference for applicants from subdistricts not having existing and/or approved programs. Notwithstanding WHH's contention that the foregoing objectives apply only to comparatively reviewed applications, it is found that these objectives must be taken into account in determining whether the proposal is consistent with the plan. The evidence reflects that not all of the existing programs in the service area are operating at 350 procedures per year. Indeed, University Community Hospital, L. W. Blake and Manatee Memorial Hospital are operating at substantially below that number. The record also indicates that the applicant has not reasonably demonstrated that it will reach a level of 200 procedures within three years. Further, unless 700 procedures per year can be generated by LRMC and WHH, which is highly questionable, the requirement that the new program not reduce average utilization in the applicant's service area (Polk County) below 350 will not be met. As to the requirement that an applicant have a historical commitment to the provision of indigent care, WHH's historical commitment, while substantially less than some providers such as TGH, is marginally sufficient to satisfy this requirement. Next, even though the district is not apportioned into subdistricts for the purpose of determining open heart surgery program need, it is noted that WHH's proposed facility would lie within fifteen miles of LRMC. Finally, WHH is considered a community hospital rather than a major regional referral center and thus it falls short on that objective. Even if WHH was a step above a community hospital, it must still be recognized that open heart surgery is a specialized tertiary service which should be regionalized and performed in a limited number of institutions. Therefore, it is found that the proposal is inconsistent with the local health plan. Chapters 4 and 5 of the state health plan contain various objectives and goals for specialized services such as open heart surgery programs. Goal 1 of chapter 4 of the plan establishes an objective of developing "acute-care resources in quantity and mix which appropriately meet population needs in the most cost-efficient manner." Goal 4 of chapter 5 provides an objective of insuring "the appropriate availability of cardiac catherization and open-heart services at a reasonable cost." In addition, objective 4.2 of chapter 5 provides that its goal is "to maintain an average of 350 open heart surgery procedures per program in each district through 1990." The parties have not relied upon or cited any other applicable portions of the state plan. Since the existing programs within the district are not operating at capacity, the approval of the application would be inconsistent with goal 1 of chapter 4 which provides that acute-care resources should be developed in the most cost-efficient manner. The evidence further supports a finding that as to goal 4 of chapter 5, the approval of another program within the district will drive up costs at existing programs. The bases for this finding is set forth in findings of fact 43-46. Thus, the proposal is inconsistent with the plan in this respect. Finally, the proposal is found to be consistent with objective 4.2 of chapter 5 since an average utilization of 350 procedures per program should be maintained through 1990 even with the addition of a new program. Given the above two shortcomings, it is found that the proposal is inconsistent with the state plan. Subsections 381.705(1)(b), (2)(a),(b) and (d), F.S.- These criteria require that HRS consider the "availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services and hospices in the service district of the applicant," whether less costly and more efficient and appropriate services are available, and whether patients will experience "serious problems in obtaining inpatient care of the type proposed, in the absence of the proposed new service." To put these criteria in perspective, it is noted that when the application was reviewed by HRS, there were four existing open heart surgery programs within the district. At time of hearing, two other approved programs had commenced operations. The areas with highest population densities, such as Lakeland, Tampa and Bradenton, all have open heart programs in the vicinity. Thus, the existing programs in the district are geographically distributed consistent with the relative population distribution within the district. There are no programs in either Hardee or Highlands Counties, but they have a very small population base. Indeed, HRS acknowledged in the state agency action report that a new program at WHH would not enhance access to residents of those two counties. According to traffic engineering studies introduced into evidence, open heart surgery services currently are available to 90% of the population of district 6 within a two hour drive time, as required by subparagraph 4.a. of rule 10- 5.011(1)(f). The City of Lakeland is only fifteen miles, or thirty minutes drive time, from Winter Haven. Therefore, the addition of a new program in Winter Haven will not materially enhance geographic accessibility. Further, there is no demonstrated accessibility problem by residents of the district. The existing facilities in the district have sufficient excess capacity to perform additional open heart surgery cases. This projected growth can be accommodated without any additional capital expenditures. Indeed, greater utilization of the existing programs would be a less costly alternative to the establishment of a new program at WHH. Also, there is no evidence that cardiac patients in the district will experience serious problems in obtaining open heart surgery services in the absence of a program at WHH. Therefore, it is found that the applicant has failed to show that the existing programs are inadequate or unavailable, that residents have an accessibility problem to existing facilities, that the quality of care, efficiency, utilization and appropriateness of other programs are less than satisfactory, that less costly, more efficient alternatives are not available, that patients will experience a serious problem in obtaining care in the absence of the proposed new service, or that existing facilities are being used in an inappropriate or inefficient manner. Subsections 381.705(1)(c) and (h), F.S. - These two criteria go hand in hand and require HRS to consider "the ability of the applicant to provide quality of care and the applicant's record of providing quality of care," and whether the applicant has sufficient resources, including manpower, to accomplish and operate the project. Petitioners suggest that WHH will be unable to offer adequate quality of care because the new program will not attract a sufficient number of patients and because of a lack of adequate planning. They also contend that WHH will not be able to recruit and hire the necessary personnel to support its program. To ensure quality of care, WHH intends to enter into a contract with The Watson Clinic in Lakeland to provide a surgical team. Since those physicians are performing surgeries at LRMC, WHH proposes that the team would split its time between the two facilities. The team now performs more than 500 procedures per year at LRMC. Thus, WHH asserts that the team can easily maintain its proficiency even if it does not meet its projected level of procedures. For that matter, WHH points to a suggested standard by the American College of Surgeons (ACS) that 150 procedures per year is a reasonable standard, a goal that WHH obviously believes it can reach. It goes on to contend that the surgical team, and not the hospital, performs the procedure, and that as long as the combined efforts of the surgical team surpasses the 500 threshold, the quality of care will be maintained. As to the resources and manpower needed to accomplish the project, WHH projected in its application the need to hire two scrub technicians, two registered nurses and one perfusionist for a single surgical team in one operating room. However, it projected no incremental staffing needs for additional ICU nurses or technicians. The applicant concedes it may "encounter some difficulty in hiring the necessary personnel" for its program but points to a good track record in hiring other personnel and the fact that the perfusionist may be provided by the surgical team from The Watson Clinic. It further posits that aside from the five positions, it is unlikely that any other personnel must be hired. This is because it already has some experienced personnel in the employ of the hospital who can be transferred to the open heart surgery program and others can be readily trained. The evidence establishes the fact that there is a direct relationship between the volume of open heart surgery performed at a hospital and the quality care afforded open heart surgery patients. In other words, as the volume of cases increases, mortality rates generally decrease. As demonstrated in studies introduced by LRMC witness Luft, hospitals performing between 20 and 100 coronary artery bypass graft procedures per year had a risk adjusted mortality rate of 5.2%. This rate decreased to 4.1% for hospitals with annual volumes of between 201 and 350 procedures, and dropped even farther for facilities performing in excess of 350 procedures per year. This measure has proven to be accurate at LRMC, for as the volume at the hospital has increased, mortality has decreased. The above statistics are accepted as being a more reliable measure than the ACS standard of 150 procedures per year suggested by WHH. The more credible evidence reflects that WHH will not be able to perform 200 adult open heart surgery procedures annually within three years of initiating its program. This level could only be achieved if WHH gains a substantial share of Highland County's market. However, the vast majority of Highland patients are currently migrating out of the district to a church sponsored facility in Orlando. This suggests that these patients are motivated by factors other than proximity since they are already bypassing the closest facility, LRMC. In addition, LRMC's cardiovasular surgeons, who WHH plans to use, receive no referrals from that county, and only 4% of LRMC's total hospital discharges come from that county. Further, there is no evidence that WHH would be able to change existing referral patterns. Finally, although WHH projected 164 procedures in its first year, 206 the second year and a minimum of 200 by year three, it made no credible market share analysis to support those projections. Indeed, existing use rates of Polk County residents, which are another good indication of the future demand for a new service, belie WHH's projections and suggest that only 30 additional open heart surgery cases will be generated in 1990 beyond current volumes. This is consistent with the fact that LRMC has experienced the smallest growth in open heart surgery volume of any district 6 program over the last three years. It is noted that HRS projects a growth in volume of less than 200 cases by 1990 for the entire district with much of that growth being accounted for at the new programs. A more credible and reasonable projection shows that by 1993 there will be 2,700 open heart procedures available for the six existing facilities in district 6, which is only 28 procedures more than performed by the four operational programs in district 6 during the year ending September 30, 1988. It should be noted here that WHH's recently initiated cardiology program has been facing slow growth, market saturation and potential decline. All parties recognize the critical shortage of nursing personnel that exists nationally, and particularly in the areas of cardiovascular surgery and intensive care. Even today, LRMC has a number of nursing vacancies, including vacancies in its intensive care unit, despite having a full time recruiter and an aggressive recruiting program. Thus, LRMC's fear of losing skilled personnel to WHH should the application be granted are well-founded, particularly since it has lost staff to WHH in the past. In addition, qualified perfusionists are extremely difficult to hire. Indeed, The Watson Clinic has been attempting, unsuccessfully, to hire an additional perfusionist for the LRMC program for almost a year. Current salaries for a perfusionist range from $70,000 to as high as $100,000 per year. This contrasts with the unrealistic projection of WHH that it could hire a perfusionist for $40,000 per year. A back-up open heart surgery operating room fully equipped and staffed will be necessary in order for WHH to assure patient safety and to be able to provide angioplasties. Additional ICU space is also required. Because WHH has made no provision for an additional operating room or ICU space, and the necessary related staffing, it is apparent that WHH has not adequately planned and demonstrated the intensive care capacity necessary to serve open heart surgery patients. The applicant must have more than one surgical team so as to allow for vacations, sick days, 24-hour coverage, and emergencies. However, table 11 of the application reflects that WHH intends to provide for only one assembled surgical team. With the proposed limitation of one operating room and one surgical team, WHH would not be able to handle emergency cases that arise during normal hours when a scheduled procedure is in progress. It should be noted here that The Watson Clinic now employs only three cardiovascular surgeons. One of those surgeons is leaving, and the clinic has been attempting, unsucessfully so far, to recruit another surgeon. Until a replacement is recruited, the clinic will have only two surgeons who ostensibly would work at both WHH and LRMC if the application was approved. The application does not provide for the additional intensive care staff necessary to care for 200 open heart patients per year. A 1:1 patient to nurse ratio for the first twenty-four hours following surgery is desirable. Even if WHH utilized a less desirable 2:1 ratio, at least four additional intensive care nurses would be required to handle the incremental patient load. During the start-up period for a new open heart surgery program, a hospital cannot be expected to perform the number of cases necessary to achieve the desired low mortality rates. This reality has been taken into acount by HRS by giving new programs three years in which to reach the 200 procedure threshold. Even with this grace period, the evidence supports a finding that WHH will not be able to reach that threshold within the required three year time period. Given this fact, and the shortcomings in applicant's planning for staff and equipment, it is found that WHH has failed to demonstrate that it can ensure the requisite quality of care required by the law. It is further found that applicant has failed to demonstrate that it will have the necessary resources, including manpower, to accomplish and operate the project. Subsections 381.705(1)(d) and (2)(c), F.S. - These criteria require a consideration of alternatives, including sharing arrangements, to the proposal under review. Except for existing facilities, there are no alternatives to open heart surgery. In this regard, HRS determined that "less costly alternatives to the proposal would be greater utilization of the existing open heart surgery programs in District VI." As noted in finding of fact 27, the existing facilities have sufficient excess capacity to handle the projected growth in the district. Although LRMC has offered to explore a cooperative, shared open heart surgery program with the applicant, WHH officials have so far declined. The Watson Clinic, from which the surgical team will be obtained, has also indicated a willingness to support such an arrangement. In light of WHH's unwillingness to consider this alternative, it is found that the statutory criteria have not been ftet. Subsection 381.705(1)(i), F.S. - An applicant for a CON is required to demonstrate the short and long-term financial feasiblility of the project. In this case, the long-term financial feasibility of the project is dependent in large measure upon the reasonableness of WHH's projections. The pro forma financial projections contained in the application are flawed and unreliable. This was borne out by WHH's own financial expert who rejected four of the five assumptions underlying the pro formas. To overcome these deficiencies, at hearing WHH's expert offered a new financial analysis which was substantially different than the pro formas submitted with the application and reviewed by HRS prior to deeming the application complete. As such, the new analysis constituted an impermissible amendment to the application. Even if it was not construed to be an amendment to the application, the projected utilization of 206 procedures by the second year of operation, and upon which the financial projections are premised, was not supported by the evidence. Because of this, it is found that applicant has not demonstrated that the project is financially feasible in the long term. Subsection 381.705(1)(1), F. S. - This criterion requires HRS to consider the "probable impact of the proposed project on the costs of providing health services proposed by the applicant". The statute also speaks of competition and its effect on the ability of the applicant's competitors to promote quality assurance and cost-effectiveness. Initially, it is noted that in recent years there has been increasing competition for open heart patients in district 6. This is because three new programs have recently become operational. In addition, a new program was just authorized in Pasco County which will reduce the inflow of Pasco County residents into district 6. Most of the Pasco County patients were utilizing the facility of TGH. The authorization of another program will inevitably draw patients from the existing facilities and the expected loss will serve to increase costs both to patients and hospitals. Although WHH intends to charge lower fees for open heart patients than do LRMC and TGH, HRS concedes that this would not likely have the effect of causing those providers to decrease their charges. At the same time, the competition between LRMC and WHH for the skilled personnel necessary to operate an open heart surgery program would have the effect of driving up costs at both institutions. If approved, the application would directly and adversely impact LRMC. This is because approximately 75% of LRMC's open heart patients are residents of Polk County. The historical overall hospital primary Service area of WHH, which is projected by WHH to mirror the primary service area of its open heart surgery program, directly overlaps LRMC'S primary service area for open heart surgery. In addition, cardiologists and surgeons at LRMC currently receive referrals of surgical, angioplasty and diagnostic cardiac catherization cases from Winter Haven physicians, and those referrals will likely be reduced with the approval of a new program at WHH. This is supported by the fact that when WHH opened its cardiac catherization laboratory in August 1988, LRMC experienced a substantial drop in cases referred from Winter Haven physicians. Further, if WHH achieves its projected level of 206 cases by the second year of operation, LRMC would likely lose 133 open heart referrals and 128 angioplasty cases. This in turn would result in an annual financial loss of $1,652,640 for LRMC. If the number of procedures reached 350, LRMC could likely lose 226 cases per year, a number that WHH's own expert conceded was reasonable given the fact that some 200 patients per year come to LRMC from points outside of Lakeland but within Polk County. Given LRMC's declining operating margins in recent years, and a projected operating margin of only $300,000 in 1990, LRMC would be forced into a deficit position thereby adversely impacting its current level of services, quality of care and ability to provide indigent care. Tampa General Hospital's indigent load is substantial, and for the current fiscal year it anticipates providing $45 million worth of indigent care net of any reimbursement. Indeed, approximately 43% of TGH's patients are in the medically needy category, and it projects a deficit in 1990 of $4.3 million. To offset these losses, TGH relies on revenues from paying patients, of which the open heart surgery program is a major source. In 1988, this source provided 15% of its net patient services revenue. The approval of a program at WHH would further reduce the availability of open heart patients to TGH. If a new program caused only a 10% loss of open heart surgery patients, TGH's gross service revenue would decrease by over $4 million per year. Even the 5% to 6% loss that WHH predicts will occur would equate to a not insubstantial sixty-two patients per year. Accordingly, it is found that the introduction of a new program at WHH would have an adverse impact on TGH, although not as profound as on LRMC. Subsection 381.705(1)(n), F. S. - This subsection requires HRS to consider the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent. Recent data indicates that only 2.7% of WHH's total patient days were Medicaid days. Also, its total charity uncompensated care was $410,176. When the Hill-Burton compulsory contribution is excluded, WHH's net voluntary indigent and uncompensated care was only $133,950, which was two-tenths of one percent of gross revenue for the year. This contrasts with TGH's total uncompensated care in 1987 of 4.5% of gross revenue. According to Health Care Cost Containment Board data for 1988, WHH's total uncompensated care was approximately one-tenth the amount incurred by LRMC during the same time period. Also, the applicant has had a policy of requiring major surgery patients to demonstrate financial capability before being admitted. Even so, WHH has represented to HRS that it intends to dedicate 2% of open heart services to Medicaid patients which is comparable to the level historically reported by existing providers in the district. Given this representation, which was not contradicted, it is found that the application is in compliance with this criterion. The remaining statutory criteria - Petitioners have not seriously contested WHH's ability to satisfy the remaining statutory criteria. It is specifically found that the remaining relevant statutory criteria have been satisfied. To the extent the rule criteria, except rule 10-5.011(1)(f), apply, they are also deemed to have been satisfied but only where the comparable statutory criteria have been met. Rule 10-5.011(1)(f), F. A. C. - This rule sets forth additional criteria against which applications for open heart surgery programs are evaluated. Of some significance is the admonition in subparagraph 2. which states that "(t)he Department will not normally approve applications for open heart surgery programs in any service area unless the conditions of Sub- paragraphs 8. and 11., below, are met." Since WHH does not rely on "not normal" circumstances, a major controversy has arisen over the manner in which MRS has deemed subpart 11.a.(I) to have been satisfied. To determine the numeric need for new programs within a service area, HRS utilized the formula embodied in subparagraph 8. of the rule. Under this formula, a use rate was calculated for the service district based upon the number of open heart surgery procedures per 100,000 population for the year ending June 30, 1988. The use rate was then applied to the projected population for the horizon year of 1990, the year the program is expected to begin. This calculation produced a projected number of 2,914 procedures for 1990. After dividing that number by 350, MRS determined that 8.3 programs were needed in the district by 1990. Since the district already has six existing or approved programs, which must be subtracted from the projected need, the formula produced a net need of two additional programs. According to MRS's expert, the formula calculation merely provides an opportunity, and not a requirement, for MRS to approve an additional program since the applicant's conformity with other rule and statutory criteria must also be considered. It should be noted that the rule projects a need on a district-wide basis and has no provision for projecting the number of cases within various geographic areas of the district such as the service area defined in WMM's application. In this regard, WHH made no claim that it would attact patients from anywhere in district 6 other than Polk, Mardee and Highlands Counties. Subparagraph 11. of the rule reads in part as follows: There shall be no additional open heart surgery programs unless: the service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to operate at a minimum of 350 adult open heart surgery cases per year . the conditions specified in Sub- paragraph 5.4, above, will be met by the proposed program. b. No additional open heart surgery programs shall be approved which would reduce the volume of existing open heart surgery facilities below 350 open heart surgery procedures annually for adults . . . The above rule was adopted in substantially its present form in February 1983. Under the plain language in subparagraph 11.a., even if a numeric need is shown, a new program shall not be established unless each existing and approved program within the district is operating at and is expected to operate at a minimum of 350 procedures per year. The agency's expert acknowledged that the plain language of the rule requires that each existing and approved program be operating at the 350 threshold before a new program may be approved. She also acknowledged that if the words "and approved" were not in subpart 11.a.(I), the agency would interpret the provision in the manner suggested by petitioners. Nonetheless, HRS interprets the rule as requiring that each existing and approved program must in the future maintain an average of 350 procedures if a new program is approved. No determination is made as to whether the existing programs are currently averaging 350 procedures annually. According to HRS's expert, this interpretation is based upon a reading of the entire subparagraph 11. Applicant's expert, who was formerly in charge of HRS's CON program, also supported the agency's practice of "averaging" and concluded that subparagraph authorized this interpretation. Even so, the word "averaging" is not found in any provision within subparagraph 11. In addition, the proponents of the averaging policy rely upon another portion of the rule to support their position. More specifically, they rely heavily upon subparagraph 7. of the same rule which provides that "(t)he provision of open heart surgery in the service area shall be consistent with the needs reflected in the local health plan and the Florida State Health Plan." One objective of the state health plan is to maintain an average of 350 procedures per program in the district through 1990. It is noted, however, that the state health plan applicable to this proceeding was adopted more than two years after the rule in question became effective, and thus could not have supported HRS's interpretation during the rule's first two years of operation. Moreover, that objective is directly at odds with the provisions in subpart 11.a.(I). Finally, the proponents argue that if the rule is interpreted in the manner suggested by LMRC and TGH, a new program could never be authorized if a district had an approved program since an approved program is not yet operational and obviously could not achieve the 350 threshold. They argue that such a construction would be illogical and absurd. However, it is noted that the rule provides that a new program can be authorized by HRS if not normal circumstances are shown even if the 350 threshold is not being satisfied. Indeed, HRS has granted at least three open heart CONs based on not normal circumstances. In November 1982 HRS was in the process of considering changes to the rules pertaining to CON applications for both cardiac catherization laboratories and open heart surgery programs. In response to a staff suggestion, HRS amended its cardiac catherization laboratory rule by changing the existing utilization provisions to require that an average of 600 adult catherizations be used as a utilization threshold for the review of applications rather than a requirement that each laboratory in the district be performing 500 adult catherizations. This amendment was made because HRS recognized that by using the word "average", the authorization of new laboratories would "not be impeded by a few or even one laboratory which is operating below the required minimum". In contrast, however, HRS chose not to amend its open heart rule to make a corresponding change. This was perhaps due to the fact that HRS initially interpreted the open heart rule to mean what it literally says and early on denied at least one application because each existing program in the service district was not performing 350 or more procedures per year. Expert testimony established good health planning reasons why the rule should be applied as written and why the incipient policy being used by HRS is improper. Given the undisputed relationship between the quality of an open heart surgery program and its volume, it is gold health planning to allow newly approved providers to become operational and reach the 350 procedure level as soon as possible and before new programs are authorized. If the 350 averaging procedure was used, new programs could be approved even though there were existing programs in the area, as here, maintaining an annual volume substantially below 350 procedures. The inevitable result would be to drive down the utilization in most or all of the programs. Indeed, HRS undertook no formal analysis in this proceeding to determine if the approval of a new program would force the utilization rate of any existing provider below the 350 threshold. In the absence of not normal circumstances, it is found that the provisions of subpart 11.a.(I) have not been met. Amendments or Updates? At issue in this proceeding is the admissibility of certain information proffered by WHH at hearing which was not contained in the original application. This includes (a) certain pro forma financial projections and (b) proposed changes to the staffing and equipment. These are discussed in greater detail below. It should be noted here that any changes to facilities, beds or staffing outlined in the application would be a "significant" amendment to the proposal from a health planning perspective as it would change the projected costs of the operation in both the long-term and short-term. Moreover, HRS's expert agreed that WHH is bound by the projections in the application and omissions response. The original application contained pro forma financial projections to justify the financial feasibility of the project. This is the same "detailed financial projection" that is statutorily required to be filed with the application. At hearing, WHH introduced into evidence, subject to petitioners' objections, new pro formas to demonstrate that the program would be financially feasible. This new analysis was substantially different than the pro formas submitted to HRS by WHH and was not reviewed by HRS prior to deeming the application complete. In the application reviewed by HRS, WHH represented that it intended to hire five additional personnel, including two scrub technicians, two registered nurses, and one perfusionist for a single surgical team. At hearing, WHH presented several proposed changes in its staffing and equipment plans. First, WHH suggested that The Watson Clinic would supply the perfusionist and certain other personnel for its surgical team, although it projected no costs for those personnel. Secondly, WHH suggested it could equip and staff a back-up operating room and could train surgical and ICU nurses currently employed at WHH to become proficient in the care of open heart patients, rather than hiring additional nurses. Again, no additional costs were submitted with these new proposals. These changes were not reviewed by HRS prior to deeming the application complete. The applicant was made aware that its proposal did not provide for adequate facilities, beds, or staffing prior to the filing of its application. This advice was conveyed to WHH by its own consultant in September 1988. For whatever reason, at that time WHH chose not to adopt the more costly recommendation of its consultant.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the application of Winter Haven Hospital, Inc. for a certificate of need to authorize the establishment of an open heart surgery program be DENIED. DONE and ORDERED this 7th day of December, 1989, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of December, 1989.
The Issue The issue for determination is whether an agency statement, and criteria used in support of the statement, constitute a rule under Subsection 120.52(16), Florida Statutes (1993), whether the statement and criteria have been adopted as a rule pursuant to Section 120.54, Florida Statutes (1993), and whether the statement and criteria violate Subsection 120.535(1), Florida Statutes (1993).
Findings Of Fact Sacred Heart initiated this proceeding by filing a Petition alleging that, in reviewing the Baptist application, AHCA developed a statement which violates the provisions of Section 120.535(1), Florida Statutes, because the statement should have been promulgated as a rule. The statement, as described by Sacred Heart, is as follows: The Agency may, in its discretion, approve a CON application to establish an adult open heart surgery program notwithstanding findings by it that: 1) Need is not indicated pursuant to Florida Administrative Code Rule 59C-1.033(7)(c), i.e., approval of a new program will reduce the 12 month total to an existing adult open heart surgery program in the district below 350 open heart surgery operations; (2) the applicable fixed need pool for adult open heart surgery programs in the District is zero; and, (3) the application failed to demonstrate "not normal" circumstances justifying the approval of its application. By contrast, Rule 59C-1.033(7)(c) establishes the formula for determining numeric need and also provides: (c) Regardless of whether need for a new adult open heart surgery program is shown in paragraph (b) above, a new adult open heart surgery program will not normally be approved for a district if the approval would reduce the 12 month total at an existing adult open heart surgery program in the district below 350 open heart surgery opera- tions. . . . In reaching the preliminary decision to approve the Baptist application, various AHCA staff considered and discussed the facts presented, and the merits of the Baptist application. Dr. James T. Howell, the AHCA Division Director for Health Policy and Cost Containment, made the decision to approve the Baptist open heart surgery CON, because of Baptist's substantial, active, sophisticated cardiology program, its status as a high disproportionate share provider, its size, and because the results of the numeric need calculation and the formula for determining the reduced volume at existing providers were close to that required by rule. In February, 1993, after the numeric need publication and prior to the filing of the application at issue in this case, Dr. Howell, Albert Granger, and Robert Sharpe of AHCA met with the Mayor of Pensacola who is also Senior Vice President of Baptist Health Care and President of Baptist Health Care Foundation, and Baptist's Vice President for Planning who expressed frustration over the denials of its prior open heart surgery CON applications. Baptist submitted CON applications for open heart surgery in 1987, 1989, 1991, 1992, and 1993. Among the issues of concern was the status of Sacred Heart and West Florida Regional as grandfathered providers resulting in their having "a permanent franchise." Baptist representatives expressed concern about their ability ever to secure an open heart surgery program under the current rules. After that meeting, the rule amendment process was initiated to allow consideration of data reported up to 3 months, rather than 6 months prior to the publication of the fixed need pool. At the time the Baptist application for CON 7184 was reviewed, the amendment had not been adopted. No other change in the open heart surgery rule has been made subsequent to the review of the prior Baptist CON application. When the Baptist application for CON 7184 was filed initially, Laura MacLafferty was assigned as AHCA's primary reviewer. The state agency action report ("SAAR") represents her factual analysis of the application, although she did not and, routinely, does not make recommendations to issue or deny CONs. Ms. MacLafferty and her supervisor, Alberta Granger, are not aware of any AHCA non-rule policy to determine if a calculation of minimum volume is "close" enough to the 350 standard of the rule, nor any agency guidelines to determine when a hospital is "large" or "operates a large cardiology program" which should include open heart surgery. Subsequent to reviewing the Baptist application, in December 1993, Ms. MacLafferty reviewed another open heart surgery application from District 1, filed on behalf of Fort Walton Beach Medical Center. In her review of both the Baptist and Fort Walton applications, Ms. MacLafferty found no documentation that patients in District 1 experienced problems with access to open heart surgery services. Ms. MacLafferty submitted the draft SAAR to a supervisor, Alberta Granger. The draft SAAR was retrieved from her desk, prior to Ms. Granger's reviewing it. It was removed by Elizabeth Dudek, who heads AHCA's CON and health care board sections. Ms. Granger did not review the SAAR, which was prepared by Ms. MacLafferty. The final draft was returned to Ms. Granger for her to sign on July 7, 1993. This was the only time since Ms. Granger became supervisor in the CON office, that she has not reviewed and discussed with Ms. Dudek SAARs prepared by her staff. Ms. Granger had been the primary reviewer of Baptist's 1989 CON application. Ms. Granger and her supervisor, Ms. Dudek, are aware that in this case and in one or more of its prior CON open heart surgery applications, Baptist argued that its size, scope of cardiology services, and proposed fixed rate structure were reasons to approve its proposal. Ms. Granger stated, and Ms. Dudek confirmed, that the usual procedure was not followed in the review of this and one other application in this batching cycle. In this batching cycle, Dr. Howell requested that Mr. Sharpe, head of AHCA's planning section, also review those two open heart surgery applications. Ms. Dudek recalls, that prior to 1987, there were two batches of approximately 12 total applications in which agency personnel other than the CON staff was involved in the review of CON applications. In making his decision on the Baptist application, Dr. Howell consulted Ms. Dudek and Mr. Sharpe. Ms. Dudek, who heads the CON and health care board section, was not initially in favor of the approval of the Baptist application. Mr. Sharpe, head of the planning section, prepared a 9 page analysis of the pros and cons of the Baptist proposal. The Sharpe analysis demonstrates that an increase of 9 additional open heart surgeries during the 12 month reporting period, and the use of the more current data under the pending rule revision would have resulted in the need for one additional open heart surgery program in District 1. The memorandum also demonstrated that a lower future volume of open heart surgeries is projected by using the actual use rate, as required by Rule 59C-1.033(7)(6)2, rather than a trended use rate. If these adjustments to the data are made to achieve numeric need, then Baptist's application could be approved without a showing of not normal circumstances. The memorandum also reported the October 1991-September 1992 volumes of cardiac cath admissions at Baptist as 2677, at Sacred Heart as 2053, and at HCA West Florida as 1915, with the conclusion that Baptist "had the largest number of cardiac catheterization admissions of the three hospitals." The evidence in this proceeding is that the memorandum was in error. Actual volumes for October 1991-September 1992 were 912 at Baptist, not 2677. Dr. Howell found Baptist's proposal consistent with health care reform trends towards eliminating the need for CON regulation by enhancing market competitive forces, as a part of Florida's managed competition model, as explained in the Sharpe analysis. Similarly, Dr. Luke described the 1980's use of the CON process to control costs by limiting duplication and the rejection of institution specific planning as outdated. Dr. Luke also favors a model of competition for cost controls. At this time, however, these positions have not been adopted in Florida Statutes and rules. The 1994 Florida Health Security Plan recommends the continuation of CON review of all tertiary services, including open heart surgery. That plan was submitted as a part of AHCA's 1994 legislative proposals. Ms. Dudek described traditional "not normal" circumstances as issues related to financial, geographic, or programmatic access to the proposed service by potential patients, and not facility specific concerns. Facility specific concerns, in this case, include Baptist's attempt to retain cardiologists who wish to perform procedures not approved at Baptist and to improve its position to compete for managed care contracts. Baptist and AHCA contend that the intent to approve the application is predicated upon the exercise of AHCA's discretion to determine whether the circumstances justify a departure from the "normal" operation of the rule methodologies. As stated by Baptist and AHCA, this position is not inconsistent with the wording of the rule, but reflects a disagreement with Sacred Heart over what constitutes not normal circumstances. AHCA interprets Rule 59C-1.033 as giving the agency flexibility, in the exercise of its professional judgment, to approve open heart surgery applications when the rule methodology does not result in a numeric need for a new program, and/or the calculation intended to assure the 350 minimum procedures for established providers yields a lower number. Both sections of the open heart surgery rule have been upheld with the not normal circumstances provisions included. St. Mary's Hospital v. HRS, 13 FALR 2096 (F.O. 5/1/91). In the review of certificate of need applications, the weight to be accorded a particular statutory or rule criterion varies based upon the facts and circumstances of each case. If an earlier application is denied, and a new one submitted, the weight to be afforded certain criterion in the review of the more recent application may be different if the facts and circumstances are different. It is not consistent, however, for AHCA to treat the same facts differently, or to reach different conclusions of law on the same facts. In 1987, the agency responsible for CON regulation, denied a Baptist application, in the absence of numeric need, for the express purpose of protecting the 350 volumes at existing providers. In the preceding 12 months, there were 45 emergency angioplasties performed at Baptist, Sacred Heart's open heart surgery volume was 291, and West Florida Regional's was 344. The Baptist application was denied in a SAAR, which is replete with the references to the relationship of volume to quality, and which concludes: There is insufficient need for a third open heart surgery program in District One. It would lower the average number of procedures below the 350 recommended in the Rule and it would have a negative impact on existing providers. SAAR, CON Action No. 5120 at p.17. In early 1990, another Baptist application for an open heart surgery CON was denied. Using the preferences from the 1989 state health plan, the agency found that Baptist was (1) in a large county with a higher than average elderly population, (2) a disproportionate share provider, which would serve patients regardless of their ability to pay, (3) large enough to propose a fixed price structure for 3 years, and (4) capable of providing all the supplementary procedures for a complete cardiac program. Baptist was also found to have met the quality of care standard and to have the resources to implement the program. In addition, the fixed rate proposal was viewed as enhancing competition. The agency recommended denial, after finding no need for the project, no enhanced access or quality of care benefits and that existing providers volumes would fall below 350. The 1989 state health plan is also applicable to the review of CON 7184. Using the same 1989 preferences, the findings on the preferences in this case are essentially the same, except that the elderly population in Escambia is now below the state-wide average. See, DOAH Cases Nos. 93-4886 and 93-4887, Findings of Fact 53-60 (R.O. 11/18/94). By 1992, the use rate indicated a need for 2.48 open heart surgery programs in District One. Baptist asserted as "not normal" circumstances: (1) scheduling difficulties at Sacred Heart, (2) its status as a Level II trauma center, and (3) a fixed price structure at 85 percent of the average rate per DRG for the two existing providers. In its analysis of Baptist's asserted "nor normal" circumstances, the agency noted that "[a]pparently, Baptist has made no attempt to refer cases to West Florida Regional." The agency rejected the assumption that a trauma center has a need for open heart surgery services. The agency treated the proposed pricing structure as one reason for concluding that Baptist's proposed open heart program would reduce patient volumes at Sacred Heart and West Florida Regional. See, SAAR CON Action No. 6774, pp. 3-5. In this case, AHCA made a mistake of fact and failed to follow its precedents in determining not normal circumstances. See, Finding of Facts 16 and 17, supra. Due to the regulatory scheme which establishes the certificate of need review process and the criteria in statutes and rules which have be weighed and balanced, it is impossible to have a rule which would describe every set of circumstances which would justify departure from the "normal" operation of a rule methodology. The agency has, however, described the conditions which should be alleviated by the approval of a CON under not normal circumstances. In the 1987 CON 5120 SAAR, the agency found: There is no accessibility problem, geographic, programmatic or financial, noted by the applicant or the Local Health Council, for patients in District One for open heart surgery. SAAR, CON Action No. 5120 at p.6. The "not normal" circumstance claimed by Baptist do not involve access problems for District 1 residents and have been rejected as such by the agency in the past.
The Issue At issue in these proceedings is whether there exists a need for a new open heart surgery program in HRS District IX and, if so, whether the applications of St. Mary's Hospital, Inc. (St. Mary's), Boca Raton Community Hospital, Inc. (Boca), and Martin Memorial Hospital Association, Inc. (Martin), or any of them, for a certificate of need to establish such a program should be approved.
Findings Of Fact Case status In September 1989, Boca Raton Community Hospital, Inc. (Boca), St. Mary's Hospital, Inc. (St. Mary's), and Martin Memorial Hospital Association, Inc. (Martin), filed timely applications with the Department of Health and Rehabilitative Services (Department or HRS) for a certificate of need (CON) to establish a new open heart surgery program in HRS District IX. That district is comprised of Palm Beach, Martin, St. Lucie, Indian River, and Okeechobee Counties. Boca's and Martin's applications sought authorization to establish an adult open heart surgery program, whereas St. Mary's application sought authorization to establish an adult and pediatric open heart surgery program. On January 26, 1990, the Department published notice in the Florida Administrative Weekly of its intent to grant Boca's application, and to deny the applications of St. Mary's and Martin. St. Mary's and Martin filed timely protests to the Department's proposed action, and three existing providers of open heart surgery services in the district, NME Hospitals, Inc., d/b/a Delray Community Hospital (Delray), JFK Medical Center, Inc. (JFK), and AMI/Palm Beach Gardens Medical Center, Inc. (Palm Beach Gardens), timely protested the Department's intention to grant Boca's application or intervened to oppose the approval of any new open heart surgery program in the district. The applicants Boca, a 394-bed not-for-profit community hospital, is the southernmost hospital in Palm Beach County and HRS District IX, being located in Boca Raton, Florida, just two miles north of the Broward County/HRS District X line. It was established in the 1960's, and is a comprehensive hospital providing adult cardiac catheterization services, as well as most services available in an acute care facility, with the exception of a designated psychiatric unit, burn unit, and neonatal intensive care. During the period of April 1988 through March 1989, Boca performed 656 adult inpatient cardiac catheterizations, and referred 192 patients for open heart surgery between July 1988 and June 1989. By its application, Boca proposes to establish an adult open heart surgery program to enhance its cardiology services. Boca's primary service area covers a radius of approximately ten miles around the hospital, and it routinely serves patients from Boynton Beach, Palm Beach County, on the north to Pompano Beach, Broward County, on the south. Presently, three providers of open heart surgery services are located proximate to Boca: approximately 11 miles north of Boca, an average drive time of 17 minutes, is Delray, a current provider of open heart surgery services in District IX; approximately 21 miles north of Boca, an average drive time of 32 minutes, is JFK, a current provider of open heart surgery services in District IX; and approximately 15 miles south of Boca, an average drive time of 19 minutes, is North Ridge General Hospital (North Ridge), a current provider of open heart surgery services in District X and the recipient of the vast majority of referrals for open heart services from Boca. St. Mary's, a 378-bed not-for-profit community hospital located in West Palm Beach, Florida, is owned by the Franciscian Sisters of Allegheny, and has served the community for more than 50 years. In addition to the full range of medical surgical services, St. Mary's offers obstetrics, a Regional Perinatal Intensive Care Center (RPICC) -- levels II and III, blood bank, dialysis center, substance abuse center, hospice center, free-standing cancer clinic, adult inpatient cardiac catheterization laboratory, and children's medical services clinic. Upon the opening of its 40-bed psychiatric center, which is currently under construction, St. Mary's will be the largest hospital in District IX. During the period of April 1988 through March 1989, St. Mary's performed 254 adult inpatient cardiac catheterziations. By its application, St. Mary's proposes to enhance its existing services by establishing an adult and pediatric open heart surgery program. Currently, there are no pediatric open heart surgery programs in District IX. There are, however, two current providers of adult open heart surgery services located in Palm Beach County and proximate to St. Mary's: approximately 6 miles north of St. Mary's is Palm Beach Gardens, and approximately 11 miles south of St. Mary's is JFK. Martin, a 336-bed not-for-profit community hospital established in 1939, is located in Stuart, Martin County, Florida. As with the other applicants, Martin offers a full range of acute care services, as well as adult inpatient cardiac catheterization services, a non-invasive cardiology laboratory, and cardiac rehabilitation and support services for cardiac patients and their families. No significant data is, however, available on Martin's adult inpatient cardiac catheterization program since it is a new service. By its application, Martin proposes to establish an adult open heart surgery program. Currently, there are no open heart surgery programs located in the four northern counties of District IX (Martin, St. Lucie, Indian River, and Okeechobee Counties), and Martin is currently the only hospital located in those four counties that provides in-patient cardiac catheterization services. Accordingly, to access open heart surgery services within the district, residents of the northern four counties must avail themselves of the current programs existent in Palm Beach County. The protestants As heretofore noted, open heart surgery services are currently available at three facilities within District IX; Delray, JFK and Palm Beach Gardens, each of which is located in Palm Beach County. Delray is a 211-bed acute care hospital, sited in the southern portion of Palm Beach County, and located in Delray Beach, Florida. It is a comprehensive hospital providing all services normally available in an acute care facility, with the exception of obstetrics, pediatrics and radiation ontology, and is part of a larger medical campus, operated by the same parent company, that includes a 60-bed inpatient rehabilitation hospital that is physically attached to Delray, a 120-bed psychiatric hospital, and a 120-bed skilled nursing facility. In addition to its other services, Delray provides inpatient cardiac catheterization services and has, since 1986, provided adult open heart surgery services. With a recent addition, Delray has two dedicated open heart operating rooms (ORs) and one back up, as well as three separate intensive care units for coronary care, medical intensive care and surgical intensive care. For calendar year 1989 Delray reported to the local health counsel that it performed 338 open heart cases. Delray is located approximately 11 miles north of Boca, an average drive time of approximately 17 minutes. Between Delray and Boca, there is more than a 50 percent overlap in the medical staffs of the two hospitals, and almost 70 percent overlap in the areas of cardiology and internal medicine. Considering the overlap in the facilities' service areas, it is reasonable to conclude that if Boca's application is approved Delray would lose 122 open heart and 84 angioplasty cares in Boca's first year of operation and 130 open heart and 93 angioplasty cases in Boca's second year of operation. Such losses would translate into a after-tax income loss to Delray of approximately $645,000 in the first year of operation alone. Such loss of revenue and patients could adversely impact Delray's existing program. JFK is a 369-bed community hospital located in Atlantis, Florida; a small town just south of West Palm Beach. It provides a full range of medical- surgical services, with the exception of OB-GYN and nursery services, including cardiac, cancer, orthopedic, and medical/surgical intensive care and coronary care. It established its inpatient cardiac catheterization and open heart surgery program in February 1987, and currently has ten operating rooms, two of which are devoted exclusively to open heart surgery, and a 16-bed cardiac care unit (CCU), 10 beds of which are dedicated to open heart patients. For calendar year 1989, JFK reported to the local health council that it performed 262 open heart cases. As sited, JFK is located just south of West Palm Beach and within 10 miles of St. Mary's. Currently, there is an 83 percent overlap in the MDC-5 service areas (the service area closest to the open heart surgery program) of St. Mary's and JFK, and a substantial overlap between cardiologists on the staffs of both facilities. During the period of January 1988 - May 1990, 43 percent of the patients St. Mary's referred for open heart and angioplasty services were referred to JFK. Assuming St. Mary's could achieve the volumes it projected in its application, it is reasonable to assume that JFK would lose 75 open heart and 83 angioplasty cases in St. Mary's first year of operation, and 91 open heart and 100 angioplasty cases in St. Mary's second year of operation. Such lose in the first year of St. Mary's operation would translate into a net reduction of $1,200,000 in JFK's income. Such loss of revenue and patients could adversely impact JFK's existing program. Palm Beach Gardens is a 205-bed acute care hospital sited in north Palm Beach County. It provides inpatient cardiac catheterization services and has, since 1983, provided open heart surgery services. Currently, Palm Beach Gardens maintains two operating rooms dedicated to open heart surgery, and has a third operating room available for open heart surgery should the demand arise. For calendar year 1989, Palm Beach Gardens was the largest provider of open heart surgery services in the district, having reported to the local health council that it performed 491 open heart cases. Palm Beach Gardens is located approximately 10 miles south of the Palm Beach County/Martin County line or a straight line distance of approximately 25 miles south of Martin and approximately 10 miles north of St. Mary's. During the period of July 1988 - June 1989, 229 residents of St. Mary's primary service area had open heart surgery at Palm Beach Gardens, and 142 residents of Martin's primary service area obtained such services at that facility. If Martin's proposal is approved and its utilization projections realized, Palm Beach Gardens would lose approximately 84 cases in year one of Martin's operation and 101 cases in year two. Such losses in year two would translate into a $1,400,000 pretax reduction in Palm Beach Gardens' net revenues. Such reduction in revenues and patients was not, however, considering Palm Beach Garden's financial condition and open heart surgery volume, shown to have any significant adverse impact to Palm Beach Gardens, or any identifiable program within its facility. Likewise, should St. Mary's application be approved, volumes at Palm Beach Gardens would not be reduced below optimal levels, and it would not suffer any significant adverse impact to existing programs. The parties' stipulation The parties have agreed that the following facts are admitted: Boca, St. Mary's, and Martin Memorial timely filed their Letters of Intent and CON applications at issue in this proceeding. Further, the parties stipulate that the Letter of Intent complied with all statutory and rule requirements. The construction costs of $100,000 as set forth in Table 25 of St. Mary's application is a reasonable construction costs estimate for the renovation of one special procedures room to perform open heart surgery as proposed in St. Mary's schematic plans. The parties admit that adult open heart surgery services are currently available within a maximum automobile travel time of two hours under average travel conditions for at least 90 percent of HRS Service District IX's population. This stipulation is not meant to preclude other relevant evidence regarding travel times within or without District IX. All existing providers of open heart surgery in District IX are JCAHO accredited; all applicants in this proceeding are JCAHO accredited. Each of the applicants, if approved, have the ability to implement and apply circulatory assist devices such as intra-aortic balloon assist and prolonged cardiopulmonary partial bypass for adult open heart surgery. Each of the applicants, if approved, will be capable of fulfilling the requirements of an adult open heart surgery program to provide the following services: medicine, for example, cardiology, hematology, nephrology, pulmonary medicine and infectious diseases; pathology, for example, anatomical, clinical, blood bank and coagulation lab; anesthesiology, including respiratory therapy; radiology, for example, diagnostic nuclear medicine lab; neurology; adult cardiac catheterization laboratory services; non-invasive cardiographics lab, for example, electrocardiography including cardiographics lab, for example, electrocardiography including exercise stress testing, and echocardiography; intensive care; and emergency care available 24 hours per day for cardiac emergencies. This stipulation relates only to the provision of medical services, not that the applicants have sufficient capacity to provide those services in connection with an open heart surgery program. The redesignation of acute care beds from medical/surgical beds to any type of critical care unit beds, except for neonatal intensive care beds, does not require a certificate of need unless the hospital incurs a capital expenditure in excess of the capital expenditure threshold in accomplishing this redesignation. The Department's open heart surgery and methodology and the "fixed need" pool. On August 11, 1989, the Department, pursuant to Rule 10-5.008(2)(a), Florida Administrative Code, published notice of the fixed need pool for open heart surgery programs for the July 1992 planning horizon in the Florida Administrative Weekly. Pertinent to this case, such notice established a net need for zero new adult open heart surgery programs in District IX. There was, however, no publication of any fixed need pool for pediatric open heart surgery. Following publication of the fixed need pool, the Department received protests contending that its calculation of net need was erroneous. Upon review, the Department concluded that its initial calculation was in error, and on September 1, 1989, the Department published a notice of correction in the Florida Administrative Weekly, and established a new net need for one open heart surgery program in District IX. On September 5, 1989, St. Mary's challenged the Department's corrected need assessment, claiming the Department had underestimated the need in District IX for adult open heart surgery services, and on September 8, 1989, Palm Beach Gardens challenged the Department's assessment, claiming the Department had overestimated the need for open heart services in the district. These challenges were forwarded by the Department to the Division of Administrative Hearings, along with a request for the assignment of a hearing officer to conduct all necessary proceedings required under law. Pertinent to the derivation of the fixed need pool, the Department has established by rule an adult and pediatric open heart surgery methodology that must normally be satisfied before any new open heart surgery programs will be approved. That methodology, codified in Rule 10-5.011(1)(f), Florida Administrative Code, forms the premise for the Department's calculation of net need in the instant case. Pertinent to this case, Rule 10-5.011(1)(f), Florida Administrative Code, provides: 2. Departmental Goal. The Department will consider applications for open heart surgery programs in context with applicable statutory and rule criteria. The Department will not normally approve applications for new open heart surgery programs in any service area unless the conditions of Sub-paragraphs 8. and 11., below are met. * * * 8. Need Determination. The need for open heart surgery programs in a service area shall be determined by computing the pro- jected number of open heart surgical pro- cedures in the service area. The following formula shall be used in this determination: Nx = Uc X Px Where: Nx = Number of open heart procedures projected for year X; Uc = Actual use rate (number of procedures per hundred thousand popu- lation) in the service area for the 12 month period beginning 14 months prior to the Letter of Intent deadline for the batching cycle; Px = Projected population in the service area in Year X; and Year X = The year in which the proposed open heart surgery program would initiate service, but not more than two years into the future. * * * 11.a. There shall be no additional open heart surgery programs established unless: the service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to continue to operate at a minimum of 350 adult open heart surgery cases per year or 130 pediatric heart cases per year; and, the conditions specified in Sub-paragraph 5.d., above, will be met by the proposed program. No additional open heart surgery programs shall be approved which would reduce the volume of existing open heart surgery facilities below 350 open heart procedures annually for adults and 130 pediatric heart procedures annually, 75 of which are open heart. Sub-subparagraph 5d, referenced in subparagraph 11a(II), provides: Minimum Service Volume. There shall be a minimum of 200 adult open heart procedures performed annually, within 3 years after initiation of service, in any institution in which open heart surgery is performed for adults. There shall be a minimum of 100 pediatric heart operations annually, within 3 years of initiation of service, in any insti- tution in which pediatric open heart surgery is performed, of which at least 50 shall be open heart surgery. Essentially, the subject methodology contemplates that three conditions must be satisfied before an application for a new adult open heart surgery program in the district would normally be approved: (1) a calculated net numeric need under the Department's mathematical methodology; (2) a determination that "the service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to continue to operate at a minimum of 350 open heart surgery cases per year"; and (3) a demonstration that the applicant could perform "a minimum of 200 open heart procedures (cases) annually within 3 years after service is initiated." The first two conditions are utilized by the Department to initially establish the fixed need pool for open heart surgery services. The third condition is, by rule, related to an applicant's ability to provide quality care, and will be discussed infra. As a threshold for calculating need, and the fixed need pool, the Department's mathematical need methodology contains the formula for deriving the gross number of open heart surgical cases anticipated two years into the future. This methodology is based on the actual use rate in the district for the 12- month period beginning 14 months prior to the letter of intent deadline for the batching cycle. The number of cases is then divided by 350, which is consistent with the minimum service volume mandates of subparagraph 11 of the rule, to derive an actual gross need for open heart surgery programs at the horizon year. Existing and approved programs are then substracted to determine if there is a net need for a new open heart surgery program. While there was some dispute among the parties as to what the appropriate underlying data was to drive the Department's numerical need methodology, the parties agreed and the proof demonstrated a fractional need greater than .5, under the formula. 1/ The second step in establishing a need for open heart surgery programs, and the fixed need pool, is a determination, as required by subparagraph 11(2)I of the rule, of whether "each existing and approved open heart surgery program within the service areas is operating at and is expected to continue to operate at 350 adult open heart surgery cases per year." Here, based on the data available to the Department when it established the fixed need pool, the three existing providers had operated at the following case levels for the preceding year: Palm Beach Gardens - 494 cases; Delray - 328 cases; and JFK - 275 cases. Consequently two of the three existing providers were not operating at 350 cases per year. 2/ Based on the foregoing data, the Department initially published a net need for zero new open heart surgery programs in District IX. However, following the receipt of protests to the fixed need pool it had established, the Department, based on the same data, concluded its initial decision was erroneous, and published a notice of correction which established a net need for one new open heart surgery program in the district. This decision was timely challenged. The Department's ultimate decision to publish a need for one new program was based on two factors. First, the Department had historically rounded the numerical need up where fractional need, as calculated by its methodology, was .5 or higher. Second, although of questionable validity at the time, the Department had for several years "interpreted" the 350 case level, referred to in subparagraph (11) of the rule, to require that the average of the existing programs be at 350 before a new program would be approved, as opposed to the literal rule requirement that "each existing and approved open heart surgery program ... [be] ... operating at ... a minimum of 350 adult open heart surgery cases per year." Accordingly, with differing views then pending in the Department, it elected to recalculate the utilization level by applying the averaging approach, as opposed to applying the rule as written which it had done in initially determining zero need, and therefore published a corrected need for one new program. On January 23, 1990, the Department issued final orders in three cases, each of which involved CON applications for open heart surgery services filed in the September 1988 batching cycle, Hillsborough County Hospital Authority v. Department of Health and Rehabilitative Services, 12 FALR 785 (1990), Humana of Florida, Inc. v. Department of Health and Rehabilitative Services, 12 FALR 823 (1990), and Mease Health Care v. Department of Health and Rehabilitative Services, 12 FALR 853 (1990). In each final order the Department's Secretary stated, with regard to the Department's averaging interpretation, that: I conclude that the rule should be applied as written and that numeric need should be found only where each existing and approved open heart surgery program within the service district is operating at a minimum level of 350 open heart cases per year .... I am not unmindful that the conclusion reached here departs from an established practice of interpreting subparagraph 11 of the need rule by averaging the number of cases done by the existing providers and finding subparagraph 11 to be satisfied if the average was 350 cases or more. As previously stated, I am now satisfied that application of the rule as written is more consistent with sound health planning .... Consequently, the averaging practice that resulted in the Department's corrected notice of need for the September 1989 batching cycle at issue in this case was specifically rejected by the Department as being contrary to the rule as written before it published its notice of intent to grant Boca's application. Even though the corrected need published by the Department was erroneous, as being derived contrary to the express language of the rule methodology, the Department and the applicants contend that such error is not subject to correction in this case because of the Department's fixed need pool rule and the Department's incipient policy regarding when it will correct errors in a fixed need pool that has already been published. Such contentions are, however, unpersuasive as a matter of law, discussed infra, and as not supported by any compelling proof. The Department's fixed need pool rule, codified at Rule 10- 5.008(2)(a), Florida Administrative Code, provides: Publication of Fixed Need Pools. The depart- ment shall publish in the Florida Administra- tive Weekly, at least 15 days prior to the letter of intent deadline for a particular batching cycle the fixed need pools for the applicable planning horizon specified for each service ... These batching cycle specific fixed need pools shall not be changed or adjusted in the future regardless of any future changes in need methodologies, popu- lation estimates, bed inventories, or other factors which would lead to different projections of need, if retroactively applied. In this case there has been no change in the Department's need methodology that leads to a different projection of need, as proscribed by the fixed need pool, but, rather, an identified failure of the Department to properly apply its rule when it assessed need. While the Department may have consistently misapplied its rule in the past, such consistency does not cloth it past action with any propriety where, as here, such action is properly challenged or, stated differently, because the rule was misapplied in the past does not lead to the conclusion that its proper application constitutes a change in need methodologies. Accordingly, it is found that the fixed need pool rule does not, under the circumstances of this case, preclude correction of the need established through the Department's publication of its notice of correction. 3/ The Department and the applicants also contend that the Department's policy on how it will treat corrections to a fixed need pool that has already been published, and errors in a published fixed need pool which are discovered after the cycle has begun, precludes any correction of the need published for this batching cycle. Pertinent to this point, the Department points to its policy, which was published in the Florida Administrative Weekly contemporaneously with its initial assessment of zero need, that provides: Any person who identifies any error in the fixed need pool numbers must advise the agency of the error within ten (10) days of publica- tion of the number. If the agency concurs in the error, the fixed need pool number will be adjusted prior to or during the grace period for this cycle. Failure to notify the agency of the error during this ten day period will result in no adjustment to the fixed need pool number for this cycle and a waiver of the person's right to raise the error at subsequent proceedings. Any other adjustments will be made in the first cycle subsequent to identification of the error including those errors identified through administrative hearings or final judicial review. Any person whose substantial interest is affected by this action and who timely advised the agency of any error in the action has a right to request an administrative hearing pursuant to Section 120.57, Florida Statutes. In order to request a proceeding under Section 120.57, Florida Statutes, your request for an administrative hearing must state with specifi- city which issues of material fact or law are in dispute. All requests for hearings shall be made to the Department of Health and Rehab- ilitative Services and must be filed with the agency clerk at 1323 Winewood Blvd. Building 1, Room 407, Tallahassee, Florida 32301. All requests for hearings must be filed with the agency clerk within 30 days of this publication or the right to a hearing is waived. According to the Department, its policy is to correct computational errors in the fixed need pool only if they are brought to its attention during the grace period which is triggered by the filing of a letter of intent, and if there is sufficient time to publish a corrected fixed need pool prior to the CON application deadline so that all potential competing providers will have notice of the changes. Errors brought to the Department's attention after the grace period will only be considered in the development of the subsequent batching cycle's fixed need pool, regardless of the nature or magnitude of the error. Errors brought to the Department's attention during the grace period, but not reviewed by the Department until after the grace period would only be corrected for subsequent batches. Errors identified in administrative hearings or upon judicial review, even though predicated upon a timely notice of error to the Department, would be corrected in subsequent batches, but not for the batch in which the error occurred. The Department's enunciated rational for the foregoing policy is to instill "predictability" in the CON process, which it suggests promotes competition and affords the Department an opportunity to select from a broader field the best qualified applicants to "meet the need." Such rationale lacks, however, any reasonable basis in fact where, as here, there is no need to be met, and affronts sound health planning principles. The 350 minimum procedure level established for existing providers, before a new program can be approved, is an important threshold bearing on quality of care. In this regard, it has been demonstrated that there is a direct relationship between volume of procedures and mortality, with better results being obtained at facilities operating at a minimum level of 200-350 procedures annually. Accordingly, precision in assessing the need for new open heart surgery programs is crucial to assure that any new program could reasonably be expected to achieve a sufficient level of service, and to assure that the level of service provided by existing facilities would not fall below the optimum threshold. The Department's policy ignores this relationship, would recognize a need where none exists and thereby adversely impact existing programs, and would impinge on future planning horizons. As importantly, the Department's policy would supplant its own rule methodology for calculating need, and render illusory any decision based on a balanced review of statutory criteria. Accordingly, it is concluded that the Department has failed to explicate its policy choice in the instant case, and that numeric need under the Department's methodology is a viable issue in these proceedings. The need for the services being proposed in relationship to the district plan and state health plan. Applicable to this case is the 1989 Florida State Health Plan, which contains the following preferences to be considered in comparing applications for open heart surgery programs: Preference shall be given to applicants estab- lishing new open heart surgery programs in larger counties in which the percentage of elderly is higher than the statewide average and the total population exceeds 100,000. Preference for new open heart surgery programs shall be given to applicants clearly demonstra- ting an ability to perform more than 350 adult procedures annually within three years of initiating the program. Quality of care has been demonstrated to be directly related to volume; thus, facilities are expected to perform a minimum of 350 adult procedures annually. Preference shall be given to applicants who will improve access to open heart surgery for persons who are currently seeking the service outside of their HRS district. This will improve accessibility and reduce travel time for the residents in the district. Preference shall be given to an applicant with a history of providing a disproportionate share of charity care and Medicaid patient days in the respective acute care subdistrict. Qualifying hospitals shall meet Medicaid disproportionate share hospital criteria. Priority should be given to an applicant who provides services to all persons, regardless of their ability to pay. Preference shall be given to an applicant that can offer a service at the least expense yet maintain high quality of care standards. The physical plant of larger facilities can usually accommodate the required operating and recovery room specifications with lower capital expendi- tures than smaller facilities. Larger facilities also have a greater pool of the specialized personnel needed for open heart surgical procedures. Preference shall be given to an applicant that performs percutaneous transluminal angioplasty, streptokinase, or other innovative techniques as alternatives to surgery for low-risk patients. The applicant shall include in its application a protocol regarding the selection of patients for surgery or alternative non-surgical therapeutic cardiac procedures. All three applications are reasonably consistent with the state health plan's preference for establishing open heart surgery programs in counties in which the percentage of elderly is higher than the statewide average and the total population exceeds 100,000. In 1989, Palm Beach County had a population of 873,347, 23.4 percent of which were age 65 and over, which was higher than the statewide average of 17.9 percent. The next most populous counties in the district fell within Martin's primary service area, and were St. Lucie County, with a population of 142,440, 18.3 percent of which were age 65 and over, and Martin County, with a population of 96,336, 25.1 percent of which were age 65 and over. In all, the northern four counties had a population of 360,644, 21.2 percent of which were age 65 and over. The state health plan also accords a preference to applicants who clearly demonstrate an ability to perform more than 350 adult procedures within three years of initiating the program. Of the three applicants, Boca is in the best position to achieve the preference based on the number of diagnostic cardiac caths performed at this facility, and the number of patients it has referred for open heart surgery. Comparatively, Martin and St. Mary's are unlikely to achieve such level of service within three years of initiating a program. The third objective of the state health plan accords a preference for the applicant that will more clearly improve access to open heart surgery for persons who are currently seeking the service outside the district. Currently, while there is no access problem in the district, it is apparent that many district residents leave the district for open heart surgery. During the period of July 1988 - June 1989, open heart procedures were performed on 782 people residing in Boca's primary service area. Of those, 316 received treatment in a District IX facility, 383 received treatment in a District X (Broward County) facility, and the balance received treatment elsewhere, but predominately in Dade County (District XI). While there was a substantial outmigration from Boca's primary service area for open heart services, the vast majority of such outmigration, 325 people, was serviced at North Ridge, a mere fifteen mile/nineteen minute trip from the Boca area. With regard to St. Mary's primary service area, the proof demonstrated that during the same period 566 people sought open heart services, with 455 of those people receiving treatment within District IX. Of the 111 who sought service outside the district, 41 received treatment in Broward County and 61 received treatment in Dade County. Finally, with regard to Martin's primary service area, 316 people sought open heart services, with 148 of those people receiving treatment within the district. Of the 168 who sought service outside the district, 90 received treatment in Broward County, 29 in District VII hospitals, and 39 in Dade County. As heretofore noted, access is not a problem within District IX. However, to the extent this preference seeks to address the issue of outmigration, the proof demonstrates that Martin is the superior applicant. Clearly, the 15 mile/19 minute trip from the Boca area to North Ridge is not a barrier to access, and the number of people from St. Mary's primary service area seeking services outside the district are small in comparison to the other applicants. The residents of Martin's primary service area who seek treatment outside the district are, however, disproportionately large when one considers the aggregate travel time they incur when accessing services in the Orlando or Melbourn areas, or Dade and Broward Counties. The fourth objective of the state health plan accords a preference for the applicant with a history of providing a disproportionate share of charity care and Medicaid patient days in the district. Among the applicants, St. Mary's is the only disproportionate share provider and provides the largest number of Medicaid patient days in the district. As between Boca and Martin, the proof demonstrates that Martin is more committed to, and has historically been a greater provider of, care to the medically indigent. The fifth objective of the state health plan accords a preference to the applicant that can offer a service at the least expense yet maintain high quality of care standards. Here, each of the applicants are large facilities, with demonstrated commitments to maintaining high quality of care standards. Martin has, however, demonstrated that it can offer the proposed service at the least expense. 4/ The last objective of the state health plan accords a preference to the applicant that will perform percutaneous transluminal angioplasty, strepokinase, or other innovative techniques as alternatives to surgery. Here, all applicants propose to offer such services. District IX's 1988 Health Plan was in effect at the time the CON applications were at issue in this case were filed; however, that plan had not been adopted as a rule. Accordingly, such plan is not pertinent to this proceeding. Venice Hospital, Inc. v. Department of Health and Rehabilitative Services, Case Nos. 90-2383R, et seg., (DOAH 1990). The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services in the district. Open heart surgery is a specialized, tertiary health care service. A tertiary health service is defined by Section 381.702(20), Florida Statutes, as: ... a health service which, due to its high level of intensity, complexity, specialized or limited applicability, and cost, should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost-effectiveness of such service.... As a tertiary service, planning for open heart surgery services is done on a regional basis and concentrated in a limited number of hospitals to insure the quality, availability and cost effectiveness of the program. Essentially, the concept of regionalization creates a distinction between hospitals; some hospitals offer routine acute care services, while special high risk services are concentrated in a limited number of hospitals. Encompassed within such concept is the expectation that patients will be transferred from one facility to another to obtain tertiary care services. As a touchstone for assessing need within a service district, the Department has adopted the open heart surgery need methodology, discussed supra, that must normally be satisfied before a new open heart surgery program will be approved. Under that methodology, further need for adult open heart surgery programs is determined based on the projected increase in the number of open heart surgery procedures two years into the future and the open heart surgery volume of existing providers. The rule provides that, regardless of the projected growth in the number of open heart procedures, no additional adult open heart programs are granted unless each existing adult open heart program performs a minimum of 350 procedures annually. Application of the rule methodology to the facts of this case projects a growth in the projected number of open heart procedures sufficient to support a fractional need greater than .5, which the Department reasonably rounded to 1. However, two of the existing three providers were not performing a minimum of 350 procedures annually. Therefore, there is no need under the Department's methodology for a new open heart surgery program in District IX. While no need under the Department's methodology, the applicants have advanced several factors which they contend reflect negatively on the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization or adequacy of existing open heart programs in the district, and which they suggest warrant a finding of need based on special or not normal circumstances. Foremost among the factors pressed by the applicants as indicitive of an abnormal circumstance is the high number of District IX residents who seek open heart surgery services outside the district; referred to in this case as outmigration. Outmigration is, however, simply an observation of patient flow patterns and does not, in and of itself, constitute an abnormal circumstance that would demonstrate need in the district. Rather, to demonstrate a not normal circumstance, such outmigration must be demonstrated to be a consequence of some failing of existing programs, i.e., accessibility or quality of care, to be pertinent to any abnormal need assessment. 5/ In this case, there is no such failing in the existing programs. The three existing adult open heart surgery programs in the district are currently available to 90 percent of the population of the district within a maximum automobile travel time of two hours. Under such circumstances there is no geographic access problem within the district. Moreover, only Martin would actually enhance accessibility, were it a problem, because the residents of the four northern counties it proposes to serve must currently travel to Palm Beach County to access services within the district. In contrast, Boca is within approximately 30 minutes travel time of two existing providers in the district and an additional provider in District X. Likewise, St. Mary's is located less than 10 miles from two of the existing providers in the district. As with geographic access, there is likewise no economic access problem in the district. While the Medicaid use rate within the district for calendar year 1989 was .1 percent, well below the statewide average of approximately 2 percent, such raw statistic does not demonstrate that there is a Medicaid access problem in the district. To persuasively demonstrate such fact from use statistics would require a demonstration that Palm Beach County's use rate was significantly lower than counties with similar demographics. Here, there was no such showing. Moreover, St. Mary's, the largest provider of Medicaid services in the district, was only shown to have transferred three Medicaid patients for open heart or angioplasty services from January 1988, through May 1990. Finally, each of the existing providers have contracted with the Palm Beach County Health Care District to provide care to indigent patients, and have not refused service to anyone regardless of their ability to pay. Accordingly, it is concluded that there is no economic access problem within the district. With two of the three existing providers operating below 350 procedures when this cycle commenced, there is clearly excess capacity within the district when one considers the fact that a single operating room has the capacity to handle at least 500 cases annually. In reaching this conclusion, the applicants' assertion that delays may have been encountered in gaining admission to some facilities during the season because of a lack of critical care beds has not been overlooked. However, any such delays were not reasonably quantified in terms of number or duration, and were not shown to be significant. As importantly, existing facilities have increased their critical care bed capacity, and can increase it further by merely redesignating acute care beds from medical/surgical beds to any type of critical care beds needed as the exigency arises. Although two of the three existing providers offer relatively new programs, the proof is compelling that each provides a quality surgical and post surgical open heart surgery program, appropriately staffed, and that there is no want of quality care within the district. The use of agency nurses, as suggested by one applicant, was not persuasively demonstrated to reflect adversely on quality of care. Succinctly, simply because one is an agency nurse does not suggest substandard performance, and the use of agency nurses, as needed, to staff a facility does not, of itself, aversely impact patient care. Here, the staffs of existing facilities are appropriately trained and supervised, and offer their patients a quality program. While there is certainly a significant outmigration from the district for open heart surgery services, such outmigration was not shown to be related to any infirmity in existing programs. Rather, such outmigration is most reasonably attributable to physicians' established referral patterns or patient preference. 6/ Finally, regarding special circumstances, St. Mary's suggests that its designation as a trauma center and the lack of pediatric open heart services to 90 percent of the population within a maximum automobile travel time of two hours warrant approval of its application. Such suggestions are, however, not supported by compelling proof. While it is true that St. Mary's has been selected by the Palm Beach County Health Care District, along with Delray, for designation as a Level II trauma center, such designation has not been contractually finalized and St. Mary's has not applied for such designation with the Department. As importantly, on October 1, 1990, a new law regarding trauma centers became effective which will reopen the county trauma center designation process, and require facilities to be designated by the state as trauma centers. Under such circumstances, it is speculative whether St. Mary's will become a trauma center, and until such event actually occurs such factor is not significant to these proceedings. St. Mary's quest for a pediatric open heart surgery program is premised on special circumstances, not numeric need, and finds it basis on the fact that no pediatric open heart surgery program exists in the district and that such pediatric services are not available to 90 percent of the population within two hours travel time. While such may be the case, St. Mary's application, on balance, fails to support such an award for a number of reasons. First, St. Mary's application projects that it will perform 10 pediatric open heart surgery cases in its first year of operation, and 20 in its second year of operation. It contains no projection for the third year of operation, but St. Mary's consultant, Michael Schwartz, opined that St. Mary's would perform 50 pediatric open heart surgery cases by the third year based on his belief that St. Mary's would capture 80 to 100 percent of the potential pediatric referrals from District IX and the northern portion of District X. Mr. Schwartz's opinions are not, however, credible. During the period July 1, 1988 to June 30, 1989, there were 40 pediatric open heart surgery cases performed on patients residing throughout District IX, with 22 receiving treatment at Jackson Memorial (Dade County), 14 at Miami Children's Hospital, and 4 at Shands in Gainesville. During the same period, there were 24 open heart pediatric patients in northern District X, an area equi-distant in travel time from the Miami facilities and St. Mary's, with 15 receiving treatment at Jackson Memorial, 8 at Miami Children's Hospital and 1 at Shands. Each of these facilities are either teaching hospitals or specialty pediatric hospitals, are among the top four facilities in the state that perform over 100 pediatric open heart surgery cases each year, and each enjoys an excellent reputation for providing quality pediatric care. Given existent referral patterns and the quality of existing pediatric programs, it is improbable that St. Mary's could reach its projected utilization for years one and two, much less attain a level of 50 pediatric open heart surgery cases during its third year of operation. In 1994, the third year of St. Mary's program, there would be approximately 53 pediatric open heart surgery cases performed on patients residing throughout District IX. To attain a level of 50 cases in its third year, St. Mary's would have to attract almost 100 percent of all cases arising within the district, an improbable occurrence. Equally improbable is St. Mary's ability to penetrate the pediatric open heart surgery market in northern Broward County, an area defined by Mr. Schwartz as being equi-distant in travel time from the Miami facilities and St. Mary's, given existent referral patterns and physicians' satisfaction with existing programs. In sum, the proof demonstrates that St. Mary's could not reasonably be expected to perform 50 pediatric open heart surgery cases within three years of initiating service. In addition to its inability to generate sufficient volume to maintain service quality in a pediatric open heart surgery program, St. Mary's also lacks a pediatric cardiac cath program which is required of any facility proposing pediatric open heart surgery services. Notably, with regard to pediatric cardiac services, Rule 10-5.011(1)(e), which relates to cardiac catheterization services, and Rule 10-5.011(1)(f), which relates to open heart services, are mutually dependent. The cardiac catheterization rule, as it relates to pediatrics, provides: 6. Coordination of Services. * * * Pediatric cardiac catheterization programs must be located in a hospital in which pediatric open heart surgery is being performed. * * * 8. Need Determination. * * * f. Pediatric cardiac catheterization programs shall be established on a regional basis. A new pediatric cardiac catheterization program shall not normally be approved unless the numbers of live births in the service planning area, minus the number of existing and approved programs multiplied by 30,000, is at or exceeds 30,000. (Emphasis added) Also pertinent to this issue, the open heart surgery rule provides: 3. Service Availability. * * * c. The following services must be provided in the health care facility within which the open heart surgery program is located and must be capable of fulfilling the requirements of an open heart surgery program: * * * (VI) Cardiac catheterization laboratory.... The Department reasonably interprets the foregoing provisions as mandating that a pediatric cardiac catheterization program or pediatric open heart surgery program may not be approved independent of the other but, rather, they must coexist. Since the proof is clear that St. Mary's only operates and is only approved by the Department to operate an adult cardiac cath program, and it has not applied for a pediatric cardiac cath program, its proposal is deficient. 7/ In view of the foregoing, it is concluded that, while pediatric open heart services are not currently available within District IX and are not available to 90 percent of the population within two hours travel time, that St. Mary's application to initiate such services should be denied. It is further found that the provisions of the open heart surgery rule relating to the two- hour access standard, which does not specifically state whether such standard applies to adult, pediatric or both, is not applicable to pediatrics. Rather, the Department interprets such rule provision to apply only to adult programs, because such standard is not necessarily pertinent to pediatric open heart surgery since it is more specialized or tertiary in nature than adult open heart surgery programs. Given the close relationship between the cardiac cath rule and the open heart surgery rule, the Department's position is reasonable. In this regard, the cardiac cath rule establishes a travel standard for adult programs, but not pediatric. Rather, it provides for establishment of such programs on a "regional basis," and provides that a new pediatric cardiac cath program should not normally be approved unless the number of live births exceeds 30,000. Here, there were only 16,500 live births in District IX in 1988, a number that is insufficient to warrant a pediatric cardiac cath program. Given such fact, and the relationship between the two rules, the Department's interpretation is reasonable and the two-hour travel time standard does not apply to pediatric open heart surgery. Finally, as to adult open heart surgery services, it is concluded that there exist no special circumstances within the district that would warrant approval of a new open heart surgery program, and that existing facilities are providing appropriate quality care that is accessible to all residents of the district regardless of their ability to pay. The ability of the applicant to provide quality of care and the applicant's record of providing quality of care. Each of the applicants in this case has established an excellent record for providing quality care to their patients, and would be generally expected to provide high quality care for open heart surgery patients notwithstanding some failings in their applications. During the course of the proceeding, some protestants contended that because an applicant failed to detail some particular item of equipment essential to an open heart program, that such failing reflected adversely on their ability to provide quality care. While such could be the case in the abstract, it does not, where, as here, the applicants have sound records, with a demonstrated ability to attract quality personnel to staff their programs. Such failings are, however, germane to the feasibility of the applicant's proposals, discussed infra. Other failings pointed to by the protestants, included: St. Mary's proposal to utilize a call team composed of nurses who customarily assist at thoracic surgery and to recover its open heart patients in a mixed intensive care unit; St. Mary's inability to achieve a 200 and 350 case level per year; Martin's inability to achieve a 350 case level per year; and Martin's failure to document in its application the manner in which it could rapidly mobilize an open heart surgery team 24-hours a day, or how it would treat emergency patients within a two-hour period. Again, considering the quality of the applicants, and the quality personnel they will attract, as well as the parties' stipulation, these failings are minor and do not reflect adversely on their proposals with but one exception. 8/ The only significant factor presented that could bear on an applicant's ability to provide quality care is its ability to achieve optimal utilization levels. In this regard, it has been demonstrated that a relationship exists between the volume of open heart surgical procedures performed at a hospital and the quality of care rendered at those facilities, as measured by patient outcomes. Overall, facilities performing more than 350 cases per year experienced the lowest in-hospital death rate, with those performing more than 200 cases per year being next in line. Pertinent to this issue, the Department has adopted Rule 10-5.011(f)5, Florida Administrative Code, which addresses service quality for open heart surgery programs. That rule, as heretofore noted under the findings related to the Department's need methodology, requires that a minimum of 200 adult open heart surgery cases be performed annually within 3 years of initiating the service, and that at least 50 pediatric open heart surgery cases be performed within 3 years of initiating such service. Here, St. Mary's has failed to demonstrate that it can achieve such level of utilization, and its ability to offer a quality program is therefore suspect. As importantly, Rule 10- 5.011(f)11.a.(II) precludes the approval of St. Mary's application under such circumstances. Boca and Martin could reasonably expect to perform at least 200 cases within 3 years. The need in the service district of the applicant for special equipment and services which are not reasonably and economically accessible in adjoining areas, and the needs and circumstances of those entities which provide a substantial portion of their services or resources to individuals not residing in the service district in which the entities are located. As heretofore noted, North Ridge is located in northern Broward County, a mere 15 mile/19 minute drive time from Boca. North Ridge is a 395-bed hospital that provides all services with the exception of obstetric and radiation therapy, and has for 15 years provided open heart surgery services. It currently has two cardiac catheterization laboratories, and two dedicated and two backup open heart operating rooms. At an average of 750 cases per year, over the last few years, North Ridge has additional capacity, and could comfortably accommodate 1,000 cases per year. North Ridge's primary service area is, and has been for sometime, northern Broward County and southern Palm Beach County, although prior to the initiation of other services in Palm Beach County it serviced the entire area. North Ridge markets extensively in southern Palm Beach County, has follow-up activities for its Palm Beach County residents, and has strong ties with the physician community in southern Palm Beach County. Accordingly, North Ridge has an established presence in southern Palm Beach County, with approximately 30-40 percent of its patients coming from that area. North Ridge's mortality statistics, along with its utilization and reputation, mark it as an excellent facility with a quality open heart surgery program. Moreover, its charges for open heart surgery services are significantly below those of Palm Beach County facilities, as well as those proposed by Boca. North Ridge's location makes it easily accessible to the patients of southern Palm Beach County, and physicians have not experienced any significant problems gaining access to that facility. Moreover, Boca's patients have been accorded first priority at North Ridge. With new technology and the development of various drug therapies, it is extremely rare for a patient to have such an urgent need for open heart surgery that transportation becomes a significant issue. When urgently needed, North Ridge, as well as Delray, can adequately serve the needs of southern Palm Beach County. In sum, there is a viable alternative for residents of southern Palm Beach County to Boca's application, and that is their continued referral to North Ridge. That program is easily accessible, reasonably priced, and historically sound. On the other hand, to approve Boca's application would significantly adversely impact North Ridge, since their service areas in southern Palm Beach County and northern Broward County overlap in most material respects. The availability of resources, including health manpower, management personnel, and funds for capital and operating expenditures, for project accomplishment and operations. Each applicant has demonstrated that it either has or can obtain all resources, including health manpower, management personnel and funds for capital and operating expenditures. Boca and Martin each have the funds on hand for project accomplishment, and St. Mary's has demonstrated its ability to acquire such funds through donations, as needed, for project accomplishment. Each applicant is a quality provider of acute care services, and has demonstrated through its existing programs its ability to attract and retain appropriate management and health manpower for project accomplishment, notwithstanding the current nursing shortage being experienced locally and nationally. Accordingly, while the cost of skilled personnel to staff their open heart surgery programs may exceed their initial estimates in some cases, any of the applicants should be able to appropriately staff their program through the use of existing staff, national or local recruitment, or a combination thereof. While each applicant has adequate resources, the viability of Boca's application has been challenged based on its failure to provide a complete list of all capital projects in its application, as required by Section 381.707(2)(a), Florida Statutes. In this regard, the proof demonstrates that the only item listed in its application was for an "expansion/upgrade" of the physical plant at a proposed cost of $6.2 million. That information was an accurate financial description of that project at the time, but did not include other items relating to other construction and equipment purchases to which Boca was committed. In this regard, as of September 1989, Boca had committed itself to an additional $1,261,400 for projects relating to its 1989 fiscal year and $1,380,039 for projects relating to its 1990 fiscal year, for a total of $2,641,439. All of these items will be capitalized by Boca, and it could have provided a list or summary of such projects at the time of filing its application in September 1989. Boca's failure to do so, failed to comply with section 381.707(2)(a), and prevented the Department from having a complete picture of Boca's financial resources to complete the project. The extent to which the proposed services will be accessible to all residents of the service district, and the applicant's past and proposed provision of health care service to Medicaid patients and the medically indigent. Of the proposed programs, only those advanced by St. Mary's and Martin would be reasonably accessible to all residents of the service district. In this regard, the geography and population densities of the district demonstrate that Palm Beach County, at 1,993 square miles, is the single most populous county in the district, with a 1989 population of 873,347. The northern four counties are geographically larger than Palm Beach County, at 2,404 square miles, and contained a 1989 population of 360,664, nearly one-third of the total population of the district. The most dense population in the northern four counties is the Martin County/Port St. Lucie area. The district itself measures 100 miles in length, north to south, in a straight line. Martin is located approximately 60 miles from the southern boarder of the district, St. Mary's is approximately 30 miles, and Boca is 2.1 miles Considering Boca's geographic location, it would not be readily accessible to all residents of the district. Martin and St. Mary's are, on the other hand, sited such that they could, geographically, address the needs of the district as a whole. However, St. Mary's, like Boca, is proximate to a number of open heart surgery providers and would not improve geographic accessibility within the district, as would Martin. Further bearing on the issue of accessibility, is the applicants' commitment to service Medicaid and the medically indigent. In this regard, the proof demonstrates that Boca has not been an historic provider of Medicaid or indigent care, and for its fiscal 1989 dedicated less than 1 percent of its total admissions to Medicaid and indigent care. On the other hand, St. Mary's patient mix has included 15 percent Medicaid and 5 percent indigent, and it is the highest Medicaid provider in the district. Martin has, although to a lesser degree than St. Mary's, also demonstrated a commitment to the underserved by historically serving 5 1/2 percent Medicaid and indigent patients. In its application, Boca "committed" to provide at least 2 percent of gross revenue generated by the open heart surgery program for the provision of charity or indigent care on an annual basis. Considering Boca's nominal historic commitment to indigent care, its location in an affluent area of Palm Beach County, and its closed staff, Boca could not reasonably achieve such level of care, and would not increase accessibility for underserved groups. Comparatively, St. Mary's and, to a lesser extent, Martin, would increase accessibility for underserved groups should the need exist. Here, St. Mary's has projected that 7 percent of its total patient days will be devoted to Medicaid patients and 3 percent to indigent patients, and Martin has projected 5 percent Medicaid and indigent. The costs and methods of the proposed construction. In its application, Boca estimated a total project cost of $7,499,856 to construct and equip a new addition to house its open heart surgery program. That figure included a $6,147,900 construction fund and $783,056 for equipment costs to complete the two operating suites, recovery areas and ten-bed surgical intensive care unit proposed. Its estimates were, however, deficient. Boca's equipment budget, as it appeared in its application, was prepared by an individual who had no expertise in this area, and was deficient in terms of the actual equipment listed and its cost. To properly equip and furnish the two operating room suites, recovery room areas and a ten-bed surgical intensive care unit proposed by Boca would require an expenditure in excess of $1,690,000. Adding necessary instrumentation and a backup pump could add an additional $50-60,000. At hearing, Boca sought to minimize the significance of its underestimation by offering the testimony of an expert in medical equipment planning, cost estimating and procurement. That expert, Richard Drinkwine, was most credible and found, upon review of the Boca proposal that it was wanting in both equipment and cost. In his opinion a more reasonable cost to purchase moverable equipment would be $1,027,267, and a reasonable estimate for the furniture needs of Boca would be $92,257. This estimate was based on the assumption that Boca would not initially equip its second operating room, exam rooms or recovery rooms. To do so, would add an additional cost of $411,329 (movable and fixed equipment) for the second operating room and $160,000 to equip the recovery areas. Adding needed instrumentation and a back up pump would bring Boca's equipment costs to over $1,740,000. 9/ While Boca underestimated its equipment costs, the proof demonstrates that its construction estimate of $6,147,900 was overstated. The major factor which accounts for the overstatement by Boca in its application was an over estimate of the cost to construct the first floor of its addition, which is a covered parking area. In fact, Boca will be able to construct its proposed addition for approximately $5,226,397, or $921,503 less than it estimated in its application. Although Boca could realize a significant savings on construction costs, and those savings would be adequate to almost offset the deficiencies in its equipment budget, the restructuring of its application at this time is not appropriate under the Department's Rule 10-5.010(2)(b). Notably, while the total cost figures might be the same, the additional equipment that is needed to equip Boca's program, and that was omitted from its application, is significant. In addition to Boca's failure to demonstrate the reasonableness of its cost proposal, it is also found that Boca's proposal is oversized and overpriced to meet any demands Boca could reasonably expect to fulfill at any time in the foreseeable future. First, each of the two operating rooms proposed by Boca are over 1,100 square feet in size. Such size is more than twice the size reasonably needed to accommodate open heart surgery. Second, areas in the central core and lounges are also larger then needed. More significantly, Boca is proposing a four-bed recovery area and ten dedicated SICU beds. Even assuming there is a need for an additional open heart surgery program in the district, Boca could never reasonably expect to capture sufficient market share to justify the capital expenditure necessary to warrant a 10-bed SICU. Ten SICU beds could handle between 900 and 1400 open heart patients in a year. There are no programs anywhere in South Florida, no matter how mature or well respected, that have achieved utilization close to that level, and it is not reasonable for Boca to expect to achieve such volumes. Significantly, a portion of the capital cost for Boca's project would, under the present system, be passed along to the federal government by the capital cost pass through. By this mechanism, over $3,500,000 of Boca's project would ultimately be reimbursed to the hospital in the form of Medicare payments. Compared to Boca's cost proposal, St. Mary's is modest. Here, the schematics submitted by St. Mary's with its application and omissions response depict the existing surgical suites at St. Mary's and the minor renovations necessary to convert an existing room into the proposed open heart surgery suite. As proposed, St. Mary's program would have a dedicated open heart surgery suite, as well as a backup operating room. Recovery would be accommodated in its existing 16-bed ICU. In its application, St. Mary's estimated a maximum project cost of $850,000 to remodel its existing facility and equip its proposed open heart surgery program. That figure included up to $100,000 for remodeling costs, and up to $700,000 for equipment costs. St. Mary's estimates are reasonable and cost effective whether its program is dedicated to adult and pediatric open heart surgery service or simply adult services. Significantly, the equipment needed to perform open heart surgery on adults and pediatrics is the same except for some special instruments. That cost, at less than $25,000, is nominal and does not affect the reasonableness of St. Mary's estimates. As proposed in its application, Martin would construct 2,800 square feet of new space at its facility for the purpose of implementing an open heart surgery program. The location of the project is the hospital's first floor adjacent to both the cardiac catheterization laboratory and the existing surgical suites. This location will provide rapid access for cardiac catheterization emergencies requiring open heart intervention and will share common areas with the existing surgical suites, minimizing additional construction and project cost. It is also proximate to a 9-bed surgical intensive care unit. Of the eight existing operating rooms at Martin, two are large enough to serve as backup open heart operating rooms in the event of an emergency, but Martin has not proposed to establish, or budgeted the necessary equipment to establish, a backup operating room. Martin, like St. Mary's, proposes a modest expenditure, compared to Boca, for the initiation of its open heart surgery program. In this regard, Martin's application estimates its total project cost at $1,239,029. That figure includes a total construction cost budget of $796,669, and an equipment budget at $375,360. Martin's costs and methods of proposed construction are reasonable. While the proof demonstrates that approximately $411,000 is a reasonable cost to equip an open heart surgery suite, it also demonstrated that Martin currently has on hand some necessary equipment, such as cell-savers and heating-cooling machines. Under such circumstances, Martin could reasonably equip its program within its $375,360 budget. It could not, however, equip a backup operating room within such budget, and without a backup operating room could not reasonably expect to be able to handle 500 open heart cases a year, as required by rule 10-5.011(f)3d, given the need to back up its cardiac cath program. The immediate and long-term financial feasibility of the proposal. To assess the financial feasibility of the project, Boca's pro forma of income and expense, contained within its application, projects 192 patients during the first year of operation of its open heart surgery program and 211 patients during the second year. Projected charges for both years are based on $55,430 for DRG 104 and $41,942 for DRG 106 with an average length of stay of 10 days. Payor class mix is estimated to be as follows: Medicare 70 percent, Medicaid 0 percent (nominal), insurance 25 percent, other 3 percent, and indigent 2 percent. Net revenue over expenses for year one is projected to be $1,303,312, and for year two to be $1,597,959. Boca's proposed charges, utilization levels, and payor mix are reasonable. However, its pro forma contained unreasonable assumptions regarding average length of stay, total deductions and expenses. 10/ At hearing, Boca made no effort to defend the unreasonable assumptions it had presented to the Department through the pro forma contained in its application. Rather, conceding the unreasonableness of its assumptions, it sought to minimize their import through the testimony of Rufus Harris, an expert in health care finance and accounting. Such objective was not, however, attained. Mr. Harris, employed during the course of these proceedings, actually prepared a completely new pro forma for the Boca program. That pro forma significantly changed Boca's average length of stay from 10 to 16 days; significantly reduced the number of full time equivalents (FTEs) in open heart surgery, recovery and the surgical intensive care unit (SIC) from 39.3 to 24.1; increased the number of support FTEs from 25 to 30 or 32; increased the cost per FTE in the open heart surgery program by $800; increased the cost for each support FTE by $14,000; included the indigent care assessment ($68,000), utility cost ($108,000) and malpractice insurance cost ($17,000) that had been omitted from the application; increased the supply cost by $618,000; and reduced deductions from revenue by $186,000. But for the charges, utilization levels, and payor mix, Mr. Harris' pro forma is a complete revision of Boca's application pro forma, and demonstrates that such pro forma was not based on reasonable assumptions. Although not based on reasonable assumptions, Mr. Harris opined that such failing is not material since Boca's pro forma, like his pro forma, calculated a profit. Mr. Harris' opinion is rejected. The bottom line profit he derived was based on a substantial change in Boca's proposed program. Such slight of hand does not address the financial feasibility of the program Boca proposed in its application. Boca's proposal, developed through the testimony of its construction, equipment and financial experts, bears little resemblance to its initial application, and must be rejected as an impermissible amendment. Boca's application proposed two operating rooms. As such, Boca could facially handle at least 500 open heart surgery cases per year. As amended, with one operating room, Boca could not reasonably expect to attain such level of operations, given the need to back up its cardiac catheterization program, contrary to Rule 10- 5.011(1)(f)3d. As proposed, Boca's open heart surgery program would include recovery areas and a 10-bed SICU, fully staffed. As amended, the SICU would be staffed with one FTE and other staffing substantially reduced. Through downsizing, Boca would presume to significantly alter its proposal, and thereby demonstrate the reasonableness of its cost and financial feasibility projections. Such was not, however, the proposal submitted to the Department for review, and it cannot be permitted, at this stage of the proceedings, to amend its proposal in such material respects. Accordingly, based on the record, Boca has failed to demonstrate the financial feasibility of its proposal. 11/ St. Mary's pro forma of income and expenses projects 200 adult and 10 pediatric open heart surgery cases during its first year of operation, and 240 adult and 20 pediatric during its second year of operation. Separate pro formas describe the adult and pediatric parts of St. Mary's proposal. Actual charges proposed by St. Mary's will vary by DRG, as will average length of stay. The weighted average charges are, however, projected to be $38,000 for adult services and $43,025 for pediatric services during its first year of operation, and $39,900 for adult services and $45,176 for pediatric services during its second year of operation, based on a 10 day average length of stay. Payor class mix for adults is estimated as follows: Medicare 50 percent, Medicaid 7 percent, self pay/commercial 40 percent, and indigent 3 percent. Payor class mix for pediatrics is estimated to be as follows: Medicare 0 percent, Medicaid 50 percent, self pay/commercial 40 percent, and indigent 10 percent. Net revenue over expenses for its adult program is projected, on an incremental cost basis, to be $2,297,566 for year one, and $2,885,102 for year two. Net revenue for its pediatric program is projected, on an incremental cost basis, to be $62,326 for year one, and $224,797 for year two. St. Mary's proposed charges, average length of stay, utilization levels, payor mix, as well as its assumptions regarding total deductions and expenses are not reasonable. St. Mary's proposed charges were not shown to be reasonably achievable. Rather, where, as here, a facility's charge structure is based on consumption of services, the increased costs associated with an open heart program, discussed infra, would translate into significantly higher charges than those proposed by St. Mary's. St. Mary's application contains no data to reasonably support its conclusions that it will achieve 200 adult cases in year one and 240 adult cases in year two, nor did the proof it offered at hearing demonstrate such potential. Rather, the persuasive proof demonstrated that St. Mary's could not reasonably expect to attract more than 80 adult open heart cases in its first year of operation, and that it would not even be able to attract 200 open heart cases during its third year of operation. Notably, the area St. Mary's proposes to serve is currently adequately served by two open heart surgery programs. St. Mary's pro forma contains several other serious flaws. First, its gross patient revenues are driven by an average length of stay of 10 days. Such assumption is unreasonable, and St. Mary's could more reasonably expect an average length of stay of 15-17 days, with significantly higher expenses associated with the greater consumption of resources occasioned by such increased length of stay. Second, St. Mary's payor mix is significantly understated for Medicare. Here, the proof demonstrates that St. Mary's could reasonably expect to achieve a 68-70 percent Medicare utilization rate, as opposed to the 50 percent it projected. Such increase would significantly reduce its self pay/commercial, assuming its Medicaid and indigent utilization levels are to be accorded any credence, and significantly increase its deductions from revenue. Third, St. Mary's pro forma significantly understated expenses, primarily with regard to supplies and FTEs. Had St. Mary's reasonably calculated its average length of stay at 15-17 days, its expenses for supplies and FTEs would have been substantially higher. Additionally, St. Mary's application only addresses the need to tap incremental FTEs in the nursing area, whereas initation of an open heart program would have a tremendous impact on all services in the hospital, such as lab, pharmacy and social services, with attendant higher costs. Based on the opinion of Richard Cascio, an expert in health care finance, which is credited, St. Mary's proposal is not financially feasible in the long term. 12/ Regarding St. Mary's pediatric open heart program, the proof, as heretofore found, fails to support is utilization projection of 10 cases in year one and 20 cases in year two. Therefore, St. Mary's has failed to demonstrate the long term financial feasibility of that program operated, as proposed, concurrently with an adult program. As a stand alone program, neither St. Mary's application nor the proof at hearing reasonably address such a prospect. However, since the pediatric program was not shown to be financially feasible with the adult program bearing a significant portion of operating expenses, it must also be concluded that the pediatric program would not be financially feasible were it to carry all operating expenses. Martin's pro forma of income and expenses is predicated upon 148 adult open heart surgery cases during its first year of operation, and 195 cases during its second year of operation. Actual charges proposed by Martin will vary by DRG, as will average length of stay. Projected average charges are, however, projected to be $41,000 during its first year of operation and $43,080 during its second year of operation, based on a 15.7 day average length of stay. Payor class mix is estimated as follows: Medicare 63.0 percent, Medicaid 2.5 percent, private pay/commercial insurance 32.5 percent, and free care 2 percent. Net revenue over expenses is projected to be $260,000 for year one and $337,000 for year two. Martin's utilization levels, proposed charges, payor mix, and average length of stay are reasonable. Martin's pro forma did, however, contain some unreasonable assumptions regarding expenses, primarily staffing costs. 13/ Martin's pro forma estimates staffing costs based on the manpower requirements (FTEs) and salaries set forth in Table 11 of its application. It further calculates fringe benefits at 20 percent of salaries. Notably, however, the number of people needed to staff a program at a given FTE level is significantly higher than the raw FTE number. Accordingly, since Martin projected its salary expense and fringe benefits based on FTE's, its expenses associated with those items are understated. Further, the salaries Martin proposed in Table 11 for its operating room nurses are entry level salaries and Martin could not reasonably expect to recruit experienced open heart surgery personnel at such rates. Nor is its projected salary for a perfusionist, at $59,551 reasonable. A more reasonable figure would be in excess of $75,000. Even though the proof offered in opposition to Martin's application did demonstrate that Martin's assumptions regarding salary expenses were understated, it failed to demonstrate that Martin could not meet current market demands and still be profitable. Rather, Martin's proposal, while generating a lower bottom line, will still be profitable if such increased expenses are considered, and it is financially feasible in the long term. While each of the applicant's have demonstrated the immediate financial feasibility of their projects, by demonstrating the availability of funds for project accomplishment and operation, only Martin has demonstrated the long term financial feasibility of its proposal. Other criteria bearing on capital expenditure proposals for the provision of new health services to inpatients. In cases of capital expenditure proposals for the provision of new health services to inpatients, Section 381.705(2), Florida Statutes, requires that the Department reference each of the following in its findings of fact: That less costly, more efficient, or more appropriate alternatives to such inpatient services are not available and the development of such alternatives has been studied and found not practicable. That existing inpatient facilities pro- viding inpatient services similar to those proposed are being used in an appropriate and efficient manner. In the case of new construction, that alternatives to new construction, for example, modernization or sharing arrangements, have been considered and have been implemented to the maximum extent practicable. That patients will experience serious problems in obtaining inpatient care of the type proposed, in the absence of the proposed new service. In the instant case, none of the foregoing criteria can be answered in the affirmative. Rather, the proof demonstrates that less costly, more efficient or more appropriate alternatives currently exist through increased utilization of existing facilities. It further demonstrates that two of the existing three providers have not yet attained a 350 case per year level of operation, and that their services are therefore not yet being used at an appropriate level. Existing utilization levels and capacity further demonstrate that patients will not experience any serious problems in accessing such services. Finally, the applicants further failed to demonstrate that they had considered alternatives to new construction and had implemented them to the maximum extent possible. In the case of all applicants' there is no proof of any effort to initiate sharing arrangements. On the matter of Boca's complaints regarding delays experienced in effecting patient transfers by ambulance, as well as the inadequacy of such ambulances and their breakdowns, it offered no proof that it had investigated other ambulance services or its ability to operate its own service and found them impractable. Notably, such services are an item over which Boca has significant control, and its failure to investigate alternatives in this regard evidences the insignificance of any such problem. The criteria on balance. In evaluating the applications at issue in this proceeding, none of the criteria established by Section 381.705, Florida Statutes, or Rule 10- 5.011(1)(f), Florida Administrative Code, has been overlooked. The applicants' failure to demonstrate need, either numeric or not normal circumstances, as well as their failure to demonstrate compliance with Section 381.705(2), Florida Statutes, is, however, dispositive of their applications, and such failure is not outweighed by any other or combination of any other criteria. Further, even were the fixed need pool accorded the deference suggested by the Department, the other indicators of need subsumed within other criteria would dispel such illusion, and again compel the conclusion that there is no need in this case. Had numeric need been demonstrated, and the need requirements encompassed within section 381.705(2) satisfied, the proof would still fail to support an award to Boca or St. Mary's. Rather, among the competing applicants, Martin was shown to best satisfy the pertinent review criteria on balance and would, under such circumstances, be the favored applicant.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is recommended that a final order be entered denying the applications of Boca, St. Mary's and Martin for a certificate of need to establish an open heart surgery program in District IX. RECOMMENDED in Tallahassee, Leon County, Florida, this 15th day of March 1991. WILLIAM J. KENDRICK 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 15th day of March 1991.
The Issue Whether any of the applications of Oak Hill Hospital, Citrus Memorial Hospital, or Brooksville Regional Hospital for adult open heart surgery programs should be granted?
Findings Of Fact District 3 Extended across the northern half of the state with a reach from central Florida to the Georgia line, District 3 is the largest in land area of the eleven health service planning districts created by the Florida Legislature. See Section 408.032(5), Florida Statutes. Sites of the three hospitals whose futures are at issue in this proceeding are in two of the sixteen District 3 counties: Citrus County and at the southern tip of the district, Hernando County. The three hospitals aspire to join the ranks of District 3's six existing providers of adult open heart surgery programs. Three of the existing providers are in Alachua County, all within the incorporated municipality of Gainesville: Shands at Alachua General Hospital, Shands at the University of Florida, and North Florida Regional Medical Center. Two of the existing providers are in Marion County: Munroe Regional Medical Center and Ocala Regional Medical Center. The sixth provider, opened in November of 1998 as the most recently approved by AHCA in the district, is in Lake County: the Leesburg Regional Medical Center. The CON status of the two Ocala providers is somewhat unusual. Located across the street from each other in downtown Ocala, they share virtually the same medical staff. Pursuant to a Stipulation and Settlement Agreement with the State of Florida, the two have offered adult open heart surgery services since 1987 under a single certificate of need issued for a joint program that reflects their proximity and identity of medical staff. The Agency's view of the arrangement has evolved over the years. It now holds the position that Munroe Regional and Ocala Regional operate independent programs. Accordingly, AHCA lists each as separate programs on its inventory of adult open heart services in District 3. Nonetheless, the two operate as a joint program pursuant to the Settlement Agreement and under state sanction reflected in the agreement, that is, they derive their authority to offer adult open heart surgery services from a single certificate of need. Other than a change of attitude by the Agency, there is nothing to detract from the status they have enjoyed since the agreement reached with the state in 1987: two hospitals operating a joint program under a single certificate of need. The three Gainesville providers all operated at an annual volume of less than 350 procedures during the reporting period that was most current at the time of the filing of the applications by the three competitors in this case. Those competitors are: Citrus Memorial, Oak Hill, and Brooksville Regional. Citrus Memorial, Oak Hill, Brooksville Regional Citrus Memorial Health Foundation, Inc., is a 171-bed, not-for-profit community hospital located in Inverness, Florida. HCA Health Services of Florida, Inc., d/b/a Oak Hill Hospital is a 204-bed hospital located in Oak Hill, Florida. Hernando HMA, Inc., d/b/a Brooksville Regional is a 91- bed hospital located in Brooksville, Florida. Hernando HMA, Inc. (the applicant for the program to be sited at Brooksville Regional) also operates a second campus under a single hospital license with Brooksville Regional. The 75-bed campus is in southern Hernando County in Spring Hill. Citrus and Hernando Counties Citrus Memorial is in Citrus County to the south of the cities of Gainesville and Ocala, the sites of five of the existing providers of adult open heart surgery in the district. Further south, Oak Hill and Brooksville Regional are in Hernando County. Although adjacent to each other along a boundary running east-west, the county line is a natural divide, north and south, with regard to service areas for open heart surgery. Substantially all Citrus County residents, including Citrus Memorial patients, receive open heart surgery and angioplasty services at one of the two Ocala providers to the north. In contrast, almost all Hernando County residents (94 percent) receive open heart services at Bayonet Point, a provider in Health Planning District 5 to the south of Hernando County. The neatness of this divide would be disrupted by the approval of the application of Brooksville Regional. Brooksville's application includes part of south Citrus County in its designated primary service area, an appropriate choice because of Brooksville Regional's location on Route 41 with good access to Citrus County. At present, however, the divide between north and south along the Citrus/Hernando boundary remains a Mason-Dixon line of open heart surgery service areas. During the year ended September 1999, for example, 408 Citrus County residents received open heart surgery in Florida. Of these, 85 percent received them in Ocala at one of the two providers there. During the same period, 618 Citrus County residents underwent angioplasty, with 89.7 percent of them going to the two Ocala providers. During the year ended March 1999, 698 Hernando County residents underwent open heart surgery at Florida Hospitals. Of the 663 residents of Oak Hill's primary service area, 94.3 percent received services at Bayonet Point in District 5. Similarly, of the 779 Oak Hill primary service area residents receiving angioplasty, 93.8 percent went south to Bayonet Point. Brooksville Regional projects that 10 percent of its OHS/angioplasty volume will be from Citrus County. Still, 90 percent of the volume is projected to be from Hernando County. Thus, even with the threat posed by Brooksville's application to the divide at the Citrus/Hernando boundary, the overwhelming percentage of Brooksville's patients will be from south of the Citrus-Hernando boundary. In sum, there is de minimis competition between would- be-provider Citrus Memorial and the providers to the north vis- a-vis would-be-providers Oak Hill and Brooksville Regional and the providers to the south in the arena of open heart surgery services needed by residents of the district. Bayonet Point Under the umbrella of HCA Health Services of Florida, Inc., Bayonet Point is a provider of open heart surgery services in Pasco County. Only thirty minutes by road from its sister HCA facility Oak Hill and 45 minutes from Brooksville Regional, Bayonet Point captures approximately 94 percent of the open heart surgery patients produced among the residents of Hernando County. Although its location is in a county that is only one county to the south of the two Hernando County hospitals, Bayonet Point is in a different health planning district. It is in District 5 on its northern edge. The residents of Hernando County who receive open heart surgery services at Bayonet Point, a premier provider of adult open heart surgery services in the state of Florida, are well served. Operating at far from capacity, the quality of its open heart program is excellent to the point of being outstanding. Position of the Parties re: "not normal" circumstances The Agency's Open Heart Surgery Rule, Rule 59C-1.033, Florida Administrative Code (the "Rule") establishes a need methodology and criteria applicable to review of certificate of need applications for the establishment of adult open heart surgery programs. The Rule also governs a hospital's ability to offer therapeutic cardiac catheterization interventional services (i.e., coronary angioplasty). Pursuant to Rule 50C- 1.032, Florida Administrative Code, a cardiac catheterization program that includes the provision of coronary angioplasty must be located within a hospital that provides open heart services. Applying the methodology of Rule 50C-1.033 (the "Rule"), AHCA determined that a "fixed need pool" of zero existed in District 3 for the July 2002 planning horizon. Calculation under the formula in the Rule produced a fixed need pool of one. Several District 3 programs, however, did not have an annual case volume of 350 or more procedures. The Rule's methodology requires that calculated numeric need be zeroed out whenever there are existing programs in a district with a sub- 350 annual volume. (See Section (7)(a)2., of the Rule.) As required, therefore, the Agency published a numeric need of zero for the applicable planning horizon. The determination of zero numeric need was not challenged and so became final. Their aspirations confronted with a numeric need of zero, Citrus Memorial, Oak Hill and Brooksville Regional, nonetheless, each filed applications seeking the establishment of adult open heart surgery programs. As evidenced by the Agency's initial decision to grant Citrus Memorial's application and by its change of position with regard to Oak Hill's application, the Agency is in agreement that "not normal" circumstances exist to justify granting the applications of both Citrus Memorial and Oak Hill. Thus, while the parties may differ as to the precise identification of those circumstances, all agree that there are circumstances that support the approval of at least one application (and perhaps two) for an adult open heart surgery in District 3 for the July 2002 planning horizon. It is undisputed that a new OHS program in Hernando County would have no effect on the three existing programs located in Gainesville that perform less than 350 procedures annually. This circumstance is a "not normal" circumstance, as previously found by the Agency. It allows an application's approval in the face of the Rule's dictate that the Agency will not normally approve an application when an existing provider falls below the 350 watermark. It is not, however, a circumstance that compels the award of a CON to any of the parties as in the case of "not normal" circumstances typically recognized by the Agency. (An example of such a circumstance would be an access problem for a specific population.) Rather, it is a circumstance that allows the Agency to overcome the zeroing-out effect of the Rule that demanded a fixed-need pool of zero. It is a circumstance that allows AHCA to award an adult open heart surgery CON to one of the Hernando County hospitals provided there is a demonstration of need. There are no typical "not normal" circumstances that support any of the applications. There are no geographic, economic or clinical access problems for the residents of the any of the primary service areas of the three applicants that rise to the level of "not normal" circumstances. Nor would granting the applications of any of the three support cost efficiencies. In the case of Oak Hill, moreover, granting its application would both reduce the operating efficiencies at Bayonet Point and increase the average operating cost per case at Bayonet Point. Approval of an application is not compelled by the "not normal" circumstance that exists in this case. The "not normal" circumstance simply clears the way for approval provided there is a demonstration of need. Stipulated Matters The parties stipulated that all applicants have a good record of providing quality of care and that all sections of the respective applications addressing that issue be admitted into evidence without further proof so as to establish record of quality of care. Accordingly, the parties stipulated that each application satisfies Section 408.035(1)(c) as to "the applicant's record in providing quality of care." The parties stipulated that, subject to proving their ability to generate the open heart surgery and angioplasty volumes projected in their respective applications, each applicant has the ability to provide adequate and reasonable quality of care for those proposed services. Accordingly, subject to the proof involving service volume levels, each application satisfies Section 408.035(1)(c) as the "ability of the applicant to provide quality of care . . .". The parties stipulated that all applicants have available and adequate resources, including health manpower, management personnel, and funds for capital and operating expenditures in order to implement and operate their proposed projects. Furthermore, they stipulated that all sections of their respective applications relating to those proposed projects and all sections of their respective applications relating to those issues were to be admitted into evidence without proof. Accordingly, all applications satisfy that portion of Section 408.035(1)(h), Florida Statutes (1999) related to the availability of resources. The parties stipulated that all applications satisfy, and no further proof is required to demonstrate, immediate financial feasibility as referenced in Section 408.035(1)(i), Florida Statutes (1999). The parties stipulated that the costs and methods of proposed construction, including schematic design, for each proposed project were not in dispute and were reasonable, and that all sections of each application related to those issues were to be admitted into evidence without further proof. (Stip., p.3.) Accordingly, each application satisfies Section 408.035(l)(m), Florida Statutes (1999). The parties stipulated that each application contained all documentation necessary to be deemed complete pursuant to the requirements of Section 408.037, except that Section 408.037(b)3. is still at issue regarding operational financial projections (including a detailed evaluation of the impact of the proposed project on the cost of other services provided by the applicant). The parties stipulated that each applicant satisfied all of the operational criteria set forth in the Rule (those operational criteria being encompassed in subsections 3, 4, and 5). Accordingly, it is undisputed that each applicant will have the support services, operational hours, open heart surgery team mobilization, accreditation, availability of health personnel necessary for the conduct of open heart surgery, and post- surgical follow-up care required by the Rule in order to operate an adult open heart surgery program. The Hernando County Hospitals Oak Hill Oak Hill is located on Highway 50, in the southern part of Hernando County, between the cities of Brooksville and Springhill. Oak Hill's licensed bed compliment includes 123 medical/surgical beds, 24 ICU beds, 50 telemetry beds, and 7 beds for obstetrics. Oak Hill provides an array of medical services and specialties, including: cardiology, internal medicine, critical care medicine, family practice, nephrology, pulmonary medicine, oncology/hematology, infectious disease treatment, neurology, pathology, endocrinology, gastroenterology, radiation oncology, and anesthesiology. Board certification is required to maintain privileges on the medical staff of Oak Hill. Oak Hill's six-story facility is situated on a large campus, and has been renovated over time so that the hospital's physical plant permits the provision of efficient care for patients. Oak Hills's surgery department has five operating rooms, plus a cystoscopy room. The department performs approximately 7,800 surgeries annually, a figure that demonstrates functional efficiency. Oak Hill is JCAHO accredited, with commendation. Recently named one of the nation's top 100 hospitals for stroke care by one organization, it has also received recognition for the excellence of its four intensive care units. Oak Hill's cancer program is the only one to have received full accreditation from the American College of Surgeons within a six-county contiguous area. Oak Hill recently expanded its emergency department and implemented a fast track program called Quick Care. The program is designed to treat lower acuity patients more rapidly. Gallup Organization surveys reflect a 98 percent patient satisfaction rate with the emergency department, the eighth best rate among the approximately 200 HCA-affiliated hospitals. During 1999, the emergency department treated 24,678 patients. During the same period, 376 patients presented to Oak Hill's emergency department with an acute myocardial infarction, and there were 258 such patients during the first eight months of 2000. Oak Hill operates a mature cardiology program with ten Board-certified cardiologists on staff. Eight of the ten perform diagnostic cardiac catheterizations in the hospital's cath laboratory. Oak Hill's program is active with regard to both invasive and non-invasive cardiology. The non-invasive cardiology laboratory offers a variety of services, including echocardiography, holter monitoring, stress testing, electrocardiography, and venous, arterial and carotid artery testing. The invasive cardiology laboratory has been providing inpatient and outpatient cardiac catheterization services since 1991. During calendar year 1999, Oak Hill saw 1,671 diagnostic cardiac catheterization procedures and transferred 619 cardiac patients to Bayonet Point, 258 for open heart surgery, 311 for angioplasty, and 50 patients for cardiac catheterization. The volume of catheterization procedures at Oak Hill has led to the construction of a second "cardiac cath" laboratory suite, scheduled for completion in May of 2001. The cath lab's medical director (Dr. Mowaffek Atfeh, the first interventional cardiologist in Hernando County) has served in that capacity since inception of the lab in 1991. The cath lab equipment is state-of-the-art. Oak Hill's cath lab provides excellent quality of care through its Board-certified cardiologists and the dedication and experience of its well- trained nursing and technical staff. Brooksville Regional Originally a 166-bed facility operated by Hernando County, 75 of the beds at Brooksville Regional were moved in 1991 to create a second facility at Spring Hill. A few years later, the facilities went into bankruptcy. The bankruptcy proceeding concluded in 1998, with operational control of both facilities being acquired by Hernando HMA, Inc. ("Hernando HMA"). The CON applicant for the adult open heart surgery program to be sited at Brooksville Regional, Hernando HMA is a wholly-owned subsidiary of Health Management and Associates, Inc. ("HMA"), a corporation located in Naples, Florida, and whose shares are traded publicly. Under the arrangement produced by the bankruptcy proceeding, Hernando County retained ownership of the buildings and the land. Hernando HMA, in turn, operates the facilities per a long-term lease with the County. Hernando HMA operates the Brooksville Regional and Spring Hill Campuses under a single hospital license issued by AHCA. The two campuses therefore share key administrative staff, including their chief executive officer. They share a single Medicare provider number and they have a common medical staff. HMA (Hernando HMA's parent) operates 38 hospitals throughout the country, many in the State of Florida. Among the 38 is Charlotte Regional Medical Center in Charlotte County, an existing provider of adult open heart surgery and recently recognized as one of the top 100 OHS programs in the country. Charlotte Regional will be able to assist Brooksville Regional with staff training and project implementation if its application is approved. An active participant in managed care contracting, Hernando HMA is committed to serving all payer groups, including Medicaid and indigent patients. It recently qualified as a Medicaid disproportionate share provider. It also serves patients without ability to pay. In fiscal year 2000, it provided $5 million of indigent care. Under the lease agreement Hernando HMA has with Hernando County, it must continue the same charity care policies as when the facilities were operated by the County. Hernando HMA must report annually to the County to show compliance with this charity care obligation. Also under the lease, Hernando HMA is obliged to invest $25 million in renovations and improvements to the two facilities over a 5-year period. About $10 million has already been invested. If the adult open heart surgery program is granted this would nearly satisfy the $25 million obligation. The County reserves to itself certain powers under the lease. For example, the County reserves the authority to pre- approve the discontinuation of any services currently offered at these facilities. Also, if Hernando HMA seeks to relocate either of the two, the County retains the authority whether to approve the relocation. The Spring Hill facility is located in the southwest portion of Hernando County, very near the Pasco County line. It is a general acute care facility, offering a full range of cardiology and other acute care services. Spring Hill was recently approved to add the tertiary service of Level II Neonatal Intensive Care. The Brooksville facility is located in the geographic center of Hernando County. Its service area is all of Hernando County and southern Citrus County. Brooksville is a full- service, general acute care facility. It offers services in cardiology, orthopedics, general surgery, pediatrics, ICU, telemetry, gynecology, and other acute services. Brooksville Regional has 91 acute care beds. Normally, the beds are used as 12 ICU beds, 24 telemetry beds, and 55 medical/surgical beds. During its peak annual period of occupancy, Brooksville has the capability to use up to 40 beds for telemetry purposes. The hospital has ample unused space and facilities associated with its 91 beds that resulted from the move of the 75 beds to create the Spring Hill campus. Brooksville Regional offers full scope cardiology services and technologies, including diagnostic cardiac catheterization. Just as in the case of Oak Hill, the cardiac cath lab is state-of-the-art. The only cardiac services not offered at the hospital are open heart surgery and angioplasty. The quality of cardiology and related services at Brooksville Regional are excellent. The equipment, the nursing staff, the allied health professional staff, and the technology support services are very good. The medical staff is broad- based and highly qualified. Brooksville Regional offers substantial educational and training programs for its nursing staff and other personnel on staff. Brooksville Regional routinely treats patients in need of OHS or angioplasty services. Nearly 400 patients per year receive a diagnostic cardiac cath at Brooksville Regional and are then transferred for open heart surgery or angioplasty. The vast majority of these patients are transferred to Bayonet Point, about 45 minutes away. In addition to transfers of patients following diagnostic catheterization, Brooksville Regional transfers about 120 patients per year to Bayonet Point who have not had such services. These patients fall into two categories: (1) high- risk patients, and (2) persons presenting at Brooksville's emergency room in need of angioplasty or open heart surgery. The Proposals Citrus Memorial By its application, Citrus Memorial proposes to establish a program that will provide adult open heart surgery and angioplasty services. There is no dispute that Citrus Memorial has the ability to provide adequate and reasonable quality of care for the proposed project (just as per the stipulation of the parties, there is no dispute that all of the applicants have such ability.) There is also no dispute that each applicant, including Citrus Memorial, will have all of the staff, equipment and other resources necessary to implement and support adult open heart surgery and angioplasty services. The ability to provide high quality care stems, in part, from Citrus Memorial's contract with the Ocala Heart Institute. Under the contract the Institute will provide supervision of the implementation and ongoing operations of the Citrus Memorial program. This supervision will be provided under the leadership of the president of the Institute, cardiovascular surgeon Michael J. Carmichael, M.D. The contract between Citrus Memorial and the Ocala Heart Institute is exclusive. Citrus Memorial will not extend medical staff privileges to any cardiovascular surgeon not affiliated with the Ocala Heart Institute unless approved by the Institute. The Ocala Heart Institute (whose physician members include not only cardiovascular surgeons, but also cardiovascular anesthesiologists and invasive cardiologists) has similar exclusive contracts for the operation of adult open heart surgery programs at Monroe Regional Medical Center and at Ocala Regional Medical Center and at Leesburg Regional Medical Center. At these three hospitals, the Institute's physicians have consistently produced excellent outcomes. The Ocala Heart Institute produces these results not just through the skills of its physicians but also through the use of the same clinical protocols at each hospital governing the provision of open heart surgery. Citrus Memorial proposes to follow identical protocols at its facility. Excellent open heart surgery outcomes for the Institute's physicians are also the product of standardized facility design, equipment and supplies. The standardization of design, equipment, supplies, and protocols has the added benefit of clinical efficiencies that reduce costs and shorten lengths of stay. Beyond supervision of the initial implementation of the program, the Ocala Heart Institute will provide the medical directorship for Citrus Memorial's program. In cooperation with Munroe Regional, the directorship's 24-hour-a-day, 7-days-a-week coverage of the program will include scheduled case, emergency case, and backup coverage by cardiovascular surgeons, cardiovascular anesthesiologists, perfusionists, and interventional cardiologists. The Ocala Heart Institute will provide education and training to Citrus Memorial's medical staff and other hospital personnel as appropriate. The Institute's obligations will include continually working to improve the quality of, and maintain a reasonable cost associated with, the medical care furnished to Citrus Memorial's open heart surgery and angioplasty patients, consistent with recognized standards of medical practice in the field of cardiovascular surgery. The contract with the Ocala Heart Institute ensures to the extent possible that Citrus Memorial will have a high- quality adult open heart surgery program. Oak Hill Through approval of its application to establish an adult open heart surgery program at its facility, Oak Hill hopes Hernando County residents who now must travel outside the county to receive open heart and angioplasty services will be better served. In particular, Oak Hill hopes to provide these services to the residents of the six zip code area that comprise its primary service area ("PSA"). Containing 75 percent of the county's population, Oak Hill's PSA also encompasses the county's concentration of recent growth. Oak Hill's administration is committed to the proposal contained in its application. It has the support of the hospital's Board of Trustees and medical staff. Not surprisingly, the proposal enjoys a measure of popularity in the county. A petition in support of a program at Oak Hill drew 7,628 signatures from residents of Hernando County. This popularity is based in the fact that residents now must leave District 3 (albeit Bayonet Point in District 5 is close to Oak Hill and closer for many residents of south Hernando County) to receive open heart and angioplasty services. The number of affected residents is substantial. In 1999, for example, over 600 cardiac patients were transferred by ambulance from Oak Hill to Bayonet Point. A greater number of patients traveled on a scheduled basis to Bayonet Point for cardiac care. The vast majority of Hernando County residents and Oak Hill primary service area residents in need of OHS services receive them at Regional Medical Center-Bayonet Point. HCA Health Services of Florida, a subsidiary of HCA-The Healthcare Company ("HCA") holds the Bayonet Point license. It also is the licensee of Oak Hill and other hospitals in Florida including North Florida Regional and Ocala Regional. Bayonet Point (Regional Medical Center-Bayonet Point) is an acute care hospital in Hudson. Hudson is in Pasco County, the county immediately to the south of Hernando County. Although in a separate health planning district (District 5), Bayonet Point is relatively close to Oak Hill, 17 miles to the south. Bayonet Point's open heart surgery program experiences the fourth highest case volume in the state. The program is recognized as one of the top two programs in the state. It enjoys a national reputation. For example in July of 1999, it was ranked 50th in the nation in cardiology and heart surgery in U.S. News and World Report's list of "America's Best Hospitals." Oak Hill, as a sister hospital of Bayonet Point under the aegis of HCA, plans to develop its program in cooperation with Bayonet Point and its cardiovascular surgeons so as to bring the high quality program at Bayonet Point to Oak Hill's community and patients. A prospective operational plan for the adult open heart surgery program has been initiated by Oak Hill with assistance from Bayonet Point. Oak Hill, unlike Citrus Memorial, did not present evidence concerning the specific duties to be imposed on each physician group under contract. Nor did Oak Hill present evidence as to whether and how those groups would create and implement the type of standardization of protocols, facility design, equipment, and supplies that Citrus Memorial's program will rely upon for high quality and reduced costs. Nonetheless, it can be expected that the cooperation of Oak Hill and Bayonet Point, as sister HCA hospitals, will continue through the development and implementation of appropriate staff training, policies, procedures and protocols in the establishment of a high quality program at Oak Hill. Oak Hill's achieved volume in its open heart surgery program, if approved, will be at the direct expense of Bayonet Point. Its approval will increase the operating costs per case at Bayonet Point. Patients transferred from Oak Hill to Bayonet Point for OHS and angioplasty receive excellent outcomes. Patients are transferred to Bayonet Point for OHS and angioplasty smoothly and without delay particularly because Bayonet Point operates a private ambulance system for the transport of cardiac patients to its hospital. Two groups of cardiovascular surgeons are the exclusive cardiovascular/thoracic surgeons at Bayonet Point. Although, at present, there are no capacity constraints at Bayonet Point, both groups support a program at Oak Hill and are committed to participate in an open heart surgery program at Oak Hill. If approved, Oak Hill will enter similar exclusive contracts with the two groups. Raymond Waters, M.D., a cardiovascular surgeon, heads one of the groups. He has performed open heart surgery at Bayonet Point since its inception and is largely responsible for the development of the surgery protocols used there. Dr. Waters has consulting privileges at Oak Hill. In addition to consulting there, Dr. Waters presents medical education programs at Oak Hill. Forty to 50 percent of Dr. Waters' patients come from Hernando County and Oak Hill Hospital. Dr. Waters and his group strongly support initiation of an open heart surgery ("OHS") program at Oak Hill. Their support is based, in part, on the excellence of the institution, including its physical structure, cath labs, intensive care units, nursing staff, medical staff, and the state of its cardiology program. Dr. Waters and his group are prepared to assist in the development of an open heart surgery program at Oak Hill, and to assure appropriate surgery coverage. Oak Hill will create a Heart Center at the hospital to house its OHS program. All diagnostic and invasive cardiac services will be located in one area of the hospital to ensure efficient patient flow and access to support services. The center will occupy existing space to be renovated and newly constructed space on the first floor of the facility. Two new cardiovascular surgery suites, with all support spaces necessary, will be constructed, along with an eight-bed cardiovascular intensive care unit. The hospital's two state- of-the-art cardiac catheterization laboratory suites are available for diagnostic procedures and angioplasty procedures. A large waiting area and cardiac education/therapy room will also be constructed. Open heart surgery patients will progress from the OR to the new CVICU for the first 24-28 hours after surgery. From the CVICU, the patient will be admitted to a thirty-bed telemetry monitored progressive care unit, located on the second floor. Currently a 38-bed medical/surgical unit, thirty of the beds will remain as PCU beds. Eight beds will be relocated to create the CVICU. The PCU will provide continued care, education and discharge planning for post open heart surgery and angioplasty patients. Oak Hill will also implement a comprehensive cardiac rehabilitation program for both inpatients and outpatients. Brooksville Regional Like Oak Hill, part of the purpose of the Brooksville Regional proposal is to provide more convenient OHS and angioplasty services to Hernando County residents in need of them, 94 percent of whom now travel to Bayonet Point in Pasco County for such services. In addition to proposing improvements in patient convenience and access, Brooksville Regional sees its application as increasing patient choice and competition in the delivery of the services. Indeed, patient choice and competition for the benefit of patients, physicians and payers of hospital services are the cornerstone of Brooksville Regional's application. There is support for the proposed program from the community and from physicians. For example, Dr. Jose Augustine, a cardiologist and Chief of the Medical Staff at Oak Hill since 1997, wrote a letter of support for an open heart program at Brooksville Regional. Although he believes Hernando County would be better served by a program at Oak Hill, he wrote the letter for Brooksville Regional because, "if Oak Hill didn't get it, [he] wanted the program to be here in Hernando County." (Oak Hill No. 12, p. 43.) Consistent with his position, Dr. Augustine finds Brooksville Regional to be an appropriate facility in which to locate an open heart program and he would do all he could to support such a program including providing support from his cardiology group and encouraging support other physicians. But Brooksville Regional offered no evidence regarding the identity of its cardiovascular surgeons. Hernando HMA proposes to construct a state-of-the-art building of 19,500 square feet at Brooksville Regional to house its OHS program. Two OHS operating rooms will be built. Eight CVICU beds will be used for the program, to be converted from other licensed beds. A second cath lab will be added. The total project cost is nearly $12 million. Brooksville Regional proposes to serve all of Hernando County. In addition, 10 percent of its volume is expected to come from Citrus County. Brooksville Regional commits to serving all payer groups with the vast majority projected to be Medicare, Medicare HMO/PPO and non-Medicare managed care. Brooksville lists two specific CON conditions in its application. First, it commits to over 2 percent for charity care and 1.6 percent for Medicaid. Second, it commits to establishing the OHS program at Brooksville's existing facility, located at 55 Ponce de Leon Boulevard in the City of Brooksville. The second of these two was reaffirmed unequivocally at hearing when Brooksville introduced testimony that if Brooksville's CON application is approved, its OHS program will be located at Brooksville's existing facility. Need In Common One "not normal" circumstance exist that supports all three applications: the lack of effect any approval will have on the sub-350 performers in the district. Which, if any, of the three applicants should be awarded an adult open heart surgery program, therefore, is determined on the basis of need and that determination is to be made in the context of comparative review. Benefits of Increased Blood Flow Lack of blood flow to the heart caused by narrowed arteries or blood clots during a heart attack, results in a loss heart of muscle. The longer the blood flow is disrupted or diminished, the more heart muscle is lost. The more heart muscle lost, the more likely the patient will either die or, should the patient survive, suffer a severe reduction in the quality of life. The key to prevent the loss of heart muscle in a heart attack is to restore blood flow to the heart through a process of revascularization as quickly as possible. Cardiovascular surgeons and cardiologists make reference to this phenomenon through the maxim, "time is muscle." The faster revascularization is accomplished the better the outcome for the patient. Those who treat heart attack patients seek to restore blood flow within a half hour of the onset of the attack. Revascularization within such a time frame maximizes the chance of reducing permanent damage to the heart muscle from which the patient cannot recover. Achievement of revascularization between 30 minutes and 90 minutes of the attack results in some damage. Beyond 90 minutes, significant permanent damage resulting in death or severe reduction in quality of life is likely. The three primary treatment modalities available to a patient suffering from a heart attack are: 1) thrombolytics; 2) angioplasty and 3) open heart surgery. Thrombolytic therapy is the standard of care for the initial attempt to treat a heart attack. Thrombolytic therapy is the administration of medication, typically tissue plasminogen ("TPA") to dissolve blood clots. Administered intravenously, the thrombolytic begins working within minutes in an attempt to dissolve the clot causing the heart attack and, therefore, to prevent or halt damage to the heart muscle. Thrombolytic therapies are successful in restoring blood flow to the affected heart muscle about 60 to 75 percent of the time. In the event it is not successful or the patient is not appropriate for the therapy, the patient is usually referred for primary angioplasty, a therapeutic cardiac catheterization procedure. Cardiac catheterization is a medical procedure requiring the passage of a catheter into one or more cardiac chambers with or without coronary arteriograms, for the purpose of diagnosing congenital or acquired cardiovascular diseases, and includes the injection of contrast medium into the coronary arteries to find vessel blockage. See Rule 59C-1.032(2)(a), Florida Administrative Code. Primary angioplasty is defined as a therapeutic cardiac catheterization procedure in which a balloon-tipped catheter inflated at the point of obstruction is used to dilate narrowed segments of coronary arteries in order to restore blood flow to the heart muscle. Rule 59C-1.032(2)(b), Florida Administrative Code. More often now, in the wake of cardiac care advances, a "stent" is also placed in the re-opened artery. A stent is a wire cylinder or a metal mesh-sleeve wrapped around the balloon during an angioplasty procedure. The stent attaches itself to the walls of the blocked artery when the balloon is inflated, acting much like a reinforced conduit through which blood flow is restored. Its advantage over stentless angioplasty is improved blood flow to the heart and a reduction in the likelihood that the artery will collapse in the future. In other words, a stent may prevent substantial re-occlusion. The development of stent technology has led to dramatically increased angioplasty procedure volumes in recent years and the trend is continuing. Based on mortality rates, studies suggest that immediate angioplasty, rather than thrombolytic treatment, is the preferred treatment for revascularization. When thrombolytic therapy is inappropriate or fails and a patient is determined to be not a candidate for angioplasty, the patient is referred for open heart surgery. Under the Open Heart Surgery Rule, Rule 59C-1.032, Florida Administrative Code, a cardiac catheterization program that includes the provision of angioplasty must be located within a hospital that also provides open heart surgery services. Open heart surgery is a necessary backup in the event of complications during the angioplasty. The residents of Citrus Memorial's primary service area (and those of Oak Hill's and Brooksville Regional's), therefore, do not have immediate access (that is access to a hospital in their county of residence) to not just open heart surgery services but to angioplasty services as well. In addition to increased benefits to the residents of the proposed service areas, much of the need in this case is based on a demonstration of geographic access problems. For example, population concentration and historical utilization of open heart surgery services in the district demonstrate that the open heart surgery programs in the district are maldistributed. At the same time, the Bayonet Point program's service by virtue of both superior quality and proximity to Hernando County ameliorates the effect of the maldistribution of the programs intra-district particularly with regard to the residents of Hernando County. The four southernmost of the 16 counties in the district (Citrus, Hernando, Sumter and Lake) account for approximately 41 percent of the total adult population and 53.5 percent of the population aged 65 and over within District 3 as a whole. The super majority of aged 65 and over population in these counties is of great significance since that population is the primary base of those in need of adult open heart surgery and angioplasty. This same base accounts for 57 percent of the total annual open heart surgeries performed on district residents. For District 3 as a whole, 27 percent of the adult population is aged 65 and older. In comparison, 38.2 percent of Citrus County residents fall within that age cohort, 37.2 percent of Hernando County residents and 33.3 percent of residents in Lake and Sumter Counties combined fall within that age cohort. In contrast, in the northern part of the district, the counties closest to the three Gainesville open heart surgery programs (Columbia, Hamilton, Suwanee, Alachua, Bradford, Dixie, Gilchrist, Lafayette, Levy, and Union) contain a combined basis of 32.4 percent and Putnam County contains 24.7 percent of the District 3 population aged 65 and over. The overall District 3 open heart surgery use rate (number of surgeries per 1,000 population age 15 and over) is 3.47. Yet, the combined use rate for Columbia, Hamilton, and Suwanee Counties is 1.96, the combined use rate for Alachua, Bradford, Dixie, Gilchrist, Lafayette, Levy, and Union Counties is 1.55, and the Putnam County use rate is 2.05. More specifically, the northern county use rates are significantly below the use rates for the remainder of District 3 counties. Marion County is 4.12. Citrus County is at 4.26. Hernando County is at 6.41. Lake and Sumter Counties are at 4.31. Transfers Drive time is but one component of the total time necessary to effectuate a patient transfer. Additional time is consumed in making transfer and admission arrangements with the receiving hospital, awaiting arrival of an ambulance to begin transport, and preparing and transferring the patient into and out of the ambulance. Time delays that necessarily accompany hospital-to-hospital transfers can be critical, clinically. The fact that a facility-to-facility transfer is required means that the patient is at relatively high risk. Otherwise, the patient would be sent home and electively scheduled later. The need to travel outside the community carries other adverse consequences for patients and their families. Continuity of care is disrupted when patients cannot receive hospital visits from their regular and trusted physicians. Separation from these physicians increases stress and anxiety for many patients, and patients heal better with lower levels of stress and anxiety. Further, most OHS patients are elderly, and travel by their spouses to another community to visit is stressful and difficult at best, sometimes impossible. The elderly loved ones of the patient also tend to have health problems and, even when able, the drive to the hospital is stressful. District 3 Out-migration A high volume of OHS patients leave District 3 for OHS services. During the year ended March 1999, there were a total of 3,520 District 3 residents discharged from Florida hospitals following OHS. Only 2,428 of those OHS cases were reported by hospitals located within District 3. An outmigration rate of 31 percent, on its face, is indicative of a district geographic access problem. The problem is mitigated, however, by an understanding that most of the outmigration is of Hernando County residents who are able to travel or are transferred to Bayonet Point, a provider within 30 to 45 minutes driving time from the two Hernando County applicants in this proceeding. Citrus Memorial Volume Projections and Financial Feasibility Citrus Memorial reasonably projects an open heart surgery case volume of 266 for the first year of operation, 313 for the second year, and 361 for the third year. Citrus Memorial reasonably projects an angioplasty case volume of 409 for the first year of operation, 481 for the second year, and 554 for the third year. The Citrus Memorial program is financially feasible in the long term. It will generate approximately $1 million in not-for-profit income by the end of the second year of operation ($327,609 from open heart surgery cases, and $651,323 from angioplasty cases). Increased Access in Citrus County The two Ocala hospitals are approximately 30 miles from Citrus Memorial. With traffic, the normal driving time from Citrus Memorial to the hospitals is 60 minutes. The driving time from Oak Hill to Bayonet Point is normally 29 minutes or about half the time it takes to get from Citrus Memorial to one of the Ocala providers. The drive time from Brooksville Regional to Bayonet Point is approximately 45 minutes, 25 percent faster than the driving time from Citrus Memorial to the Ocala hospitals. Myocardial infarction patients for whom thrombolytic therapy is inappropriate or ineffective who present to the emergency room at Citrus Memorial, on average, therefore, are exposed to greater risk of significant heart muscle damage than those who present to the emergency rooms at either Oak Hill or Brooksville Regional. The delay in transfer for a Citrus Memorial patient in need of angioplasty or open heart surgery can be compounded by the ambulance system in Citrus County. There are only 7 ambulances in the system. If one is out of the county, the provider of ambulance services will not allow another to leave the county until the first has returned. Citrus Memorial presented medical records of 17 cases in which transfers took more than an hour and in some cases more than 3 hours from when arrangements for transfers were first made. There was no testimony to explain the meaning of the records. Despite the status of the records as admissible under exceptions to the hearsay rule and therefore the ability to rely on them for the truth of the matters asserted therein, the lack of expert testimony diminishes the value of the records. For example in the first case, the patient presented at the emergency room on June 14, 1999. Treatment reduced the patient's chest pain. In other words, thrombolytics appeared to be beneficial. The patient was admitted to the coronary care unit after a diagnosis of unstable angina, and cardiac catheterization was ordered. On June 15, the next day, at about 11:40 a.m., "just prior to going down to Cath Lab, patient developed severe chest pain." (Citrus Memorial Ex. 16, p. 1017.) Following additional treatment, the chest pains were observed half an hour later to be "better." (Id.) Several hours later, at 1:45 p.m., that day, transfer to Ocala Regional was ordered. (Id., p. 1043). The patient's progress notes show that the transfer took place at 3:45 p.m., two hours after the order for transfer was entered. Whether rapid transfer was required or not is questionable since the patient appears to have been stabilized and had responded to thrombolytics and other therapy. In contrast, the second of the 17 cases is of a patient whose "risk of mortality [was] . . . close to 100%." The physician's notes indicate that at 1:10 p.m. on August 8, 1999, "emergency cardiac cath [was] indicated [with] a view toward revascularization." (Citrus Memorial Ex. 16, p. 1093). The same notes indicate after discussion between the physician and the patient and his spouse "that transfer itself is risky, but that risk of mortality [if he remained at Citrus Memorial] . . . is close to 100 percent." Although these same notes show that at 1:10 p.m., the patient's transfer had been accepted by the provider of open heart surgery, it was not until 3:30 p.m., that the "Ocala team" (id., at 1113) was shown to be present at Citrus Memorial and not until 3:45 p.m., that the patient was "transferred to Ocala." (Id.) Given the maxim that "time is muscle," it may be assumed that the 2-hour and 45- minute delay in transfer from the moment the patient was accepted for transfer until it occurred and the ensuing time thereafter for the drive to Ocala contributed to significant negative health consequences to the patient. Whatever the value of the 17 sets of medical records, they demonstrate that transfers from Citrus Memorial on occasion take up time that is outside the 30-minute and 90-minute timeframes for avoiding significant damage to heart muscle or minimizing such damage to heart attack patients for whom angioplasty or open heart surgery procedures is indicated. Citrus Memorial also presented twenty sets of records from which the "emergent" nature of the need for angioplasty or open heart intervention was more apparent from the face of the records than in the 17 cases. (Compare Citrus Memorial Ex. No. 16 to No. 17). These records reveal transport delays in some cases, lack of immediate bed ability at the Ocala hospitals in others, and in some cases both transport delays and lack of bed availability. In 16 of the cases, it took over 90 minutes for the patient to reach the receiving hospital and in 13 of the cases, it took 2 hours or more. It would be of significant benefit to some of those who present to Citrus Memorial's emergency room with myocardial infarctions to have access to open heart surgery services on site should thrombolytic therapy be inappropriate or prove ineffective. Other Access Factors Besides time considerations, there are other factors that provide comparisons related to access by Citrus Memorial service area residents on the one hand and Hernando County residents to be served by either Oak Hill or Brooksville Regional on the other. Among the other factors relied on by Citrus Memorial to advance its application is a comparison of use rate. The use rate per 1,000 population aged 15 and over for Hernando County is 6.08, compared to 4.13 for Citrus County. "[B]y definition" (tr. 458), the use rates show need in Hernando County greater than in Citrus County. But the use rates could indicate an access problem financially or geographically. In the end, there are a lot of components that make up the use rate. One is obviously the age of the population and underlying heart disease, two, . . . is the physician practice patterns in the county. [S]tudies . . . show that [in] two equivalent populations, . . . one with a very conservative medical community that . . . hospitalizes more frequently . . . [versus] another . . . where the physicians hospitalize less frequently for the same situation or who use a medical approach versus a surgical approach. (Id.) While there may be one possible explanation for the lower use rate in Citrus County than in Hernando County that favors Citrus Memorial, a comparison of use rates on the state of this record is not in Citrus Memorial's favor. Other factors favor Citrus Memorial. In support of its open heart surgery and angioplasty volumes, for example, Citrus Memorial reasonably projects an 80 percent market share for such services from its primary service areas. In contrast, Oak Hill projected a much lower market share from its primary service area: 58 percent. The lower market share projection by Oak Hill is due to the proximity of the Bayonet Point program to Hernando County. The difference in the two projections reveals greater demand for improved access in Citrus County than in Hernando County. This same point is revealed by projected county outmigration. Statewide data reveals that the introduction of open heart surgery services within a county causes a county resident generally to stay in the county for those services. Yet with a new program in Hernando County, Bayonet Point is still projected reasonably to capture one-half of the open heart surgeries and angioplasties performed on Hernando County residents, further support for the notion that Hernando County residents have adequate access to open heart surgery services through Bayonet Point's program. As to angioplasty demand, Oak Hill projected an angioplasty/open heart surgery ratio of 1.3. Citrus Memorial's ratio is 1.5. Geographic access limitations also adversely affect continuity of care. To have open heart surgery performed at another hospital, the patient will have to travel for pre- operative, operative, and post-operative follow-up services and duplication of tests. This lack of continuity of care often results in the patient's primary and specialty care physicians not following the patient and not being involved with all phases of care. In assessing travel time and access issues for open heart surgery and angioplasty services, travel time and distance present not only potential hardship to the patient, but also to the patient's family and friends who accompany and visit the patient. These issues are of particular significance to elderly persons (be they the patient, family member or friend) who do not drive and must rely on others for transport. Financial Access - Indigent Care Consistent with its mission as a community not-for- profit hospital, Citrus Memorial will accept any patient who comes to the hospital regardless of ability to pay. In 1999, Citrus Memorial provided approximately $4.9 million in charity care, representing 3.6 percent of its gross revenues. Citrus County provided Citrus Memorial with $1.2 million dollars in subsidization, part of which was allotted to capital construction and maintenance, part of which was allotted to charity care. Subtracting all $1.2 million, as if all had been earmarked for charity care, from the charity care, the dollar amount of Citrus Memorial's out-of-pocket charity care substantially exceeds the dollars for the same period provided by Oak Hill ($1.3 million) and by Brooksville Regional ($935,000). The percentage of gross revenue devoted to charity care is also highest for Citrus Memorial; Brooksville Regional's is 1.1 percent and tellingly, Oak Hill's, at 0.6 percent is less than one-quarter of Citrus Memorial's percentage of out-of- pocket charity care. "[C]learly Citrus has a much stronger charity care credential than does either Oak Hill or Brooksville Regional." (Tr. 241). But this credential does not carry over into the open heart surgery arena. As a condition to its CON, Citrus Memorial committed to a minimum 2.0 percent of total open heart surgery patient days to Medicaid/charity patients. The difference between Citrus Memorial's commitment and that of Oak Hill's and Brooksville Regional's, both standing at 1.5 percent, is not nearly as dramatic as past performance in charity care for all services. The difference in the comparison of Citrus Memorial to the other applicants between past overall charity care and commitment to future open heart services for Medicaid and charity care is explained by the population that receives open heart and angioplasty services. That population is dominated by those over 65 who are covered by Medicare. Competition Citrus Memorial's current charges for cardiology services are significantly lower than comparable charges at Oak Hill or Brooksville Regional. A comparison of the eight cardiology-related DRGs that typically have high volume utilization reveals that Oak Hill's gross charges are 62 percent greater than Citrus Memorial's gross charges. A comparison of gross charges is not of great value, however, even though there are some payers that pay billed charges such as "self-pay" and indemnity insurance. When managed care payments are a function of gross charges then such a comparison is of more value. On a net revenue per case basis for those DRGs, Oak Hill's net revenues are 10 percent greater than Citrus Memorial's. A 10 percent difference in net revenues, a much narrower difference than the difference in gross charges, is significant. Furthermore, it is not surprising to see such a narrowing since most of the utilization is covered by Medicare which makes a fixed payment to the provider. A comparison of projections in the applications reveals that Oak Hill's gross revenue per open heart surgery cases will be 164 percent greater than Citrus Memorial's gross revenue per such case. Oak Hill's net revenue per open heart surgery case will be 32 percent greater than Citrus Memorial's net revenue per such case. A comparison of projections in the applications also reveals that Oak Hill's gross revenue per angioplasty case will be 74 percent greater than Citrus Memorial's and that Oak Hill's net revenues per angioplasty case will be 13 percent greater than Citrus Memorial's. If a program is established at Oak Hill, there will be a hospital within District 3 with a new open heart surgery program. But what Oak Hill, under the umbrellas of HCA, proposes to do in reality is to take a quarter of the volume from [Bayonet Point, a] premier facility to set up in a sense a satellite operation at a facility . . . 16 miles away . . . [when] those patients already have an established practice of going to the premier tertiary facility . . . [ and when the two enjoy] a very strong positive relationship. (Tr. 1434). Such an arrangement will do little to nothing to enhance competition. Comparing Citrus Memorial and Brooksville Regional gross revenues on the basis of the same cardiology-related DRGs reveals that Brooksville's gross charges are 83 percent greater than Citrus Memorial's charges. A comparison of projections in the applications reveals that Brooksville Regional's gross revenue per open heart surgery case will be 147 percent greater than Citrus Memorial's and the Brooksville's net revenue per open heart surgery case will be 45 percent greater than Citrus Memorial's. A comparison of projections in the applications reveals that Brooksville's gross revenue per angioplasty case will be 36 percent greater than Citrus Memorial's and that Brooksville's net revenue per angioplasty case will be 7 percent lower than Citrus Memorial's. Impact of a Citrus Memorial Program on Existing Providers Citrus Memorial reasonably projected that by the third year of operation, a Citrus Memorial program will take away 100 cases from Ocala Regional. In 1999 Ocala Regional had an open heart surgery volume of 401 cases. In 2000, its annual volume was 18 cases more, 419. This is a decline from both the immediately prior two-year period, 1997 to 1998 and the two-year period before that of 1995 to 1996. The volume decline for the two-year period 1999 to 2000 compared to the previous two-year period, 1997 to 1998 is not at all surprising because of "two big factors." (Tr. 97). First, in 1997 and 1998, Ocala Regional was used as a training site for the development of Leesburg Regional's open heart surgery program that opened in December of 1998. In essence, Ocala Regional enjoyed an increase in the volume of cases in 1997 and 1998 when compared to previous years and a spike in volume when compared to both previous and subsequent two-year periods because of the 1997-98 short-term "windfall.) (Id.) Second, Ocala Regional was a Columbia-owned facility. In 1999 and thereafter, "Columbia developed a lot of bad publicity because of some federal investigations that were going on of the Columbia system." (Id.) The publicity negatively affected the hospital's open heart surgery volume in 1999 and 2000. The second factor also helps to explain why Ocala Regional's volume in 1999 and 2000 was lower than in 1995 and 1996. There are other factors, as well, that help explain the lower volume in 1999 and 2000 than in 1995 and 1996. In any event if impact to Ocala Regional, alone, were to be considered for purposes of the prohibition in Rule 59C- 1.033(7)(c), that a new program will not normally be approved if approval would reduce 12-month volume at an existing program below 350, then the impact might result in veto by rule of approval of a program at Citrus Memorial. But Ocala Regional is but one hospital under a single certificate of need shared with another hospital across the street from its facility: Munroe Regional. Annualization for 1999 of discharge data for the 12 months ending September 30, 1999 shows that Munroe Regional enjoyed a volume of 770 cases. There is no danger that the program carried out by Ocala Regional and Munroe Regional jointly under a single certificate of need will fall below 350 procedures annually should Citrus Memorial be approved. Oak Hill Need for Rapid Interventional Therapies and Transfers A high number of residents of Oak Hill's proposed service area present to its emergency room with myocardial infarctions. Many of them would benefit from prompt interventional therapies currently made available to them at Bayonet Point. Over 600 patients annually, almost two patients every day, must be transferred by ambulance from Oak Hill to Bayonet Point for cardiac care. A significant number of them would benefit from interventional therapy more rapidly available. The travel time from Oak Hill to Bayonet Point is the least amount of time, however, of the travel time from any of the three applicants in this proceeding to the nearest existing open heart provider; Brooksville Regional to Bayonet Point or Citrus Memorial to one of the Ocala providers. The extent of the benefit, therefore, is difficult to quantify and is, most likely, minimal. As with the other two applicants, thrombolytic therapy is the only method of revascularization currently available to Oak Hill's patients because Oak Hill is precluded by Agency rule and clinical standards from offering angioplasty without on-site open heart surgery backup. The percentage of MI patients who are ineligible for thrombolytic therapy, coupled with the percentages of patients for whom thrombolytic therapy is ineffective, are extremely significant given the high number of MI patients presenting to Oak Hill's emergency room. During 1998, 418 patients presented to Oak Hill's ER with an MI, and 376 MI patients presented in 1999. During the first eight months of 2000, 255 MI patients presented to Oak Hill's ER, an annualized rate of 384. Conservatively, thrombolytic therapy is not effective for at least 10 percent of patients suffering from an acute MI, either because patients are ineligible to receive the treatment or the treatment fails to clear the blockage. Accordingly, it may be conservatively projected that at least 104 patients who presented to Oak Hill's ER between 1998 and August 2000 (10 percent of 1049) suffering an MI were in need of angioplasty intervention for which open heart surgery backup is required. Most patients are diagnosed as in need of OHS or angioplasty as a result of undergoing a diagnostic cardiac catheterization. Oak Hill performs an extremely high volume of cardiac cath procedures for a hospital that lacks an OHS program. In 1999, for example, it performed 1,641 cardiac catheterizations. This is a higher volume than experienced by any of six hospitals during the year prior to which they recently implemented new OHS programs. If Oak Hill had an OHS program, most of the patients at Oak Hill determined to be in need of angioplasty or OHS could receive those procedures at Oak Hill. Such an arrangement would avoid the inevitable delay and stress occasioned by a transfer to Bayonet Point or elsewhere. Furthermore, if Oak Hill had an OHS program then those patients in need of diagnostic cardiac catheterization and angioplasty sequentially would have immediate access to the interventional procedure. The need is underscored for those patients presenting to Oak Hill's ER with myocardical infarctions who do not respond to thrombolytics because, as stated earlier in this order, access to angioplasty within 30 minutes of onset is ideal. Oak Hill transfers an extremely high number of cardiac patients for angioplasty and open heart surgery. In 1999, Oak Hill transferred 258 patients to Bayonet Point for open heart surgery, and 311 for angioplasty/stent procedures. Of course, most OHS patients are scheduled on an elective basis for surgery, rather than being transferred between hospitals, as is evident from the fact that during the 12-month period ending March 1999, 698 Hernando County residents underwent OHS. For now, Oak Hill patients determined to be in need of urgent angioplasty or open heart surgery must be transferred by ambulance to an OHS provider which for the vast majority of patients is Bayonet Point. Approximately 17 miles south, the average drive time to Bayonet Point from Oak Hill is 30 minutes but it can take longer when on occasion there is traffic congestion. Once the transfer is achieved and patient receives the required procedure, the drive can be difficult for the patient's family and loved ones. Community members often express to physicians and hospital staff their support and desire for an OHS program at Oak Hill. Many believe travel outside Hernando County for those services is cumbersome for loved ones who are important to the patient's healing process. The community support and demand for these services is evidenced by the 7,628 resident signatures on petitions in support of Oak Hill's efforts to obtain approval for an OHS program. While a program at Oak Hill would be more convenient, Oak Hill did not demonstrate a transfer problem that would rise to the level of "not normal" circumstances. Because of Oak Hill's relationship with Bayonet Point, Bayonet Point's proximity and excess capacity, coupled with the high quality of the program at Bayonet Point, Oak Hill's case is more in the nature of seeking a satellite. As one expert put it at hearing, [Oak Hill] is, in fact, a satellite. And my question is, [']What's the wisdom of doing that if you don't have the problems that normally are being addressed when you grant approval of a program?['] In other words, if you don't have transfer issues [that rise to the level of "not normal" circumstances], if you don't have access issues, if you're not achieving any price competition, if it's not particularly cost effective, why would you [approve Oak Hill]? (Tr. 1537-38). Oak Hill's Projected Utilization Oak Hill projected a range of 316 to 348 OHS cases during its first year, and by its third year a range of between 333 and 366 cases. Those volumes are sufficient to ensure excellent quality of care from the beginning of the program, particularly with the involvement of the Bayonet Point surgeons. Oak Hill defined its primary service area (PSA) for OHS based on historic MDC-5 cardiology related diagnosis discharges from its hospital. For the 12-month period ended March 1999, over 90 percent of Oak Hill's MDC-5 discharges were residents of six zip codes, all in the vicinity of Oak Hill Hospital and within Hernando County. Accordingly, that area was chosen as the PSA for projecting OHS utilization. Out-of-PSA residents accounted for only 8.9 percent of Oak Hill's MDC-5 discharges, and of these, 1.5 percent were out-of-state patients, and 4.9 percent were residents from other parts of District 3. For the year ending ("YE") March 1999, Oak Hill had an MDC-5 market share of 40.9 percent within its PSA, without excluding angioplasty, stent, and OHS cases. If angioplasty, stent, and OHS cases are excluded, Oak Hill's PSA market share was 52.7 percent. In order to project OHS service demand, Oak Hill examined the population projections for 1999 and 2004 for District 3, and for Oak Hill's PSA. The analysis was based on age-specific resident populations and use rates, to serve as a contrast to the Agency's projections. The numeric need formula in the OHS Rule utilizes a facility based use rate derived by totaling all of the reported OHS cases performed by hospitals within a District during a given time period, and then dividing those cases by the adult population aged 15 and over. While a facility-based use rate measures utilization in those District hospitals, however, it does not measure out-migration. Nor does it reflect the residence of the patients receiving those services. On the other hand, a resident-based use rate identifies where patients needing OHS actually come from, and permits development of age specific use rates. For example, the resident-based use rates reflects that the southern portion of District 3 has a much higher concentration of elderly persons than does the northern portion of the District, and reveals extremely high migration out of the District for OHS services. Oak Hill's PSA is more elderly than the District 3 population as a whole. In 1999, 32.8 percent of the Oak Hill PSA population was aged 65 or over, as opposed to only 21.5 percent for District 3 as a whole, with similar results projected for the population in 2004, the projected third year of operation of Oak Hill's program. Based on the district-wide use rate resulting from the OHS Rule need methodology, Hernando County would be expected to generate 276 OHS cases in the planning horizon of July 2002 (use rate of 2.3 per 1000 adult population). Application of this OHS Rule use rate to Hernando County clearly understates need if resources to meet the need are considered within the isolation of the boundaries of District 3. For example, the OHS Rule based projection of 276 OHS cases in 2002, is far below the actual 664 Hernando County resident OHS discharges during YE March 1998, and the 698 OHS cases during YE March 1999. While the facility-based district-wide use rate was 2.3, the Hernando County resident-based use rate was 6.45 per 1000 population. The fact of increasing use rates with age is demonstrated by the Hernando County resident use rate of 6.95 for ages 55-64, increasing to 12.01 for ages 65-74, and increasing again to 14.95 for age 75 and over. But focusing on Hernando County use rates within District 3 ignores the reality of the proximity of an excellent program at Bayonet Point. Oak Hill reasonably projected OHS demand in its PSA by examining the age-specific use rates of residents in the southern portion of District 3, which experienced an overall use rate of 4.55 for the year ending March 1999. Those age-specific use rates were then applied to the age-specific population forecast for each of the three horizon years of 2002 through 2004, resulting in an expected PSA demand for OHS of 547 cases in 2002, 561 cases in 2003, and 575 cases in 2004. Those projections are conservative given that 663 actual open heart surgeries were reported among PSA residents during the YE March 1999. The same methodology was used to project angioplasty service demand in the PSA, resulting in an expected demand ranging from 721 cases in 2002 to 758 cases in 2004. Oak Hill then projected its expected OHS case volume by assuming that its first year OHS market share within its PSA would be the same as its MDC-5 market share, being 52.7 percent. Oak Hill next assumed that by the third-year operation its market share would increase to equal its current cardiac cath PSA market share of 57.9 percent. It further assumed that it would have a non-PSA draw of 8.9 percent, which is equal to its current non-PSA MDC-5 market share. Oak Hill reasonably expects that 91.1 percent of its OHS cases would come from within its six zip code PSA, with the remaining 8.9 percent expected to come from outside that area. Oak Hill then projected an expected range of OHS discharges during its first three years of operation by using both a low estimate and a high estimate. The resulting utilization projections reflect a low range of 316 OHS cases in 2002, 324 cases in 2003, and 333 cases in 2004. The high range estimate for the same years respectively would be: 348, 357, and 366 cases. The same methodology was used to project angioplasty cases, resulting in the following low range: 417 cases in 2002; 428 in 2003; and 438 in 2004. The expected high range for the same respective years would be: 458, 470, and 482. Oak Hill's OHS and angioplasty utilization projections are reasonable. Long-term Financial Feasibility Long-term financial feasibility is defined as a demonstration that the project will achieve and maintain financial self-sufficiency over time. Oak Hill's projected gross charges were based on Bayonet Point's charge structure. The projected payer mix was based on Oak Hill's cardiac cath experience. Projected net reimbursement by payor source was based on Oak Hill's experience for Medicare, Medicaid, and contractual adjustment history. Oak Hill's expenses were projected on a DRG specific basis using information generated by the cost accounting system at Bayonet Point. The use of Bayonet Point's expense experience is a reasonable proxy for a number of reasons. Its patient base is comprised of patients who are reasonably expected to be the base of Oak Hill's patients. Management there is similar to what it will be at an Oak Hill program. And, as stated so often, the two facilities are relatively close in location. To account for differences between Bayonet Point's expenses and Oak Hill's project costs, interest and depreciation, adjustments were made by Oak Hill as reflected in its application. As a means of compensating for fixed costs differentials between the two hospitals, Oak Hill added its salary costs projected in Schedule 6 to the salary expenses already included in Bayonet Point's costs. (Schedule 6 nursing, administration, housekeeping, and ancillary labor costs exceeded $3 million in the first year of operations.) This counting of two sets of salary expenses offsets any economies of scale cost differential that may exist between the OHS programs at Bayonet Point and Oak Hill. A reasonable 3 percent annual inflation factor was applied to both projected charges and costs. The reasonableness of Oak Hill's overall approach is supported by Citrus Memorial's use of a substantially similar pro forma methodology in modeling its proposed program on Munroe Regional Medical Center. Oak Hill reasonably projects a profit of $1.38 million in the first year of operation, and that profitability will increase as the case volumes grow thereafter. An Oak Hill program will cost Bayonet Point (a sister HCA hospital) patients and may diminish the corporate profits of the two hospital's parent corporation, HCA Health Services of Florida, Inc. It is clear from the parent's most recent audited financial statements, however, that it has ability to absorb a lower level of profit from Bayonet Point without jeopardizing the financial viability of Oak Hill. Brooksville Regional argues that the financial impact to Bayonet Point of an Oak Hill program demonstrates that the Oak Hill application is nothing more than a preemptive move to stifle competition. Oak Hill, in turn, characterizes its proposal as a sound business judgement to compete with non-HCA hospitals in District 3. Whatever characterization is applied to the Oak Hill proposal, it is clear that it is financially feasible in the long term. Other Statistics The AHCA population estimates for January 1, 1999, show a Hernando County population of 108,687 and a Citrus County population of 98,912. The same data sources show the "age 65 and over" population (the "elderly") in Hernando to be 40,440 and in Citrus to be 37,822. During the year 2000, there were 2,545 more people aged 65 and over in Hernando County than in Citrus County. By the year 2005, the difference is expected to be 3.005. The total change in the elderly population between 2000 and 2005 is projected to be 4,109 in Citrus County and 4,614 in Hernando County. Generally, the older the population, the older the OHS use rate. Comparatively, then, Hernando County has the larger population to be served both now, and in all probability, in the foreseeable future. Oak Hill has the largest cardiology program among the applicants. For the 12-month period ending September 1999, MDC- 5 discharges were 1,130 at Brooksville Regional, 2,077 at Citrus Memorial and 2,812 at Oak Hill. The combined Brooksville and Spring Hill Regional Hospital MDC-5 case volume of 2,238 is below Oak Hill's MDC case volume for the same period. Oak Hill is the largest cardiac cath provider among the applicants. For the 12-month period ending September 2000, Citrus Memorial reported 646 cardiac catheterization procedures and Brooksville Regional reported 812. Oak Hill reported 1,404 such procedures, only sixty shy of a volume double the combined volume at the other two applicants. The level of ischemic heart disease in an area is indicative of the level of open heart surgery needed by residents of the area. The number of ischemic heart disease cases by county during the 12-month period ending September 1999 were: 1,038 for Alachua; 1,978 for Citrus; 2,816 for Marion; and, Hernando, 3,336. During the 12-month period ending September 1999, 657 Hernando County residents underwent OHS at Florida hospitals, while only 408 residents of Citrus County did so. Similarly, 948 Hernando County residents had angioplasty, while only 617 Citrus County residents underwent angioplasty. For the year ending June 30, 1999, the Citrus County OHS use rate was 4.26 per 1,000 population, substantially lower than the Hernando County use rate of 6.41. A comparison of the use rates for the year ending September 30, 1999, again shows Hernando County's use rate to be higher: 4.13 for Citrus, 6.08 for Hernando. Hernando County also experiences a higher cardiovascular mortality rate than does Citrus County. During 1998, the age-adjusted cardiovascular mortality rate per 100,000 population for Citrus was 330.88 and 347.40 for Hernando. During 1999, those mortality rates were 304.64 in Citrus and 313.35 in Hernando (consistent with the decline between 1998 and 1999 for the state as a whole). The Hernando mortality rates greater than Citrus County's indicate a greater prevalence of heart disease in Hernando County than in Citrus County. Most importantly, during 1999, Oak Hill transferred 619 patients to Bayonet Point for cardiac intervention - 258 for open heart surgery, 311 for angioplasty/stent, and 50 for cardiac cath. Brooksville Regional transferred a combined 383 patients after diagnostic cardiac catheterization to other hospitals for either angioplasty or OHS. Brooksville Regional has 91 licensed beds, Citrus Memorial has 171 beds and Oak Hill has 204 beds. Although with Spring Hill one could view Brooksville Regional as "two hospital systems with 166 beds under common ownership and control" (Tr. 1544), at 91 beds, Brooksville would become the smallest OHS program in the state in terms of licensed bed capacity, Hospitals of less than 100 beds are not typically of a size to accommodate an OHS program. There might be dedicated cardiovascular hospitals of 100 beds or less with capability to support an open heart surgery program, but "open heart surgical services in [a general, surgical-medical hospital of less than beds] would overwhelm the hospital as far as the utilization of services." (Tr. 126). Oak Hill's physical plant, hospital size, number of beds, medical staff size, number of cardiologists, cath lab capacity, number of cath procedures, number of admissions, and facility accessibility to the largest local population are all factors in its favor vis-à-vis Brooksville Regional. In sum, Oak Hill is a hospital more ready and appropriate for an adult open heart surgery program than Brooksville. Alternatives As an alternative to its CON application, Oak Hill considered the possibility of seeking approval of a program to be shared with Bayonet Point. Learning that the Agency looks with disfavor on inter-district shared adult open heart surgery programs, Oak Hill decided to seek approval of a program independent of Bayonet Point but one that would rely on Bayonet Point's experience and expertise for development, implementation and operation. Bed Capacity Brooksville contends that Oak Hill lacks sufficient bed capacity to accommodate the implementation of an OHS program in conjunction with its projected-related increased admissions. Brooksville relied on an Oak Hill daily census document, focusing on the single month of January, arguing that the document reflected that Oak Hill exceeded its licensed bed capacity on 5 days that month. The licensed bed capacity, however, was not exceeded. Observation patients, who are not inpatients, and not properly included in the inpatient count, were included in the counts provided by Brooksville. Seasonal peaks in census during the winter months, particularly January, are common to all area hospitals. Similarly, all hospitals experience a higher census from Monday through Thursday, than on other days. Oak Hill has adequate capacity and flexibility to accommodate those rare occasional days during the year when the number of patients approaches its number of beds. Patients are sometimes hospitalized for "observation," and when so classified are expected to stay less than 24 hours. Typically, Oak Hill places such patients in a regular "licensed" bed, so long as such beds are available. There are other areas in the hospital suitable for observation patients, including: 12 currently unused and unlicensed beds adjacent to the cardiac cath recovery area; six beds in the ER holding area; eight beds in the ER Quick Care Unit; and additional beds in the same day surgery recovery area. Observation patients can be cared for appropriately in these other areas, a routine hospital practice. Peak season census is "a fact of life" for hospitals, including Oak Hill and Brooksville. Oak Hill has never been unable to treat patients due to peak season demands. January is the only month during the year when bed capacity presents a challenge at Oak Hill. If necessary, Oak Hill could coordinate patient admissions with Bayonet Point to ensure that all patients are appropriately accommodated. Oak Hill can successfully implement a quality OHS program with its current bed capacity. In fact, all parties have stipulated to Oak Hill's ability to do so. Moreover, should it actually come to pass in future years that Oak Hill's annual average occupancy exceeds 80 percent, it may add up to 20 licensed beds on a CON exempt basis. Brooksville Regional Factors favoring Brooksville over Oak Hill Bayonet Point is the dominant provider of OHS/angioplast to residents of Hernando County. As a non-HCA hospital, a Brooksville program (in contrast to one at Oak Hill) would enhance patient choice in Hernando County for hospitals and physicians, and would create an environment for price and managed care competition. Other health planning factors that support Brooksville Regional over Oak Hill are the locations of the two Hernando County hospitals and the ability of the two to transfer patients to Bayonet Point. Patient Choice and Competition Of the OHS/angioplasty services provided to Hernando County residents, Bayonet Point provides 94 percent, the highest county market share of any hospital that provides OHS services to residents of District 3. Indeed, it is the highest market share provided by any OHS provider in any one county in the state. The importance of patient choice and managed care competition has been acknowledged by all the parties to this proceeding. If Brooksville Regional's program were approved, Hernando County residents would have choice of access to a non- HCA hospital for open heart and angioplasty services and to physicians and surgeons other than those who practice at Bayonet Point. This would not be the case if Oak Hill's program was approved instead of Brooksville's. Price Competition Although Brooksville is not a "low-charge provider for cardiovascular services" (tr. 1347), approving Brooksville creates an environment and potential for price competition. A dominant provider in a marketplace has substantial power to control prices. Adding a new provider creates the motivation, if not the necessity, for that dominant provider to begin pricing competitively. A dominant provider controls prices more than hospitals in a competitive market. Bayonet Point's OHS charges illustrate this. Approving Brooksville's application creates an environment for potential price competition with Bayonet Point, whereas approving Oak Hill's application, whose charges are expected to be the same as Bayonet Point's, does not. Managed Care Contracting Just as competitive effects on pricing are reduced in an environment in which there is a dominant provider, so managed care contracting is also affected. Managed care competition depends not just on competition between managed care companies but also on payer alternative within a market. If a managed care company is forced to deal with one health care provider or hospital in a marketplace, its competitive options are reduced to the benefit of the hospital that enjoys dominance among hospitals. "[T]he power equation moves much more strongly in that type of environment towards the provider [the dominant hospital] and away from the managed care companies." (Tr. 1471). Managed care companies who insure Hernando County residents have no alternative when it comes to open heart surgery and angioplasty services but to deal with Bayonet Point. With a 94 percent share of the Hernando County residents in need of open heart and angioplasty services, there is virtually no competition for Bayonet Point in Hernando County. The managed care contracting for both Bayonet Pont and Oak Hill is done at HCA's West Florida Division office, not at the individual hospital level. Approving Oak Hill will not promote or provide competition for managed care. Approving Brooksville, on the other hand, will provide managed care competition over open heart and angioplasty services in Hernando County. Ability to Transfer Patients While transfers of Hernando County patients always produce some stress for the patient and are cumbersome as discussed above for the patient's loved ones, there is no evidence of transfer problems for Oak Hill that would rise to the level of "not normal" circumstances. Outcomes for patients transferred from Oak Hill to Bayonet Point on the basis of morbidity statistics, mortality statistics, length of stay, patient satisfaction, and family satisfaction are excellent. It is not surprising that sister hospitals situated as are Oak Hill and Bayonet Point would enjoy minimal transfer delays and access problems encountered when patients are transferred. Transfers between unaffiliated hospitals are not normally as smooth or efficient as between those that have some affiliation. Unlike Oak Hill's patients, Brooksville patients, for example, are never transported for OHS/angioplasy by Bayonet Point's private ambulance. Other than in emergency cases, Bayonet Point decides the date and manner when the patient will be transferred. But just as in the case of Oak Hill, there is no evidence of transfer problems between Brooksville Regional and Bayonet Point that would amount to an access problem at the level of "not normal" circumstances. Outmigration As detailed earlier, there is extensive outmigration of Hernando County residents to District 5 for open heart and angioplasty procedures. The outmigration pattern on its face is in favor of both applications of Oak Hill and Brooksville. The outmigration from Hernando County, however, is of minimal weight in this proceeding since Bayonet Point is so close to both Oak Hill and Brooksville. The patients at the two Hernando hospitals have good access to Bayonet Point, a facility that provides a high level of care to Hernando County residents in need of open heart surgery and angioplasty services. The relationship is inter-district so that it is true that there is outmigration from District 3. Outmigration statistics showing high outmigration from a district have provided weight to applications in other proceedings. They are of little value in this case. Location of the Two Hernando Hospitals Brooksville is located in the "dead center" (Tr. 1290) of Hernando County. With good access to Citrus County via Route 41, it is convenient to both Hernando County residents and some residents of Citrus County. It reasonably projects, therefore, that 90 percent of its open heart/angioplasty volume will be from Hernando County with the remaining 10 percent from Citrus. Oak Hill is located in southwest Hernando County, closer to Bayonet Point than Brooksville. Oak Hill's primary service area is substantially the same as that part of Bayonet Point's that is in Hernando County. Oak Hill does not propose to serve Citrus County. Brooksville, then, is more centrally located in Hernando County than Oak Hill and proposes to serve a larger area than Oak Hill. Financial Feasibility (long-term) Brooksville has operated profitably since its bankruptcy. In its 1999 fiscal year, the first year out of bankruptcy, Hernando HMA earned a profit of $3 million. In fiscal year 200, Brooksville's profit was $6 million. OHS programs are generally very profitable. There is no OHS program in Florida not generating a profit. Brooksville's projected expenses and revenues associated with the program are reasonable. Schedule 5 in the Brooksville application contains projected volumes for OHS/angioplasty. The payer mix and length of stay were based on 1998 actual data, the most recent data for a full year available. The projected volumes are reasonable. The projected volumes are converted to projected revenues on Schedule 7. These projections were based on actual 1998 charges generated for both Hernando and Citrus County residents since Brooksville proposes to serve both. These averages were then reasonably projected forward. Schedule 7 and the projected revenues are reasonable. These projected volumes and revenues account for all OHS procedures performed in Hernando and Citrus Counties in 1998 even though effective October 1, 1998, the DRG procedure codes for OHS procedures were materially redefined. Thus, when Brooksville's schedules were prepared using 1998 data, only 3 months of data were available using the new DRG codes. Brooksville opted to use the full year of data since using a full year's worth of data is preferable to only 3 months. Similarly, the DRGs for angioplasty both as to balloon and with stent were re-classified. Again, Brooksville opted to use the full year's worth of data. Brooksville's expert explained the decision to use the full year's worth of data and the effect of the DRG reclassification on Brooksville's approach, "We've captured all the revenues and expenses associated with these open heart procedures and just because the actual DRGs have changed, doesn't . . . impair the results because both revenues and expenses are captured in these projections." (Tr. 1651). Schedule 8 includes the projected expenses. It included the health manpower expenses from Schedule 6 and the project costs from Schedule 1. The remaining operating expenses were based upon the actual costs experienced by all District 3 OHS providers generated from a publicly-available data source, and then projected forward. As to these remaining operating costs, consideration of an average among many providers is far preferable to relying on just one provider. Schedule 8 was reasonably prepared. It accounts for all expense to be incurred for all types of OHS and angioplasty procedures. It is based on the best information available when these projections were prepared and are based on 12 months of actual data. Even if the projections of the schedules are not precise because of the re-classification of DRGs, they contain ample margins of error. Brooksville's financial break-even point is reached if it performs 199 OHS and 100 angioplasty procedures. This low break-even point provides additional confidence that the project is financially feasible. Brooksville demonstrated that its proposed program will be financially feasible.
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 that grants the application of Citrus Memorial (CON 9295) and denies the applications of Oak Hill (CON 9296 )and Brooksville Regional (CON 9298). DONE AND ENTERED this 4th day of October, 2001, 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 4th day of October, 2001. COPIES FURNISHED: Diane Grubbs, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308-5403 William Roberts, Acting General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308-5403 Michael J. Cherniga, Esquire Seann M. Frazier, Esquire Greenberg Traurig, P.A. East College Avenue Post Office Box 1838 Tallahassee, Florida 32302-1838 Stephen A. Ecenia, Esquire Rutledge, Ecenia, Purnell and Hoffman, P.A. 215 South Monroe Street, Suite 420 Tallahassee, Florida 32302-0551 James C. Hauser, Esquire Metz, Hauser & Husband, P.A. 215 South Monroe Street, Suite 505 Post Office Box 10909 Tallahassee, Florida 32302 John F. Gilroy, III, Esquire Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308-5403
Findings Of Fact The Agency For Health Care Administration ("AHCA") is the state agency responsible for the administration of certificate of need ("CON") laws in Florida. On February 5, 1993, AHCA published a need for one additional adult open heart surgery program in District 9. AHCA defines open heart surgery as a "tertiary health service" which, due to complexity, cost, and the relationship between volume and quality of care should be concentrated in a limited number of hospitals. Rule 59C-1.002(66), Florida Administrative Code. District 9 is located generally along the southeast coast of Florida and includes Palm Beach, Indian River, Martin, St. Lucie, and Okeechobee Counties. Palm Beach is the county at the southern end of District 9. The parties have referred to the counties other than Palm Beach, as the four northern counties. Martin County is north of Palm Beach, and St. Lucie, Okeechobee, and Indian River are further north. The applicants in this proceeding, seeking to establish an additional District 9 adult open heart surgery program, are Lawnwood Medical Center, Inc., d/b/a Lawnwood Regional Medical Center, Inc. ("Lawnwood"), St. Mary's Hospital, Inc. ("St. Mary's"), and Martin Memorial Medical Center, Inc. ("Martin Memorial"). Lawnwood Regional Medical Center Lawnwood is a 335-bed for-profit hospital located in Ft. Pierce, in St. Lucie County. Lawnwood has CON approval for the construction of an additional 18 skilled nursing beds and 10 level II NICU beds. In addition to the 335 licensed beds, Lawnwood has 16 unlicensed bassinets for a total of 351. Lawnwood's 335 licensed beds include 60 psychiatric beds, located one and a half blocks away from the main Lawnwood building, at a facility called Harbor Shores. Lawnwood has 260 general acute care beds. When Lawnwood filed its application, its parent corporation was HCA, Inc., a subsidiary of the Hospital Corporation of America. HCA was also the parent corporation of the Medical Center of Port St. Lucie, the only other hospital in St. Lucie County, and of Raulerson Hospital in Okeechobee County. After the application was filed and prior to hearing, a subsidiary of Columbia Health Care Corporation merged with HCA. As a result of the merger, the administrator of Lawnwood also serves as the market manager assigned to coordinate the services offered at the three hospitals. Lawnwood is classified by the State as a disproportionate share provider of Medicaid-reimbursed services for financially needy patients. In 1993, 21 percent of its total patient days were attributable to Medicaid and 4 percent to charity. Lawnwood operates an outpatient cardiac catheterization ("cath") laboratory and, in 1992, received CON approval to perform inpatient cardiac caths in a lab which was scheduled to open in October 1994. The outpatient lab opened in 1988 at Lawnwood. In 1989, 561 cardiac cath lab procedures were performed at Lawnwood, 494 in 1990, 362 in 1991, and 468 procedures in 1993. Although 602 procedures were reported to the local health council in 1993, these were performed on 468 patients, which is the number consistent with reporting methods of other cath labs. As a result of the diagnostic caths, 45 patients were referred for open heart surgery, and 98 for angioplasties. Of the 45 patients referred for open heart surgery, 26 were actually scheduled for the procedure. Lawnwood proposes to establish an adult open heart surgery program for a total project cost of $4.99 million. The project includes construction of two dedicated operating rooms, renovations to provide a 4-bed dedicated recovery room, and conversion of 12 acute care beds to construct a 12-bed cardiovascular intensive care unit ("CVICU"). St. Mary's Hospital St. Mary's is a 430-bed not-for-profit hospital, which has been operated 55 years by the Franciscan Sisters, currently through a parent organization called the Allegheny Health System. St. Mary's is the largest hospital in District 9, and the largest provider of womens' and childrens' medical services in the district. St. Mary's is a designated regional perinatal intensive care center with level II and III neonatal intensive care units, and is the designated level II trauma center for the northern area of Palm Beach County. Like Lawnwood, St. Mary's is recognized by the State as a disproportionate share provider of services to Medicaid reimbursed and indigent patients. It is approximately sixth in the state in the provision of services to financially needy patients. St. Mary's cardiac cath lab began operation in February 1988. There were 267 inpatient and 116 outpatient cardiac caths at St. Mary's lab in 1991, 240 and 118 respectively in 1992, and 171 and 115 respectively from January to November 1993. St. Mary's operates a 10-bed coronary care unit. St. Mary's proposes to establish an adult open heart surgery program for a total of $2,166,351, funded by private donors. The project will include renovations to two existing operating rooms and to a recovery room area. Martin Memorial Medical Center Martin Memorial is a 336-bed not-for-profit acute care hospital, with an additional 17 nursery/bassinets which are not required to be in the total licensed beds. The ultimate parent corporation for the Martin Memorial facilities and its foundation is Martin Memorial Health Systems, a not-for- profit corporation with a volunteer community board of directors. Martin Memorial's beds are divided between two campuses, with 236 beds in Stuart, and 100 in Port Salerno. The Port Salerno hospital opened in September, 1992 and is approximately 8 miles south of Stuart. Included in the 236 beds at Martin Memorial in Stuart are 5 level II neonatal intensive care beds, 23 intensive care unit beds, 45 ventilator, telemetry or other monitored beds, and 134 medical/surgical beds. Martin Memorial's existing cardiac services include a cardiac cath lab which opened in 1989 and, that year, reported 250 procedures. Caths at Martin reached the highest volume, 905 in 1991, followed by 799 in 1992, and 867 in 1993. Martin Memorial proposes to establish an adult open heart surgery program in Stuart for a total project cost of $3,594,720. Martin's project includes a newly constructed open heart surgery suite adjacent to the cardiac cath lab and, as a back-up, renovation of an existing operating room. As a part of an approved, separate CON application, Martin proposes to renovate and expand to accommodate a 13-bed surgical intensive care unit ("SICU") with four private rooms dedicated as a cardiovascular intensive care unit ("CVICU"). The expenses associated with the four CVICU rooms are included in the total open heart surgery project costs. Existing Open Heart Surgery Providers In Or Adjacent To District 9 All of the existing adult open heart surgery programs in District 9 are in Palm Beach County, at Delray Community Hospital ("Delray"), JFK Medical Center, Inc. ("JFK"), and AMI Palm Beach Gardens Community Hospital, Inc. d/b/a Palm Beach Gardens Medical Center ("Palm Beach Gardens"). The same services are also available in the adjacent districts to the north in District 7 at Holmes Regional Medical Center in Brevard County, and to the south in District 10 at AMI North Ridge General Hospital in Broward County. In addition, established referral patterns exist from District 9 to Miami Heart Institute in Dade County and Holy Cross Hospital in Broward County. All residents of District 9 have access to open heart surgery within two hours average drive time, which exceeds the geographic access standard of Rule 59C-1.033(4)(a), Florida Administrative Code. Delray is located in southern Palm Beach County and is a level II trauma center for that area. JFK is a 369-bed not-for-profit hospital located in Atlantis, Florida, approximately midway between Boca Raton and West Palm Beach, in north central Palm Beach County. The corporation which owns and operates JFK, also is the parent of a fund-raising foundation, and other subsidiaries, some of which are for-profit corporations. JFK has had an open heart surgery program since 1987. JFK's two operating rooms are equipped and sized identically, and located in close proximity to the two room cardiac cath lab and the intensive care unit. JFK has the capacity to perform up to 1000 cases annually, while actual annual volumes at JFK have ranged from 350 to 370 cases. Palm Beach Gardens is a 204-bed for-profit hospital located in the northern part of Palm Beach County. It operates the oldest open heart surgery program in the district, having started in 1982 or 1983. In fiscal year 1992- 1993, there were 477 open heart surgery patients at Palm Beach Gardens, of which 173 resided in the four northern counties of the District. Palm Beach Gardens has 11 operating suites, 7 capable of being used for open heart surgeries, and 4 dedicated solely to open heart surgeries. The current capacity of Palm Beach Gardens is 900 open heart procedures a year. By adding staff, Palm Beach Gardens could reach a volume of 1100 cases a year. While Palm Beach Gardens has excess capacity in its operating rooms, at the peak of its seasonal demand, delays occur in scheduling non-emergency surgeries due to inadequate capacity in its 24-bed intensive care unit. Occupancy levels in the 24 beds were 112.5 percent in 1993, according to Treasure Coast Health Council data. Although Palm Beach Gardens also suggested that an 8-bed overflow unit supplemented the 24 beds, accounting reports do not reflect billings for their use as intensive care services. Comparison of Applicants and Applications Subsection 408.035(1)(a) -- need in relation to state and local plans The 1989 state health plan, Healthy Floridians, includes six preferences for the review of open heart surgery applications. The first preference favors applicants establishing programs in counties with a population over 100,000 and a higher percentage than statewide average of 18.8 percent elderly persons. All the experts in health planning testified that the term "elderly" in this preference means persons 65 years of age and older, which is consistent with the age group with the greatest demand for open heart surgery. St. Mary, Lawnwood, and Martin meet the preference. The 1993 population of Palm Beach County was 900,000, St. Lucie's was 162, 598, and Martin's was 108,089. The population age 65 and over as a percentage of total population was 24 percent in Palm Beach, 21.2 percent in Lawnwood, and 27.5 percent in Martin County. The second state preference is for applicants who can demonstrate the ability to perform at least 350 annual procedures within 3 years of initiating an open heart program. Lawnwood reasonably projected a total of 314 open heart surgery procedures in year one, 350 in year two, and 386 in year three. Lawnwood's utilization projections are conservatively based on the assumption that, by the third year, 70 percent of its open heart patients will come from St. Lucie and Okeechobee Counties, which are already in its primary service area. Martin Memorial's expert questioned Lawnwood's projected open heart volumes from Martin and Indian River Counties, based on its acute care and cath lab patient origins. In addition, traditional referral patterns show Indian River patients going north to Brevard and Orange Counties, while Martin County patients go south to Palm Beach, Broward, and Dade Counties. Considering the acute care and cath lab competition within the four northern counties, the absence in that area of any competition for an open heart surgery program, the relative success of Lawnwood's outpatient cath lab despite its limitations and competition, and its affiliation with Port St. Lucie and Raulerson hospitals, Lawnwood established the reasonableness of its projected utilization. Lawnwood also reasonably expects to reverse some of the 73.5 percent out-migration for open heart surgery by residents of the northern four counties. See, Findings of Fact 27, infra. Martin Memorial's projections of 249 cases in year one, 317 in year two, and over 350 in year three are also reasonable. Martin Memorial's underlying assumptions, that its open heart surgery market share will at least equal that of its acute care, that it will keep some patients previously referred from its cath lab, and that, it, like Lawnwood, would reverse some district out-migration, are also reasonable. Martin Memorial referred 172 patients from its cath lab for open heart surgery in 1993, in contrast to 45 from St. Mary's, and 41 from Lawnwood. Martin Memorial's projections are based on 1991-1992 use rates which declined in 1993. Despite the one year decline and some expert predictions of a continuing downward trend in use rates, Martin Memorial's projections are bolstered by the fact that its open heart surgery primary service area includes Port St. Lucie, which contains 40 percent of the population of St. Lucie County and is the fastest growing area of District 9. That area, which is closer to Stuart, but is located in the St. Lucie County community in which Lawnwood has an affiliate hospital, supports both the projections of Lawnwood and Martin Memorial, and could be served by an open heart surgery program at either facility. Although Martin Memorial's projected volumes are higher than and inconsistent with other projections made by Martin Memorial, the reasonableness of the projections was established. St. Mary's projected 171 open heart surgeries in year one, 265 in year two, and 363 in year three. The projections are based on the use of a gravity model designed to determine potential volume "attracted" to the program by using the size of the hospital and the proximity of patients as factors. The model used a zip code level analysis to take into consideration the fact that St. Mary's expects a sub-county primary service area, as a result of sharing the county with the three existing District 9 providers. The projected utilization was reduced, by St. Mary's expert, to take into consideration an expected start- up factor. There is, however, substantial expert testimony that the variables and/or the weight attributed to each variable included in this gravity model are inadequate to explain actual or potential volumes. There is substantial evidence that the size of a hospital is not reliable enough to be one of only two variables in a model. For example, JFK although larger than Palm Beach Gardens, only exceeded 350 cases in 1991-1992 by 16, when smaller Palm Beach Gardens with an older open heart surgery program reached 499 cases. The model also fails to consider actual physician referral patterns. St. Mary's projections and its ability to exceed 350 cases also depend on its ability to attract Medicaid patients over and above the patients projected by the gravity model. See, Findings of Fact 35, infra. The volume of diagnostic cardiac caths at St. Mary's is low and has declined over the past three years. In part, the volume is low because there is no open heart surgery back-up available in the event the diagnostic cardiac cath indicates that need. Cath patients suspected of needing more invasive procedures are diverted by referring physicians to hospitals with angioplasty and open heart programs. But that explanation of St. Mary's volumes apparently is incomplete, since, by contrast Boca Raton Community Hospital and Martin Memorial, which also have no open heart surgery back-up, have had more steadily increasing cardiac cath volumes. The fact that St. Mary's cath volumes are low and its open heart surgery projections unreliable is also attributable to the fact that St. Mary's is located 11 miles north of JFK and 5 1/2 miles south of Palm Beach Gardens, therefore, at a competitive disadvantage with these established programs. The third state health plan preference applies to proposals, for improving access for persons currently leaving the district. With almost half of Palm Beach County open heart surgery patients receiving the service outside the county, St. Mary's claims to be in the best location to reverse that trend if geographical access is the problem. St. Mary's also points to the convenience of access to its hospital, which is 2 miles from Interstate 95, the main north-south transportation corridor through the district. Approval of St. Mary's proposal will not, however, reverse out-migration to the extent that it is attributable to factors such as seasonal residency, established physician referral practices from northern areas of District 9 to providers in adjacent districts, and managed care contractual arrangements. Lawnwood is located in the largest, fastest growing, and most centrally located county of the northern four counties. St. Lucie County is adjacent to each of the other three northern counties, with Martin to the south, Okeechobee to the west, and Indian River to the north. The level of "out-migration," defined as those patients leaving the district to receive the service, increases dramatically from south to north in District 9, from 55 percent in Martin, 70 percent in St. Lucie, 80 percent in Okeechobee, to 100 percent in Indian River County. Considering growth in western St. Lucie County, the needs of St. Lucie and Okeechobee County residents, and the alternative to out-migration provided for both Indian River and Martin County residents, the Lawnwood location is superior to that of Martin Memorial in terms of the ability to improve access to the service. See, also Findings of Fact 23-24, supra. The fourth state preference for applicants with a history of providing disproportionate share Medicaid and charity care favors the applications of St. Mary's and Lawnwood, in that order. Martin Memorial argues that it also meets the disproportionate share criteria, which the preference requires, although it has not been designated by the State, which the preference does not require. Relying on the criteria in subsection 409.911(2), Florida Statutes, Martin claims to meet or exceed the disproportionate share requirements for 1990, despite the agency's reliance on 1989 data. Assuming, arguendo, that Martin is entitled to the preference, the comparative ranking of St. Mary's first, Lawnwood second, and Martin third remains the same. In addition, the preference looks at a history of disproportionate service, as does subsection 408.035(1)(n), in part, which Martin failed to establish. For 1991, St. Mary's provided 15.8 percent of total District 9 Medicaid, Lawnwood provided 11.7 percent, and Martin Memorial, 1.7 percent. Martin Memorial established that it treated a larger number of Medicaid patients with circulatory diseases as a proportion of Medicaid patients in Martin County, as compared to St. Lucie County residents treated at Lawnwood. However, the absolute number of circulatory disease Medicaid patients treated at Lawnwood was approximately two and half times the number treated at Martin Memorial. Statistical indicators, including per capita income and low income patients diagnosed with circulatory diseases, demonstrate that residents of St. Lucie and Okeechobee Counties are less affluent, and more medically needy than those in Palm Beach and Martin Counties. The fifth state preference favors the applicant offering a service with the highest quality of care at the least expense. The preference includes an explanation that larger facilities usually have more available resources to meet the preference. As the largest hospital with the lowest cost per case by the second year of the program, $22,659, St. Mary's best meets the preference. Martin's projected cost is $26,909 and Lawnwood's is $27,085. Martin Memorial's expert calculated total expenses per case at $23,221 for Martin Memorial, $22,615 for St. Mary's, and $23,645 for Lawnwood. St. Mary's projected charges of $50,600 in year one and $53,100 in year two. Lawnwood projected charges of $55,199 in year one, and $58,133 in year two. Martin Memorial projected charges of $55,594, in year one, $58,955 in year two. Total project costs were estimated at $2,166,351 for St. Mary's, $3,594,720 for Martin Memorial, and $4,995,039 for Lawnwood. Using either set of cost data or the projected charges, St. Mary's best meets this preference based on size, the lowest total project costs, and the lowest projected charges for open heart surgery services. Martin Memorial and Lawnwood have, as described by one expert, remarkably similar costs, and the same is true of projected average charges per case. The final state preference favors applicants who will include protocols for the use of innovative therapeutic alternatives to surgery for appropriate patients, including streptokinase and tissue plaminogen activator therapies. Lawnwood and Martin Memorial currently use streptokinase. St. Mary's performs emergency angioplasties, and uses streptokinase therapy. All three applicants meet the preference for providing and/or planning to provide alternative therapies to open heart surgery. The first District 9 local health plan allocation factor gives a priority for established cardiac cath programs. Based on expert testimony, a cardiac cath program exceeding 150 annual procedures is established. All the applicants exceed the minimum volume and, therefore, comply with the allocation factor. Martin Memorial has the highest volume in an operational inpatient and outpatient lab and, meets the allocation factor better than Lawnwood and St. Mary's. The other District 9 factor favors applicants with a documented commitment to provide services regardless of patient's ability to pay. Lawnwood projects 2.51 percent Medicaid and 1.5 percent charity care in year two. St. Mary's projects providing 5 percent Medicaid and 3.5 percent charity care in year two. Martin Memorial projects 2 percent Medicaid and 1.9 percent charity care in year two. St. Mary's best meets the factor, followed by Lawnwood, and then Martin Memorial. More Medicaid residents live in the primary service area of Lawnwood than that of Martin Memorial. Martin has filed CON compliance reports demonstrating difficulty in meeting prior CON Medicaid conditions due to the demographics of its service area. Subsections 408.035(1)(b) - availability, quality of care, efficiency, accessibility, extent of utilization of like and existing programs; 408.035(2)(b) - appropriate and efficient use of existing inpatient facilities; and 408.035(2)(d) - serious problems in obtaining care without proposed new program(s). With the exception of seasonal excess demand for Palm Beach Gardens' ICU beds, the evidence demonstrates there is excess capacity in existing District 9 providers. Geographic access to existing providers in or adjacent to the district is also reasonable. The quality of care at existing providers is excellent. St. Mary's asserts that its proposal will best assist in alleviating access barriers to open heart surgery for low income persons with limited geographic mobility. One expert estimated that 38 District 9 Medicaid patients needed, but did not receive, open heart surgeries in 1991, based on the use rates for commercially insured patients. In general, the highest density of population with a demand for invasive heart therapies and open heart surgeries is concentrated in southern and central Palm Beach County. However, expert testimony established that Medicaid patients are underserved for reasons, other than the policies of the existing providers. The evidence does not show that St. Mary's proposal can overcome these financial barriers. St. Mary's is a level II trauma center, and maintains that trauma patients in need of open heart surgery are at risk of death from having to wait for transfers. Transfers of patients from St. Mary's to Palm Beach Gardens or JFK for open heart surgery take from three hours to three days, averaging 8 to 12 hours, in approximately 30 percent of the cases. From May 1991 through January 1994, over 2600 trauma patients were treated at St. Mary's. Expert testimony, after review of medical records, indicates that from one to six patients needed open heart surgery, an insufficient number to constitute a not normal circumstance for the establishment of an open heart program at St. Mary's. Palm Beach Gardens' position that an additional adult open heart surgery program is not needed in District 9 is rejected. Open heart surgery use rates are not increasing nationally or in Florida. However, District 9 population is increasing, as is open heart surgery utilization for District 9 as a whole, and for Palm Beach, St. Lucie and Okeechobee Counites, while remaining static in Martin County and decreasing in Indian River. Palm Beach Gardens and JFK have demonstrated that in Palm Beach County, an additional open heart surgery program is not needed, and would be detrimental to existing programs. See, Findings of Fact 51-52. Subsection 408.035(1)(c) - quality of care The applicants, like the existing providers, are accredited by the Joint Commission on Accreditation of Healthcare Organizations. All of the applicants provide excellent quality care, as indicated by their accreditations and proposals, compromised only by their ability to achieve the projected volumes. See, Findings of Fact 23-26. Subsection 408.035(1)(d) - alternatives or outpatient facilities and 408.035(2)(a) - alternatives to inpatient services There are no alternatives or facilities other than acute care hospitals in which open heart surgeries can be performed. The criterion is inapplicable to this case. Subsections 408.035(1)(e) - economies of joint or shared facilities and 408.035(2(k) - modernization or sharing arrangements as alternatives to new construction. Martin Memorial is a part of a network of hospitals planning a more formalized affiliation to attract managed care contracts. Lawnwood is a part of a large corporate group, which can offer experience in establishing an open heart surgery program. Neither of these arrangements entitles the applicants to special consideration under the statutory criterion, as it has been construed by AHCA. In this case, each applicant is a separate acute care hospital. An alternative arrangement for a shared program was considered by Martin Memorial, but there is no showing that any proposal which improves access for the northern four counties could avoid the necessity for new construction. Subsection 408.035(1)(f) - needs for equipment and services not accessible in adjoining areas There is no evidence that any applicant proposes to provide a service not readily available in adjoining areas. On the contrary, each applicant proposes to offer an alternative within the district for residents who currently use providers in adjoining areas. See, Finding of Fact 27. Subsection 408.035(1)(g) - need for research and educational programs There is no evidence that any of the applicants will meet research or educational needs, or is a teaching hospital. AHCA has strictly construed the statutory criterion to apply to teaching hospitals. Subsection 408.035(1)(h) - availability of resources, including staff, management, and funds for capital and operating expenditures, including personnel required in Rule 59C-1.033(5)(b). The Cleveland Clinic has expressed an interest in providing surgeons for Martin Memorial's program, but no agreement has been formalized. Martin Memorial was criticized for not having a full-time infectious disease specialist, inadequate pulmonary and nephrology specialists, and for being unable to perform transesophageal echocardiology, all of which are necessary to support an open heart surgery program. St. Mary's was criticized for not planning to have nurses assigned exclusively to its open heart surgery team. Lawnwood has been unable to attract full-time coverage in thoracic, orthopedic, and neurosurgery. Despite these specific criticisms, each applicant has successful recruitment mechanisms and affiliations which will be enhanced by the presence of an open heart surgery program. The applicants' staffing and equipment proposals are reasonable. Both St. Mary's and Lawnwood are subsidiaries of larger organizations which include hospitals with open heart surgery programs. Subsection 408.035(1)(i) - immediate and long term financial feasibility St. Mary's has the ability to establish an adult open heart surgery program for a total of $2,166,351, funded by private donors. St. Mary's provided a pro forma of expected revenues and expenses to establish financial feasibility based on two factors which were challenged, the average length of stay ("ALOS") and the mix of payer classifications for patients. St. Mary's projected 10.3 days as the ALOS. JFK's experts suggested that a 13-day ALOS is more reasonable, particularly for a new program. JFK's actual experience was an ALOS of 16.1 days in 1988, 14.5 days in 1992, and 12.6 days by the year ending June 1993. Mature programs generally have lower ALOS than newer ones. Currently, ALOS in the District are 10.9 for Palm Beach Gardens, 12.5 for Delray, and 14.5 for JFK. JFK's assertion that St. Mary's initial ALOS will more likely be 13 days not 10.3 is reasonable. The fact that the ALOS will be longer than that projected in the pro forma means that expenses for the care of each patient will be greater, while revenues will not increase proportionately. Revenues are limited in fixed Diagnostic Related Group ("DRG") reimbursement categories, such as Medicare and managed care, which are the dominant payer groups, in contrast to the more flexible per diem reimbursement of commercial insurers. St. Mary's failed to include revenues and expenses for the construction period, anticipating only capital expenditures and start-up costs for implementing a new service. St. Mary's pro forma was based on a first year payer mix which includes 12.4 percent managed care and 11.6 percent commercial insurance in 1995. At JFK, the open heart surgery payor mix was 33 percent managed care and 9 percent commercial in 1993. St. Mary's underestimated the proportion of patients in the DRG-based managed care category, as compared to the per diem arrangements typical of commercial insurance. Taking into consideration increased expenses of $251,000 in year one and $409,000 in year two, due to adjustments from 10.3 to 13 days in the ALOS, and reduced revenues of $350,000 in year two, St. Mary's proposal is not financially feasible. The conclusion is also compelled by St. Mary's failure to establish the reasonableness of its utilization projections for the program. See, Finding of Fact 25. Martin Memorial has the funds necessary to establish an open heart surgery program for $3,594,720. Its pro forma shows revenues and expenses for the construction period, which are identical with or without the open heart surgery program. Martin Memorial's pro forma is flawed by double counting revenues from patients currently spending some time and revenues at Martin Memorial prior to transfers for open heart surgery. Revenues associated with pre-transfer stays must be deducted from revenues for open heart surgeries of average total lengths of stay. The amounts of over-stated revenues were not calculated by Palm Beach Gardens expert, and other criticisms of Martin Memorial's pro forma are rejected. Lawnwood, like St. Mary's, failed to include any construction period revenues and expenses in its pro forma. Lawnwood, as a separate legal entity, does not have the funds to establish its open heart surgery program, without relying on its parent, Hospital Corporation of America. The commitment of funds, represented by a letter dated April 30, 1993, indicated the source as either internally generated cash or available lines of credit. Lawnwood demonstrated its financial feasibility, in part, by showing that its open heart program's break-even point, at which expenses and revenues would be equal is 182 cases, well below projected utilization. See, Findings of Fact 23. Subsection 408.035(1)(j) - special needs and circumstances of health maintenance organizations The applicants do not propose to provide any different or special services for health maintenance organizations, nor is any applicant in this batch itself a health maintenance organization, as required by AHCA's interpretation to the statutory criterion. NME Hospitals, Inc., d/b/a West Boca Medical Center v. HRS, DOAH Case Nos. 90-7037 and 91-1533 (F.O. 4/8/92). Subsection 408.035(1)(k) - substantial, specialty services to non-residents of the service district Although the applicants propose to provide open heart surgery, which is one of the specialty services listed in the statute, they do not project that they will serve residents of other districts. The applications are not distinguishable on the basis of Subsection 408.035(1)(k), Florida Statutes. Subsection 408.035(1)(l) - impact on costs and effects of competition with existing providers. If St. Mary's proposal is approved and, as St. Mary's projects, two- thirds of its patients come from existing district providers, the program at JFK will be adversely affected. As the result of JFK's loss of approximately 106 cases, its net income could also be reduced up to $2.6 million. By contrast, programs at Lawnwood or Martin Memorial would have a negligible impact on JFK. The existing program at Palm Beach Gardens would suffer an adverse impact from the approval of programs at either St. Mary's or Martin Memorial. The adverse impact of a program at Martin Memorial is greater. Palm Beach Gardens could lose from 128 to 142 cases in the first year and from 179 to 198 cases in the third year in the worst case scenarios, depending on whether the use rate declines or remains constant. In addition, the further development of the VHA Network proposed by some District 9 hospitals, including Martin Memorial, as a means to attract managed care contracts, would enhance referrals to an open heart surgery program at Martin Memorial. Reasonable estimates of the financial loss to Palm Beach Gardens range between $2.8 and $3.1 million, although Palm Beach Gardens, with $9 million in annual income, would still be profitable. While the numeric calculations required in Rule 59C-1.033(7)(c), Florida Administrative Code, indicate that there will be enough total open heart surgeries to allow each of the existing providers to continue to exceed 350 operations, Palm Beach Gardens would be disproportionately, adversely affected by a program at Martin Memorial, as would JFK by a program at a St. Mary's. As the lowest volume provider, JFK is also at greater risk of dropping below the 350 minimum level established as indicative of the quality of care. Subsection 408.035(1)(m) - costs and methods of construction With total project costs of $4.99 million, Lawnwood's proposal to construct two new, dedicated operating rooms is the most expensive. Martin Memorial's cost of $3.59 million includes new construction of one and renovation of another operating room. St. Mary's low project cost of $2.16 reflects the fact that renovations rather than new construction is planned. The advantages of new construction, however, are that the size of the operating rooms will exceed general state requirements, and comply with recommendations developed specifically for open heart surgery. See, Findings of Fact 58, infra. Subsection 408.035(1)(n) - past and proposed service to Medicaid and medically indigent patients Based on history and proposed service, the applicants rank, in order, St. Mary's, Lawnwood, and Martin Memorial in complying with the criterion. See, Findings of Fact 28 and 32, supra. Subsection 408.035(1)(o) - continuum of care in multilevel system, including acute, skilled nursing, and home health care The applicants failed to distinguish their proposals on the basis of this statutory criterion. Other Criticisms of the Applications St. Mary's has a 16-bed intensive care unit, 4 of those beds will require no additional equipment to be used to provide post-operative care for open heart surgery patients. The 4 beds are located adjacent to the intended open heart surgery operating suite. The proposed 4-bed ICU was criticized for being too crowded, and inadequately designed to allow adequate patient observation and monitoring, and for not being dedicated solely to open heart surgery patients. The 16-bed unit has experienced over 90 percent occupancy rates, but some of those patients have required the staffing, but not the equipment available in the intensive care unit. St. Mary's acknowledged potential capacity problems, but has the ability to create additional step-down unit beds to relieve the ICU unit, when necessary. In addition, outpatient surgeries were scheduled to be performed in a separate facility beginning in July 1994. While some clinicians may prefer a separate ICU, there was no evidence of any requirements that open heart surgery patients receive post-operative care in a separate ICU, nor that the lack of a specialized unit means a lack of staff capable of caring for such patients. St. Mary's project involves the renovation of a total of 1731 square feet, 764 net square feet of that in the main operating room on the first floor. The back-up operating room at St. Mary's is 480 square feet, below the American College of Cardiologists' recommendation and 1992 Federal Guidelines of a minimum of 600 and up to 800 square feet. Despite the term "back-up," expert testimony established the need for regular use of both operating rooms, one for regularly scheduled procedures and one for emergencies which occur within the cardiac cath lab or the post-operative intensive care unit. The size of St. Mary's back-up operating room meets state requirements for operating rooms, which do not differentiate on the basis of the type of surgery. St. Mary's also demonstrated that open heart surgeries are performed in comparably sized or smaller operating rooms at JFK. The space allocated to Lawnwood's 4-bed open heart surgery recovery room was criticized as inadequate to accommodate the equipment and personnel required to monitor and, if necessary, to revive post-operative patients. The space allocated complies with state licensure requirements. Reconfiguration of the beds and equipment in the space is permissible, if necessary, in final construction documents which must be approved by AHCA. Lawnwood's proposal was also criticized because the CVICU will be located three stories above the surgical area and recovery rooms. There was no evidence that the location of the CVICU violated licensure requirements or compromised the quality of care. The use of restricted elevator access between the surgical/recovery area and the CVICU is reasonable. AHCA favored the applications of both Lawnwood and Martin over that of St. Mary's due to their locations outside Palm Beach County. Having been told by staff that it was then a "toss up" between the two, AHCA's Division Director selected Martin Memorial. The Division Director, Dr. James Howell, is a former Deputy District Administrator for AHCA District 9 and former County Health Director for Palm Beach County. In explaining his decision, Dr. Howell testified as follows: Q. Ultimately, sir, you recommended to Ms. Dudek that Martin be approved rather than Lawnwood; isn't that correct, sir? A. Yes, sir. In our mutual discussions we had a discussion about two. To be straightforward, the reason that I'd recommended Martin was that Martin is a long-term community hospital with local community responsiveness or local community board of directors, as far as I know, and that AHCA owned - now I believe, it's part of the Columbia system, was in St. Lucie County and was a newer hospital, and that, you know, I felt more comfortable with giving the first CON in the area to a group that had a long heritage and commitment to the area, even though I can tell you I can't say anything negative about AHCA in dealings with them. Q. Or Columbia? A. Or Columbia; right. I can't say anything. That's not meant to be prejudicial with them. They did a good job with us, with maternity/child health. Q. You did approach this batch, did you not, sir, with a bias towards Martin Memorial because you knew the institution had been there a long, long time and was a very stable institution; isn't that correct? A. That is quite correct, yes, sir. See, Transcript, p. 251. The court reporter's references to "AHCA" are corrected and understood, in this context, to refer to HCA or Hospital Corporation of America. The statutory and rule criteria, on balance, demonstrate that open heart surgery programs at Martin Memorial or Lawnwood are more likely to improve access, to meet projected volumes, and to be financially feasible. Of these two, however, Lawnwood is better situated to reverse district out-migration, and has to be preferred, under the state and local health plans and subsection 408.035(1)(n), Florida Statutes, for its history of providing a disproportionate share of its services to Medicaid and charity patients. Finally, the most significant distinction between the applicants is that the quality of care at existing providers, as measured by their volumes of open heart surgeries, will not be adversely affected by the approval of a new program at Lawnwood. Application Content AHCA accepted Martin Memorial's application, although two different letters of intent for mutually exclusive open heart surgery programs were filed simultaneously by Martin Memorial, one for a program shared with Indian River Memorial, and one for a separate program. Martin Memorial's application also, arguably exceeds the scope of its Board approval by including renovation of a portion of the surgical intensive care unit ("SICU"). AHCA accepted Martin Memorial's proposal to allocate the cost of 4 of 13 SICU beds to the open heart surgery project. As a practical matter, Martin Memorial's witnesses concede, the 4 beds cannot be constructed independently. The Board separately authorized the filing of an expedited CON for the SICU construction and renovations. In an Additional Motion For Summary Recommended Order Palm Beach Gardens' submitted correspondence between AHCA and Martin Memorial attempting to establish that the separate SICU CON has expired. AHCA accepted Lawnwood's application without a construction period pro forma, and without identification of the ultimate parent corporation of the subsidiary, Lawnwood Medical Center, Inc.
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 issuing Certificate of Need 7245 to Lawnwood Medical Center, Inc., denying Certificate of Need 7244 to St. Mary's Hospital, Inc., and denying Certificate of Need 7243 to Martin Memorial Medical Center, Inc. DONE AND ENTERED this 13th day of March, 1995 in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of March, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-4908 To comply with the requirements of Section 120.59(2), Fla. Stat. (1991), the following rulings are made on the parties' proposed findings of fact: Petitioner, Lawnwood's Proposed Findings of Fact. Accepted in Findings of Fact 2. Accepted in Findings of Fact 3. Accepted in Findings of Fact 16. Accepted in Findings of Fact 4. Accepted in Findings of Fact 5. 6-12. Accepted in or subordinate to Findings of Fact 27. 13. Accepted in Findings of Fact 13. 14-20. Accepted in or subordinate to Findings of Fact 27. Accepted in or subordinate to Findings of Fact 16 and 19. Accepted in Findings of Fact 24. 23-39. Accepted in or subordinate to Findings of Fact 27. 40-47. Accepted in or subordinate to Findings of Fact 34. 48-61. Accepted in or subordinate to Findings of Fact 28. 62-64. Accepted in relative terms or subordinate to Findings of Fact 27. 65-70. Accepted in or subordinate to Findings of Fact 28. 71-73. Accepted in part or subordinate to Findings of Fact 24 and 28. 74-86. Accepted in part or subordinate to Findings of Fact 2, 23 and 27. 87. Issue not reached. 88-94. Accepted in or subordinate to Findings of Fact 23. 95. Rejected in part and accepted in part in Findings of Fact 24. 96-100. Accepted in Findings of Fact 23. 101-105. Accepted in general in Findings of Fact 24. 106-111. Accepted in Findings of Fact 47. Accepted in general in Findings of Fact 22-29. Accepted in Findings of Fact 22. Accepted in Findings of Fact 23. Accepted in Findings of Fact 27. Accepted in Findings of Fact 28. Accepted in relevant part in Findings of Fact 28. Accepted in Findings of Fact 29. Accepted in Findings of Fact 30. 120-122. Accepted in or subordinate to Findings of Fact 31. 123-131. Accepted in or subordinate to Findings of Fact 5, 43, and 48. 132-133. Accepted in or subordinate to Findings of Fact 43. 134-146. Accepted in or subordinate to Findings of Fact 48. Accepted in or subordinate to Findings of Fact 45, 48 and conclusions of law 66. Accepted in or subordinate to Findings of Fact 48. 139-141. Accepted in or subordinate to Findings of Fact 29. 142-147. Accepted in or subordinate to Findings of Fact 48. 148-152. Accepted in Findings of Fact 8 and 53. Accepted in Findings of Fact 43. Subordinate to Finding of Fact 53. 155-164. Accepted in or subordinate to Findings of Fact 59. 165-173. Accepted in or subordinate to Findings of Fact 43. 174. Accepted in or subordinate to Findings of Fact 38 and 43. 175-176. Accepted in Findings of Fact 7. Accepted in or subordinate to Findings of Fact 38 and 43. Accepted in or subordinate to Findings of Fact 53. Accepted in or subordinate to Findings of Fact 43. 180-181. Accepted in Findings of Fact 38. 182-187. Accepted in Findings of Fact 61. 188. Rejected in Findings of Fact 61. Petitioner, Palm Beach Gardens' Proposed Findings of Fact. 1-3. Accepted in Findings of Fact 16-19. Accepted in Findings of Fact 5 and 8. Accepted in Findings of Fact 13 and 15. Accepted in Findings of Fact 9 and 12. Accepted in preliminary statement. Accepted in Findings of Fact 3. Accepted in Findings of Fact 3 and 16. 10-15. Accepted in or subordinate to Findings of Fact 61. Rejected in conclusions of law 69. Rejected in Findings of Fact 53. Rejected in Findings of Fact 2 and 27. 19-25. Accepted in or subordinate to Findings of Fact 16 and 33. 26. Accepted in or subordinate to Findings of Fact 34. 27-44. Accepted in or subordinate to Findings of Fact 52. 45-48. Accepted in or subordinate to Findings of Fact 18-19 and 27-28. 49-52. Accepted in or subordinate to Findings of Fact 51 and 52. 53. Accepted in general in Findings of Fact 27. 54-55. Accepted in or subordinate to Findings of Fact 33. 56-60. Accepted in or subordinate to Findings of Fact 34. 61. Rejected "substantially" in Findings of Fact 52. 62-72. Accepted in or subordinate to Findings of Fact 16, 27, and 33. 73-76. Accepted in or subordinate to Findings of Fact 27. 77-84. Accepted in or subordinate to Findings of Fact 52. 85-92. Accepted in or subordinate to Findings of Fact 27,28 and 34. 93-103. Accepted in or subordinate to Findings of Fact 28. 104-105. Accepted in Findings of Fact 31. 106. Accepted in Findings of Fact 32. 107-109. Accepted in or subordinate to Findings of Fact 28 and 32. 110-111. Accepted in Findings of Fact 22. 112-125. Accepted in or subordinate to Findings of Fact 23. 126. Accepted in or subordinate to Findings of Fact 5. 127-141. Accepted in Findings of Fact 23 and 24. 142. Rejected in Findings of Fact 7 and 23. 143-145. Accepted in or subordinate to Findings of Fact 7 and 23. 146-151. Issue not reached. 152-158. Accepted in or subordinate to Findings of Fact 24. 159-160. Accepted in Findings of Fact 27. 161-162. Accepted in Findings of Fact 28. Accepted in part in Findings of Fact 28. Accepted in or subordinate to Findings of Fact 29. 165-167. Accepted in or subordinate to Findings of Fact 29. 168-169. Accepted in Findings of Fact 30. 170. Accepted in Findings of Fact 21-30. 171-172. Rejected in general in Findings of Fact 47. 173. Accepted in Findings of Fact 47. 174-184. Rejected or subordinate to Findings of Fact 47. 185-187. Rejected or subordinate to Findings of Fact 43 and 47. 188-193. Accepted in Findings of Fact 47. 194-199. Subordinate to Finding of Fact 47. 200. Accepted in Findings of Fact 29. 201-208. Accepted in or subordinate to Findings of Fact 52. 209. Rejected. 210-218. Accepted in or subordinate to Findings of Fact 52. 219. Rejected conclusion as to "substantial" in Findings of Fact 52. 220-229. Accepted in or subordinate to Findings of Fact 52. 230. Rejected conclusion as to "substantial" in Findings of Fact 52. Petitioner, St. Mary's, Proposed Findings of Fact. 1-3. Accepted in or subordinate to Findings of Fact 9. Accepted in Findings of Facts 3 and 22. Accepted in or subordinate to Findings of Fact 9. Accepted in or subordinate to Findings of Fact 12. Accepted in or subordinate to Findings of Fact 10. Accepted in or subordinate to Findings of Fact 27. Accepted in Findings of Fact 2. 10-12. Accepted in or subordinate to preliminary statement and Finding of Fact 12. 13-14. Accepted in or subordinate to Findings of Fact 58. 15-17. Accepted in or subordinate to Findings of Fact 43. 18-24. Accepted in Findings of Fact 30. 25-26. Rejected in Findings of Fact 44-46. 27-29. Accepted in Findings of Fact 30. Rejected in Findings of Facts 44-46. 31-32. Accepted in or subordinate to Findings of Fact 44. 33-35. Accepted in or subordinate to Findings of Fact 43. 36. Accepted in or subordinate to Findings of Fact 56. 37 Accepted in or subordinate to Findings of Fact 9. Accepted in Findings of Fact 38. Accepted in or subordinate to Findings of Fact 58. Accepted in or subordinate to Findings of Fact 60. 41-44. Accepted in or subordinate to Findings of Fact 56 and 57. 45-54. Accepted in or subordinate to Findings of Fact 35. 55. Rejected in Findings of Fact 35. 56-57. Accepted in or subordinate to Findings of Fact 34. 58. Conclusion rejected, although access is limited by comparison to commercially insured patients, See, Findings of Fact 34. 59-66. Accepted in or subordinate to Findings of Fact 34. 67-73. Accepted in Findings of Facts 9, 28 and 32. Accepted in Findings of Fact 9. Accepted in Findings of Fact 32. Accepted in Findings of Fact 34. Rejected as significant benefit in Findings of Fact 34. Accepted (as both interests can be better accomplished) in Findings of Fact 27. Accepted in or subordinate to Findings of Fact 25. 80-81. Rejected in Findings of Fact 25. Accepted in Findings of Fact 25. Rejected in Findings of Fact 25. Rejected in Findings of Fact 25. Rejected as valid in Findings of Fact 34. 86-88. Accepted in Findings of Facts 27 and 36. 89-91. Accepted in part or subordinate to Findings of Fact 26. Rejected in Findings of Fact 26. Rejected in Findings of Fact 25 and 26. Accepted in Findings of Fact 22. Rejected in Findings of Fact 25-26. Rejected in general in Findings of Fact 27. 97-98. Accepted in or subordinate to Findings of Fact 28. Accepted in Findings of Fact 29. Accepted in Findings of Fact 30. Rejected conclusion in Findings of Fact 35. Accepted in Findings of Fact 31 and 32. 103-104. Accepted in Findings of Fact 27. 105. Accepted in Findings of Fact 37. 106-107. Rejected in Findings of Fact 51. Accepted in or subordinate to Findings of Fact 51. Accepted in Findings of Fact 35. Rejected in Findings of Fact 47. Rejected in Findings of Fact 48. Rejected in Findings of Fact 24. Intervenor, JFK Medical Center, Inc.'s Proposed Findings of Fact. Accepted in Findings of Fact 9. Accepted in Findings of Fact 18. Accepted in or subordinate to Findings of Fact 12. 4-6. Accepted in or subordinate to preliminary statement. 7-9. Accepted in or subordinate to Findings of Fact 2. Accepted in or subordinate to Findings of Fact 16-19. Accepted in Findings of Fact 27. Accepted in relevant part in Findings of Fact 16 and 27. 13-19. Accepted in or subordinate to Findings of Fact 34. Accepted in Findings of Fact 18 Accepted in Findings of Fact 35. Accepted in Findings of Fact 19. 23 Accepted in relevant part in Findings of Fact 33. 24. Accepted in Findings of Fact 36. 25-27. Accepted in or subordinate to Findings of Fact 33. 28-31. Accepted in or subordinate to Findings of Fact 27. 32-34. Accepted in or subordinate to Findings of Fact 27 and 34. 35-44. Accepted in or subordinate to Findings of Fact 35. 45-48. Accepted in or subordinate to Findings of Fact 25. 49-50. Accepted in or subordinate to Findings of Fact 26. 51. Accepted in or subordinate to Findings of Fact 25. 52-57. Accepted in Findings of Fact 44-46. 58. Subordinate to Finding of Fact 44-46. 59-66. Accepted in or subordinate to Findings of Fact 51. 67-75. Accepted in or subordinate to Findings of Fact 59. 76-78. Rejected in Findings of Fact 59. 79-80. Accepted in or subordinate to Findings of Fact 25. 81-82. Rejected in or subordinate to Findings of Fact 57. 83-84. Accepted in or subordinate to Findings of Fact 52. 85. Accepted in Findings of Fact 43. 86-89. Accepted in or subordinate to Findings of Fact 58. Respondent, AHCA's Proposed Findings of Fact. 1. Accepted in general or subordinate to Findings of Fact 5-8. 2. Accepted in or subordinate to Findings of Fact 9-12. 3. Accepted in or subordinate to Findings of Fact 13-15. 4. Accepted in Findings of Fact 16 and 18. 5. Accepted in Findings of Fact 6 and 19. 6. Accepted in preliminary statement and Findings of Fact 2. 7. Accepted in Findings of Fact 31 and 32. 8. Accepted in Findings of Fact 31. 9. Accepted in or subordinate to Findings of Fact 7. Subordinate to Findings of Fact 7. Accepted in Findings of Fact 11 and 26. Accepted in or subordinate to Findings of Fact 14. 13,14. Accepted in or subordinate to Findings of Fact 6, 28 and 32. 15. Accepted in or subordinate to Findings of Fact 10, 28 and 32. 16,17. Accepted in or subordinate to Findings of Fact 28 and 32. Accepted in Findings of Fact 21-30. Accepted in Findings of Fact 22. 20,21. Accepted in part in Findings of Facts 23 and 24. Accepted in Findings of Fact 24. Accepted in or subordinate to Findings of Fact 25, 26 and 27. Accepted in Findings of Fact 27. Accepted in Findings of Fact 28. Subordinate to Findings of Fact 29. Accepted in Findings of Fact 5, 9 and 13. Rejected conclusion in terms of other indicators in Findings of Fact 29. Accepted in or subordinate to Findings of Fact 5, 9, 13 and 29. Accepted in Findings of Fact 29. 30-33. Accepted in or subordinate to Findings of Fact 23-26. Accepted in Findings of Fact 30. Accepted in Findings of Fact 27 and 34-37. 36-37. Accepted in or subordinate to Findings of Fact 27. 38. Accepted in Findings of Fact 35. 39-42. Accepted in or subordinate to Findings of Fact 32 and 34. Accepted in Findings of Fact 18. Accepted in Findings of Fact 51. Accepted conclusion in Findings of Fact 52. 46-48. Accepted in Findings of Fact 23-26 and 38. Accepted in Findings of Fact 14 and 24. Accepted if last line changed from "St. Mary's" to "Lawnwood" in Findings of Fact 27, 36 and 37. 51-52. Accepted in Findings of Fact 40 and 61. Accepted in Findings of Fact 42. Accepted in Findings of Fact 29. Accepted in Findings of Fact 48. Accepted in Findings of Fact 44-46. Accepted in Findings of Fact 47. Accepted in Findings of Fact 29 and 51. Respondent, Martin Memorial's Proposed Findings of Fact. Accepted in Findings of Fact 2. Accepted in preliminary statement. Accepted in or subordinate to Findings of Fact 13. Accepted in or subordinate to Findings of Fact 9. 5-6. Accepted in or subordinate to Findings of Fact 5. Accepted in or subordinate to Findings of Fact 7, 11 and 14. Accepted in or subordinate to preliminary statement and Findings of Fact 19. Accepted in or subordinate to preliminary statement and Findings of Fact 18. Accepted in preliminary statement and Finding of Fact 1. Accepted in Findings of Fact 3 and 16. Accepted in or subordinate to Findings of Fact 23 and 24. Accepted in or subordinate to Findings of Fact 20. 14-15. Accepted in or subordinate to Findings of Fact 14. Accepted in or subordinate to Findings of Fact 15. Subordinate to Finding of Fact 13. Accepted in Findings of Fact 12. Accepted in relevant part or subordinate to Findings of Fact 8 and 49. 20-21. Accepted in Findings of Fact 61. Accepted in Findings of Fact 62. Accepted in preliminary statement and Finding of Fact 2. Accepted in Conclusions of Law 74. Accepted in Findings of Fact 52. Accepted in Findings of Fact 38. 27-28. Rejected conclusion that program is superior in terms of quality of care in Findings of Fact 38. 29-30. Accepted in or subordinate to Findings of Fact 43. Accepted in general or subordinate to Findings of Fact 43. Rejected in or subordinate to Findings of Fact 59. 33-34.. Accepted conclusion in Findings of Fact 43. 35-37. Accepted in or subordinate to Findings of Fact 23-26. 38-40. Conclusion rejected in substantial part in Findings of Fact 23. 41-43. Accepted in substantial part in Findings of Fact 24. 44. Accepted in Findings of Fact 47. 45-48. Accepted in or subordinate to Findings of Fact 48. 49-50. Rejected in Findings of Fact 66 and 67. 51-52. Accepted in or subordinate to Findings of Fact 29. Rejected conclusion in part in Findings of Fact 23 and 24. Accepted in Findings of Fact 27. 55-59. Accepted in or subordinate to Findings of Fact 28 and 34. 60. Conclusion rejected in Findings of Fact 32. 61-62. Accepted in Findings of Fact 27. 63. Rejected in general in Findings of Fact 23 and 27. 64-65. Rejected as to alternatives for "residents most likely" to the extent that is inconsistent with need in relation to state plan, in Findings of Fact 27. Accepted in Findings of Fact 51 and 52. Accepted in or subordinate to Findings of Fact 52. Rejected in Findings of Fact 52. 69-70. Accepted in or subordinate to Findings of Fact 52. Accepted in Findings of Fact 22 and 30. Rejected conclusion in Findings of Fact 23 and 24. Accepted except last sentence in Findings of Fact 27. 74-75. Accepted in Findings of Fact 28. 76-77. Accepted in or subordinate to Findings of Fact 29. Rejected conclusion or subordinate to Findings of Fact 29. Accepted in Findings of Fact 32. 80-82. Accepted in or subordinate to Findings of Fact 31. COPIES FURNISHED: W. David Watkins, Esquire 2700 Blair Stone Road, Suite C Post Office Box 6507 Tallahassee, Florida 32314-6507 (Counsel for St. Mary's Hospital) Michael J. Cherniga, Esquire David C. Ashburn, Esquire Greenberg, Traurig, Hoffman, et al. Suite 2000 111 South Monroe Street Tallahassee, Florida 32302 (Counsel for Palm Beach Gardens Community Hospital) Elizabeth McArthur, Esquire 101 North Monroe Street, Suite 1000 Post Office Drawer 11307 Tallahassee, Florida 32302 (Counsel for Lawnwood Medical Center) Leslie Mendelson, Esquire Senior Attorney Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 Byron B. Mathews, Jr., Esquire 201 South Biscayne Boulevard Suite 2200 Miami, Florida 33131 Robert A. Weiss, Esquire John M. Knight, Esquire The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, Esquire The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
The Issue Whether proposed rule amendments to Rule 59C- 1.033(7)(c) and (7)(d), Florida Administrative Code, published in the Notice of Change on June 15, 2001, constitute an invalid exercise of delegated legislative authority. Whether the proposed rule is invalid due to the absence of a provision specifying when the amendments will apply to the review of certificate of need applications to establish open heart surgery programs.
Findings Of Fact The Agency is responsible for administering the Health Facility and Services Development Act, Sections 408.031-408.045, Florida Statutes. The goals of the Act are containment of health care costs, improvement of access to health care, and improvement in the quality of health care delivered in Florida. AHCA initiated the rulemaking process by proposing amendments to existing Rule 59C-1.033, Florida Administrative Code, the rule for determining the need for adult open heart surgery (OHS)1 services, which currently provides, in part, that: Adult Open Heart Surgery Program Need Determination. a new adult open heart surgery program shall not normally be approved in the district if any of the following conditions exist: There is an approved adult open heart surgery program in the district. One or more of the operational adult open heart surgery programs in the district that were operational for at least 12 months as of 3 months prior to the beginning date of the quarter of the publication of the fixed need pool performed less than 350 adult open heart surgery operations during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool; or One or more of the adult open heart surgery programs in the district that were operational for less than 12 months during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool performed less than an average of 29 adult open heart surgery operations per month. Provided that the provisions of paragraphs (7)(a) and (7)(c) do not apply, the agency shall determine the net need for one additional adult open heart surgery program in the district based on the following formula: NN =((Uc x Px)/350)) -- OP>=0.5 Where: NN = The need for one additional adult open heart surgery program in the district projected for the applicable planning horizon. The additional adult open heart surgery program may be approved when NN is 0.5 or greater. Uc = Actual use rate, which is the number of adult open heart surgery operations performed in the district during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool, divided by the population age 15 years and over. For applications submitted between January 1 and June 30, the population estimate used in calculating Uc shall be for January of the preceding year; for applications submitted between July 1 and December 31, the population estimate used in calculating Uc shall be for July of the preceding year. The population estimates shall be the most recent population estimates of the Executive Office of the Governor that are available to the department 3 weeks prior to publication of the fixed need pool. Px = Projected population age 15 and over in the district for the applicable planning horizon. The population projections shall be the most recent population projections of the Executive Office of the Governor that are available to the department 3 weeks prior to publication of the fixed need pool. OP = the number of operational adult open heart surgery programs in the district. Regardless of whether need for a new adult open heart surgery program is shown in paragraph (b) above, a new adult open heart surgery program will not normally be approved for a district if the approval would reduce the 12 month total at an existing adult open heart surgery program in the district below 350 open heart surgery operations. In determining whether this condition applies, the agency will calculate (Uc x Px)/(OP+1). If the result is less than 350 no additional open heart surgery program shall normally be approved. Based on the issues raised by the Petitioner, Bethesda, and the factual evidence presented on these issues, AHCA must demonstrate that its proposed amendments to the existing OHS rule are valid exercises of delegated legislative authority or, more specifically, that it (a) followed the statutory requirements for rule-making, particularly for changing a proposed rule; (b) considered the statutory issues necessary for the development of uniform need methodologies; (c) acted reasonably to eliminate potential problems in earlier drafts of the proposed rule; (d) used appropriate proxy data to project the demand for the service proposed; (e) appropriately included county considerations for a tertiary service with a two-hour travel time standard; and (f) was not required to include a provision advising when CON applications would be subject to the new provisions. Rule challenges and rule development process The existing rule was challenged by IRMH on June 27, 2000, in DOAH Case No. 00-2692RX. Martin Memorial intervened in that case, also to challenge the rule. Like IRMH, Martin Memorial was an applicant for a certificate of need (CON), the state license required to establish certain health care services, including OHS programs, in Florida. Both are located in AHCA health planning District 9, as is the Petitioner in this case, Bethesda. AHCA entered into a settlement agreement with IRMH and Martin Memorial on September 11, 2000, which was presented when the final hearing commenced on September 12, 2000. Prior to the rule challenge settlement agreement, staff at AHCA had been discussing, over a period of time, possible amendments to the OHS rule to expand access and enhance competition. Issues raised by AHCA staff included the continued appropriateness of OHS as a designated tertiary service and the anti-competitive effect of the 350 minimum volume of OHS cases required of existing providers prior to approval of a new provider in the same district. The staff was considering whether the rule was too restrictive and outdated given the advancements in technology and the quality of OHS programs. The relationship of volume to outcomes was considered as various studies and CON applications were received and reviewed, as was the increasing use of angioplasty also known as percutaneous coronary angioplasty, referred to as PTCA or simply, angioplasty, as the preferred treatment for patients having heart attacks. Angioplasty can only be performed in hospitals with backup open heart services. During an angioplasty procedure, a catheter or tube is inserted to open a clogged artery using a balloon-like device, sometimes with a stent left in the artery to keep it open. Discussions of these issues took place at AHCA over a period of years, during the administrations of the two previous Agency heads, Douglas Cook and Reuben King-Shaw. In August 2000, AHCA published notice of a rule development workshop to consider possible changes to the OHS rule. Because it could not get the parties to settle DOAH Case No. 00-2692RX at the time, rather than proceed with the workshop while defending the existing rule, AHCA cancelled the workshop. As a result of the September 11, 2000, settlement agreement, on October 6, 2000, AHCA published a proposed rule amendment and notice of a workshop, scheduled for October 24, 2000. That version of a proposed rule would have changed Subsection (7)(a) of the OHS Rule to allow approval of "additional programs" rather than being limited to approval of one new program at a time in a district. The October proposal would have also eliminated OHS from the list of tertiary health services in Rule 59C-1.002(41). Tertiary health services are defined, in general, in Subsection 408.032(17), Florida Statutes, as follows: "Tertiary health service" means a health service which, due to its high level of intensity, complexity, specialized or limited applicability, and cost, should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost-effectiveness of such service. Examples of such services include, but are not limited to, organ transplantation, specialty burn units, neonatal intensive care units, comprehensive rehabilitation, and medical or surgical services which are experimental or developmental in nature to the extent that the provision of such services is not yet contemplated within the commonly accepted course of diagnosis or treatment for the condition addressed by a given service. The agency shall establish by rule a list of all tertiary health services. With this statutory authority, AHCA adopted Rule 59C- 1.002(41), Florida Administrative Code, to provide a more specific and complete list of tertiary services: The types of tertiary services to be regulated under the Certificate of Need Program in addition to those listed in Florida Statutes include: Heart transplantation; Kidney transplantation; Liver transplantation; Bone marrow transplantation; Lung transplantation; Pancreas and islet cells transplantation; Heart/lung transplantation; Adult open heart surgery; Neonatal and pediatric cardiac and vascular surgery; and Pediatric oncology and hematology. As an additional assurance that tertiary services are subject to CON regulation, the tertiary category is specifically listed in the projects subject to review in Subsection 408.036, Florida Statutes. The October 2000 version included a proposal to increase the divisor from 350 to 500 in the formula in Subsection (7)(b), to represent the average size of existing OHS programs, but to decrease from 350 to 250, the minimum number required of an existing provider prior to approval of a new program in Subsection (7)(a)2. The definition of OHS would have been amended to add an additional diagnostic group, DRG 109, to delete DRG 110 and to eliminate the requirement for the use of the heart-lung by-pass machine during the surgery. Most controversial in the October version was a separate county- specific need methodology for counties which have hospitals but not OHS programs, in which residents are projected to have 1,200 annual discharges with a principal diagnosis of ischemic heart disease. On October 24, 2000, AHCA held a workshop on the proposed amendments. At the workshop, AHCA Consultant, John Davis, outlined the proposed changes. As a practical matter, eight Florida counties are not eligible to provide OHS because they have no hospitals. When Mr. Davis applied the county-specific need methodology, as if it were in effect for the planning horizon of January 2003, six Florida counties demonstrated a need for OHS: Hernando, Martin, Highlands, Okaloosa, Indian River, and St. Johns. Two of these, Martin and Indian River are in AHCA District 9. AHCA has already approved an OHS program for Martin County, at Martin Memorial. Mr. Davis also presented a simplified methodology for reaching the same result. In support of the proposed rule, AHCA received data, although not adjusted by the severity of cases, showing better outcomes in hospitals performing from 250 to 350 OHS, as compared to larger providers. Although the majority of heart attack patients are treated with medications, called thrombolytics, for some it is inappropriate and less effective than prompt, meaning within the so-called "golden hour," interventional therapies. In these instances, angioplasty is considered the most effective treatment in reducing the loss of heart muscle and lowering mortality. Opposing the proposed rule at the October workshop, Christopher Nuland, on behalf of the FSTCS, testified that OHS is still a highly complex procedure, that it requires scarce resources, equipment and personnel, and should, therefore, be available in only a limited number of facilities. In general, however, the opponents complained more about process rather than the substance of the proposal. Having petitioned on October 13, 2000, for a draw-out proceeding instead of the workshop, those Petitioners noted that AHCA had obligated itself to predetermined rule amendments based on the settlement agreement, regardless of information developed in the workshop. The draw- out Petitioners were the Florida Hospital Association, Association of Community Hospitals and Health Systems of Florida, Inc., Delray, Lakeland Regional Medical Center, Punta Gorda HMA, Charlotte Regional Medical Center, JFK, HCA Health Services of Florida, Inc., d/b/a Regional Medical Center Bayonet Point; Tampa General and the FSTCS. While agreeing that OHS is complex and costly, supporters of the proposed rule, particularly the declassification of OHS as a tertiary service, noted that many cardiologists are now trained to do invasive procedures. In support of fewer restrictions on the expansion of OHS programs in Florida, other witnesses at the October workshop discussed delays and difficulties in arranging transfers to OHS providers, possible complications from deregulated diagnostic cardiac catheterizations at non-OHS provider hospitals, and hardships of travel on patients and their families, especially older ones. On December 22, 2000, AHCA published another proposal, which retained most of the October provisions, continuing the elimination of OHS from the list of tertiary services, the addition of DRG 109, the deletion of DRG 110, the elimination of the requirement for the use of a heart-lung by-pass machine, and the authorization for approval of more than one additional OHS program at a time in the same district. The minimum number of OHS performed by existing providers prior to approval of a new one continued from the October 2000 version, to be decreased from 350 to 250, and the divisor in the numerical need formula continued to be increased from 350 to 500. As in the October version, the requirement that existing providers be able to maintain an annual volume of 350 OHS cases after approval of a new program was stricken. The separate need methodology for counties without an OHS program was simplified, as proposed by Mr. Davis, and was as follows: Regardless of whether need for additional a new adult open heart surgery programs is shown in paragraph (b) above, need for one a new adult open heart surgery program is demonstrated for a county that meets the following criteria: None of the hospitals in the county has an existing or approved open heart surgery program; Residents of the county are projected to generate at least 1200 annual hospital discharges with a principal diagnosis of ischemic heart disease, as defined by ICD-9- CM codes 410.0 through 414.9. The projected number of county residents who will be discharged with a principal diagnosis of ischemic heart disease will be determined as follows: PIHD = (CIHD/CoCPOP X CoPPOP) Where: PIHD = the projected 12-month total of discharges with a principal diagnosis of ischemic heart disease for residents of the county age 15 and over; CIHD = the most recent 12-month total of discharges with a principal diagnosis of ischemic heart disease for residents of the county age 15 and over, as available in the agency's hospital discharge data base; CoCPOP = the current estimated population age 15 and over for the county, included as a component of CPOP in subparagraph 7(b)2; CoPPOP = the planning horizon estimated population age 15 and over for the county, included as a component of PPOP in subparagraph 7(b)2; If the result is 1200 or more, need for one adult open heart surgery program is demonstrated for the county will not normally be approved for a district if the approval would reduce the 12 month total at an existing adult open heart surgery program in the district below 350 open heart surgery operations. In determining whether this condition applies, the agency will calculate (Uc X Px)/(OP + 1). If the result is less than 350 no additional open heart surgery program shall normally be approved. County-specific need identified under paragraph (c) is a need occurring because of the special circumstances in that county, and exists independent of, and in addition to, any district need identified under the provisions of paragraph (b). A program approved pursuant to need identified in paragraph (c) will be included in the subsequent identification of approved and operational programs in the district, as specified in paragraph (a). On January 17, 2001, a public hearing was held to consider the December amendments. Opponents complained that the proposals resulted from a private settlement agreement rather than a public rule development workshop as required by law. They noted that declassification of OHS as a tertiary service is contrary to the recommendations of AHCA's CON advisory study group and the report of the Florida Commission on Excellence in Health Care, co-chaired by AHCA Secretary Reuben King-Shaw, created by the Florida Legislature as a part of the Patient Protection Act of 2000. The risk of inadvertently allowing some OHS procedures to become outpatient services was also raised, because of the statute that specifically states that tertiary services are CON-regulated. The reduction from 350 to 250 in the annual volume required at existing programs prior to approval of new ones was criticized for potentially increasing costs due to shortages in qualified staff, including surgical nurses, perfusionists, recovery and intensive care unit nurses, who are needed to staff the programs. The potential for approval of more than one program at a time, under normal circumstances, was viewed as an effort to respond to the needs of two geographically large districts out of the total of eleven health planning districts in Florida. That, in itself, one witness argued demonstrated that more than one approval at a time should be, as it currently is, a not- normal circumstance. The combination of the district-wide and county- specific need methodologies was criticized as double counting. The district formula which relied on the projected number of OHS, overlapped with the county formula, which used projected ischemic heart disease discharges, to the extent that the same patient hospitalization could result in first, the diagnosis, and then the OHS procedure. Approximately, eighteen percent of diagnosed ischemic heart disease patients in Florida go on to have OHS. The county-specific methodology was also characterized as inappropriate health planning based on geo- political boundaries rather than any realistic access barriers. Although 500, the average size of existing programs was the proposed divisor in the formula, and 250 was the threshold number existing providers, the proposal included the deletion of any provision assuring that existing programs maintain some minimum annual volume, which is 350 in subsection 7(e) of the current rule. AHCA representatives testified that the proposal to delete a minimum adverse impact was inadvertent. The combined effect of a district-wide need methodology, an independent but overlapping county need methodology, and the absence of an adverse impact provision, created concern whether approvals based on county need determinations could reduce volumes at providers in adjacent counties to unsafe levels. Some health planners predicted that, as a consequence of adopting the December draft, like the October version, a number of new OHS programs could be coming into service at one time, seriously draining already scarce resources. One witness, citing an article in the Journal of the American Medical Association, testified that higher volume OHS providers, those over 500 cases, do have better outcomes, and that the relationship persists for angioplasties, including those performed on patients having heart attacks. Florida has 63 or 64 OHS programs. Of those, 25 to 30 percent have annual OHS volumes below 350 surgeries a year. The demand for OHS is increasing slowly and leveling off. AHCA was warned, at the January public hearing by, among others, Eric Peterson, Professor of Cardiology, Duke University Medical Center (by videotaped presentation); and Brian Hummel, M.D., a Cardiothoracic Surgeon in Fort Myers, President of the Florida Society of Thoracic and Cardiovascular Surgeons, that simultaneously easing too many provisions of the OHS rule was a risk to the quality of the programs and the safety of patients. Among other specific comments made at the January public hearing related to the December proposal were the following: This change would authorize a county- specific methodology to support approving a program on the theory that that county needs better access to open heart surgery program. Yet there is no inquiry under the proposed provision into how accessible adjacent programs are or, indeed, how low the volumes of adjacent programs are. Most blatantly, the county provision requires double counting and double need projections. (AHCA Ex. 7, p. 14, by Elizabeth McArthur). The proposed rule creates an exemption for counties that are currently without open heart surgery programs. One can only surmise that the purpose of this exemption is to improve access, and certainly improving access is an appropriate goal and it is possible that there are few situations around the state where access to open heart surgery is a concern, but the proposed rule is completely inadequate and a thoroughly inappropriate way to identify which situations those are . . . (AHCA Ex. 7, p. 26, by Carol Gormley). With the county exemption provision, the Agency has stumbled on an entirely new method for estimating need. In fact, the only good thing about this provision is that it demonstrates that the Agency actually can look at some alternative ways to estimate need, and the use of data about incidence of ischemic heart disease might be one of those. Certainly it should be explored if there is ever a valid planning process that addresses open heart surgery. However, the proposed rules cobble together the county- based epidemiology with the district-wide demand based formula, and I believe that this method is not applicable for evaluating access to care. It is not applicable because the provision only considers the population's rate of ischemic heart disease and does not even attempt to assess the extent to which county residents with ischemic disease are, in fact, already receiving open heart surgery. Therefore, a determination that county residents generate at least 1,200 ischemic heart disease discharges annually does nothing to indicate whether or not they experience any barriers to obtaining that needed service. * * * Another problem with county exemption permission [sic: provision] is that the addition of this assessment, quote "regardless of the results of the district need formula," end quote, constitute double counting of a need in districts where counties without programs are located. (AHCA Ex. 7, p. 27-30, by Carol Gormley). * * * As further evidence of the benefits of limiting open heart surgery to a few high volume programs, the Society would like to place into record the following articles. The first one you've heard on several occasions is the Dudley article, "Selective referral to high volume hospitals." The second, from Farley and Osminkowski, is, "Volume-outcome relationships and in- hospital mortality: Effective changes in volume over time," from Medicare in January of 1992. There's another article from Grumbach, et al., "Regionalization of cardiac surgery in the United States and Canada," again from JAMA. Another article from Hannon, et al., "Coronary artery bypass surgery: The relationship between in-hospital mortality rate and surgical volume after controlling for clinical risk factors," Medical Care. Hughes, et al., "The effects of surgeon volume and hospital volume on quality care in hospitals," again from Medical Care; finally, Riley and Nubriz, "Outcomes of surgeries among Medicare aged: Surgical volume and mortality." Each of these scholarly articles comes to the same inevitable conclusion: outcomes improve as the volume of cardiac surgeries in any given program and hospital increases, therefore increasing the number of hospitals in which these services are provided inevitably will lead to an increase in morbidity. (AHCA Ex. 7, p. 83-84, by Christopher Nuland). * * * On or before the January public hearing, AHCA also received the following written comments: Martin Memorial supports the exception provision for Counties that do not have an open heart surgery program and have a substantial number of residents experiencing cardiovascular disease. This provision ensures an even dispersion of programs, and that adequately sized communities are not denied open heart surgery. (Martin Memorial Ex. 6, Letter of 10/24/2000, from Richard M. Harman, Chief Executive Officer, Martin Memorial, to Elizabeth Dudek) * * * Adding new open heart surgery programs to counties that currently lack programs will increase geographic access to coronary angioplasty services as well as open heart surgery. Primary angioplasty is now the treatment of choice for a significant percentage of patients presenting in the emergency department with acute myocardial infarction (patients who would otherwise be treated with thrombolytic drugs to dissolve blood clots in occluded coronary arteries). Thus, the provision of the proposed regulations that addresses the need for open heart surgery at a county level will also increase access to life-saving invasive cardiology services. The effect of the proposed rule changes is to slightly broaden the circumstances in which the Agency would see presumed need for new programs. Initially, the increase in the number of programs presumed to be needed would be only five. These potential new approvals would be in counties which currently have no programs. This is consistent with the reasoning that supports removing open heart surgery from the list of tertiary procedures. All else equal, distributing new programs to counties where they already exist is reasonable in light of the goal of improving geographic accessibility of advanced cardiology services. As with the other draft proposed rule changes, there is no certainty that any programs will be approved on the basis of the county-specific need formula in (7)(c). These proposed programs would still have to meet the statutory and rule criteria. As discussed above, a number applications for programs have been ultimately denied even when presumed need was shown by the need formula. We recommend adoption of this additional formula for demonstrating need. (IRMH Ex. 1, p. 25, Comments of Ronald Luke, J.D., Ph.D., 10/24/2000) In what could be interpreted as an admission that the process resulting in the development of the earlier drafts was flawed, Jeff Gregg, Chief of the AHCA CON Bureau, concluded the January public hearing by saying, . . . in terms of the analysis that the Agency did about the proposed rule, I would simply have to tell you that CON staff was not involved in that analysis, and that's CON staff including myself. So I cannot elaborate on what went into it. But having said that, I do want to assure you that CON staff will be involved in further analysis and we will do our best to consider all the points that have been made and present them as clearly and concisely as we can in assisting the Agency to formulate its response to this hearing. (AHCA Ex. 7, p. 86). The December draft was also challenged by a number of Petitioners in DOAH Case No. 01-0372RP, filed on January 26, 2001, and ten other consolidated cases. In response to the criticism that the adverse impact provision should not have been deleted and because that omission was unintended, AHCA published another proposed amendment to the OHS rule, on May 4, 2001, reinstating a minimum adverse impact volume, this time set at 250 OHS operations, down from 350 in the existing rule. On May 31, 2001, AHCA and the other parties to DOAH Case No. 01-0372RP and the consolidated cases entered into another settlement agreement, which provided: that in an effort to avoid further administrative proceedings, without conceding the correctness of any position taken by any party, and in response to materials received in to the record on or before the public hearing, the Agency for Health Care Administration agrees to publish and support . . . The Notice of Change . . . (Bethesda Ex. 34, p. 2-3). In upholding that agreement, AHCA superseded or revised all prior drafts and published a notice of change on June 15, 2001. In this final version, AHCA limited normal approval of a new OHS program to one at a time, used 500 as the numeric need formula divisor, increased the required prior-to-approval OHS minimum volume at mature existing providers from 250 in the October version to 300 (down from 350 in the existing rule) and for non- mature programs from a monthly average of 21 in the October draft to 25 (down from 29 in the existing rule), retained the classification of OHS as a tertiary service, and altered the separate, independent county need methodology to make it a county preference. The June 15th version, containing Subsections 7(c) and 7(d), which are challenged in this case is as follows: Adult Open Heart Surgery Program Need Determination. An additional open heart surgery programs shall not normally be approved in the district if any of the following conditions exist: There is an approved adult open heart surgery program in the district; One or more of the operational adult open heart surgery programs in the district that were operational for at least 12 months as of 3 months prior to the beginning date of the quarter of the publication of the fixed need pool performed less than 300 adult open heart surgery operations during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool; One or more of the adult open heart surgery programs in the district that were operational for less than 12 months during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool performed less than an average of 25 adult open heart surgery operations per month. * * * Provided that the provisions of paragraphs (7)(a) do not apply, the agency shall determine the net need for an additional adult open heart surgery programs in the district based on the following formula: NN=[(POH/500)-OP]> 0.5 where: NN = the need for an additional adult open heart surgery programs in the district projected for the applicable planning horizon. The additional adult open heart surgery program may be approved when NN is 0.5 or greater. POH = the projected number of adult open heart surgery operations that will be performed in the district in the 12-month period beginning with the planning horizon. To determine POH, the agency will calculate COH/CPOP x PPOP, where: COH = the current number of adult open heart surgery operations, defined as the number of adult open heart surgery operations performed in the district during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool. CPOP = the current district population age 15 years and over. PPOP = the projected district population age 15 years and over. For applications submitted between January 1 and June 30, the population estimate used for CPOP shall be for January of the preceding year; for applications submitted between July 1 and December 31, the population estimate used for CPOP shall be for July of the preceding year. The population estimates used for COP and PPOP shall be the most recent population estimates of the Executive Office of the Governor that are available to the agency 3 weeks prior to publication of the fixed need pool. OP = the number of operational adult open heart surgery programs in the district. In the event there is a demonstrated numeric need for an additional adult open heart surgery program pursuant to paragraph (7)(b), preference shall be given to any applicant from a county that meets the following criteria: None of the hospitals in the county has an existing or approved open heart surgery program; and Residents of the county are projected to generate at least 1200 annual hospital discharges with a principal diagnosis of ischemic heart disease, as defined by ICD-9- CM codes 410.0 In the event no numeric need for an additional adult open heart surgery program is shown in paragraphs (7)(a) or (7)(b) above, the need for enhanced access to health care for the residents of a service district is demonstrated for an applicant in a county that meets the criteria of paragraph (7)(c)1. and 2. above. An additional adult open heart surgery program will not normally be approved for the district if the approval would reduce the 12 month total at an existing adult open heart surgery program in the district below 300 open heart surgery operations. Bethesda objects to Subsections 7(c) and 7(d) as invalid. It challenges the rule promulgation process as a sham, having resulted from settlement negotiations rather than from statutorily mandated considerations and processes. That charge was, in effect, conceded by AHCA, as related to the October draft. That version carried over into the December draft, essentially unchanged, but did gain support at the October workshop. The October and December versions are not at issue in this proceeding. The proposed rule amendments at issue in this proceeding must have been supported by information provided to AHCA before or during the January public hearing. The proposal at issue differs substantially from the terms of the September settlement agreement, but is precisely what was attached to the May 31, 2001, settlement agreement. For example, the settlement agreement of September 11, 2000, included a proposal to reduce the prior minimum volume of cases at existing OHS providers from 350 to 250, but in May and June, that number was set at 300. AHCA, in the September settlement agreement, was to eliminate any limitation on the number of additional programs approved at a time, but the May and June version retains the one-at-a-time provision of the existing rule. AHCA agreed to determine county numeric need independent of and in addition to district numeric need, in September, but that provision is, in the May 31st and June 15th version, a preference. In September 2000, AHCA agreed to delete adult OHS from the list of tertiary services in Rule 59C-1.002(41), but it is a tertiary service in the May and June version. Bethesda is correct that the records of the October workshop and January public hearing contained criticisms of the county need methodology but no specific proposal to modify it into a preference. The first draft of that concept is the May 31, 2001, settlement agreement. (See Findings of Fact 26 and 27). Statutory rule-making issues Subsection 408.034(3), Florida Statutes, provides that: The Agency shall establish, by rule uniform, need methodologies for health care services and health facilities. In developing uniform need methodologies, the agency shall, at a minimum, consider the demographic characteristics of the population, the health status of the population, service use patterns, standards and trends, geographic accessibility, and market economics. As required by statute, AHCA considered the demographics and health status of the population and examined, as a part of the rule adopting process, age-specific calculations of ischemic heart disease. AHCA relied on statistical evidence of the relationship of ischemic heart disease and OHS. In 1999, for example, there were 33,027 OHS in Florida, and 25,257 of those patients had a primary diagnosis of ischemic heart disease. Consideration of service use patterns, and standards and trends related to OHS led AHCA to increase the divisor in the numeric need formula to maintain the average size of 500 surgeries for existing providers. The availability of more reliable data than that collected when the existing rule was promulgated allowed AHCA to propose reliance on residential use rates. The trend towards the use of angioplasty, as a preferred treatment for heart attack patients, and the need for timely geographical access to care are major factors for AHCA's proposal to consider a county services within the normal need analysis or as a not normal indication of a need for enhanced access when a county has a critical mass of heart disease patients. Geographical accessibility is also addressed in the travel time standard in the existing rule, which the proposal would not change. AHCA received testimony on the issue of market economics and health status, related to care for indigent and minority patients in not-for-profit, county-funded hospitals, and related to reimbursement formulas. The record demonstrates that AHCA was provided with evidence on the effect of scare resources on the costs of operating OHS programs. County-specific need methodology in earlier drafts as compared to the county preference in 7(c) and the need for enhanced access in 7(d) Bethesda alleges that the county preference in the June version is essentially another need methodology, like the county-specific need methodology in the earlier versions of the proposed rule. Bethesda also contends that a preference for a hospital because it is in a county which does not have an open heart program over a reasonably accessible facility in an adjoining county in the same district is irrational health planning which could lead to a maldistribution of programs. The county-specific need methodology was first included in the September settlement agreement, and the preference in 7(c) and need for access in 7(d), originated after the January 17, 2001, public hearing. During the public hearing, counsel for the Florida Hospital Association complained that the county-specific need methodology precluded any inquiry into accessibility and volumes at adjoining programs. Another representative of the Florida Hospital Association surmised that the goal of the county exemption was improved access but explained that it was an inappropriate means to identify access concerns. For example, while Hernando County would qualify for need with the separate methodology, most of its residents, 97 percent receive OHS services at a hospital in another district which is only 13 miles from the population center. (See Finding of Fact 26). The preference under normal circumstances in Subsection 7(c) and finding of need for enhanced access in Subsection 7(d), must be supported by evidence that county boundaries, in general, do create valid access issues. On or before the January workshop, information provided to AHCA indicated that some special inquiry into access issues related to CON applications for programs in counties without OHS programs is warranted. See Finding of Fact 27). AHCA found correctly that counties matter for several reasons. First is the fact that emergency services are funded and organized by counties, in general, and operated by municipal and county agencies. Approximately 60 percent of heart attack patient discharges in Florida are admitted through emergency rooms. Emergency heart attack patients who live in counties with OHS programs are twice as likely to be taken to a hospital with OHS as those who live in counties without an OHS provider. Second, whether a patient is taken to an OHS provider affects the care received. The probability of having an angioplasty performed is almost 50 percent greater for residents of counties with OHS programs as compared to those in counties without an OHS program. Third, some health care reimbursement plans and health care districts are operated within counties, limiting financial access to out-of-county hospitals. AHCA has always considered whether or not a county has an OHS program as a part of access issues. The issue of greater access to OHS was the basis for AHCA's initial consideration of the possibility of easing the OHS rule. With the May and June draft, it has codified and specified when that policy will apply. AHCA's deputy secretary noted that geographic access in the absence of numeric need was the basis for approvals of OHS CONs for Marion County, and for hospitals located in Naples and Brandon. In each instance, the applicants argued a need for enhanced access. AHCA has experience in applying preferences as a part of balancing and weighing criteria from statutes, rules and local health plans, particularly to distinguish among multiple applicants. In the totality of the review process, other factors which Bethesda's expert testified should be considered, including financial, racial and other potential access barriers, are not precluded. Preferences related to specific locations within health planning areas are included in CON rules governing the need for nursing home beds and hospices. Bethesda noted that these are not tertiary services, suggesting that a county location preference is inappropriate for tertiary services, but similar preferences for OHS exist in some of the local health plans. In AHCA District 1, the CON allocation factors for OHS and cardiac catheterization services include a preference for applicants proposing to locate in a county which does not have an existing OHS program. In District 4, the preference favors an applicant located in a concentrated population area in which existing programs have the highest area use rates. District 5 is similar to District 4, supporting OHS projects in areas of concentrated population with the highest use rates. The District 8, like District 1, preference goes to the applicant located in a county without an OHS program. There is no evidence that the existing preferences have been difficult to apply within the context of other CON criteria for the review of OHS applications. In effect, the proposed amendments establish an uniform state-wide county preference which is more concrete in terms of the requirements for a potential patient base. Bethesda has questioned the rationale for standards which are, in effect, different in Subsection 7(c) as compared to Subsection 7(d). The lower requirement, according to Bethesda, 1200 ischemic heart diagnoses, in 7(d), applies when there is no numeric need. But, the 500 divisor and 300 minimum at existing providers, when combined with 1200 ischemic heart diagnoses is a heavier burden to meet in 7(c), although under normal circumstances. Bethesda did not adequately explain reasons for this objection to the proposed rule. In addition, it is not inconsistent logically for AHCA to require applicants to demonstrate lower numeric need in situations in which AHCA has determined that these will be, in general, a greater need for enhanced access. Bethesda also raised a concern for the eventual maldistribution of programs as a result of the county preference. In 1999, Palm Beach county residents received 2700 OHS, or an average of 900 cases for each of the three programs. The total for District 9 was 3800 cases in 1999. When 500 St. Lucie County resident cases, in which Lawnwood is an OHS provider, are combined with 2700 Palm Beach resident cases, that leaves only 650 resident cases from Okeechobee, Indian River and Martin Counties. If programs are approved in all three, then the total will be inadequate for each to reach 300 cases, while, presumably, the demand in Palm Beach could be increasing disproportionately and not be met adequately. Disproportionate need, the appropriate dispersion of programs, and the benefits of enhanced competition are among the factors which AHCA can consider along with county need when choosing among competing applicants. 1200 ischemic heart disease discharges The proposed amendments require a projection that residents will reach a threshold of 1200 cases of ischemic heart disease discharges as a condition for the entitlement to the numeric need preference or to demonstrate a not normal need for enhanced access. In general, ischemic heart disease, which is also known as coronary heart disease, is characterized by blocked arteries which, in turn, limit blood to heart muscles causing first the onset of angina from acute coronary syndrome, progressing on to acute myocardial infarction, or a heart attack. The use of heart disease as a proxy for OHS utilization is consistent with AHCA's use of live births in pediatric open heart surgery and pediatric cardiac catheterization rules, deaths in the hospice rule, and related diagnoses in organ transplantation rules rather than actual utilization. It was supported by information received during or before the January workshop (See Finding of Fact 26 and 27). Bethesda's criticism of the use of a proxy per se is also not well-founded because any single statistical approach could be misleading. For example, historic use rates can understate future use with a growing service or an artificially imposed access limit. Using heart disease data in a preference or a need for enhanced access as opposed to a need formula or conclusive finding allows more flexibility in determining need in conjunction with other significant factors. One of Bethesda's expert health planners was also critical of the use of 1200 ischemic heart disease diagnoses as inadequate for projecting OHS cases, and for not equating to approximately 300 annual OHS cases, the minimum required of existing providers in Subsection 7(a) and the minimum adverse impact allowed in Subsection 7(e). Based on actual historical Florida data, 1200 ischemic heart disease diagnoses on average resulted in 207 OHS in 1997, 203 in 1998, and 203 in 1999. Ischemic heart disease has approximately an 18 to 20 percent conversion rate to OHS, and results in a total of 76 to 80 percent of all OHS cases. OHS cases from other diagnoses added statistically another 54 OHS in 1997, 59 in 1998, and 61 in 1999, to those from ischemic heart disease, giving, in each year a total less than 300. Bethesda presented evidence of wide variations in the ischemic heart disease to OHS conversion ratios from county-to- county. For example, only 14 percent of Bradford County ischemic heart diseases converted to OHS, and only 11 percent of the 700 cases in Columbia County converted to OHS. In Columbia County, the average state conversion rate of 20 percent yields 140 cases but, in reality, there were only 78 OHS cases from Columbia County in 1999. Bethesda's expert concluded that conversion ratio discrepancies resulting in the approval of a program that cannot achieve 300 OHS, as required in Subsection 7(a)2. and 7 (e), of the proposed rule, could bar the approval of new programs when needed in the district and would not be of minimum required quality. Bethesda also proved that the accuracy of projected OHS cases can also be affected by patterns of patient migration for health care, particularly if in- and out-migration do not offset each other. In counties with OHS programs, the average out-migration for acute care is 10.7 percent, varying widely from 3.8 percent in Alachua County to 70 percent in Seminole County. In counties without an OHS provider, average out- migration for acute care is 44 percent, but ranges from 17.6 percent in Indian River County to 98 percent in Baker County. An average of 18 percent of the residents of Florida counties with OHS programs have their surgeries performed elsewhere. Like out-migration, in-migration for acute care, for ischemic heart disease care, and for OHS varies from county to county in Florida. Counties without OHS programs have acute care in-migration from lows of 5.3 percent for Flagler County up to highs of 40 percent for Columbia County. In counties with OHS, in-migration for acute care is as low as 8 percent for Brevard and Polk, and as high as 60 percent for Alachua County. Similarly, in-migration, as determined by ischemic heart disease discharges averages 19.4 percent in counties without OHS programs and approximately 25 percent in those with OHS. In-migration for OHS, averages 35.7 percent for the state, but that is derived from a range from 9.2 percent in Pinellas County to 74 percent in Alachua and Leon Counties. Bethesda demonstrated, patterns of migration for health care vary throughout Florida, but there are trends due to the presence of OHS programs. Average net in-migration to counties with OHS is 29 percent, and is positive in sixteen of the twenty-four counties with OHS programs. All of these differences can be considered within the regulatory scheme proposed by AHCA. The issue of whether 1200 residential ischemic heart disease diagnoses is, in fact, the critical mass of prospective OHS patients needed or is deceptive due to migration patterns, due to access to alternative providers or any other review criteria listed in rule or statutes can be considered on a case-by-case basis with the proposed amendments. Bethesda's specific concern is that Indian River with well over 1200 ischemic heart disease discharges could be approved even though that represented only 255 OHS cases, and that if Indian River is approved under the county preference provision, then Bethesda would not be approved under normal circumstances until Indian River achieved and was projected to maintain 300 OHS cases a year. That Bethesda may be delayed in meeting the requirements for normal need is likely, but that appears to be a function of its location as compared to existing providers as much as it is the result of the county preference. Bethesda is not precluded, however, under either the existing or proposed rules from demonstrating not normal circumstances in District 9 for the issuance of an OHS CON to Bethesda. Bethesda's assumption that 300 is the minimum volume required for adequate quality is not supported by studies from various professional societies. The American College of Cardiology, the American Heart Association, and the Society of Thoracic Surgeons set minimums of 200 to 250 annual hospital cases as the volumes necessary to maintain the skills of the staff. The American College of Surgeons, in 1996, published their opinion that 100 to 125 cases per hospital is sufficient for quality, while at least 200 cases a year are needed for the economic efficiency of a program. AHCA has never used the required and protected volumes as the volume which must also be projected for a new programs. In the current OHS rule, the volume required is 350 a year for existing programs but that has not been required of applicants. In the recent approval of an OHS CON for Brandon Regional Hospital, the applicant projected reaching 287 cases in the third year of operation. County preference, tertiary classification and travel time Bethesda argued that the tertiary classification, suggesting a regional approach, is inconsistent with having a county access provision. Bethesda correctly noted that the county provision first appeared in a draft which included the elimination of OHS from the list of tertiary services. But AHCA proposes to establish the county preference and to maintain OHS on the list of tertiary services under Rule 59C-1.002(41), and to maintain the two-hour drive time standard in Rule 59C- 1.033(4)(a). Substantial information, mostly from medical doctors and studies linking morbidity to low volume, supports the view that OHS continues to be a complex service. Obviously, those services in the tertiary classification range in complexity and availability from OHS at the lower level to organ transplantation at the upper level. The tertiary classification is justified to assure AHCA's continued closer scrutiny of OHS CON applications. It is also consistent with the increase in the need formula divisor to 500, which together serve as restrains on the approval of additional programs. AHCA reasonably concluded, based on case law and precedents with local health plan that it is not inconsistent to apply county preferences to OHS while it is classified a tertiary service. The two-hour travel time standard, is as follows: Adult open heart surgery shall be available within a maximum automobile travel time of 2 hours under average travel conditions for at least 90 percent of the district's population. The counties most likely qualify for the preference, based on meeting or exceeding 1200 residential ischemic heart disease diagnoses, are Citrus, Martin, Hernando, St. Johns, Highlands, Indian River, and Okaloosa. The population centers in each of these counties are well within two hours of an existing provider. Citrus County, in which there is an approved but not yet operational OHS program, is about an hour's drive from Marion County. Hernando is approximately 25 minutes from the Pasco County provider. The population center of St. Johns County is approximately 40 minutes away from Duval County OHS providers. Okaloosa County is approximately a one-hour drive away from Escambia County OHS providers. In District 9, Indian River is approximately a 30- minute drive from the Lawnwood OHS program. Martin Memorial, is an approved provider, is approximately 20 miles or 35 minutes from Lawnwood and 30 miles or 40 minutes from Palm Beach Gardens, another existing OHS provider. In the next three to five years, it is foreseeable that Okeechobee County in northwestern District 9 could qualify for the county preference. Adjacent to Okeechobee, Highlands County's population can drive either an hour and thirty minutes to a Charlotte County OHS program or an hour and twenty minutes to a Polk County facility. The evidence related to travel times, according to one of Bethesda's experts, demonstrates that the county preference is not needed to assure access which is already provided for each and every likely qualifying county. But the population centers in the entire state of Florida are all within the two- hour travel standard, and there has been no suggestion that Florida cease approval of new OHS programs. Bethesda's contention that no need exists for enhanced access if the travel time standard is met, and its claim that the rule is internally inconsistent with a county preference and two-hour drive time are rejected. Two hours is, as the rule clearly states, a "maximum" not a bar, and has never been interpreted by AHCA as a bar, to more proximate locations. Any other interpretation is an impossibility considering the numerous counties across the state with multiple programs, including Dade, Broward, Palm Beach, Hillsborough, Pinellas, Orange, Volusia, Duval, and Escambia, among others. AHCA can appropriately and consistently establish reasonable guidelines for choosing among applicants to enhance access within the maximum travel standard. There is no language in the proposed rule indicating when it will take effect. Although the issue was raised in Bethesda's petition, it failed to provide evidence or legal arguments at hearing or subsequently to support its objection to the omission. AHCA's deputy secretary testified that the agency reviews applications using need methodology rules in effect when the applications are filed. Before new rules are applied, applicants are given the opportunity to reapply to address new provisions in a rule.
The Issue Whether the adult open heart surgery rule in effect at the time the applications were filed until January 24, 2002, or the rule as amended on that date applies to this case. Whether either or both, Lifemark Hospital of Florida, Inc., d/b/a Palmetto General Hospital ("Palmetto General") and Miami Beach Healthcare Group, Ltd., d/b/a Aventura Hospital and Medical Center ("Aventura Hospital") demonstrated the existence of not normal circumstances for the issuance of certificates of need ("CONs") to establish adult open heart surgery programs in Dade County.
Findings Of Fact The Agency for Health Care Administration ("AHCA") administers the certificate of need ("CON") program for health care facilities and services in Florida. Section 408.034, Florida Statutes. Aventura Hospital Miami Beach Healthcare Group, Ltd., d/b/a Aventura Hospital and Medical Center ("Aventura Hospital") is the applicant for CON No. 9395 to establish an adult open heart surgery program in Dade County, in AHCA District 11. Aventura Hospital is a 407-bed community hospital located in the recently incorporated City of Aventura in northeast Dade County. It is approximately one mile west of the Atlantic Ocean on U.S. Highway 1, three-tenths of a mile south of the Broward/Dade County line. It is halfway between Fort Lauderdale and downtown Miami. Aventura Hospital is owned by the Hospital Corporation of America ("HCA"), which operates hospitals in 30 states and 3 countries, including 40 hospitals in Florida. The 407 beds at Aventura Hospital include 327 acute care beds, 32 adult psychiatric beds, 24 adult substance abuse beds, and 24 obstetrics beds. Services, in addition to those provided in the specialty beds, include general medical/surgical services, oncology, a breast diagnostic center, children's after-hours walk in clinic, comprehensive cancer center, dialysis, intensive care, orthopedics, inpatient and outpatient surgery, and physical, speech and occupational therapies. It is a Baker Act facility. The Aventura Hospital staff has from 700 to 750 medical doctors, and 1,200 to 1,300 employees. The emergency room ("ER") has approximately 34,000 annual visits. According to one ER physician on the staff, the average age of patients presenting at the Aventura Hospital ER is 84 years old. That results in a higher than average hospital admission rate from the ER, 35 to 40 percent, as compared to 15 percent nationally. The staff includes 52 clinical cardiologists, 27 invasive cardiologists and five cardiovascular thoracic surgeons. They currently perform, at Aventura Hospital, inpatient and outpatient cardiac catheterizations ("caths"), pacemaker implants, echocardiograms, cardiac stress and cardiac nuclear testing, diagnostic and transesophageal echocardiograms, diagnostic and interventional vascular surgeries. For the 12 months ending June 30, 2001, 422 open heart patients left the Aventura Hospital's primary service area for their surgeries, and 1,132 received cardiac cath procedures. At Aventura Hospital, from April 1999 through March 2000, 178 diagnostic cardiac caths were performed. In terms of total cardiology services, Aventura Hospital is the largest non-open heart provider in the District, ranking second to Mount Sinai Medical Center ("Mount Sinai"). In calendar year 2001, there were 3,489 cardiovascular disease discharges from Aventura Hospital. The boundaries of the primary service area, from which Aventura Hospital draws most of its patients, are Hollywood Boulevard to the north, U.S. Highway 441 to the west, the Bal Harbour/Miami Shores communities near 125 Street to the south and the Atlantic Ocean to the east. Parkway Regional Medical Center ("Parkway Regional") in Dade County, and Memorial Regional Medical Center ("Memorial Regional") in Hollywood, in Broward County, are the closest hospitals to Aventura Hospital. The primary service area has a population of approximately 250,000 residents and includes growing retirement communities such as Sunny Isles Beach, Hallandale Beach, Southeast Hollywood, North Miami Beach, part of Miami Shores, and Bal Harbour. Parkway Regional and Aventura reported a combined total of 1,721 ischemic heart diseases (IHD) discharges in calendar year 2000. IHD is the diagnostic category for patients experiencing a narrowing of the arteries who are most likely ultimately to require open heart surgery. An international patient services department at Aventura Hospital assists patients, particularly from Canada, and Central and South America. Aventura Hospital is a member of the Miami Medical Alliance, also known as Salud Miami, which has promoted Miami as a destination for health care. Miami Heart Institute (Miami Heart), Mount Sinai, Baptist Hospital (Baptist), South Miami Hospital (South Miami), Miami Children's Hospital and Jackson Memorial Hospital (Jackson Memorial) are among the members of the Alliance. At the time the CON application was filed, Aventura Hospital was scheduled for expansion with the addition of a three-story tower and other capital projects costing an estimated $50 million. Subsequently, in December 2001, Aventura Hospital received approval from HCA for the expenditure of an additional $80 million to build the tower up to nine stories immediately, with the structure capable of ultimately being increased to 12 stories. It is expected to be able to withstand a direct hit from a Class V hurricane. In the past, Aventura Hospital has been entirely evacuated twice due to hurricane warnings. When construction is complete, the ER will be approximately three times larger, relocated to the first floor of the new tower, and projected to receive 50,000 visits annually. Ten new operating rooms on the second floor will include two that are properly-sized for cardiovascular surgeries. Because of higher ceilings in the new tower, the second floor of the new building will connect to the third floor of the existing building, on which the cardiac cath lab and related diagnostic equipment is located. If the open heart program is approved, a ten-bed cardiovascular intensive care unit ("CVICU") will be added to the second floor of the new building, and a second cardiac cath lab will be constructed. A dedicated elevator will connect the surgery suites to a 42-bed intensive care unit ("ICU") on the third floor. The remaining floors will consist of single patient rooms equipped or capable of being equipped for telemetry monitoring. The projected building cost for the portion of the construction related to the open heart surgery program is $3 million. Mount Sinai which purchased Miami Heart from HCA, has agreed to close one of its two open heart surgery programs within one year following the issuance of an adult open heart surgery CON to Aventura Hospital. Otherwise, Mount Sinai is committed to operate both programs for five years from June 30, 2000. Jeffrey Gregg, the head of the CON program at AHCA testified that he believes that it is "unprecedented" for an applicant to submit a letter from an existing provider committing to close a program. (Tr. 3061). Aventura Hospital has also offered to commit to providing 2.5 percent of the patient days generated by the adult open heart surgery program to Medicaid and charity patients. Palmetto General Lifemark Hospitals of Florida, Inc., d/b/a Palmetto General Hospital ("Palmetto General") is an applicant for CON No. 9394 to establish an adult open heart surgery program, also in Dade County, AHCA District 11. Palmetto General is a 360-bed acute care hospital located in the City of Hialeah in northwest Dade County at the intersection of 122nd Street, Northwest, and the Palmetto Expressway. Palmetto General is an affiliate of the Tenet Health Care Corporation ("Tenet"), which operates 16 hospitals in Florida, five in Dade County. They are, in addition to Palmetto General, Hialeah Hospital, North Shore Medical Center, Parkway Regional in northern communities, and Coral Gables Hospital in the south. Tenet owns Florida Medical Center, which has an adult open heart surgery program in Broward County. Tenet also operates the open heart program at the Cleveland Clinic in Broward County. The 360 beds at Palmetto General are divided into 253 acute care beds (excluding obstetrics and pediatrics), 48 adult psychiatric beds, and 10 neonatal intensive care beds. Services available on the Palmetto General campus include outpatient imaging and surgery, psychiatry, oncology, rehabilitative therapies, and intensive care. Palmetto General has a staff of 600 physicians, 350 of whom are on the active staff, and 1,500 employees. Palmetto General has approximately 40 cardiologists on staff, 19 of whom are invasive cardiologists. The services available include ultrasound, exercise testing, arrhythmia studies, including halter monitoring and electrophysiology, surgical insertions of pacemakers and defibrillators, and diagnostic cardiac caths. For the 12 months ending June 30, 2001, 1,658 cardiac caths and 668 open heart procedures were performed on patients from the Palmetto General primary service area. At Palmetto General, there were 528 diagnostic cardiac caths performed from April 1999 through March 2000, making it the largest cardiac cath provider in Dade County, which does not also have an open heart program. In calendar year 2001, there were 3,089 cardiovascular disease discharges from Palmetto General. The primary service area for Palmetto General includes the communities of Hialeah, Hialeah Springs, Miami Lakes, and portions of Opa Locka. Approximately 450,000, or 22 percent of the 2.2 million people living in District 11, live in the Hialeah area, over 50,000 are over 65 years old. The 65 and older population in the Palmetto General primary service area is projected to increase by 10 percent by 2005. Seventy to 80 percent of the residents of Palmetto General's primary service area are Hispanic, many first-generation. Most of the staff and employees of Palmetto General are Hispanic or speak Spanish. In addition to Palmetto General, the primary service area includes two other hospitals, Hialeah Hospital and Palm Springs General Hospital ("Palm Springs General"). Of the three, only Palmetto General has a cardiac cath lab. About 400 suspected heart attack patients are treated in the ER at Palmetto General each year. The ER has approximately 60,000 annual visits. It is the third busiest ER in the county. Although the use rate for open heart surgery has been flat or declining throughout the district, it has increased in the Palmetto General service area. While District 11 had an absolute increase of 51 open heart cases from 1999 to 2000, there was a 91-case increase in the Palmetto General service area. Together Palmetto General, Hialeah Hospital, and Palm Springs reported 2,206 IHD discharges, 982 of those from Palmetto General. Subsequent to filing the open heart CON application, Palmetto General developed a $23 million master facility plan of capital expenditures to upgrade the facility in response to operational deficiencies and capacity constraints. Tenet approved the expenditure of $6 million in the first year. When entirely implemented, the plan will result in doubling the size of the ER, expanding maternity labor and delivery areas, building a new 18-bed intensive care unit with space to add ten more beds later, and refurnishing existing operating rooms and adding three more. Palmetto General also, in 2002, experienced significant discord among the medical staff which apparently has been resolved with a change in the hospital's senior management. Palmetto General maintains that its master facility plan is independent of its plans for an open heart surgery program, although the master plan supports and facilitates that proposal. Mount Sinai and Aventura Hospital contend that Palmetto General has impermissibly amended the architectural plans for the open heart surgery program. The plans, as submitted in the CON, showed the addition of two open heart operating rooms on the ground floor, with an area of shelled-in space, and mechanical/electrical space, and part of the roof, above that on the first floor, and an elevator and corridor on the second floor within the same area designated as being within the scope of work. A separate area of work, on the schematic drawing of the second floor, showed a four-bed CVICU. On the master facility plan, the two open heart surgery operating rooms are in the same location but reconfigured. The space above is still shown as shelled-in and it may have columns. On the second floor, the four-bed CVICU for open heart patients is no longer a separate unit but is included in an existing ten- bed CVICU. The CVICU is adjacent to the existing cardiac cath lab and to an area shown for cath lab expansion, previously a part of the roof on the CON drawing. As a result of the use of the existing space for the CVICU, the total area devoted to the open heart program is reduced in size. Although the two open heart operating rooms are reconfigured and the four-bed open heart CVICU will not be an entirely separate unit, the concept for the open heart surgery program is essentially unchanged. Construction detailed drawings of the master plan were expected to be completed in January 2003. If the open heart surgery program CON is approved, Palmetto General will commit to providing 7.5 percent of open heart and angioplasty services to Medicaid and charity care patients. Existing District 11 Providers Baptist, Cedars Medical Center ("Cedars"), Jackson Memorial, Mount Sinai, Miami Heart, Mercy Hospital ("Mercy"), South Miami, and Kendall Medical Center ("Kendall") are the eight hospitals in Dade County which have open heart surgery programs. Mount Sinai and Miami Heart are, as previously noted, both owned by Mount Sinai. They are located within two miles of each other on Miami Beach, near the Julia Tuttle Causeway. Jackson Memorial which, like Mount Sinai, is a University of Miami Medical School teaching hospital is located in downtown Miami, across the street from Cedars and near Mercy. Kendall is further south and west. South Miami and Baptist are in South Central Dade County. In the summer and fall of 2000, when AHCA published the fixed need pool, and Aventura Hospital and Palmetto General filed their applications, four of the eight open heart programs in Dade County were operating at volumes below 350 cases a year. In 1999, those programs and volumes were Cedars, with 340 surgeries, Jackson Memorial with 332, South Miami at 211, and Kendall with 187. In 2001, Cedars increased to 361 open heart cases and Jackson Memorial reported 513. The programs at Kendall and South Miami have continued to operate below 350 cases a year. The volume at Kendall was 184 in 2000, and 295 in 2001. South Miami reported 175 and 148 in calendar years 2000 and 2001, respectively. Like Aventura Hospital, Cedars, and Kendall are owned by HCA. South Miami and Baptist Hospital, which are 3.5 miles apart, are both affiliated with the Baptist health care system. Because volumes were below 350 at existing programs, AHCA published a numeric need for zero additional programs in District 11 for the January 2003 planning horizon. The rule on numeric need, as revised on January 24, 2002, reduced the minimum volume for existing providers to 300 open heart surgeries for the 12-month period specified in the rule, although it implicitly increased the expected size of each existing program to 500 cases by increasing the divisor in the numeric need formula. Under either rule, the applicants must demonstrate the existence of not normal circumstances for the approval of any additional open heart surgery programs in the district. Under the old rule, with 350 as the divisor in the formula, the numeric calculation, before being reduced to zero because of low volume programs, resulted in a need for 2.1 additional programs. That number is a negative one under the new rule. Aventura Hospital projected that its open heart surgery volumes would be 240, 312, and 347 during the first three years of operations, anticipating these to be the years ending in September of 2004, 2005, and 2006, respectively. Palmetto General projected volumes of 148, 210, and 250 open heart surgeries and 225, 230, and 310 angioplasties, in the first three years. From 1996 to 2001, the total annual volume of open heart surgeries in District 11 declined by 346, from 3,821 in 1996, to 3,421 in 2000, then increased slightly to 3,475 in 2001. Therefore, if Aventura Hospital and Palmetto General achieve projected volumes, it will result largely from redirecting cases from existing providers including one that would close if Aventura's CON is approved. The declining open heart volumes also reflects a technological improvements and a shift to less invasive angioplasty procedures. The number of angioplasties performed in District 11 increased from 6,384 in 2000, to 7,682 in 2001. Mount Sinai and Miami Heart Mount Sinai is one of six statutory teaching hospitals in Florida, with 19 accredited training programs, including residencies and fellowships. The cardiovascular and thoracic surgery residency program is shared with Jackson Memorial. In addition to the University of Miami, Mount Sinai is affiliated with the medical schools at Nova Southeastern University, Barry University, and the University of South Florida. Mount Sinai has the largest open heart volume in District 11, with over 40 percent of the total volume. It also has the broadest geographical draw for patients, with only 60 percent of the cases originating from the District. In the year from April 1999 to March 2000, Mount Sinai reported performing 1,034 adult open heart surgeries and 4,318 adult inpatient cardiac caths. In calendar years 2000 and 2001, the volume of open heart surgeries at Mount Sinai remained virtually constant at 980 and 976, respectively. Angioplasties increased during that same period of time from 1,037 to 1,067. At Miami Heart, from April 1999 through March 2000, 483 open heart surgeries and 4,179 cardiac caths were performed. The combined total of therapeutic cardiac caths or angioplasties performed at Mount Sinai and Miami Heart is approximately 2,500 a year. There is evidence that Mount Sinai has begun to phase-out open heart cases at Miami Heart where the volume dropped to 390 surgeries in 2000, and to 296 in 2001. In a travel time study commissioned by Mount Sinai, the drive time from Palmetto General ER to Mount Sinai ER was 28 minutes to travel the 15.5 miles. From various zip codes within the Palmetto General service area to the Mount Sinai ER, travel times ranged from 14 minutes to 36 minutes. Driving times from Aventura to Mount Sinai ranged from 18 to 37 minutes. Due to its close proximity, to Mount Sinai, it reasonably should take approximately the same driving time to reach Miami Heart. In an Aventura Hospital survey of transfers of high- risk cardiac patients, the average times were estimated to range from 59 minutes from Aventura Hospital to Mount Sinai and 1 hour and 26 minutes from Aventura Hospital to Miami Heart Institute. Those times must include more than actual drive time, otherwise the differences between Mount Sinai and Miami Heart would not be so significant. One would also anticipate that, while under common ownership, transfers from Aventura Hospital to Miami Heart would have been less cumbersome. The accompanying narrative in the CON suggests that time frames may have been counted from the time the decision to transfer is made to the time the patient arrives at the receiving facility. The testimony regarding the data compilation process was vague and inadequate and, therefore, the conclusions are unreliable. The Mount Sinai study showed travel times of 27 minutes to Miami Heart and 28 minutes to Mount Sinai from Palmetto General. That difference of one minute is confirmed in data underlying Aventura Hospital time travel study. Based on projected volumes, prior transfers, referral patterns and market shares, an open heart program at Palmetto General will reduce the volumes at Mount Sinai and Miami Heart by 92 to 107 open heart surgeries a year, for a financial loss of $1.6 million. An open heart program at Aventura is expected to reduce the combined volume at Mount Sinai and Miami Heart by 196 cases. A combined reduction of approximately 300 cases and the closure of one of the programs would leave the remaining Mount Sinai program at approximately 900 open heart cases, with a loss of $4.7 million. Mount Sinai was projected to experience a net loss from operations of $32 million in 2002. There was testimony that overall financial management and the potential for profitable operations have improved. Despite the fact that an Aventura program will have almost double the adverse impact of one at Palmetto General, Mount Sinai, in the asset purchase agreement resulting in its acquisition of Miami Heart from HCA, agreed not to contest the application filed by Aventura Hospital. Jackson Memorial Jackson Memorial is the hospital designated to provide indigent care in Dade County, through a public health trust funded by a portion of sales taxes. In the 12 months ending March 2000, 334 open heart surgeries and 3,644 cardiac caths were performed at Jackson Memorial. In 2000 and 2001, the open heart volume increased to 438 and 513 surgeries, respectively. The Mount Sinai travel time study, showed that the distance from Palmetto General to Jackson Memorial was 10.7 miles and that the average drive took 22 minutes. Jackson Memorial will lose an estimated 46 cases to Palmetto General, in the third year of an open heart program in 2004, and 12 cases to an Aventura Hospital program, or a combined total of approximately 60 cases a year. Mercy Mercy had a volume of 412 open heart surgeries and 2,704 cardiac caths, from April 1999 through March 2000. In calendar year 2000 and 2001, the open heart volumes at Mercy were 492 and 478, respectively. The average driving time from Palmetto General to Mercy ranged from 24 minutes to 38 minutes, averaging 27 minutes in Mount Sinai's expert's study. If Palmetto General is approved, a reduction of 44 open heart cases is expected at Mercy. An Aventura Hospital program is expected to result in a five-case reduction at Mercy. Cedars The volume at Cedars was 316 open heart cases from April 1999 through March 2000. In calendar years 2000 and 2001, the volume increased to 334 and 361 open heart surgeries, and to 1,323 and 1,468 angioplasties, respectively. The average driving time to Cedars, from Palmetto General, was 23 minutes, in the Mount Sinai travel time study, with a range of drive times from 17 minutes (starting at 4:19 a.m.) to 30 minutes (starting at 7:06 a.m.). If Palmetto General is approved to become an open heart provider, Cedars' volume is expected to be reduced by 20 surgeries. If Aventura Hospital becomes an open heart provider, Cedars' volume will be reduced by an estimated 14 cases. Kendall Kendall had a volume of 180 open heart cases for the year ending March 2000. Kendall has consistently been a low volume open heart provider, increasing from 136 surgeries in 1989, to 295 in 2001. Kendall is located in southwestern Dade County, well beyond the primary service areas of Palmetto General and Aventura Hospital. The common feature shared with Palmetto General is that Kendall is also considered an Hispanic or Spanish-speaking hospital, although every hospital in Dade County is staffed to serve Spanish-speaking patients. Mount Sinai's study found the average drive time from Palmetto General to Kendall to be 23 minutes, covering 14.6 miles. Estimates of case reductions at Kendall are six if Palmetto General is approved and one if Aventura Hospital is approved. South Miami and Baptist South Miami reported a volume of 199 open heart cases for the year ending March 2000. The volume of open heart surgeries has been low, over the years, from 132 in 1989, to 148 in 2001, never exceeding 215 cases in any one year. South Miami has become a referral center for complex, multi-vessel angioplasties. Angioplasties increased, at South Miami, from 723 in 2000, to 837 in 2001. Like Kendall, South Miami and Baptist have no overlap with the primary service areas of Aventura Hospital and Palmetto General. If Palmetto General offers open heart services, then South Miami would lose approximately nine cases in the third year of operations. If Aventura Hospital's CON is approved, then South Miami would lose an estimated two cases that year. The volumes at Baptist, from April 1999 through March 2000, were 472 open heart surgeries and 4,730 cardiac caths. The Baptist volume of open heart cases declined to 428 in 2000, and 408 in 2001. Baptist's volume is expected to decline by 14 cases lost to Palmetto General, and two to Aventura Hospital. Existing District 10 Providers Mount Sinai, in its proposed recommended order, suggested that Memorial Regional, the Cleveland Clinic, and Florida Medical Center all in Broward County, are available open heart providers for northern Dade County residents. Tenet operates the open heart program at the Cleveland Clinic, which is 17 miles north of Palmetto General. The average travel time to the Cleveland Clinic, in the Mount Sinai study, was 26 minutes, but that is unreliable because it includes one run where the driver obviously had to speed, at 4:42 a.m., to average over 60 miles per hour. The staff at Cleveland Clinic is not predominantly Spanish-speaking. The medical staff is also closed so that only Cleveland Clinic doctors practice at that hospital. Patients have interruptions in their continuity of care when referred to an entirely different medical staff. In addition, the Cleveland Clinic is a referral hospital drawing patients from outside the area. It does not function as a community hospital. The Cleveland Clinic is not, therefore, an alternative provider for Dade County residents. At Memorial Regional, six miles north of Aventura Hospital, there were 766 open heart surgeries performed in one 12-month period in 1999 and 2000 and 641 in calendar year 2000. Twenty-six percent of the Aventura Hospital primary service area open heart surgeries were performed at Memorial Regional in 2001, as compared to 5 percent from the Palmetto General Area. Over 30 percent of the angioplasties performed on Aventura Hospital service area residents were performed at Memorial Regional in 2001, and less than 4 percent for Palmetto General service area residents. If Aventura Hospital is approved, the loss in volume from Memorial Regional would be approximately 103 cases a year. Aventura Hospital noted that Memorial Regional has experienced capacity problems. In Columbia Hospital Corporation of South Broward vs. AHCA, the administrative law judge found that the proposal to establish a new hospital in Miramar was intended to " . . . allow Memorial Regional and Memorial West the opportunity to decompress and operate at reasonable and efficient occupancies into the foreseeable future without the operational problems caused by the current over-utilization." There is evidence that the relief resulting from the construction of the Miramar Hospital, will not alter the difficulties that Aventura Hospital-based doctors experience in gaining access to the cardiac cath lab at Memorial Regional. Florida Medical Center has approximately 450 open heart surgery cases a year. It is a Tenet facility in Western Broward County. The financial data from Florida Medical Center was used in Palmetto General's projections of income and expenses, but there was no evidence that Florida Medical Center's open heart program is a viable alternative to programs at either Aventura Hospital or Palmetto General. Review Criteria Subsection 408.035(1) - need in relation to applicable district health plan; 59C-1.030(2)(a)-(e) - need that the population has, particularly low income, ethnic minorities, elderly, etc.; relocation of a service; needs of medically underserved, Medicare, Medicaid and indigent persons; and Subsection 408.035(11) - past and proposed Medicaid and indigent care. The District 11 health plan includes preferences for applicants seeking to provide tertiary services who have provided the highest Medicaid and charity care, and who have demonstrated the highest ongoing commitment to Medicaid and indigent patients. Aventura Hospital provided approximately 1 percent charity, 6 to 7 percent Medicaid and 17 percent Medicare in 2001. It qualified as a disproportionate share Medicare hospital. Aventura Hospital's proposed CON commitment is to provide a minimum of 2.5 percent of open heart surgery and angioplasty patient days to Medicaid and charity patients. Palmetto General is and, for at least the last ten years, has been a disproportionate share Medicaid and Medicare provider. Over 20 percent of the total care at Palmetto General has been given to Medicaid patients in recent fiscal years. The care to indigent patients was approximately $8 million in one year. In this regard, Palmetto serves as a "safety net" hospital for poor people, like Jackson Memorial and Mount Sinai. Palmetto General will meet the needs of ethnic minorities, and more Medicaid, low income and indigent patients. Aventura Hospital is serving an older population and, in effect, would be relocating an open heart program from Miami Heart. In a service like open heart surgery, Medicare is the dominant payor. Subsection 408.035(2) - availability, quality of care, accessibility, extent of utilization of existing facilities in the district; Rule 59C-1.033(4)(a) - two-hour travel time; and Subsection 408.035(7) - enhanced access for residents of the district. The applicants contend that the existing programs in the district are geographically maldistributed to the detriment of the residents of northeast and northwest Dade County. They also contend that those access issues outweigh the fact that district residents can reach open heart providers within the two- hour travel time standard in the open heart rule. In its proposed recommended order, Mount Sinai noted that if Dade County is divided in half using " . . . State Road 836 (also known as the Palmetto Expressway), which runs east-west in the center of the County, near Miami International Airport . . . ," there are four existing open heart providers in the north and four in the south. This statement must be inaccurate because Palmetto General's location was described as being on the Palmetto Expressway with no existing open heart providers in the same service area. The existing programs in District 11 are inappropriately dispersed geographically to serve the population, as it is distributed throughout Dade County. The Hialeah area, with 22 percent of the population, is larger than 14 counties in Florida which have at least one open heart surgery program. The population in the Aventura Hospital primary service area, 250,000 residents, is roughly half that of Hialeah, but is equal to or larger than five counties in Florida which have open heart surgery programs. If the applicants' patients are not transferred to other hospitals, then the volume of open heart procedures at those hospitals will decline. The medical literature and experts in the field demonstrate a relationship between volume and quality. In Florida, the old rule and new rule set the minimums for existing providers at 350 and 300, respectively. If Aventura Hospital's open heart CON is approved, almost 200 surgeries will be lost from Miami Heart and Mount Sinai, approximately half of that from the program that will be closed, and just over 100 from Memorial Regional. The effect on the low volume providers will be negligible, one lost case to Kendall and two from South Miami. Based on its projections, Aventura Hospital expects to reach 347 open heart surgeries in its third year of operation. Even assuming that most of the cases would be redirected from other providers, the projection is aggressively based on the assumption that Aventura Hospital will have a market share of 87 percent of its primary service area. If Palmetto General's open heart CON is approved, the greatest impact will also be on Mount Sinai and Miami Heart, a loss of approximately 100 surgeries a year, and on Jackson Memorial, a loss of 46 surgeries a year. Palmetto General projected that it would reach a volume of 250 open heart surgeries by the end of the third year of operations. South Miami would lose nine and Kendall would lose six open heart cases. Neither an Aventura nor a Palmetto area program will keep the existing low volume providers below 300 or 350 open heart surgeries. With or without them, South Miami and Kendall are expected to continue to operate below the objective set by the open heart rule. The absence of a material adverse impact on low volume providers is the result of the absence of any overlap in the service areas of the applicants and South Miami and Kendall. In District 11, only Cedars is likely to end up having open heart surgery volumes in a range between 300 and 350 cases as a result of the approval of both programs. Difficulties and delays in patient transfers for open heart or angioplasty services were raised as possible not normal circumstances in Dade County. Aventura Hospital witnesses presented anecdotal evidence of patients who could have benefited from the availability of angioplasty and open heart case without transfers. The evidence was inadequate to demonstrate that access to existing facilities is not available within a reasonable time. Palmetto General provided a review of medical charts to show patients whose outcomes would have been improved if it had an open heart program. Physicians who testified about those patients differed in their conclusions concerning the urgency of transfers, the need for primary angioplasty or thrombolytics, and the causes of delays. No medical records indicated patient outcomes after they were transferred. Aventura Hospital and Palmetto General also contend that the residents of their primary service area are at a disadvantage by not having timely access to primary angioplasty for patients who are having heart attacks. Treatment in their ERs is limited to administering thrombolytic or clot-busting drugs in an effort to save heart muscle. Increasingly, research has shown the benefits of primary angioplasty over thrombolytics as the most effective treatment to restore blood flow to heart muscle. The benefits include lower mortality rates and few complications, and are enhanced if the "door-to-balloon" time is less than 90 minutes. In Dade County, transfer times typically range from two to five hours, including the time to contact a receiving facility, to find a receiving physician, to receive insurance authorization, to summon an ambulance, and to prepare the patient medically for transfer, as well as the actual travel time. Research also shows that the quality of an open heart surgery program continues to be linked to its volume. In Florida, AHCA has not revised its rules either to provide for angioplasty services without open heart surgery back-up, or to reduce the tertiary designation of open heart surgery programs. Therefore, the need for more timely access to angioplasty is rejected as a not normal access issue. Palmetto General, due to operational difficulties is unlikely to meet the 90-minute reperfusion goal. In fact, most hospitals with open heart programs do not. Palmetto General does not plan to construct a second cardiac cath lab for use at the time it establishes an open heart program. Mount Sinai witnesses questioned the ability of a hospital with one cath lab to provide emergency primary angioplasty services. An additional cath lab is not required in the open heart rule and, while difficulties in scheduling are likely to occur, successful open heart programs have been operated with one cath lab initially, including Tenet-operated Delray Medical Center. Palmetto General can, when needed, construct a second cardiac cath lab in approximately six months without CON review. AHCA has not revised the open heart surgery rule to respond to the development of primary angioplasty as a preferred treatment. By its adoption of a new rule maintaining the link between angioplasty and open heart surgery, and maintaining the tertiary nature of open heart surgery, AHCA has placed the State of Florida on the side of the debate which is more concerned about the link between volumes and quality in open heart programs. Palmetto General also attempted to demonstrate the existence of access constraints at Jackson Memorial. The evidence showed discrepancies in lengths of stay, with indigent patients generally hospitalized longer. But those discrepancies were subject to other interpretations, including the possibility that indigent patients are more sick because lengths of stay were longer before and after indigent patients are transferred to and from Jackson Memorial. The maldistribution of open heart programs in Dade County as compared to the areas of significant population growth is a not normal circumstance affecting the availability, access, extent of utilization, and quality of care of existing facilities in the district. The commitment to the closure of an existing program is also a not normal circumstance in favor of the Aventura Hospital proposal. Subsection 408.035(3) - applicant's quality of care; Rule 59C- 1.030(2)(f) - accessibility of facility as a whole; Subsection 408.035(10) - costs and methods of construction. The parties stipulated that both Aventura Hospital and Palmetto General have a record of providing quality care with regard to the scope and intensity of services provided historically, and that both are accredited by the Joint Commission on Accreditation of Health Care Organizations. The parties also stipulated that both applicants can establish quality perfusion services and recruit qualified perfusionists at the costs identified in their applications. Palmetto General failed to identify any surgeons who would staff their proposed open heart program. Two cardiac surgeons in a group which submitted a letter of interest included in the Palmetto General CON application were killed in a car accident a month before the final hearing. While the absence of named surgeons affects the certainty of referrals, there is no requirement, in AHCA rules, that surgeons be named in CON applications. One board-certified and a second at least board-eligible surgeon must be on the hospital staff if it starts an open heart program. Tenet has the resources and the senior management at Palmetto General has the experience to recruit qualified medical and nursing staff. The plan for a four-bed CVICU at Palmetto General was criticized as allocating too few beds for open heart surgery patients. Using the normile statistical methodology, one expert witness testified that a six-bed CVICU is required to accommodate the expected patient census in the third year of an open heart program. Using an average daily census of 1.43 patients and a target occupancy rate of 70 percent in the four-bed CVICU, however, only two beds are needed in the first year. Subsequently, as needed, acute care beds may be converted to ICU beds without CON review. Subsection 408.035(4) - needs that are not reasonably and economically accessible in adjoining areas. Mount Sinai contends that the residents of the Aventura and Hialeah areas reasonably and economically receive open heart services in Broward County. The statistical data and evidence of capacity constraints, even after the Miramar hospital is constructed, and the closure of one of the programs that residents of the Aventura Hospital primary service area have relied on and its relocation to their area, is more appropriate than increasing their reliance on Memorial Regional. The evidence does not demonstrate that the residents of the Palmetto General service area have reasonable access to Cleveland Clinic, Memorial Regional or any other Broward County hospital with an open heart surgery program. Subsection 408.035(5) - needs of research and educational facilities. Aventura Hospital is not a statutory teaching hospital. It does have podiatry, nursing, and occupational and physical therapy students training at the hospital. Residents and interns from the primary care program at Nova Southeastern University, from the Barry University School of Podiatry, and area nursing and technical schools receive some of their training at Palmetto General. Although one rating service places Palmetto General in the category of a teaching hospital, it is not a statutory teaching hospital. A program at Aventura Hospital will have a greater adverse effect on Mount Sinai, while one at Palmetto General will have a greater adverse effect on Jackson Memorial. Both Mount Sinai and Jackson Memorial are statutory teaching hospitals. Subsection 408.035(6) - management personnel and funds for project accomplishment; Subsection 408.035(8) - immediate and long term financial feasibility. Both Aventura Hospital and Palmetto General have adequate funds and experienced management to establish open heart surgery programs. In the pre-hearing stipulation, the parties agreed that the applicants have sufficient available funds for capital and operating expenses to initiate open heart surgery programs and to operate the programs, in the short term, until financially self- sufficient. Aventura Hospital reasonably projected net profits of approximately $543,000 from an open heart program in the first year of operation, and $1 million in the second year. Aventura Hospital reasonably relied on the experiences of other HCA open heart providers in the area, particularly Miami Heart and JFK Medical Center in Palm Beach County. Mount Sinai questioned the reasonableness of Palmetto General's projection that it will generate higher profits than Aventura Hospital with lower case volumes. It also questioned Palmetto General's ability to attain the volumes projected. Palmetto General projected a net profit of just over $700,000 in the first year, $1.18 million in the second year, and $1.5 million in the third year, with 148 open heart cases in the first year, 210 in the second year, and 250 in the third year. By comparison, Aventura Hospital's first three-year projections for open hearts were 240, 312, and 347. Aventura's projected volume was potentially overstated in view of the experience at HCA facility Columbia Westside in Broward County which has achieved approximately half the open hearts projected. But the differences in projections reasonably reflect Aventura's draw from a smaller but older population and Palmetto General's draw from a larger, poorer but younger population. Palmetto General's projected volumes are reasonable considerating the number of actual open heart surgeries, 668, originating from its primary service area in the 12-months ending in June 2001. Palmetto General reasonably and conservatively based its reimbursement rates on those received at Florida Medical Center in Broward County, which actually has a lower reimbursement rate than Dade County. Mount Sinai also demonstrated that charges at three South Florida Tenet facilities, Delray Medical Center, North Ridge Medical Center, and Florida Medical Center were significantly higher than those at Mount Sinai. But those facilities operate successfully in competitive markets in Districts 9 and 10, which supports the testimony that, for open heart surgery, charges are not very relevant. Most compensation is derived from fixed-rate reimbursement from Medicare. Subsection 408.035(9) - extent to which proposal fosters competition that promotes quality and cost effectiveness. In the District, HCA, the parent of Aventura Hospital, after the sale of Miami Heart, continues to operate Cedars, which has exceeded 350 cases for the first time in 2001, and Kendall, which at 295 cases in 2001, has been a chronically low volume open heart provider. That would raise doubts about the projected volumes at Aventura Hospital, but for the demographics of its location and the closure and, in effect, proposed relocation of the Miami Heart program to a more geographically appropriate area of the District. The relocation, therefore, makes the proposal a "wash" resulting in no net increase in programs or competition in the District. By contrast, the approval of a program operated by Tenet which has five Dade County hospitals, none with an open heart program, does introduce a new provider into the market in a location with special needs due to the larger critical mass of people, their ethnicity, relative poverty and fewer, more distant alternate open heart providers. Subsection 408.035(12) - nursing home beds. The criterion related to nursing home beds, by stipulation of the parties, is inapplicable to this case. Summary of Findings On balance, Palmetto General is preferable as the hospital with the larger critical mass of population, the status as a disproportionate share provider of Medicaid and Medicare, the improved geographical access for a large ethnic group with relatively high IHD and heavy demands for services, including cardiac care services in its ER and in the ERs of other hospitals within its primary service area. In addition, the detriment to existing providers, predominantly Mount Sinai and Jackson Memorial will not reduce the volumes below 350 open heart cases. On balance, the Aventura Hospital proposal, while less compelling, because it is not a Medicaid disproportionate share hospital, is not a new entrant to the market, and has a population which is half that in the Palmetto General primary service is also entirely approvable. The hospital has facilities superior to those at Palmetto General. It is better prepared to implement an open heart program, with plans to open a second cardiac cath lab immediately and with the cardiothoracic surgeons identified for the program. Within its service area population, Aventura Hospital has a large population of elderly people, who present to its hospital with symptoms of heart attacks. The troubling adverse impact on Memorial Regional is offset by the evidence of crowding and scheduling difficulties specifically in the Memorial Regional cardiac cath lab. The troubling adverse impact on the combined Miami Heart and Mount Sinai programs is offset by the Asset Purchase Agreement which contemplated the relocation of at least a portion of the Miami Heart cases to Aventura Hospital. Even with the additional loss of 100 open heart cases to Palmetto General, Mount Sinai will remain the largest Dade County provider, retaining from 900 to 1,000 annual open heart cases. The approval of both applications will improve access to open heart surgery and angioplasty care in District 11.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered issuing CON Application No. 9394 to Lifemark Hospitals of Florida, Inc., d/b/a Palmetto General Hospital, and CON Application No. 9395 to Miami Beach Healthcare Group, Ltd., d/b/a Aventura Hospital and Medical Center. DONE AND ENTERED this 14th day of April, 2003, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of April, 2003. COPIES FURNISHED: Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive Building Three, Suite 3431 Tallahassee, Florida 32308-5403 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Building Three, Suite 3431 Tallahassee, Florida 32308-5403 Michael O. Mathis, Esquire Agency for Health Care Administration 2727 Mahan Drive Building Three, Suite 3431 Tallahassee, Florida 32308-5403 C. Gary Williams, Esquire Michael J. Glazer, Esquire Ausley & McMullen 227 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302 Geoffrey D. Smith, Esquire Sandra L. Schoonover, Esquire Blank, Meenan & Smith, P.A. 204 South Monroe Street Post Office Box 11068 Tallahassee, Florida 32302-3068 Stephen A. Ecenia, Esquire R. David Prescott, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551
The Issue Whether certificate of need application number 7184 for the establishment of adult open heart surgery services at Baptist Hospital, Pensacola, Florida, filed in March 1993, meets statutory and rule criteria for approval.
Findings Of Fact On or about March 23, 1993, Baptist Hospital, Inc., ("Baptist"), Pensacola, Florida, filed a certificate of need ("CON") application to establish an adult open heart surgery program for a total project cost of $2.35 million. Baptist's application was subsequently numbered CON 7184, and was approved preliminarily by the Agency for Health Care Administration ("AHCA") on July 7, 1993. Conditions for the issuance of the CON were drafted by Elizabeth Dudek of AHCA. Violations of CON conditions may result in sanctions, including fines of up to $1,000 a day. The conditions, as drafted, are as follows: The provision of a minimum of 3 percent of total annual adult open heart surgeries to Medicaid patients. The provision of a minimum of 3 percent of total annual adult open heart surgeries to charity care patients. A fixed rate structure by DRG for open heart surgery discharge (DRGs 104-108) will be set at a level which is 85 percent of the average of the most recently available charges at Sacred Heart and West Florida Regional, inflated at 7.5 percent annually. Baptist shall ensure a minimum annual adult open heart surgery patient volume of 350 at each Sacred Heart and HCA West Florida. (This assurance shall not be achieved though the transfer of charity care patients). Baptist is a 546-bed hospital, with 388 medical/surgical beds, 62 acute care beds being used as skilled nursing beds, 76 psychiatric and 20 substance abuse beds. Baptist is a Medicaid disproportionate share provider and a designated Level II trauma center, located in Pensacola, Escambia County, in AHCA District I. District I includes Escambia, Santa Rosa, Okaloosa, and Walton Counties. Baptist's primary service area is Escambia and Santa Rosa Counties in Florida, and Baldwin and Escambia Counties in Alabama. Sacred Heart Hospital of Pensacola ("Sacred Heart") the oldest hospital in Pensacola, is licensed for 391 beds, including 42 Level II and III neonatal intensive care beds, and is a Level II trauma center. Sacred Heart has an approved CON to add 40 acute care beds for a women's and children's hospital. In late 1995, construction is expected to be completed. After the women's and children's hospital is finished, Sacred Heart will undertake the construction of 12 additional critical care beds which it projects will be operational in 1996. Sacred Heart is a Medicaid disproportionate share provider. Sacred Heart initiated an open heart surgery program in the early 1970's, and is located approximately 4 to 6 miles from Baptist. Escambia and Santa Rosa Counties are in Sacred Heart's primary service area. The secondary service area includes Okaloosa and Walton Counties, and sections of Alabama. Approximately 65 percent of the total open heart surgery patients in Escambia County, and 51 to 58 percent of the total from Santa Rosa County have open heart surgeries at Sacred Heart. West Florida Regional Medical Center ("West Florida") is a 547-bed existing provider of open heart surgery services, composed of 378 medical/surgical care, 21 skilled nursing, 89 psychiatric, and 58 comprehensive medical rehabilitative beds. West Florida is also a state Level II trauma center, in Pensacola. West Florida is approximately 7 to 9 miles from Sacred Heart, and approximately the same distance from Baptist. Open heart surgery services were initiated in 1975 at West Florida, which is the dominant provider to residents of Okaloosa and Walton Counties. West Florida Regional's service area includes all of District 1. Three open heart surgery programs exist in Mobile, Alabama, approximately one to one and a half hour drive from Pensacola, two more in Dothan, Alabama, and one in Panama City, in AHCA District 2. Over 90 percent of the population in District 1 is located within a two-hour average drive to an existing open heart surgery program. Numeric Need On February 5, 1993, AHCA published a fixed need pool of zero for additional adult open heart surgery programs in District I for the July 1995 planning horizon. Two subsequent publications of need for an additional open heart surgery program in the district have also resulted in zero numeric need. When zero numeric need is computed, using the formula in Rule 59C-1.033(7)(b), an applicant has to demonstrate not normal circumstances for the approval of the application. In addition, a new adult open heart surgery program will not normally be approved if the formula in subsection (c) of that rule yields a result less than 350, indicating that existing programs in the district will be reduced to volumes below 350 annual open heart surgery operations. The calculation to determine whether this condition applies was 346.67. A fixed need pool of zero was published and not challenged. Vol. 19, No. 5, Florida Administrative Weekly, February 5, 1993. Not Normal Circumstances for Need Baptist describes certain conditions as not normal circumstances for the approval of its open heart surgery program. The not normal circumstances described are (1) a lack of financial access for uninsured persons, (2) utilization and capacity problems at one of the two existing providers in the district, (3) the size of Baptist Hospital, and the size and complexity of its cardiology services, and the fixed price and minimum volume conditions proposed for the approval of the CON. Financial Access Baptist asserts that its program will serve uninsured patients, who are a financially underserved group in its service area. Baptist proposes in its pro forma to serve up to 15 uninsured open heart surgery patients in year one and up to 19 in year two. Assuming the percentage of uninsured persons in District 1 is comparable to that for the entire state and assuming the open heart surgery use rate for the uninsured would otherwise be the same, Baptist's expert claimed that 53 uninsured persons were denied open heart surgery services in District 1 in 1993. Baptist's opponents challenged the admissibility of evidence related to uninsured persons as an impermissible amendment not discussed in the application. Assuming arguendo, that the evidence is admissible, Baptist failed to document any unmet need for uninsured persons, which its proposal will alleviate. There was more credible evidence that uninsured persons have a lower use rate for reasons other than the absence of another program in the district, including age, lack of access to primary care physicians, lack of referrals to cardiovascular surgeons, and the failure to secure Medicaid coverage. No advantage is gained with referrals of patients to the same group of cardiologists and cardiovascular surgeons who currently serve both Sacred Heart and Baptist, in the absence of evidence that the doctors can and will accept more Medicaid and indigent patients. The use rate for Medicaid patients in District 1, adjusted for age, shows equal access to open heart surgery services, as compared to other payer groups. District 1 Demographics and Utilization AHCA District 1 includes Escambia, Santa Rosa, Okaloosa and Walton Counties. Approximately 250,000 people reside in Escambia County, with slightly over half of the district population located in the other three counties in the district. Escambia is the western-most county in the district and the state. From 1992 to 1997, adult population growth is projected to be lower in Escambia County (2.6 percent) than it is district-wide (6.5 percent) which, in turn, is lower than the statewide growth rates (9 percent). Open heart surgery services began in District 1 prior to 1988 at both Sacred Heart and West Florida. From 1988 to 1993, the volumes of procedures in District 1 and the state have been as follows: 1988 1989 1990 1991 1992 1993 District 1 805 803 733 901 1,006 848 Statewide 18,961 19,819 22,010 23,748 26,078 25,190 From July 1991 - June 1992, there were 498 and 493 open heart surgery procedures at Sacred Heart and West Florida Regional, respectively, for a total of 991 procedures in AHCA District I. At West Florida Regional, open heart surgeries declined from 533 in 1992 to 418 in 1993. Open heart surgery use rates in District 1 and statewide are declining or becoming comparatively more level. Most residents of the district receive open heart surgery services in the district, with fewer than 3 percent out-migration. Baptist's expert claimed that the 1993 decline was an anomaly rather than a trend, comparing District 1 to AHCA districts which experienced a 1993 decline, but are reporting larger volumes for the first quarter of 1994. The volumes were not annualized to take into account seasonal fluctuations. In fact, Baptist's cardiologists also noted the increase in alternative procedures such as angioplasty, electrophysiology, and drug therapies. In the first quarter of 1994, there were 250 open heart surgery procedures in the district, as compared to 265 in 1992, and 208 in 1993. Annualized for the entire year to adjust for seasonal variations, 980 open heart surgeries are expected in 1994. Expert projections of total open heart surgeries at District 1 facilities for 1995-1998 are in a range as follows: 1995 1996 1997 1998 880 - 1,051 894 - 1,069 908 - 1,085 921 - 1,100 Sacred Heart's occupancy for total acute care beds was 74.8 percent in 1991, 74.5 percent in 1992, and 74.4 percent in 1993. However, Sacred Heart's critical care unit ("CCU") is frequently at capacity during the peak season in the winter months. Delays of 1 to 3 days before patients are admitted for elective open heart surgery operations and elective angioplasties, are not uncommon. Elective procedures are those performed on patients who are stabilized with drug therapies pending the procedure. There is no evidence of delays in transfers for emergency angioplasties or emergency open heart surgeries, other than the time required to follow transfer protocols. Actual Sacred Heart CCU utilization was 83.4 percent in 1991, 84.4 percent in 1992, and 81.2 percent in 1993. Sacred Heart's expert in health planning, Mark Richardson's opinion that over 75 to 77 percent occupancy in a CCU means inadequate capacity to add a new open heart program, but not to serve an existing program is accepted. In addition, Sacred Heart plans to add 12 beds to the critical care unit in early 1996, and has improved case management procedures to alleviate capacity limits in the CCU, and scheduling heart surgeries. Two of the three cath labs at Sacred Heart are used for cardiac caths, electrophysiological studies and angioplasties. Sacred Heart has the capacity to perform 4,200 total cases a year. There are no problems associated with the capacity of the cardiac cath labs at Sacred Heart. The expert testimony is undisputed that West Florida Regional provides excellent quality of care, has excess cath lab, CCU and operating room capacity, and is in an excellent position to increase utilization without additional construction and with minimum additional staff. Cardiologists at Baptist resist transferring patients to West Florida, where they have not sought staff privileges. The statement in Baptists' CON application that the "closed medical staff arrangement at West Florida Regional limits referrals" from Baptist and Sacred Heart is not supported by the evidence. Staff privileges in various categories, including temporary privileges are available to physicians who apply. There was an inference that only doctors affiliated with the hospital's clinics gain privileges at West Florida. From September 1993 to April 1994, over one hundred doctors not affiliated with West Florida's Medical Clinic referred patients to the cath lab at West Florida. West Florida has the capacity to perform from 2500 to 3000 procedures in the two cardiac cath labs and one electrophsiology lab and from 800 to 1000 open heart surgery procedures in its 2 dedicated operating rooms. In 1993, there were 1453 cardiac cath, 387 angioplasties, and 418 open heart surgery procedures at West Florida Regional. A resident of the Baptist area and former patient, and a doctor with privileges at Baptist complained that the drive to West Florida takes up to 30 minutes. There is no credible claim of geographic access problems to West Florida, as defined by Rule 59C-1.033(4)(a), Florida Administrative Code, which provides that "[a]dult open heart surgery shall be available within a maximum automobile travel time of 2 hours under average conditions for at least 90 percent of the district's population." Medical risks of transfers do not outweigh the benefits of concentrated expertise in open heart surgery programs. That determination is one basis for AHCA's rule designating open heart surgery services as tertiary services. Cardiology Consultants is a group of cardiologists, cardiac surgeons, nurses and support staff which provides services to Baptist and Sacred Heart. The chairman of Cardiology Consultants does not travel to West Florida Regional because it is an inefficient use of his time. Because their patients would have to be transferred to cardiologists other than themselves or others in their group, the cardiologists are reluctant to make referrals from Baptist to West Florida Regional for open heart surgery. The cardiologists and one former patient who testified agreed that Sacred Heart's open heart surgery services provided excellent quality of care. By contrast, Baptist's expert, Dr. Luke, claimed that an analysis of severity adjusted mortality rates showed outcomes at Sacred Heart significantly below that statistically expected, and below that experienced at West Florida Regional. That testimony is not reliable due to his lack of an explanation of the methodology involved in the compilation of the report. The analysis was offered to demonstrate that Baptist could capture a larger market share than Sacred Heart. If Dr. Luke's assertions on quality of care are true, the conclusion would suggest that Baptist-based cardiologists refer patients almost exclusively to a lower quality facility to avoid referrals to cardiologists outside their group at West Florida. That conclusion is rejected based on the expert's admission of his lack of clinical expertise to render opinions on quality of care. One of the reasons advanced for the approval of the Baptist CON is that Baptist and Sacred Heart operate, in effect, a unified, high quality single cardiology program with a shared chief cardiologist, shared on-call cath lab staff, and virtually identical, overlapping medical staffs from the Cardiology Consultants group. Cardiology Consultants maintains offices at both Sacred Heart and Baptist. Because the group staffs both hospitals, Baptist argues that its cardiology program should be viewed in terms of serving a 1000 bed hospital, and the statutory criterion on joint or shared programs would apply. In fact, an agreement for a shared or joint CON application was rejected by Sacred Heart. Baptist, in this case, is seeking to establish a program which competes with that at Sacred Heart. Baptist's Size and Programs Baptist cited its size and the breadth of its existing cardiology services as a not normal basis for approval of its open heart surgery program. Baptist is one of only three hospitals in Florida exceeding 500 beds, performing over 1100 cardiac caths without open heart surgery backup. There are also 58 Florida hospitals with cardiac cath services without an open heart surgery program. The Baptist network in District 1 includes two other hospitals of 60 and 55 beds, and affiliations with four of the five hospitals located in Baldwin and Escambia Counties, Alabama. Baptist's actual medical/surgical bed size is 388, as compared to 391 operational and 40 more approved for a total of 431 at Sacred Heart, and 379 at West Florida Regional. All three of the Pensacola hospitals are described by AHCA's witnesses as "large." Since the late 1980's, Baptist has followed a long range plan to develop a first floor heart center. The most recent cath lab construction included shelled-in space to relocate the backup lab from the fourth floor to the first floor. The projected cost of moving the lab, as is, is $50,000 to $60,000. By comparison to the first floor lab, the fourth floor lab equipment is not state-of-the-art. Upgrading the fourth floor lab is expected to cost $400,000. Baptist has a large volume cardiology program, with a broad range of services, and claims to treat sicker cardiac patients. In fiscal year 1993, there were 1106 cardiac caths, 146 electrophysiology studies, 118 pacemaker implants, 69 coronary angioplasties, 20 vascular angioplasties, and 28 defibrillator implants. Baptist's claim that it provided services to more severe cardiac cases, based on a computer analysis of unknown variables with inadequately explained data input is not substantiated. If open heart surgery services are not approved at Baptist, the cardiology program will not be able to expand to include alternative less invasive techniques which require open heart surgery backup. Without open heart surgery, however, other cardiology services at Baptist have been able to develop and currently contribute approximately $12 million annually to net revenue, with a $6.4 million contribution margin. In the cardiac diagnostic categories, 80 percent of Baptist patients come from Escambia County with an additional 5 percent from Santa Rosa County. Baptist anticipates having the capacity in its two cardiac cath labs to handle the anticipated increase of 100 to 150 angioplasties, expected to result from the establishment of an open heart surgery program, in its two laboratories which are currently at 65 percent utilization. Utilization is approximately 80 percent in the first floor cath lab, which is used for almost all cardiac caths and angioplasties. The fourth floor cath lab is used exclusively for pacemaker implants and electrophysiology studies, not for cardiac caths or angioplasties. If approved, Baptist can meet the requirement of AHCA rules related to adequate staffing and the availability and quality of its service. Angioplasties were performed at Baptist, prior to the requirement for back-up open heart surgery services. However, an exception was given to Baptist in a letter from AHCA's predecessor agency in 1987. Baptist is allowed to have invasive cardiologists perform angioplasties in an emergency or if open heart surgery is not a viable option, as happens for some patients who have had prior open heart surgeries. Proposed CON Conditions As a condition for approval of this project, Baptist proposes to set charges, through September 1997, at the lesser of actual charges or 85 percent of the inflated average charges of the two existing providers, but not less than 50 percent of charges. Initially, Baptist proposed to adhere to the condition for the first three years, from July 1994 to September 1997. Having been delayed due to litigation, Baptist's expert financial witness testified that Baptist would adhere to the condition for three years after approval of the application. Baptist did not agree to adhere permanently to the fixed price structure, although no time limit is set in the AHCA draft of the proposed condition. AHCA did not consider the proposed condition a not normal circumstance in this or a prior Baptist application. District 1 already has the lowest average charges statewide for open heart surgery services. Statewide charges are 27 percent higher than the average for Pensacola and 42 percent higher than Sacred Heart's. There will not be an enhancement of financial access as a result of approval of the Baptist CON. In addition, relatively few patients would benefit from the proposed fixed charges. Medicare, Medicaid, and managed care contractual agreements will not be affected by the proposed fixed rate charge structure. Baptist also proposed to adhere to a CON condition to monitor and maintain annual minimum volumes of 350 open heart surgeries at Sacred Heart and West Florida. In its CON application, Baptist projects 85 to 100 of its projected 165 open heart surgeries in year one would otherwise have been performed at Sacred Heart. The loss of net income was projected at $1.37 million or 9.6 percent of total net income. Baptist projected 35 surgeries lost to West Florida Regional, and the financial loss of a half a million dollars, or 6 percent of net income. Baptist's expert, Dr. Luke, noted that at least 925 open heart procedures must be performed in 1997 to allow Sacred Heart and West Florida Regional to maintain the 350 minimum volume of procedures. If there are three open heart surgery providers in Escambia County in 1998, Dr. Luke conceded that one of those programs will not have a minimum volume of 350 open heart surgery procedures a year. Historically, the required volume of open heart surgeries was exceeded only in 1992, and the highest projected volume by Baptist's expert is 1,100 for 1998. See, Findings of Fact 12 and 14. Baptist's expert asserted that the surgeons volume is more directly related to quality than the hospital's volume, but the hospital volume requirement is specifically recognized as a factor in Rule 59C-1.033(7)(c). To the extent that open heart surgery volumes at an existing provider decline, it is unlikely that Baptist can control decisions which are made based on the convenience of cardiologists and cardiovascular surgeons, increasingly by health maintenance organizations and other insurers, and the preferences of patients or their families. While the proposed 350 minimum condition is intended to avoid adverse effects of the approval, there is no reason to create and then have to alleviate that potential problem absent a showing of need or not normal circumstances. The proposed condition is not, in and of itself, a not normal circumstance. Other Criteria Related To Need Local Health Plan The 1992 District 1 Allocation Factors Report is the applicable local health plan to the review of Baptist's CON application. However, the 1990 District 1 Allocation Factors were analyzed by Baptist, and therefore, the Baptist application addressed only those preferences common to the two plans. Preference one favors an applicant demonstrating cost efficiency, lower project costs, and the least increase in patient charges. Beyond the first three years of the program for very few patients, the fixed rate charge structure will not be effective in keeping patient costs lower. Therefore, Baptist does not meet the preference. The lowest cost expansion of open heart surgery services in the district is the use of the excess capacity at West Florida Regional, with capacity for 800 to 1000 open heart surgeries as compared to the highest district-wide projection of 1,100 open heart surgeries in 1998. See, Finding of Facts 14 and 16. The second preference for bed conversions to increase utilization is not applicable to the proposed project. Preference three favors converting existing capacity to expand services over new construction. Baptist proposed to dedicate 2 exising rooms for open heart surgery, and to renovate 9,660 square feet, including a 2-bed expansion of the existing 8-bed cardiac care unit (CCU), to relocate a 6-bed eye unit, to expand by 9-beds an existing 18-bed step-down unit, to establish of a 12-bed progressive care unit, and to relocate a cystoscopy room. Total project costs are projected to equal $2,350,000. The Baptist proposal for renovations is preferable to new construction, but cannot be favored due to the alternative of using exising capacity at West Florida Regional. Preference four for joint ventures or shared services that mutually increase efficiency as opposed to unilateral CON applications is not given to Baptist. Although the same group of cardiologists presently operates the cardiovascular surgeries as a unified program at both Baptist and Sacred Heart, this application is a unilateral application, not a joint program. It is a duplicative program. The fifth preference, for applicants proposing to serve patients regardless of ability to pay, favors the Baptist application. In response to the sixth preference, for applicants agreeing to provide the greatest percentage of Medicaid and indigent services, Baptist proposes 3.03 percent of cases to be Medicaid patients and 3.03 percent indigent patients for the first year of operation, and 2.44 percent Medicaid and 2.93 percent indigent for the second year, or up to 15 indigents in year one, and 19 in year two of initiating a open heart surgery program. In total operations at Baptist in 1991, Medicaid was approximately 20 percent and charity 3 percent. Sacred Heart which, like Baptist, is a disproportionate share provider, averaged approximately 23 percent Medicaid and 5 percent charity. West Florida provided approximately 4 percent Medicaid and 9 percent charity. Baptist is entitled to partial preference to the extent that its provision of Medicaid exceeds that of West Florida. Preference seven, for applicants demonstrating a history of serving the greatest percentage of indigent and Medicaid patients, is met by Baptist. Baptist is a disproportionate share provider of services to Medicaid and charity care. In 1991, Baptist also provided 7.3 percent charity and uncompensated care. The eighth preference, for expansion of existing facilities as opposed to the establishment and construction of a freestanding facility, is not applicable to this case. Preference nine for applications which increase a facility's weighted occupancy rate, preference ten for a facility with an actual occupancy rate equal to or above the weighted occupancy rate and preference eleven to avoid a decrease in a facility's weighted occupancy rate were not addressed by Baptist, having not been included in the earlier local plan. Preference twelve is given to CON applicants who describe the impact on patient case load and the estimated increase in subdistrict case load, but not to applicants who do not supply this information. Baptist met the preference by providing an analysis of the impact on patient case loads at Sacred Heart and West Florida Regional. Preference thirteen is given for CON applications that include a five year projected occupancy rate for the applicant facility that is equal to or greater than the rule standard rate for facilities, as specified in the state rule paragraph 59C-1.038(7)(e), currently 75 percent. Baptist did not provide five year projected occupancy rates. Preference fourteen, related to pediatric units, is not applicable to Baptist's proposal. Preference fifteen, related to eliminating ICU/CCU units of less than 10 beds, is not applicable to this project. Preference sixteen is met by Baptist's plans to establish periodic internal evaluations of staff and equipment performance. Baptist committed to meet preference seventeen by providing initial and ongoing training and educational programs for staff members treating or caring for open heart patients, including training staff at an existing high- volume hospital in Orlando. Preference eighteen is given for the creation and use of data collection systems to monitor and report patient volume, patient origin, charges, safety problems and complications. Baptist agrees to meet preference eighteen by collecting and reporting data for open heart surgery services, as it currently does for all other services. Preference nineteen for written referral agreements between facilities in District 1 is not met by Baptist. Preference twenty for a plan to record instances of service repetition due to poor results, data, or images, is met. An index of performance currently exists for cardiac cases at Baptist. The preference for applicants that demonstrate a history of or willingness to commit to provide health care services to AIDS patients, preference twenty-one, was not addressed by Baptist. Preference twenty-two, given to CON applicants that demonstrate they have provided the greatest percentage of the facility's available annual patient days to AIDS patients has not been addressed. On balance, Baptist failed to demonstrate compliance with the applicable local health plan, in part by failing to address some of the preferences. Baptist does meet preferences for serving patients regardless of their ability to pay, for its proposal to serve Medicaid and indigent patients, for having done so in the past, for quality assurance, data collection and training programs, and for including an impact analysis. State Health Plan The 1989 Florida State Health Plan provides six allocation preferences related to the review of CONs to establish open heart surgery programs. The first state plan preference favors applicants establishing new open heart surgery programs in larger counties in which the percentage of elderly is higher than the statewide average and the total population exceeds 100,000. Although the population of Escambia County exceeds 250,000, the preference is not met because the percentage of the population age 65 or over is 12.24 percent, in contrast to the statewide average of 18.59 percent. State plan preference two, for new open heart surgery programs which will reach a volume of 350 adult procedures annually within three years of initiating the program, is not met. Baptist projects that it will perform 165 open heart surgery procedures in the first year of operation and 205 operations in its second year of operation. Baptist did not include a third year projection. With a CON condition that Sacred Heart and West Florida will retain a minimum of 350 procedures, Baptist's expert, Dr. Luke, conceded that Baptist cannot achieve the 350 volume by its third year of operation. State preference three, for improved geographic accessibility and reduced travel time for residents leaving the district for open heart surgeries is not met by the Baptist application. Out-migration from District 1 is extremely low, approximately 3 percent, and the geographic access standard is met. State plan preference four, for hospitals which meet Medicaid disproportionate share criteria, is met by Baptist. State preference five which, in general, favors larger more efficient facilities is met by Baptist. Baptist has 388 medical/surgical beds, with $12 million in net revenue annually from its cardiology program. A large hospital is described by AHCA witnesses as one exceeding 350 to 400 beds. State health plan preference six, for applicants with protocols for the use of alternative non-surgical therapeutic cardiac procedures, is met by Baptist. On balance, Baptist's CON application does not comply with the state health plan. Although it meets the preferences for treating patients regardless of ability to pay, for a disproportionate share provider, and for a large, efficient hospital, and for the types of services proposed, Baptist is not located in an area with demographic characteristics indicative of need, and does not have the ability to attract enough patients from that population to reach sufficient open heart surgery volumes to assure a quality program. AHCA Review of the Baptist CON Application Dr. James T. Howell, the AHCA Division Director for Health Policy and Cost Containment, made the decision to approve the Baptist open heart surgery CON, because of Baptist's substantial, active, sophisticated cardiology program, its status as a high disproportionate share provider, its size, and because the results of the numeric need calculation and the formula for determining the reduced volume at existing providers were close to that required by rule. See, Finding of Fact 7. In February, 1993, after the numeric need publication and prior to the filing of the application at issue in this case, Dr. Howell, Albert Granger, and Robert Sharpe of AHCA met with the Mayor of Pensacola who is also Senior Vice President of Baptist Health Care and President of Baptist Health Care Foundation, and Baptist's Vice President for Planning who expressed frustration over the denials of its prior open heart surgery CON applications. Baptist submitted CON applications for open heart surgery in 1987, 1989, 1991, 1992, and 1993. Among the issues of concern was the status of Sacred Heart and West Florida Regional as grandfathered providers resulting in their having "a permanent franchise." Baptist representatives expressed concern about their ability ever to secure an open heart surgery program under the current rules. After that meeting, the rule amendment process was initiated to allow consideration of data reported up to 3 months, rather than 6 months prior to the publication of the fixed need pool. At the time the Baptist application for CON 7184 was reviewed, the amendment had not been adopted. No other change in the open heart surgery rule has been made subsequent to the review of the prior Baptist CON application. When the Baptist application for CON 7184 was filed initially, Laura MacLafferty was assigned as AHCA's primary reviewer. The state agency action report ("SAAR") represents her factual analysis of the application, although she did not and, routinely, does not make recommendations to issue or deny CONs. Ms. MacLafferty and her supervisor, Alberta Granger, are not aware of any AHCA non-rule policy to determine if a calculation of minimum volume is "close" enough to the 350 standard of the rule, nor any agency guidelines to determine when a hospital is "large" or "operates a large cardiology program" which should include open heart surgery. Subsequent to reviewing the Baptist application, in December 1993, Ms. MacLafferty reviewed another open heart surgery application from District 1, filed on behalf of Fort Walton Beach Medical Center. In her review of both the Baptist and Fort Walton applications, Ms. MacLafferty found no documentation that patients in District 1 experienced problems with access to open heart surgery services. Ms. MacLafferty submitted the draft SAAR to a supervisor, Alberta Granger. The draft SAAR was retrieved from her desk, prior to Ms. Granger's reviewing it. It was removed by Elizabeth Dudek, who heads AHCA's CON and health care board sections. Ms. Granger did not review the SAAR, which was prepared by Ms. MacLafferty. The final draft was returned to Ms. Granger for her to sign on July 7, 1993. This was the only time since Ms. Granger became supervisor in the CON office, that she has not reviewed and discussed with Ms. Dudek SAARs prepared by her staff. Ms. Granger had been the primary reviewer of Baptist's 1989 CON application. Ms. Granger and her supervisor, Ms. Dudek, are aware that in this case and in one or more of its prior CON open heart surgery applications, Baptist argued that its size, scope of cardiology services, and proposed fixed rate structure were reasons to approve its proposal. Ms. Granger stated, and Ms. Dudek confirmed, that the usual procedure was not followed in the review of this and one other application in this batching cycle. In this batching cycle, Dr. Howell requested that Mr. Sharpe, head of AHCA's planning section, also review those two open heart surgery applications. Ms. Dudek recalls, that prior to 1987, there were two batches of approximately 12 total applications in which agency personnel other than the CON staff was involved in the review of CON applications. In making his decision on the Baptist application, Dr. Howell consulted Ms. Dudek and Mr. Sharpe. Ms. Dudek, who heads the CON and health care board section, was not initially in favor of the approval of the Baptist application. Mr. Sharpe, head of the planning section, prepared a 9 page analysis of the pros and cons of the Baptist proposal. The Sharpe analysis demonstrates that an increase of 9 additional open heart surgeries during the 12 month reporting period, and the use of the more current data under the pending rule revision would have resulted in the need for one additional open heart surgery program in District 1. The memorandum also demonstrated that a lower future volume of open heart surgeries is projected by using the actual use rate, as required by Rule 59C-1.033(7)(6)2, rather than a trended use rate. If these adjustments to the data are made to achieve numeric need, then Baptist's application could be approved without a showing of not normal circumstances. The memorandum also reported the October 1991-September 1992 volumes of cardiac cath admissions at Baptist as 2,677, at Sacred Heart as 2053, and at HCA West Florida as 1,915, with the conclusion that Baptist "had the largest number of cardiac catheterization admissions of the three hospitals." The evidence in this proceeding is that the memorandum was in error. Actual volumes for October 1991-September 1992 were 912 at Baptist, not 2677. Dr. Howell found Baptist's proposal consistent with health care reform trends towards eliminating the need for CON regulation by enhancing market competitive forces, as a part of Florida's managed competition model, as explained in the Sharpe analysis. Similarly, Dr. Luke described the 1980's use of the CON process to control costs by limiting duplication and the rejection of institution specific planning as outdated. Dr. Luke also favors a model of competition for cost controls. At this time, however, these positions have not been adopted in Florida Statutes and rules. The 1994 Florida Health Security Plan, however, recommends the continuation of CON review of all tertiary services, including open heart surgery. That plan was submitted as a part of AHCA's 1994 legislative proposals. Ms. Dudek described traditional "not normal" circumstances as issues related to financial, geographic, or programmatic access to the proposed service by potential patients, and not facility specific concerns. Facility specific concerns, in this case, include Baptist's attempt to retain cardiologists who wish to perform procedures not approved at Baptist and to improve its position to compete for managed care contracts. Baptist has failed to show not normal circumstances for the departure from the open heart surgery rule, statutes and prior complications of the criteria to the review of CON applications. Baptist has also failed to demonstrate that the facts of this case justify a departure from the guidelines set by rule for the need methodology, use rate and population projections, and the minimum volumes at existing providers.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered denying the application of Baptist Hospital of Pensacola for certificate of need number 7184 to establish an adult open heart surgery program in Agency for Health Care Administration District 1. DONE AND ENTERED this 18th day of November, 1994, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 18th day of November, 1994. APPENDIX To comply with the requirements of Section 120.59(2), Fla. Stat. (1991), the following rulings are made on the parties' proposed findings of fact: Sacred Heart Hospital of Pensacola's Proposed Findings of Fact. 1-11. Accepted in or subordinate to Finding of Fact 3. 12-14. Accepted in or subordinate to Finding of Fact 15. Accepted in or subordinate to Finding of Fact 4. Accepted in Finding of Fact 16. Accepted in Finding of Fact 2. Accepted in Findings of Fact 2, 3 and 4. Accepted in Finding of Fact 5. Accepted in Finding of Fact 3. Accepted in Findings of Fact 3 and 4. Accepted in Finding of Fact 5. Accepted in Findings of Fact 3 and 4. Accepted in Finding of Fact 24. Accepted in Finding of Fact 18. Issue not reached. 27-28. Accepted in Findings of Fact 11 and 12. Accepted first two sentences in Findings of Fact 15 and 16. Remainder issue not reached. Accepted. Accepted. 32-35. Accepted in Findings of Fact 11 - 16. 36. Accepted in Findings of Fact 6 and 7. 37-38. Subordinate to Finding of Fact 6 and 7. 39. Accepted in Finding of Fact 60. 40-46. Accepted in or subordinate to Finding of Fact 15. 47-49. Accepted in or subordinate to Finding of Fact 16. 50-53. Accepted in or subordinate to Finding of Fact 26. 54-64. Accepted in or subordinate to Findings of Fact 3 and 15. 65-70. Accepted in or subordinate to Findings of Fact 12 and 15. 71. Issue not reached. 72-78. Accepted in or subordinate to Findings of Fact 4, 12, and 16. 79-88. Accepted in or subordinate to Findings of Fact 18-20. 89-95. Accepted in Finding of Fact 15. 96. Accepted in Finding of Fact 20. 97-101. Accepted in or subordinate to Finding of Fact 15. Subordinate to Findings of Fact 4 and 16. Accepted in or subordinate to Findings of Fact 4 and 16. Accepted in Finding of Fact 3. 105-110. Accepted in or subordinate to Findings of Fact 21-30 and 75. Accepted in Finding of Fact 12. Accepted in Findings of Fact 3-5 and 17. 113-121. Accepted in or subordinate to Finding of Fact 29 and 30. 122-126. Accepted in or subordinate to Finding of Fact 27. 127-135. Issue not reached. 136-138. Accepted in or subordinate to Findings of Fact 9 and 10. 139-141. Accepted in general in Findings of Fact 74 - 77. 142-149. Accepted in or subordinate to Findings of Fact 29 and 30. West Florida's Proposed Findings of Fact. Accepted in Findings of Fact 3 and 4. Accepted in Findings of Fact 1 and 6. 3-13. Accepted in or subordinate to Findings of Fact 61-76. 14-15. Accepted in or subordinate to Findings of Fact 1 and 68. 16. Accepted in or subordinate to Findings of Fact 64-68 and 75. 17-21. Accepted in Findings of Fact 6-7. 22-24. Accepted in or subordinate to Finding of Fact 17. 25. Accepted in Findings of Fact 2 and 11. 26-27. Accepted in Findings of Fact 3 and 4. 28. Subordinate to Finding of Fact 3 and 4. 29-30. Accepted in Finding of Fact 17. 31-32. Accepted in Finding of Fact 11. 33. Accepted in Findings of Fact 15 and 16. 34-36. Subordinate to Findings of Fact 11 and 12. 37-45. Accepted in or subordinate to Findings of Fact 4 and 16. 46-55. Accepted in or subordinate to Findings of Fact 11-14. 56-79. Accepted in or subordinate to Finding of Fact 14, 29, 30 and 55. 80-83. Accepted in Findings of Fact 68, 75 and 77. 84. Accepted in Findings of Fact 29 and 30. 85-87. Accepted in Findings of Fact 27 and 28. 88. Accepted in Findings of Fact 17-19. 89-90. Accepted in Findings of Fact 21-24. 91-92. Accepted in Finding of Fact 15. 93-97. Accepted in Finding of Fact 16. 98-100. Accepted in or subordinate to Findings of Fact 61, 63, 71-74 and 77. 101. Accepted in Findings of Fact 27-28. 102-105. Accepted in Findings of Fact 9 and 10. Accepted in or subordinate to Finding of Fact 11. Accepted in Finding of Fact 75. Accepted in Findings of Fact 23-24. Baptist Hospital, Inc.'s and AHCA's Proposed Findings of Fact. Accepted. Accepted in Finding of Fact 1. Accepted in Finding of Fact 6. Accepted in Finding of Fact 12. Accepted in Finding of Fact 7. Accepted in Finding of Fact 72. Accepted in Finding of Fact 8. Accepted in Finding of Fact 2. 9-11. Accepted in Finding of Fact 21. Accepted in Findings of Fact 2, 51 and 60. Accepted in Finding of Fact 24. 14-16. Accepted in Finding of Fact 34. Accepted in Finding of Fact 3. Accepted in Finding of Fact 4. 19-24. Accepted in Findings of Fact 21-23. 25-30. Accepted in or subordinate to Finding of Fact 26. 31-37. Accepted in or subordinate to Findings of Fact 21-26. 38. Rejected in Finding of Fact 23. 39-53(a-g) Accepted in or subordinate to Findings of Fact 18-24. 54. Rejected in Finding of Fact 20. 55-58. Accepted in Finding of Fact 15. Rejected in Finding of Fact 15. Accepted in Finding of Fact 15. Accepted in Finding of Fact 26. Accepted in Finding of Fact 15. 63-66. Rejected conclusions in Finding of Fact 15. Accepted in or subordinate to Finding of Fact 15. Rejected conclusions in Finding of Fact 15. 69-78. Accepted in or subordinate to Finding of Fact 15. 79-81. Rejected in or subordinate to Finding of Fact 17. 82-84. Rejected in or subordinate to conclusion in Finding of Fact 17. 85. Subordinate to Finding of Fact 15. 86-87. Accepted in or subordinate to Findings of Fact 13 and 21. 88-90. Accepted in or subordinate to Finding of Fact 18. 91-94. Rejected in Finding of Fact 15. 95-97. Accepted in or subordinate to Finding of Fact 15. 98-121. Issues not reached or rejected in Findings of Fact 74-77 except that the reference to a shared cardiology program should be understood to mean unified operation of programs under one group of cardiologists serving two hospitals, not "joint, cooperative or shared," as AHCA has previously defined those terms in construing subsection 408.035(1)(e), Florida Statutes. Accepted in or subordinate to Finding of Fact 4. Accepted in Finding of Fact 4. 124-132. Issue not reached or rejected in Findings of Fact 74-77 except that the reference to a shared cardiology program should be understood to mean unified operation of programs under one group of cardiologists serving two hospitals, not "joint, cooperative or shared," as AHCA has previously defined those terms in construing subsection 408.035(1)(e), Florida Statutes. 133-134. Accepted in Findings of Fact 15-18. 135. Accepted in Finding of Fact 75. 136-138. Conclusion not support by testimony cited. 139-145. Accepted in Findings of Fact 2, 36, 37, 38 and 57. 146-152. Accepted in or subordinate to Findings of Fact 1, 29 and 30. 153-165(a-c) Rejected conclusions that highest projections of growth in open heart surgery is reasonable in District 1 in Findings of Fact 11-16. 165(d) Rejected as insignificant number in Finding of Fact 12. 165(e-g) Rejected in Finding of Fact 19. 165(h) Accepted in Findings of Fact 9-10. Rejected in Finding of Fact 29. Accepted as shared is defined in Finding of Fact 20. 168-172. Rejected in Findings of Fact 29-30. 173-177. Rejected conclusions in Findings of Fact 29-30. 178-181. Rejected in Findings of Fact 4, 16, 17 and 18. 182-186. Accepted in 1 as explained in Findings of Fact 27 and 28. Rejected in part in Finding of Fact 52 and accepted in part in Findings of Fact 60. Rejected as most relevant in Findings of Fact 60. 189-199. Accepted in Finding of Fact 25. 200-201. Issue not reached. COPIES FURNISHED: William Wiley, Esquire Darrell White, Esquire Charles A. Stampelos, Esquire McFarlain, Wiley, Cassedy & Jones 600 First Florida Bank Building 215 South Monroe Street Tallahassee, Florida 32301 John Radey, Esquire Jeffrey Frehn, Esquire Aurell, Radey, Hinkle, Thomas & Baranek 101 North Monroe Street, Suite 1000 Post Office Drawer 11307 Tallahassee, Florida 32302 Michael J. Cherniga, Esquire Greenberg, Traurig, Hoffman Post Office Drawer 1838 Tallahassee, Florida 32302 W. Dexter Douglass, Esquire John A. Rudolph, Jr., Esquire Douglass & Powell Post Office Box 1674 Tallahassee, Florida 32302 Richard Patterson, Esquire Agency for Health Care Administration 325 John Knox Road Tallahassee, Florida 32303 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, Esquire The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
