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UNIVERSITY MEDICAL PARK OF TAMPA, LTD. vs. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, 84-000168 (1984)

Division of Administrative Hearings, Florida Number: 84-000168 Latest Update: Feb. 09, 1987

The Issue The ultimate issue is whether the application of Petitioner, University Medical Park, for a certificate of need to construct a 130-bed acute care hospital in northern Hillsborough County, Florida should be approved. The factual issues are whether a need exists for the proposed facility under the Department's need rule and, if not, are there any special circumstances which would demonstrate the reasonableness and appropriateness of the application notwithstanding lack of need. The petitioner, while not agreeing with the methodology, conceded that under the DHRS rule as applied there is no need because there is an excess of acute care beds projected for 1989, the applicable planning horizon. The only real factual issue is whether there are any special circumstances which warrant issuance of a CON. The parties filed post-hearing findings of fact and conclusions of law by March 18, 1985, which were read and considered. Many of those proposals are incorporated in the following findings. As indicated some were irrelevant, however, those not included on pertinent issues were rejected because the more credible evidence precluded the proposed finding. Having heard the testimony and carefully considered the Proposed Findings of Fact, there is no evidence which would demonstrate the reasonableness and appropriateness of the application. It is recommended that the application be denied.

Recommendation Petitioner having failed to prove the need for additional acute care beds to include OB beds or some special circumstance which would warrant approval of the proposed project, it is recommended that its application for a CON be DENIED. DONE and ORDERED this 25th day of June, 1985, in Tallahassee, Florida STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of June, 1985.

Florida Laws (2) 120.52, 120.57

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COMMUNITY HOSPITAL OF THE PALM BEACHES, INC., D/B/A COLUMBIA HOSPITAL vs GLENBEIGH HOSPITAL OF PALM BEACH INC.; BOCA RATON COMMUNITY HOSPITAL, INC.; AND AGENCY FOR HEALTH CARE ADMINISTRATION, 91-002949CON (1991)

Division of Administrative Hearings, Florida Filed:Tallahassee, Florida May 10, 1991 Number: 91-002949CON Latest Update: Sep. 09, 1993

The Issue Which, if any, of the four certificate of need applications for short-term psychiatric beds in Department of Health and Rehabilitative Services District 9 should be approved.

Florida Laws (2) 120.57, 38.22 Florida Administrative Code (1) 59C-1.012

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CHARTER MEDICAL OF ORANGE COUNTY, INC. vs. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, 89-001358 (1989)

Division of Administrative Hearings, Florida Number: 89-001358 Latest Update: Feb. 15, 1990

Findings Of Fact I The Parties Charter Medical of Orange County, Inc., (Charter) is a wholly-owned subsidiary of Charter Medical Corporation, founded in Macon, Georgia in 1969. The parent corporation operates approximately 92 hospitals throughout the country, including Florida. Most of its hospitals are psychiatric or substance abuse facilities. Orlando Regional Medical Center (ORMC) is a 1,119- bed, nonprofit medical system comprised of four divisions. In downtown Orlando it operates a 630-bed tertiary care hospital and a 255-bed Arnold Palmer Hospital for women and children. A Sand Lake campus is located 10 miles southwest of Orlando, off I-4, and includes medical/surgical beds and 32 licensed short-term psychiatric beds. ORMC's St. Cloud Campus in Osceola County, south of Orlando, includes 84 medical/surgical beds. The Department of Health and Rehabilitative Services (HRS) is the state agency responsible for implementing and enforcing the certificate of need program pursuant to Sections 381.701-.715, F.S. Psychiatric Institute of Orlando, Inc., d/b/a Laurel Oaks Hospital, (Laurel Oaks) is a subsidiary of P1A Psychiatric Hospitals, Inc., which is a subsidiary of National Medical Enterprises (NME). P1A owns approximately 50 psychiatric hospitals throughout the county, including (30-bed Laurel Oaks, in southwest Orange County, a short-term psychiatric and substance abuse facility for children and adolescents Health Management Associates, Inc., (HMA) is a health management company which owns or operates 16 hospitals in the southeastern United States, including four psychiatric hospitals in Florida. HMA's Crossroads University Behavioral Center is a 100-bed free-standing psychiatric hospital in northeast Orange County. Its 60 adult beds and 40 adolescent beds opened in January 1989 as a licensed long-term facility, but it has been operating continually as a short-term facility. The Applications Charter proposes to develop a new free-standing 60- bed psychiatric hospital (40 beds for adults, 10 beds for adolescents and 10 beds for children). It plans a wide range of treatment modalities utilizing a multi-disciplinary team approach, tailored to the age and needs of the patient. Although no specific site has been selected, several have been identified in southwest Orange County. Charter anticipates the total cost for the project will be $7,783,000. Charter's patients will be primarily commercially insured (71%), with 15% Medicare and 4% indigent. Charter has committed to serve this share of indigent for the first two years of operation. As a specialty hospital, Charter is not eligible to accept Medicaid patients. ORMC proposes to build a 60-bed free-standing facility on a 7.2 acre site within 40 acres it already owns at Sand Lake and adjacent to its existing Sand Lake Hospital, for a total project cost of $6,678,935. No new licensed beds are required as ORNC will transfer its 32 short term beds from the sixth floor of the Sand Lake Hospital and will convert 28 of its licensed medical/surgical beds from its downtown hospital. The 60 beds will consist of 30 adult and 30 adolescent short term beds. Since the existing 32 beds are primarily adult beds, ORMC's project will be adding adolescent beds to the inventory in District 7. Proximity to Sand Lake Hospital will facilitate shared services, including engineering, dietary and laundry. ORMC also expects the joint use of therapists at its psychiatric facility and its existing brain injury rehabilitation unit at Sand Lake. Because the facility will be added to ORMC's general hospital license, it can and will accept Medicaid patients. ORMC has committed to serve 20% Medicare, 8% Medicaid and 8% indigent patients. ORMC will likely seek an outside management firm to operate its psychiatric facility. The Review On August 23, 1988, HRS published a need for 140 short-term psychiatric beds in District 7. Its SAAR issued in January 1989, recommended approval of a total of 137 beds. When the SAAR was amended in March 1989, to include the Charter approval, the total surged to 197 approved beds. Even after First Hospital withdrew its application for 55 beds, the total approved exceeded the published need for the 1993 horizon year by two beds. Numeric Need The short-term psychiatric bed need rule is found at Rule 10- 5.011(1)(o) , F.A.C. "Short-term" is defined as an average length of stay of 30 days or less for adults, and 60 days or less for children and adolescents under 18 years. A favorable need determination will not normally be given to an applicant unless a bed need exists according to sub-paragraph (1)(o)4 of "the rule". Rule 10-5.011(1)(0)4, F.A.C. provides as follows: Bed allocations for acute care short term general psychiatric services shall be based on the following standards: A minimum of .15 beds per 1,000 population should be located in hospitals holding a general license to ensure access to needed services for persons with multiple health These beds shall be designated as short term inpatient hospital psychiatric beds. 20 short term inpatient hospital beds per 1,000 population may be located in specialty hospitals, or hospitals holding a general license. The distribution of these beds shall be based on local need, cost effectiveness, and quality of care considerations. The short term inpatient psychiatric bed need for a Department service district shall be projected 5 years into the future based on the most recent available January or July population estimate prior to the beginning to the respective batching cycle. The projected number of beds shall be based on a bed need ratio of .35 beds per 1,000 population. These beds are allocated in addition to the total number of general acute care hospital beds allocated to each Department District under Paragraph 10-5.011(1)(m). The net need for short term psychiatric beds shall be calculated by subtracting the number of licensed and approved beds from the number of projected beds. The population estimates are based on population projections by the Executive Office of the Governor. Occupancy Standards. New Facilities must be able to project an average 70% occupancy rate for adult psychiatric beds and 60% for children and adolescent beds in the second year of operation, and must be able to project an average 80% occupancy rate for adult beds and 70% for children and adolescent short term psychiatric inpatient hospital beds for the third year of operation. No additional short term inpatient hospital adult psychiatric beds shall normally be approved unless the average annual occupancy rate for all existing adult short term inpatient psychiatric beds in a service district is at or exceeds 75% for the preceding 12 month period. No additional beds for adolescents and children under 18 years of age shall normally be approved unless the average annual occupancy rate for all existing adolescent and children short term hospital inpatient psychiatric beds in the Department district is at or exceeds 70% for the preceding 12 month period. Hospitals seeking additional short term inpatient psychiatric beds must show evidence that the occupancy standard defined in paragraph six is met and that the number of designated short term psychiatric beds have had an occupancy rate of 75% or greater for the preceding year. Unit size. In order to assure specialized staff and services at a reasonable cost, short term inpatient psychiatric hospital based services should have at least 15 designated beds. Applicants proposing to build a new but separate psychiatric acute care facility and intending to apply for a specialty hospital license should have a minimum of 50 beds. The parties do not dispute that application of the formula yields a need for 140 beds, the total published in the applicable fixed need pool. Nor do the parties dispute that the occupancy standard was met, since HRS uses the lower standard of 70% as a threshold for determining whether need should be published. The parties agree that approval of both Charter's and ORMC's applications results in an excess of two beds over the published need. There is substantial dispute as to whether that excess is justified, and as to the composition of the beds as "speciality hospital" or "general hospital" beds. The only provision in agency rules or policy for exceeding bed need calculations is when "not normal" or "special" circumstances exist in the District. HRS' Policy Manual for the Certificate of Need program, dated October 1, 1988, provides in Section 9-6 B. (3): If a qualified applicant exist but the proposed project exceeds the beds or services identified in the fixed need pool, the department may award beds or services in excess of the pool when warranted by special circumstances as defined in rule 10- 5.011(1)(b), 1-4, F.A.C. and, specifically for nursing homes Rule 10-5.011(1)(K)2.j. F.A.C. (Laurel Oaks Exhibit #10, P. 9-2) The referenced sections of Rule 10-5.011(1)(b), F.A.C., relate to the enhancement of access--primarily economic access and access by underserved groups. Access is addressed in Part VII, below. No evidence was presented regarding special problems of access in District 7. Rather, HRS asserts that its excess approval was based on "rounding up" the numbers of beds, and on the favorable occupancy rates in the district. In its SAAR, HRS calculated the following occupancy rates by age cohort in the district: Adult 75.8% Child/Adolescent 74.8%; and in Orange County: Adult 57.4% Child/Adolescent 100. The adult rate is therefore slightly above the 75% minimum in the district, and substantially below the minimum in Orange County. The child/adolescent rate is above the 70% minimum in both the district and county. HRS appropriately does not utilize occupancy in beds other than licensed short term psychiatric bed in calculating its rates as it would be difficult to compute the number of available beds (medical/surgical, long term psychiatric, etc.). The rule specifies that a minimum of .15 beds per 1000 population "should" be allocated to hospital1s holding a general license and that .20 beds per 1000 population may be located in either speciality hospitals or hospitals holding a general license. Of the 140 beds needed in District 7, 75 may be located in a speciality hospital under this formula. 30 speciality beds were awarded to West Lake and are unchallenged. The Charter application for 60 speciality beds exceeds by 15, the 45 speciality beds left to be allocated. The State and Local Health Plans The State Health Plan is dated 1985-1987. Goal 1 is the only portion of the plan that is relevant in this review. It essentially reiterates the need methodology described above, regarding the .35 beds per 1000 population and the 70% and 75% annual occupancy thresholds. The applicable local health plan is the 1988 local health plan for District 7. This plan divides the district into "planning areas": Brevard, Osceola, Seminole and Orange -- the four counties within the district. Planning areas, unlike subdistricts, are more in the nature of guidelines and do not carry the same legal weight as subdistricts. Both applicants are committed to submit data to the local health councils, as provided in recommendation #2. Both applicants have committed to provide a fair share of care to the underserved, although ORMC's commitment is substantially greater and has a proven record to support it. Recommendation #5 provides that no new short-term psychiatric or substance abuse beds shall be approved until all existing beds in the planning area are operating at or above 75% occupancy for the most recent twelve months for which data is available from the local health council. This criteria is barely met when adult and children/adolescent occupancy is combined, and is not met by the occupancy rate for adult beds in Orange County. Financial Feasibility The pro formas of both applicants, which are no more than best guess estimates, are generally reasonable, based upon the experience of the applicants' existing programs. Charter's proposal makes no provision for management fees, although such fees are remitted to the parent company by its subsidiaries and are reported to the Health Care Cost Containment Board. Charter anticipates that it would not incur additional corporate overhead to support this facility if it is built. In recent years ORMC's psychiatric unit has lost money in its operation when overhead is factored into the cost. Its Program Director, Jeffrey Oppenheim, reasonably anticipates the new facility will make a profit, as it will serve a better mix of age cohorts and will offer a more desirable setting than its limited facility now located on the sixth floor of a medical/surgical hospital. The financial feasibility of both applications depends on the programs' ability to attract patients. That ability is not seriously questioned. Both applications have substantial experience in operating financially efficient health care programs. Quality of Care and Accessibility No evidence was presented to challenge either applicant's ability to provide quality care. Nor, however, was the quality of care of existing alternative programs at issue. Geographic access in District 7 is not a problem, and none suggests that the access standard in Rule 10-5.011(1)(o)5.g., F.A.C., is not met (travel time of 45 minutes or less for 90% of the service area population). Charter's inability to provide Medicaid services and its time-limited commitment to serve even 4% indigents amount to only minimal contribution to the economically underserved population. In the past, ORMC has been a receiving facility for Baker Act patients and it anticipates it will again when the psychiatric program has its new quarters. It is only one of two hospitals in Orange County eligible to provide Medicaid services and is the fifth highest provider of charity and Medicaid in the State of Florida, according to Medical Health Care Cost Containment Board data. Impact on Existing Facilities and Competition Positive competition among providers already exists in District 7. There are eleven existing short term psychiatric programs in the four-county area, including both speciality and general hospitals, and adult, children and adolescent programs. Only three obtained an occupancy rate of more than 75% for the fiscal period ending June 1988. The Availability of Health Manpower There is a shortage of nurses, qualified social workers and counsellors in District 7. HMA has experienced problems in recruiting staff at its Orlando facility. Competition for these staff has caused salaries to rise, and consequently the cost of providing services has risen. Turnover results when staff are attracted to new facilities, causing training problems and affecting quality of care. Charter has the corporate resources to conduct effective recruiting, but has no experience recruiting in the Orlando area. ORMC, a large diverse facility, with good opportunity for lateral and upward mobility, has experienced few problems staffing its programs. The Availability of Alternatives Eight of eleven District 7 short term psychiatric facilities have operated below 75% occupancy in the last two years. These under-utilized facilities are plainly alternatives for new projects proposing the same services. Neither applicant is proposing novel or innovative services in psychiatric care. That licensed long term psychiatric facilities such as HMA, are operating short term programs does not justify the approval of new short term beds, but rather suggests these programs could be converted, with little or no capital outlay, into short term programs. Conversion of under-utilized acute are beds to short term psychiatric beds is also an alternative in District 7. Acute care bed occupancy rates in each county of District 7 failed to reach 60% in the most recent 12-month period of available data. The criterion of Rule 10-5.011(1)(o)5.f., F.A.C. favors the conversion of under-utilized beds in other hospital services unless conversion costs are prohibitive. There has been a trend in the last several years away from inpatient care and toward less restrictive treatment modalities. Both applicants acknowledge this trend with their inclusion of partial hospitalization programs in their plans. ORMC has no reasonable alternative to building a new facility if it is to maintain its inpatient psychiatric program. There is an increasing demand for the medical surgical beds it currently occupies on the sixth floor of Sand Lake Hospital. There is no appropriate space in its downtown facilities. Balancing the Criteria Comparative Review and Summary As reflected above, not all of the relevant statutory and rule criteria have been met by these applicants. There remains, however, the planning horizon numerical need for additional short term psychiatric beds. While that need could likely be met with the utilization of beds that are not licensed for the provision of short term care, such a solution frustrates state licensing requirements. Three alternative dispositions exist: to deny both ORMC and Charter applications, leaving an unmet need in this cycle for 86 beds; to grant one application only; or to approve both and exceed the need by two beds. HRS argues that the two-bed difference is of little consequence and that the excessive number of specialty beds if Charter is approved is irrelevant, as no general hospital is currently competing for the beds. It is not possible to conjecture that appropriate general hospital applicants will participate in a near future cycle, but it is certain that if those beds are awarded in this cycle to a specialty hospital, they will not be available in a future cycle. Nothing requires that all beds identified in a fixed pool must be awarded in that cycle. The converse follows when, as here, other considerations weigh against approval of additional beds. Between the two applicants, ORMC more consistently meets the rule and statutory criteria. Although it still proposes a substantial capital outlay, (ORMC) relies on conversion of existing licensed beds and results in less impact on other existing programs. Its contribution to the underserved population is more substantial; it proposes more needed adolescent, rather than adult beds; and it does not violate the .15/.20 general hospital, specialty hospital bed balance. That balance needs to be maintained in this case to insure competition among Medicaid providers. In summary, the evidence supports approval of ORMC's application and denial of Charter's.

Florida Laws (1) 120.57

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CHARTER MEDICAL-ORANGE COUNTY, INC. vs. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, 87-004748 (1987)

Division of Administrative Hearings, Florida Number: 87-004748 Latest Update: Nov. 28, 1988

Florida Laws (2) 120.57, 77.16

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A. H., ON BEHALF OF R. H. vs DEPARTMENT OF MANAGEMENT SERVICES, 16-006837 (2016)

Division of Administrative Hearings, Florida Filed:Jacksonville, Florida Nov. 17, 2016 Number: 16-006837 Latest Update: Feb. 27, 2018

The Issue At issue in this proceeding is whether Respondent’s denial of Petitioner’s Level II appeal should be upheld or whether the inpatient residential mental health services provided to R.H. by McLean Hospital’s 3 East Dialectical Behavior Therapy (“DBT”) program from September 9, 2015, through September 22, 2015, and again from October 15, 2015, through December 11, 2015, were “medically necessary” and therefore covered under the terms of the State Employees’ PPO Group Health Insurance Plan.

Findings Of Fact DSGI is the state agency responsible for administration of the state group insurance program, pursuant to section 110.123, Florida Statutes. Petitioner, A.H., is a State of Florida employee and was insured through the State Employees’ PPO Group Health Insurance Plan (the “Plan”). R.H., the child of A.H., was eligible for coverage under A.H.’s health insurance policy as of September 1, 2015. Pursuant to contract, Florida Blue acts as DSGI’s third-party medical claims administrator for employee health insurance benefits. New Directions is Florida Blue’s subcontractor and third-party administrator for mental health and substance abuse reviews and authorizations. “Utilization management” is the process of reviewing a service claim to determine whether the service is a covered benefit under the Plan and whether the service is “medically necessary” as that term is defined in the Plan. In cases involving mental health or substance abuse services, the service must also satisfy the more detailed and specific coverage guidelines, titled “Medical Necessity Criteria,” established by New Directions.1/ Consistent with general practice in the field, the “medical necessity” criteria of the New Directions document observe the following levels of care, in increasing order of intensity: psychiatric outpatient; psychiatric intensive outpatient; psychiatric partial hospitalization; psychiatric residential; and psychiatric acute residential. In the interests of conserving medical resources and preserving patient liberty, safety, and dignity, every effort is made to place patients in the least intensive level of care consistent with effective treatment of their presenting condition. R.H., a female who was 15 years old during the period relevant to this proceeding, has been diagnosed with borderline personality disorder and has a history of eating disorders. Her treating psychologist in Florida, Nicolle Arbelaez Lopez, noted that R.H. was also being treated for generalized anxiety disorder. R.H. had an inpatient admission to the Renfrew Center in Florida for eating disorder treatment in May 2015. R.H. transitioned to partial hospitalization over the summer, followed by a step down to the Renfrew Center's intensive outpatient program, then by a step up back to partial hospitalization when her eating disorder behaviors worsened. Though less intensive than a full residential admission, intensive outpatient treatment and partial hospitalization allow patients to receive comparatively intensive treatment while remaining in their home environment.2/ R.H.’s final discharge from the Renfrew Center was on August 21, 2015. At the time she was admitted to McLean Hospital’s 3 East DBT program, R.H. had a recent history of engaging in superficial cutting of her arm. On August 30, 2015, R.H. intentionally hit herself in the hand with a hammer. R.H.’s mother took her to the emergency room for treatment and told the treating personnel that R.H. had fallen down some stairs. The hammer blow caused swelling and bruising but no broken bones. R.H. was also continuing to purge and restrict her food intake. R.H.’s treating psychiatrist, Dr. Thania V. Quesdada, and her psychologist, Ms. Lopez, both urged that she be admitted to one of three nationally-recognized immersion DBT programs. Her family chose the program at McLean Hospital. DBT is a cognitive behavioral treatment that was originally developed to treat chronically suicidal individuals diagnosed with borderline personality disorder, though it is now employed for treatment of other conditions, including eating disorders. DBT teaches behavioral coping skills such as mindfulness, distress tolerance, interpersonal effectiveness, and emotional regulation. At the hearing, DSGI did not dispute the general efficacy of DBT treatment. However, DSGI did dispute whether R.H.’s presentation merited “immersion” DBT, i.e., a residential inpatient admission. McLean Hospital’s 3 East DBT program is self-pay and requires a minimum stay of 28 days. The program does not accept insurance and does not assist patients with insurance reimbursement efforts. Because of its stance on insurance, the 3 East DBT program is obviously not an in-network provider under the Plan. Prior to admission, Petitioner was aware that the 3 East DBT program did not accept insurance. R.H. was in residential treatment at McLean Hospital from September 9, 2015, through September 22, 2015. While at McLean Hospital, R.H. engaged in restricting and purging behaviors that led to medical instability. She was discharged to Cambridge Eating Disorder Center on September 23, 2015. She remained at the Cambridge Center until October 15, 2015. R.H.’s stay at the Cambridge Center was pre-certified by New Directions and is not at issue in this proceeding. On October 15, 2015, R.H. returned to McLean Hospital, again as a residential inpatient admission. She remained at McLean Hospital until her discharge on December 11, 2015. The total billed amount for R.H.’s two stays at McLean Hospital was $96,950, which was paid by the family out-of- pocket. Section 3-5 of the Plan sets forth the following under the heading “Mental Health and Substance Dependency Services”: “Physician office visits, Intensive Outpatient Treatment, Inpatient and Partial Hospitalization and Residential Treatment Services are covered based on medical necessity.” The general definition of “Medically Necessary” is set forth at section 15-4 of the Plan: [s]ervices required to identify or treat the Illness, injury, Condition, or Mental and Nervous Disorder a Doctor has diagnosed or reasonably suspects. The service must be: consistent with the symptom, diagnosis and treatment of the patient’s Condition; in accordance with standards of good medical practice; required for reasons other than convenience of the patient or the Doctor; approved by the appropriate medical body or board for the illness or injury in question; and at the most appropriate level of medical supply, service, or care that can be safely provided. The fact that a service, prescription drug, or supply is prescribed by a Doctor does not necessarily mean that the service is Medically Necessary. Florida Blue, CVS/Caremark, and DSGI determine whether a service, prescription drug, or supply is Medically Necessary. New Directions’ Medical Necessity Criteria guidelines provided the following admission criteria for psychiatric residential admissions: Must meet all of the following: A DSM diagnosis is the primary focus of active, daily treatment. There is a reasonable expectation of reduction in behaviors/symptoms with treatment at this level of care. The treatment is not primarily social, custodial, interpersonal, or respite care. The member has documented symptoms and/or behaviors that are a significant deterioration from baseline functioning and create a significant functional impairment in at least three (3) of the following areas: primary support social/interpersonal occupational/educational health/medical compliance ability to maintain safety for either self or others Must have one of the following: The member’s family members and/or support system demonstrate behaviors that are likely to undermine goals of treatment, such that treatment at a lower level of care is unlikely to be successful. This lack must be situational in nature and amenable to change as a result of the treatment process and resources identified during a residential confinement. The member has a documented history of an inability to be managed at an intensive lower level of care. There is a recent (in the last six months) history of multiple brief acute inpatient stays without a successful transition to a lower level of care, and at risk of admission to inpatient acute care. New Directions’ Medical Necessity Criteria guidelines provided the following admission criteria for eating disorder residential admissions: Must meet 1-4 and either 5, 6, or 7 A DSM diagnosis found in the Feeding and Eating Disorder section is the primary focus of active, daily treatment. There is a reasonable expectation of reduction in behaviors/symptoms with treatment at this level of care. The treatment is not primarily social, custodial, interpersonal, or respite care. The member has documented symptoms and/or behaviors that are a significant deterioration from baseline functioning and create a significant functional impairment in at least three (3) of the following areas: primary support social/interpersonal occupational/educational health/medical compliance ability to maintain safety for either self or others Must have one of the following: The member’s family members and/or support system demonstrate behaviors that are likely to undermine goals of treatment, such that treatment at a lower level of care is unlikely to be successful. This lack must be situational in nature and amenable to change as a result of the treatment process and resources identified during a residential confinement. The member has a documented history of an inability to be managed at an intensive lower level of care. There is a recent (in the last six months) history of multiple brief acute inpatient stays without a successful transition to a lower level of care, and at risk of admission to inpatient acute care. There are active biomedical complications that require 24-hour care, including, but not limited to: Adults Children/Adolescents Pulse <40 <50 Blood Pressure <90/60 <80/50 Orthostatic changes in BP Systolic: >20 point drop Systolic: > 20 point drop (Supine to standing) Diastolic: > 10 point drop Diastolic: > 10 point drop Potassium < 3 meq/l Hypokalemia Body temperature < 97 F Abnormal core temperature Electrolytes/ serum chemistry Significant deviation from normal Significant deviation from normal Must have either a. or b.: A low body weight that can reasonably lead to instability in the absence of intervention as evidenced by one of the following: Less than 85% of IBW or a BMI less than 16.5. Greater than 10% decrease in body weight within the last 30 days. In children and adolescents, greater than 10% decrease in body weight during a rapid growth cycle. Persistence or worsening of eating disorder behavior despite recent (with [sic] the last three months), appropriate therapeutic intervention in a structured eating disorder treatment setting. If PHP or IOP is contraindicated, documentation of the rationale supporting the contraindication is required. One of the following must be present: Compensatory behaviors (binging, purging, laxative abuse, excessive exercise, etc.) have caused significant physiological complications. Compensatory behaviors occur multiple times daily and have failed to respond to treatment at a lower level of care and acute physiologic imbalance can reasonably be expected. New Directions’ contact notes for this case indicate that it was called by someone named “Rachelle” on behalf of A.H.’s family on September 3, 2015. This person asked about the authorization process for McLean Hospital. No witness was presented who had direct knowledge of the contents of this conversation. The note indicates that “Rachelle” was advised that any authorization process must be initiated with New Directions by McLean Hospital. On September 9, 2015, the day R.H. was admitted to McLean Hospital, Florida Blue received what its notes reference as a “critical inquiry” message regarding this admission. A Florida Blue employee phoned the number attached to the message but discovered it was not for A.H. but for “someone at AllState Insurance who is out of the office.” (This person turned out to be Pearl Harrison, R.H.’s grandmother and qualified representative in this proceeding, who had not yet obtained a release to receive confidential medical information concerning R.H.). No number for A.H. could be found. Florida Blue contacted New Directions, which confirmed that no request for pre-authorization3/ had been received from McLean Hospital or the member. R.H.’s stays at McLean Hospital were not emergency admissions. The term “medical emergency” was not specifically defined in the 2015 Plan, but expert testimony at the hearing established that it is a term of common meaning and usage in the medical community. An emergency situation is one in which there is an immediate risk of death, serious bodily harm, or creation of an irreversible condition. If care is not administered immediately, the person will harm herself or someone else. Michael Shaw, the utilization management team leader for New Directions, explained that emergency care is not provided at the residential level of care, but in an inpatient setting under lock and key. The medical records indicated that R.H.’s last incident of self-harming behavior occurred about a week prior to her admission to McLean Hospital. Her injuries were superficial and she was in no immediate danger or risk of irreversible damage. Section 7-1 of the Plan provides for hospital admissions, including the following pertinent language as to non-emergency admissions to non-network hospitals and pre- certification for stays at non-network hospitals: Non-Network Hospital: Non-emergency Admission Every non-emergency admission to a non- network Hospital must be pre-certified. This means that before services are provided Florida Blue must certify the Hospital admission and provide the number of days for which certification is given. Precertification of non-network Hospital stays is your responsibility, even if the Doctor admitting you or your dependent to the Hospital is a Network Provider. Failure to obtain pre-certification will result in penalties (higher out-of-pocket costs). For more information on penalties, see “If You Do Not Pre-Certify Your Stay” within this section below. To pre-certify your stay in a non-network Hospital, ask your Doctor to call Florida Blue at (800) 955-5692 before your Hospital admission and provide the reason for hospitalization, the proposed treatment or surgery, testing, and the number of Hospital days anticipated. Florida Blue will review your Doctor’s request for admission certification and immediately notify your Doctor or the Hospital if your admission has been certified and the number of days for which certification has been given. If the admission is not certified, your Doctor may submit additional information for a second review. If your Hospital stay is certified and you need to stay longer than the number of days for which certification was given, your Doctor must call Florida Blue to request certification for the additional days. Your Doctor should make this call as soon as possible. * * * If You Do Not Pre-Certify Your Stay: Non- Network Hospital Benefits for covered services will be reduced by 25 percent of the covered charges, not to exceed a maximum benefit reduction of $500 IF you are admitted to a participating Hospital (Payment for Hospital Services or PHS Provider)[4/] that is not part of the Preferred Patient Care (PPC) Network and admission certification has not been requested on your behalf or the request is denied. This Plan will not pay room and board benefits for your first two days of hospitalization IF your non-network Hospital admission is denied, but you are admitted to a non-network Hospital anyway. This Plan will not pay room and board benefits for your entire Hospital stay IF you are admitted to a non-network Hospital without having your Doctor call prior to the admission. This Plan will not pay room and board benefits for the additional days that were not certified IF your non-network Hospital admission is certified but your stay is longer than the number of days for which the admission was certified. The Plan’s pre-certification requirement was not met. Neither A.H. nor McLean Hospital requested pre-certification. Mr. Shaw testified that he spoke to three different people at McLean Hospital, all of whom stated that the 3 East DBT program does not accept or work with insurance. Mr. Shaw was unable to generate the paperwork needed to begin the pre-certification process because McLean Hospital declined to share with him the necessary clinical information about R.H.5/ Although pre-certification was not obtained for R.H.’s stays at McLean Hospital, Florida Blue conducted a post-service review to determine whether the claim was eligible for reimbursement. Petitioner submitted a request for a Level I appeal pursuant to Section 12 of the Plan, under which a person denied benefits or payment of a claim for medical services may obtain a review by Florida Blue. Petitioner submitted a package of R.H.’s medical records for review. Prest & Associates, Inc., a URAC-approved independent review organization,6/ was retained to conduct an independent review of Petitioner’s claim. Dr. Barbara Center, a staff psychiatrist with Prest & Associates, performed a review designed to determine the medical necessity of R.H.’s stays at McLean Hospital. Dr. Center is board-certified in General Psychiatry, Child and Adolescent Psychiatry, and Addiction Medicine. Dr. Center reviewed the claim in terms of the New Directions criteria for psychiatric residential admissions and for eating disorder residential admissions. She performed two reviews, one for the admission starting on September 9, 2015, and another for the admission starting on October 15, 2015. Dr. Center stated that the McLean Hospital medical records provided by Petitioner gave a detailed description of R.H.’s history of present illness, past psychiatric history, and other elements of her history that were adequate for making a medical necessity determination. As to the September 9 admission, Dr. Center concluded that medical necessity criteria were not met for either a psychiatric residential or an eating disorder residential admission. As to the psychiatric residential criteria, Dr. Center concluded that R.H.’s admission failed to satisfy criteria 3, 4, and 5. Dr. Center testified that criterion 4 looks at symptoms and behaviors that represent a significant deterioration from the patient’s baseline functioning in several areas. R.H.’s primary support structures were stable. Her mother was clearly involved in her care and had the support of other family members. Dr. Center stated that the medical records showed no sign of substantial social or interpersonal deterioration, aside from some typical difficulty in starting high school. R.H. was having no medical instability at the time of admission. She was not at a dangerously low body weight. She had a recent onset of self-harming behaviors, but there was no documentation of acute risk issues that warranted placement in 24-hour care. As to criterion 5, Dr. Center testified that the records showed no indication that R.H.’s family and support system was unsupportive or unable to take her to treatment and participate in her care. There was no documentation that R.H. could not progress in a less intensive level of care. Dr. Center noted that R.H.’s prior treatment for eating disorders had been at varying levels of care and that R.H. had not had multiple brief acute inpatient stays. Criterion 3 is a diagnosis of exclusion, meaning that if there is no apparent medical necessity for the residential placement, then the reason must be “primarily social, custodial, interpersonal or respite care.” Dr. Center found in the records no support for a 24-hour residential placement. She noted that R.H.’s self-injury was of a recent onset and that McLean Hospital had ruled out any immediate prospect of self-injury or serious threat to other people. Cutting is not uncommon among adolescents and does not rise to the level of requiring residential care. Mental health providers distinguish between self-injurious behaviors and suicidal ideation, and McLean Hospital did not describe R.H. as suicidal. Dr. Center testified that, at the request of Mr. Shaw, she also reviewed R.H.’s admission in terms of the New Directions eating disorder residential criteria. Dr. Center noted that R.H. was not at a dangerous body weight (122 pounds, with a BMI of 22.2) at the time of her admission on September 9. There was no indication of medical instability or of out-of- control eating disorders requiring 24-hour care. Dr. Center testified that DBT is routinely taught on an outpatient basis and that she recommended outpatient treatment for the stay beginning on September 9. She opined that R.H. did not meet numbers 3 through 7 of the New Directions eating disorder residential criteria. As to the McLean Hospital admission beginning on October 15, 2015, Dr. Center recommended intensive outpatient treatment. Dr. Center knew that R.H. had been transitioned from McLean Hospital to the Cambridge Center to address the eating disorder as her primary symptom. Dr. Center felt that continuing R.H. in an intensive outpatient setting would help her stabilize and maintain the progress she had made at the Cambridge Center. Dr. Center stated that a basic tenet of medical care, and especially psychiatric care, is that the patient be treated in the least restrictive setting possible under the circumstances. She stated that it is always best to treat people in the environment they live in. Treatment in the 24- hour residential setting removes the patient from the stressors she will have to deal with when she goes home. Upon her readmission to the McLean Hospital from Cambridge Center, R.H. denied suicidal ideation and homicidal ideation, and the record disclosed nothing to indicate suicidal thoughts. R.H. denied auditory or visual hallucinations and her mood was described as “euthymic,” i.e., essentially normal. Dr. Center acknowledged that the medical record showed that R.H. had been in intensive outpatient treatment for her eating disorder at the Renfrew Center in Florida from July 23 through August 21, 2015, with limited success. Dr. Center stated that the issue for R.H. had recently changed from her eating disorder to her self-harming behavior and believed that an intensive outpatient program focusing on skills to deal with self-injurious behaviors would be the appropriate placement under the circumstances. Dr. Center also acknowledged that her review did not include the records of R.H.’s treating psychiatrist and therapist during her stay at Renfrew, and that their notes indicated that R.H.’s condition had regressed while in intensive outpatient care. Dr. Center testified that these records might have persuaded her to recommend a higher level of care, such as a partial hospital program, but that she still would not have recommended residential placement. After Dr. Center rendered her opinion that R.H.’s residential stays at McLean Hospital were not medically necessary, the claim was reviewed by Dr. Frank Santamaria, Florida Blue’s care management medical director. In rendering his opinion, Dr. Santamaria reviewed the medical records sent by Petitioner and McLean Hospital, the log of contact notes kept by New Directions, and Dr. Center’s report.7/ He testified that the available records were adequate to allow him to render an opinion as to medical necessity. Dr. Santamaria concluded that, as to the New Directions criteria for psychiatric residential admissions, R.H. failed to meet criteria 3, 4, and 5. He opined generally that when assessing the need for a residential stay, he is looking for someone who is at risk of self-harm or harming others or who has an acute severe psychiatric condition such as a psychotic disorder that requires confinement. Dr. Santamaria noted that R.H.’s eating disorder was not the primary concern at the time of her admissions to McLean Hospital; however, because the eating disorder was occurring at the same time as the psychiatric problem, he was also looking for medical manifestations of the eating disorder, such as severe weight loss affecting blood chemistry. Criterion 4 requires documented symptoms and/or behaviors that are a significant deterioration from baseline functioning and create a significant functional impairment in at least three of five listed areas. Under area 4a, “primary support,” Dr. Santamaria noted that R.H. had good support from her mother and grandmother. He did not believe that primary support was a problem.8/ As to area 4b, “social/interpersonal,” the notes indicated that R.H. recently had an altercation with a friend. Dr. Santamaria did not find such an altercation out of the ordinary for a 15-year-old and thus found no functional impairment under 4b. Area 4c, “occupational/educational,” appeared to pose no problem because the records indicated that R.H. was an A-B student, despite her rocky first week of high school. As to area 4d, “health/medical compliance,” Dr. Santamaria noted that R.H. had been compliant with medical instructions and her family had been good about seeking care for her. As to area 4e, “ability to maintain safety for either self or others,” Dr. Santamaria acknowledged that R.H. had hit her hand with a hammer and acted in other self-injurious ways, chiefly superficial cutting. He testified that such behaviors are not uncommon in younger populations and do not necessarily make the person a candidate for residential care. Self-injury alone does not satisfy the criterion, unless there is a concern for suicide or homicide. The hammer incident occurred in August, at least one week before R.H.’s admission to McLean Hospital. The McLean Hospital admission note of September 9, 2015, indicates no reported history of suicidal thinking. Dr. Santamaria found no documentation to indicate R.H. was aggressive against herself or others. She had no acute conditions such as psychotic disorders. Dr. Santamaria noted that even if area 4e were deemed to have been met, criterion 4 requires significant functional impairment and degradation from baseline functioning in at least three of the listed areas, and that R.H. at most satisfied one area of the criterion. Criterion 5 of the New Directions psychiatric residential criteria requires that one of three conditions relating to the patient’s support system or treatment history be met. Dr. Santamaria concluded that none of the three conditions were met. Condition 5c requires a recent history of multiple brief acute inpatient stays without a successful transition to a lower level of care. Dr. Santamaria conceded that the record he examined disclosed little information about prior therapies that had been tried with R.H., but he concluded that the record was sufficient to confirm that R.H. did not have multiple brief inpatient stays. He was reasonably confident that McLean Hospital would have documented such stays had they occurred because they would be a very significant part of her history. Dr. Santamaria also noted that R.H. had been able to transition to an intensive outpatient program from her inpatient admission to the Renfrew Center in May 2015. Condition 5a requires that family members or the patient’s support system demonstrate behaviors that are likely to undermine the goals of treatment, such that treatment at a lower level of care is unlikely to be successful. The record disclosed that R.H.’s mother, who was her custodial guardian, had a history of substance abuse but had gone through a rehabilitation program, attended Narcotics Anonymous regularly, and had been sober for one year at the time of R.H.’s October 15, 2015, admission to McLean Hospital. Dr. Santamaria testified that if R.H.’s mother were currently using drugs and R.H. had nowhere else to go, then condition 5a might be met. However, the actual situation presented by the medical record did not establish that R.H. was living in an unsafe environment that could undermine her treatment. As to condition 5b, a documented history of an inability to be managed at an intensive lower level of care, Dr. Santamaria concluded that R.H. had responded to various therapies in the past. As noted above, criterion 3 of the New Directions psychiatric residential criteria is exclusionary, i.e., if the placement appears not to be medically necessary, then one begins to seek another motivation, such as the desire for a change of pace or a respite for the family. Dr. Santamaria noted that DBT does not require placement at the residential level. It can be done at an intensive outpatient or partial hospitalization level, both of which are lower levels of care than residential.9/ This fact made Dr. Santamaria suspect that the prime motive for R.H.’s placement may have been custodial. Dr. Santamaria testified that he also analyzed R.H.’s admission under the New Directions eating disorder residential criteria. He stated that he could not be certain from the record whether McLean Hospital was treating R.H.’s eating disorder, as well as providing DBT, but he knew that McLean Hospital was mindful of the eating disorder. He also knew that R.H.’s transfer to the Cambridge Center was partly because her eating disorder was becoming worse. Dr. Santamaria concluded that R.H. did not satisfy criteria 3 through 7 for an eating disorder residential admission. Dr. Santamaria testified that R.H. did not meet eating disorder residential criteria 3 through 5 for the same reasons she did not meet the identical criteria 3 through 5 of the psychiatric residential criteria. Criterion 6 concerns biomedical complications of an eating disorder. Dr. Santamaria reviewed the medical records and concluded that R.H. presented none of the complications that would require 24-hour care at the time of her admission on September 9, 2015. Dr. Santamaria likewise found that R.H. satisfied neither factor 7a nor 7b of Criterion 7. As to 7a, R.H. did not present with a low body weight and there was no documentation that she had lost 10 percent of her body weight in the last 30 days. As to 7b, there was no evidence that R.H.’s “compensatory behaviors,” i.e., binging and purging, had caused “significant physiological complications” or that such behaviors occurred multiple times daily and did not respond to treatment “at an intensive lower level of care.” Dr. Santamaria testified that his analysis as to the October 15, 2015, admission was identical to that for the September 9, 2015, admission. As to both admissions, he believed that intensive outpatient was the appropriate level of care. Dr. Santamaria defined “intensive outpatient” as three hours of intensive therapy for at least three days per week. He believed that this level of care could address all of R.H.’s issues, including her self-injurious behavior. Dr. Santamaria concluded that if R.H. tried the intensive outpatient level of care and failed, then a higher level could be considered. Like Dr. Center, he stated that he might have recommended a partial hospitalization setting had he known that intensive outpatient had been tried and failed, but he still would not have recommended a 24-hour residential admission. Petitioner’s presentation implied that Florida Blue and/or Prest & Associates base their coverage decisions on financial considerations rather than strictly on the merits of the claims. Dr. Center and Dr. Santamaria both testified that they had no incentive, financial or otherwise, to deny a claim for reimbursement. Their testimony on this point is credible. Petitioner offered no direct evidence that Florida Blue or Prest & Associates directly pressure their physician employees to reject meritorious claims, and there is no evidence that Dr. Santamaria or Dr. Center based their recommendations on anything other than their assessment of R.H.’s medical records in light of the relevant medical necessity criteria. Petitioner raised questions about the completeness of the records examined by Dr. Santamaria and Dr. Center and sounded a skeptical note as to the diligence of the physicians’ efforts to obtain additional documentation. As found above, both Dr. Santamaria and Dr. Center testified that they had adequate documentation to render an opinion as to medical necessity in this case. Both physicians stated that in other cases they have taken additional steps to obtain missing information, including making peer-to-peer calls to the treating physicians or reaching out to the case managers, but that no such steps were necessary in this case. Both physicians conceded that not all of the medical records were available to them at the time of their reviews. They did not have records from R.H.’s stays at the Renfrew Center and the Cambridge Center or the notes of R.H.’s treating physicians in Florida. Both Dr. Center and Dr. Santamaria credibly testified that nothing in these additional records would have changed their opinion as to the medical necessity of residential treatment for R.H. Section 12 of the Plan, which sets forth the appeal process for a denied claim, expressly states: “Your appeal may include any additional documentation, information, evidence or testimony that you would like reviewed and considered during the appeal process.” This language is included in the explanations for both the Level I and Level II appeals. Nothing prevents the member from providing any documentation whatsoever during the appeal process. Dr. Center and Dr. Santamaria are physician reviewers, not medical investigators. If something Petitioner asserted to be relevant to the decision was missing from the files, it was not the fault of the reviewing physicians. It is ultimately the member’s responsibility to provide appropriate documentation for review. By letter dated April 5, 2016, Florida Blue notified Petitioner that it “remains unable to approve additional coverage and/or payment for the Residential Treatment.” The letter set forth the following rationale for the denial: Per the State Employees’ PPO Plan Booklet and Benefits Document page 5-5: “Services or supplies that are not Medically Necessary, as determined by Florida Blue and/or CVS Caremark clinical staff and Division of State Group Insurance, are non- covered.” Specifically, coverage for the Mental Health (Eating Disorder) Residential stays is denied as it does not meet the definition of medical necessity. This is for hospital stay on and after 09/09/2015 and 10/15/2015. The final decision to proceed with the requested services is between the provider and the member. Records show that the member was not deemed to be a present risk to self or to others. Though the member had a preoccupation with weight sand [sic] eating, there was no evidence of inability to adequately care for self with functioning in multiple sphere areas, including stabilization of the eating disorder issues. There was no report of medical instability or psychosis. The member was in a body weight range. The member was described as having her eating disorder symptoms under control. From the clinical evidence, this member could have been safely treated at each occasion at a lesser level of care such as in an eating disorder intensive outpatient setting. This review was done using New Directions Clinical Care criteria and is based on the opinion of a board certified psychiatrist. Services that are not medically necessary are not covered under your health benefit plan. The denial letter provided Petitioner with information regarding the Level II appeal process to DSGI, including a reference to the pertinent section of the Plan. The denial letter reiterated that Petitioner could submit any information or documentation that Petitioner believed could assist in DSGI’s review of the appeal. Petitioner submitted a request for a Level II appeal to DSGI on May 23, 2016. The Level II appeal was reviewed by DSGI’s legal nurse coordinator, Kathy Flippo. Ms. Flippo reviewed all of the documents reviewed by Dr. Center and Dr. Santamaria, plus additional records submitted by Petitioner with the Level II appeal request. Ms. Flippo determined that the stays at issue were non-emergency admissions that required pre-certification and that the pre-certification requirements of the Plan were not met. Ms. Flippo reached the same conclusions as Dr. Center and Dr. Santamaria regarding the New Directions psychiatric residential criteria. Ms. Flippo concluded that R.H. did not meet criteria 3, 4, or 5. Ms. Flippo testified that she did not review the case pursuant to the New Directions eating disorder residential criteria because Petitioner’s Level II appeal addressed only the psychiatric issues and because R.H.’s eating disorder stay at the Cambridge Center was covered by Florida Blue. By letter dated July 29, 2016, signed by Tami Fillyaw, director of DSGI, Petitioner was informed that the Level II appeal had been denied. The letter informed Petitioner of his rights under the Plan to file a petition for a formal or an informal hearing contesting the denial of the appeal and/or to request a binding external review from an Independent Review Organization (“IRO”).10/ Petitioner requested both an administrative hearing and an external review.11/ The external review was conducted under the auspices of the Medical Review Institute of America, Inc. (“MRIoA”), a URAC-accredited external review network. The MRIoA assigned a physician whom it stated is board-certified by the American Board of Psychiatry and Neurology in the specialties of General Psychiatry and Child & Adolescent Psychiatry.12/ The external review upheld the adverse determinations regarding coverage for the McLean Hospital stays. In its decision letter dated November 11, 2016, the MRIoA provided the following relevant clinical summary and findings: At the time in question, the patient was a 15 year old female with a variety of difficulties related to depression, anxiety, eating disorder symptoms, and symptoms of obsessive compulsive disorder (OCD) with self-harming behaviors. This review has to do with a question of whether residential treatment center (RTC) level of care (LOC) for two episodes of service 9/9/15-9/22/15 and 10/15/15-12/11/15 met the plan criteria for medical necessity. It is noted that the patient was treated in a special eating disorders program on the dates between these two episodes. * * * The patient’s presentation did not meet the plan criteria for medical necessity for the dates in question. Specifically, the patient did not meet criteria #5 of the Admission Criteria. The patient is noted to have a caring and effective support system that would have supported a less intensive level of care. There was no recent history of inability to be effectively treated at an intensive level of service below residential treatment center (RTC) level of care (LOC), and there was no recent history of inability to transition from inpatient treatment into a less intensive level of care. At the time of admission to residential treatment, it is clear that the patient struggled with mood dysregulation along with episodes of food restriction and self- harming behaviors. She was not responding to attempts at outpatient treatment. The residential program in question was sought out specifically due to its approach to the utilization of DBT (dialectical behavior therapy). However, there is no indication that the patient could not have responded to attempts to escalate her treatment in the outpatient setting through the use of either intensive outpatient or partial hospitalization services. In particular, the patient could have been involved in a formal DBT program without utilization of residential treatment. Her symptom severity for the dates in question was not of a severity to require the use of round the clock observation and treatment. As a result, there was no medical necessity for residential treatment center (RTC) level of care (LOC). * * * The appeal letters from the patient’s family, outpatient providers, and residential facility discuss the need for residential treatment due to the patient’s symptoms severity, particularly the patient’s episodes of self-harming behavior and the need for her to participate in the immersive DBT program utilized at the residential program in question. The patient’s need for more intensive treatment is acknowledged. However, the patient’s recent treatment history was one of outpatient treatment with a previous history of residential treatment for eating disorder symptoms. For the DOS in question, the patient could have obtained appropriate and effective DBT in a less restrictive setting, such as either a partial hospitalization program (PHP) or an intensive outpatient program (IOP). Based on the above, the previous determination has been upheld. At the hearing, Petitioner complained that, prior to receiving the letter denying the Level II appeal, he had no inkling that medical necessity determinations were based on criteria produced by New Directions. The Plan’s definition of “medically necessary” does not reference the fact that Florida Blue relies on the New Directions criteria for medical necessity determinations in psychiatric and eating disorder admissions. Petitioner basically argues that not having the precise language of the New Directions medical necessity criteria deprived him and the medical providers of the ability to frame the coverage requests in such a way as to satisfy the criteria. The record evidence shows Florida Blue does not make the New Directions medical necessity criteria directly available to its members. In fact, New Directions is nowhere mentioned in the Plan. Witnesses for DSGI correctly stated that anyone can download the criteria from the New Directions website, but Petitioner pointed out that one must be aware the criteria exist before one can download them. If this case is typical, it appears that a Florida Blue member must be denied coverage and go through the appeal process before Florida Blue makes him aware of precisely how the determination of medical necessity is made. Dr. Santamaria testified that Florida Blue does not expect its members to have any knowledge of the New Directions criteria or to “understand all the medical jargon.” The member is expected to present Florida Blue with the best and most accurate medical information available (preferably before the services are rendered) and rely on Florida Blue to make the decision. Dr. Santamaria stated, “Your role is not to do the utilization management. That’s my role. Your role is, if you disagree with a coverage determination, to appeal it and to even have your doctor speak on your behalf or write a letter or do whatever. It’s not your role to access the documents and to use them on your own. That--that’s not what they were created for.” Dr. Santamaria emphasized that the member’s “role” is not to “meet criteria” but to provide Florida Blue with information sufficient to allow its experts to apply the criteria. While his phrasing may be condescending, Dr. Santamaria’s statement is basically accurate: the medical records determine whether the criteria have been met. Petitioner’s awareness of the particulars of the criteria would not change the substance of the medical record. The undersigned tends to agree with Petitioner that Florida Blue’s process could be more transparent. However, Petitioner failed to show how the outcome would have been different if the New Directions medical necessity criteria had been available to him or McLean Hospital. Every expert who examined the medical records agreed that R.H. did not meet the criteria for medical necessity. Their opinions are credited. Ms. Flippo emphasized that Florida Blue did not deny coverage merely because McLean Hospital’s 3 East DBT program was self-pay. If the member had been able to obtain pre- certification for hospitalization and a proper bill had been presented to Florida Blue, it would have been covered at the allowable non-network coverage amount. Ms. Flippo also stated that even if pre-certification had been obtained, Florida Blue would certainly not have covered the 70 days that R.H. spent in McLean Hospital. Ms. Flippo had never seen more than 15 days at a time approved, even for members who were floridly psychotic and admitted under the Baker Act. With modern treatments and medications, it is seldom necessary to keep patients at a residential level of care for months at a time. All of the experts agreed that DBT is more commonly provided on an outpatient basis. Additionally, Mr. Shaw pointed out that the ability of the insurer to pay the non-contracted, non-network rate to the hospital is contingent on the hospital’s willingness to accept insurance payments. McLean Hospital’s 3 East DBT program did not accept insurance. Mr. Shaw succinctly stated, “We’re not obligated to pay you back because you made the choice to go to a facility that takes your money but not ours.”

Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Services, Division of State Group Insurance, issue a final order denying Petitioner’s claim for coverage under the State Employees’ PPO Plan for R.H.’s residential treatment at McLean Hospital from September 9, 2015, to September 30, 2015, and October 15, 2015, to December 11, 2015. DONE AND ENTERED this 17th day of May, 2017, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of May, 2017.

Florida Laws (3) 110.123, 120.57, 120.68

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SELECT SPECIALTY HOSPITAL-PALM BEACH, INC. vs AGENCY FOR HEALTH CARE ADMINISTRATION, 03-002486CON (2003)

Division of Administrative Hearings, Florida Filed:Tallahassee, Florida Jul. 09, 2003 Number: 03-002486CON Latest Update: Jun. 08, 2005

The Issue Kindred Hospitals East, LLC ("Kindred") and Select Specialty Hospital-Palm Beach, Inc. ("Select-Palm Beach"), filed applications for Certificates of Need ("CONs") with the Agency for Health Care Administration ("AHCA" or the "Agency") seeking approval for the establishment of long-term care hospitals ("LTCHs") in Palm Beach County, AHCA District 9. Select-Palm Beach's application, CON No. 9661, seeks approval for the establishment of a 60-bed freestanding LTCH in "east central" Palm Beach County about 20 miles south of Kindred's planned location. Kindred's application, CON No. 9662, seeks approval for the establishment of a 70-bed LTCH in the "north central" portion of the county. The ultimate issue in this case is whether either or both applications should be approved by the Agency.

Findings Of Fact Long Term Care Hospitals Of the four classes of facilities licensed as hospitals by the Agency, "Class I or general hospitals," includes: General acute care hospitals with an average length of stay of 25 days or less for all beds; Long term care hospitals, which meet the provisions of subsection 59A-3.065(27), F.A.C.; and, Rural hospitals designated under Section 395, Part III, F.S. Fla. Admin. Code R. 59A-3.252(1)(a). This proceeding concerns CON applications for the second of Florida's Class I or general hospitals: LTCHs. A critically ill patient may be admitted and treated in a general acute care hospital, but, if the patient cannot be stabilized or discharged to a lower level of care on the continuum of care within a relatively short time, the patient may be discharged to an LTCH. An LTCH patient is almost always "critically catastrophically ill or ha[s] been." (Tr. 23). Typically, an LTCH patient is medically unstable, requires extensive nursing care with physician oversight, and often requires extensive technological support. The LTCH patient usually fits into one or more of four categories. One category is patients in need of pulmonary/respiratory services. Usually ventilator dependent, these types of LTCH patients have other needs as well that requires "complex comprehensive ventilator weaning in addition to meeting ... other needs." (Tr. 26). A second category is patients in need of wound care whose wound is life-threatening. Frequently compromised by inadequate nutrition, these types of LTCH patients are often diabetic. There are a number of typical factors that may account for the seriousness of the wound patient's condition. The job of the staff at the LTCH in such a case is to attend to the wound and all the other medical problems of the patient that have extended the time required for care of the wound. A third category is patients with some sort of neuro-trauma. These patients may have had a stroke and are often elderly; if younger, they may be victims of a car accident or some other serious trauma. They typically have multiple body systems that require medical treatment, broken bones and a closed head injury for example, that have made them "very sick and complex." (Tr. 27). The fourth category is referred to by the broad nomenclature of "medically complex" although it is a subset of the population of LTCH patients all of whom are medically complex. The condition of the patients in this fourth category involves two or more body systems. The patients usually present at the LTCH with "renal failure ... [and] with another medical condition ... that requires a ventilator ..." Id. In short, LTCHs provide extended medical and rehabilitative care to patients with multiple, chronic, and/or clinically complex acute medical conditions that usually require care for a relatively extended period of time. To meet the definition of an LTCH a facility must have an average length of inpatient stay ("ALOS") greater than 25 days for all hospital beds. See Fla. Admin. Code R. 59A-3.065(34). The staffs at general acute care hospitals and LTCHs have different orientations. With a staff oriented toward a patient population with a much shorter ALOS, the general acute care hospital setting may not be appropriate for a patient who qualifies for LTCH services. The staff at a general acute care hospital frequently judges success by a patient getting well in a relatively short time. It is often difficult for general acute care hospital staff to sustain the interest and effort necessary to serve the LTCH patient well precisely because of the staff's expectation that the patient will improve is not met in a timely fashion. As time goes by, that expectation continues to be frustrated, a discouragement to staff. The LTCH is unlike other specialized health care settings. The complex, medical, nursing, and therapeutic requirements necessary to serve the LTCH patient may be beyond the capability of the traditional comprehensive medical rehabilitation ("CMR") hospital, nursing home, skilled nursing facility ("SNF"), or, the skilled nursing unit ("SNU"). CMR units and hospitals are rarely, if ever, appropriate for the LTCH patient. Almost invariably, LTCH patients are not able to tolerate the minimum three (3) hours of therapy per day associated with CMR. The primary focus of LTCHs, moreover, is to provide continued acute medical treatment to the patient that may not yet be stable, with the ultimate goal of getting the patient on the road to recovery. In comparison, the CMR hospital treats medically stable patients consistent with its primary focus of restoring functional capabilities, a more advanced step in the continuum of care. Services provided in LTCHs are distinct from those provided in SNFs or SNUs. The latter are not oriented generally to patients who need daily physician visits or the intense nursing services or observations needed by an LTCH patient. Most nursing and clinical personnel in SNFs and SNUs are not experienced with the unique psychosocial needs of long-term acute care patients and their families. An LTCH is distinguished within the healthcare continuum by the high level of care the patient requires, the interdisciplinary treatment model it follows, and the duration of the patient's hospitalization. Within the continuum of care, LTCHs occupy a niche between traditional acute care hospitals that provide initial hospitalization care on a short-term basis and post-acute care facilities such as nursing homes, SNFs, SNUs, and comprehensive medical rehabilitation facilities. Medicare has long recognized LTCHs as a distinct level of care within the health care continuum. The federal government's prospective payment system ("PPS") now treats the LTCH level of service as distinct with its "own DRG system and ... [its] own case rate reimbursement." (Tr. 108). Under the LTCH PPS, each patient is assigned an LTC- DRG (different than the DRG under the general hospital DRG system) with a corresponding payment rate that is weighted based on the patient diagnosis and acuity. The Parties The Agency is the state agency responsible for administering the CON Program and licensing LTCHs and other hospital facilities pursuant to the authority of Health Facility and Services Development Act, Sections 408.031-408.045, Florida Statutes. Select-Palm Beach is the applicant for a free-standing 60-bed LTCH in "east Central Palm Beach County," Select Ex. 1, stamped page 12, near JFK Medical Center in AHCA District 9. Its application, CON No. 9661, was denied by the Agency. Select-Palm Beach is a wholly owned subsidiary of Select Medical Corporation, which provides long term acute care services at 83 LTCHs in 24 states, four of which are freestanding hospitals. The other 79 are each "hospitals-in-a- hospital" ("HIH" or "LTCH HIH"). Kindred is the applicant for a 70-bed LTCH to be located in the north central portion of Palm Beach County in AHCA District 9. Its application, CON No. 9662, was denied by the Agency. Kindred is a wholly owned subsidiary of Kindred Healthcare, Inc. ("Kindred Healthcare"). Kindred Healthcare operates 73 LTCHs, 59 of which are freestanding, according to the testimony of Mr. Novak. See Tr. 56-57. Kindred Healthcare has been operating LTCHs since 1985 and has operated them in Florida for more than 15 years. At the time of the submission of Kindred's application, Kindred Healthcare's six LTCHs in Florida were Kindred-North Florida, a 60-bed LTCH in Pinellas County, AHCA District 5; Kindred-Central Tampa, with 102 beds, and Kindred-Bay Area- Tampa, with 73 beds, both in Hillsborough County, in AHCA District 6; Kindred-Ft. Lauderdale with 64 beds and Kindred- Hollywood with 124 beds, both in Broward County, ACHA District 10; and Kindred-Coral Gables, with 53 beds, in Dade County, AHCA District 11. The Applications and AHCA's Review The applications were submitted in the first application cycle of 2003. Select-Palm Beach's application is CON No. 9661; Kindred's is CON No. 9662. Select-Palm Beach estimates its total project costs to be $12,856,139. Select-Palm Beach has not yet acquired the site for its proposed LTCH, but did include in its application a map showing three priority site locations, with its preferred site, designated "Site 1," located near JFK Medical Center. At $12,937,419, Kindred's estimate of its project cost is slightly more than Select-Palm Beach's. The exact site of Kindred's proposed LTCH had not been determined at the time of hearing. Kindred's preference, however, is to locate in the West Palm Beach area in the general vicinity of St. Mary's Hospital, in the northern portion of Palm Beach County along the I-95 corridor. This is approximately 15 to 20 miles north of Select's preferred location for its LTCH. There is no LTCH in the five-county service area that comprises District 9: Indian River, Okeechobee, St. Lucie, Martin, and Palm Beach Counties. There are two LTCHs in adjacent District 10 (to the south). They have a total of 188 beds and an average occupancy of 80 percent. The Agency views LTCH care as a district-wide service primarily for Medicare patients. At the time of the filing of the applications, the population in District 9 was over 1.6 million, including about 400,000 in the age cohort 65 and over. About 70 percent of the District 9 population lives in Palm Beach County. More than 70 percent of the District's general acute care hospitals are located in that county. Kindred's preferred location for its LTCH is approximately 40 to 50 miles from the closest District 10 LTCH; Select-Palm Beach is approximately 25 to 35 miles from the closest District 10 LTCH. The locations of Select Palm-Beach's and Kindred's proposed LTCHs are complementary. The SAAR Following its review of the two applications, AHCA issued its State Agency Action Report ("SAAR"). Section G., of the report, entitled "RECOMMENDATION," states: "Deny Con #9661 and CON #9662." Agency Ex. 2, p. 43. On June 11, 2003, the report was signed by Karen Rivera, Health Services and Facilities Consultant Supervisor Certificate of Need, and Mr. Gregg as the Chief of the Bureau of Health Facility Regulation. It contained a section entitled "Authorization for Agency Action" that states, "[a]uthorized representatives of the Agency for Health Care Administration adopted the recommendations contained herein and released the State Agency Action Report." Agency Ex. 2, p. 44. The adoption of the recommendations is the functional equivalent of preliminary denial of the applications. In Section F. of the SAAR under the heading of "Need," (Agency Ex. 2, p. 40), the Agency explained its primary bases for denial; it concluded that the applicants had not shown need for an LTCH in AHCA District 9. The discussions for the two, although not precisely identical, are quite similar: Select Specialty Hospital-Palm Beach, Inc.(CON #9661): The applicant's two methodological approaches to demonstrate need are not supported by any specific discharge studies or other data, including DRG admission criteria from area hospitals regarding potential need. The applicant also failed to provide any supporting documentation from area physicians or other providers regarding potential referrals. It was further not demonstrated that patients that qualify for LTCH services are not currently being served or that an access problem exists for residents in District 9. Kindred Hospitals East, L.L.C. (CON #9662): The various methodological approaches presented are not supported by any specific DRG admission criteria from area hospitals suggesting potential need. The applicant provided numerous letters of support for the project from area hospitals, physicians and case managers. However, the number of potential referrals of patients needing LTCH services was not quantified. It was further not demonstrated that patients that qualify for LTCH services are not currently being served or that an access problem exists for residents in District 9. Id. At hearing, the Agency's witness professed no disagreement with the SAAR and continued to maintain the same bases contained in the SAAR for the denials of the two applications The SAAR took no issue with either applicant's ability to provide quality care. It concluded that funding for each applicant was likely to be available and that each project appeared to be financially feasible once operating. The SAAR further stated that there were no major architectural concerns regarding Kindred's proposed facility design, but noted reservations regarding the need for further study and revision of Select Palm-Beach's proposed surgery/procedure wing, as well as cost uncertainties for Select Palm Beach because of such potential revisions. By the time of final hearing, however, the parties had stipulated to the reasonableness of each applicant's proposed costs and methods of construction. The parties stipulated to the satisfaction of a number of the statutory CON criteria by the two applicants. The parties agreed that the applications complied with the content and review process requirements of sections 408.037 and 409.039, Florida Statutes, with one exception. Select reserved the issue of the lack of a Year 2 of Schedule 6, (Staffing) in Kindred's application. The form of Schedule 6 provided by AHCA to Kindred (unlike other schedules of the application) does not clearly indicate that a second year of staffing data must be provided. The remainder of the criteria stipulated and the positions of the parties as articulated in testimony at hearing and in the proposed orders that were submitted leave need as the sole issue of consequence with one exception: whether Kindred has demonstrated that its project is financially feasible in the long term. Kindred's Long Term Financial Feasibility Select-Palm Beach contends that Kindred's project is not financially feasible in the long term for two reasons. They relate to Kindred's application and are stated in Select Palm Beach's proposed order: Kindred understated property taxes[;] Kindred completely fails to include in its expenses on Schedule 8, patient medical assistance trust fund (PMATF) taxes [citation omitted]. Proposed Recommended Order of Select-Palm Beach, Inc., p. 32, Finding of Fact 97. Raised after the proceeding began at DOAH by Select- Palm Beach, these two issues were not considered by AHCA when it conducted its review of Kindred's application because the issues were not apparent from the face of the application. AHCA's Review of Kindred's Application Kindred emerged from a Chapter 11 bankruptcy proceedings on April 20, 2001, under a plan of reorganization. With respect to the events that led to the bankruptcy proceeding and the need to review prior financial statements, AHCA made the following finding in the SAAR: Under the plan [of reorganization], the applicant [Kindred] adopted the fresh start accounting provision of SOP 90-7. Under fresh start accounting, a new reporting entity is created and the recorded amounts of assets and liabilities are adjusted to reflect their estimated fair values. Accordingly, the prior period financial statements are not comparable to the current period statements and will not be considered in this analysis. Agency Ex. 2, p. 30. The financial statements provided by Kindred as part of its application show that Kindred Healthcare, Kindred's parent, is a financially strong company. The information contained in Kindred's CON application filed in 2003 included Kindred Healthcare's financial statements from the preceding calendar year. Kindred Healthcare's Consolidated Statement of Operations for the year ended December 31, 2002, showed "Income from Operations" to be more than $33 million, and net cash provided by operating activities (cash flow) of over $248 million for the period. Its Consolidated Balance Sheet as of December 31, 2002, showed cash and cash equivalents of over $244 million and total assets of over $1.6 billion. In light of the information contained in Kindred's CON application, the SAAR concluded with regard to short term financial feasibility: Based on the audited financial statements of the applicant, cash on hand and cash flows, if they continue at the current level, would be sufficient to fund this project as proposed. Funding for all capital projects, with the support of its parent, is likely to be available as needed. Agency Ex. 2, p. 30 (emphasis supplied). The SAAR recognized that Kindred projected a "year two operating loss for the hospital of $287,215." Agency Ex. 2, p. Nonetheless, the SAAR concludes on the issue of financial feasibility, "[w]ith continued operational support from the parent company, this project [Kindred's] is considered financially feasible." Id. The Agency did not have the information, however, at the time it reviewed Kindred's application that Kindred understated property taxes and omitted the Public Medicaid Trust Fund and Medical Assistance Trust Fund ("PMATF") "provider tax" of 1.5 percent that would be imposed on Kindred's anticipated revenues of $11,635,919 as contended by Select-Palm Beach. Consistent with Select Palm-Beach's general contentions about property taxes and PMATF taxes, "Kindred acknowledges that it likely understated taxes to be incurred in the operation of its facility." Kindred's Proposed Recommended Order, paragraph 50, p. 19. The parties agree, moreover, that the omitted PMATF tax is reasonably projected to be $175,000. They do not agree, however, as to the impact of the PMATF tax on year two operating loss. The difference between the two (approximately $43,000) is attributable to a corporate income tax benefit deduction claimed by Kindred so that the combination of the application's projected loss, the omitted PMATF tax, and the deduction yields a year two operating loss of approximately $419,000. Without taking into consideration the income tax benefit, Select-Palm Beach contends that adding in the PMATF tax produces a loss of $462,000. Kindred and Select-Palm Beach also disagree over the projection of property taxes by approximately $50,000. Kindred projects that the property taxes in year two of operation will be approximately $225,000 instead of the $49,400 listed in the application. Select-Palm Beach projects that they will be $50,000 higher at approximately $275,000. Whether Kindred's or Select-Palm Beach's figures are right, Kindred makes two points. First, if year two revenues and expenses, adjusted for underestimated and omitted taxes, are examined on a quarterly basis, the fourth quarter of year two has a better bottom line than the earlier quarters. Not only will the fourth quarter bottom line be better, but, using Kindred's figures, the fourth quarter of year two of operations is profitable. Second, and most importantly given the Agency's willingness to credit Kindred with financial support from its parent, Kindred's application included in its application an interest figure of $1.2 million for year one of operation and $1.03 million for year two. Kindred claims in its proposed recommended order that "[i]n reality ... this project will incur no interest expense as Kindred intends to fund the project out of cash on hand, or operating capital, and would not have to borrow money to construct the project." Id., at paragraph 54, p. 20. Through the testimony of John Grant, Director of Planning and Development for Kindred's parent, Kindred Healthcare, Kindred indicated at hearing that its parent might, indeed, fund the project: A ... Kindred [Healthcare] would likely fund this project out of operating capital. Like I said, in the first nine months of this year Kindred had operating cash flow of approximately $180 million. So it's not as if we would have to actually borrow money to complete a project like this. Q And what was the interest expense that you had budgeted in Year Two for this facility? A $1,032,000. Q ... so is it your statement then that this facility would not owe any interest back to the parent company? A That's correct. Tr. 221-222 (emphasis supplied). If the "financing interest" expense is excluded from Kindred's statement of projected expenses in Schedule 8 of the CON application, using Kindred's revised projections, the project shows a profit of approximately $612,0002 for the second year of operation. If Select-Palm Beach's figures and bottom line loss excludes the "finances interest" expense, the elimination of the expense yields of profit for year two of operations in excess of $500,000. If the support of Kindred's parent is considered as the Agency has signaled its willingness to do and provided that the project is, in fact, funded by Kindred Healthcare rather than financed through some other means that would cause Kindred to incur interest expense, Kindred's project is financially feasible in the long term. With the exception of the issue regarding Kindred's long term financial feasibility, as stated above, taken together, the stipulation and agreements of the parties, the Agency's preliminary review contained in the SAAR, and the evidence at hearing, all distill the issues in this case to one overarching issue left to be resolved by this Recommended Order: need for long term care hospital beds in District 9. Need for the Proposals From AHCA's perspective prior to the hearing, the only issue in dispute with respect to the two applications is need. This point was made clear by Mr. Gregg's testimony at hearing in answer to a question posed by counsel for Select-Palm Beach: Q. ... Assuming there was sufficient need for 130 beds in the district is there any reason why both applicants shouldn't be approved in this case, assuming that need? A. No. (Tr. 398). Both applicants contend that the application each submitted is superior to the other. Neither, however, at this point in the proceeding, has any objection to approval of the other application provided its own application is approved. Consistent with its position that both applications may be approved, Select-Palm Beach presented testimony through its health care planner Patricia Greenberg3 that there was need in District 9 for both applicants' projects. Her testimony, moreover, rehabilitated the single Kindred methodology of three that yielded numeric need less than the 130 beds proposed by both applications: Q ... you do believe that there is a need for both in the district. A I believe there's a need for two facilities in the district. Q It could support two facilities? A Oh, absolutely. Q And the disagreement primarily relates to the conservative approach of Kindred in terms of not factoring in out-migration and the narrowing the DRG categories? A Correct. ... Kindred actually had three models. Two of them support both facilities, but it's the GMLOS model that I typically rely on, and it didn't on the surface support both facilities. That's why I reconciled the two, and I believe that's the difference, is just the 50 DRGs and not including the out-migration. That would boost their need above the 130, and two facilities would give people alternatives, it would foster competition, and it would really improve access in that market. Tr. 150-51. Need for the applications, therefore, is the paramount issue in this case. Since both applicants are qualified to operate an LTCH in Florida, if need is proven for the 130 beds, then with the exception of Kindred's long term financial feasibility, all parties agree that there is no further issue: both applications should be granted. No Agency Numeric Need Methodology The Agency has not established a numeric need methodology for LTCH services. Consequently, it does not publish a fixed-need pool for LTCHs. Nor does the Agency have "any policy upon which to determine need for the proposed beds or service." See Fla. Admin. Code R. 59C-1.008(2)(e)1. Florida Administrative Code Rule 59C-1.008(2), which governs "Fixed Need Pools" (the "Fixed Need Pools Rule") states that if "no agency policy exist" with regard to a needs assessment methodology: [T]he applicant will be responsible for demonstrating need through a needs assessment methodology which must include, at a minimum, consideration of the following topics, except where they are inconsistent with the applicable statutory or rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, subdistrict or both; Medical treatment trends; and Market conditions. Fla. Admin. Code R. 59C-1.008(2)(e)2. The Fixed Need Pools Rule goes on to elaborate in subparagraph (e)3 that "[t]he existence of unmet need will not be based solely on the absence of a health service, health care facility, or beds in the district, subdistrict, region or proposed service area." Population, Demographics and Dynamics The first of the four topics to be addressed when an applicant is responsible for demonstrating need through a needs assessment methodology is "population, demographics and dynamics." The Agency has not defined service areas for LTCHs. Nonetheless, from a health planning perspective, it views LTCH services as being provided district-wide primarily for Medicare patients. Consistent with the Agency's view, Select-Palm Beach identified the entire district, that is, all of AHCA District 9, as its service area. It identified Palm Beach County, one of the five counties in AHCA District 9, as its primary service area. In identifying the service area for Select-Palm Beach, Ms. Greenberg drew data from various sources: population estimates for Palm Beach County and surrounding areas; the number of acute care hospital beds in the area; the number of LTCH beds in the area; the types of patients treated at acute care hospitals; and the lengths of stay of the patients treated at those hospitals. AHCA District 9 has more elderly than any other district in the State, and Palm Beach County has more than any other county except for Dade. Palm Beach County residents comprise 71% of the District 9 population. It is reasonably projected that the elderly population (the "65 and over" age cohort) in Palm Beach County is projected to grow at the rate of 8 percent by 2008. The "65 and over" age cohort is significant because the members of that cohort are most likely to utilize hospital services, including LTCH services. Its members are most likely to suffer complications from illness and surgical procedures and more likely to have co-morbidity conditions that require long- term acute care. Persons over 65 years of age comprise approximately 80 percent of the patient population of LTCH facilities. Both Select-Palm Beach and Kindred project that approximately 80 percent of their admissions will come from Medicare patients. Since 90 percent of admissions to an LTCH come from acute care facilities, most of the patient days expected at Select-Palm Beach's proposed LTCH will originate from residents in its primary service area, Palm Beach County. When looking at the migration pattern for patients at acute care facilities within Palm Beach County, the majority (90 percent) come from Palm Beach County residents. Thus, Select- Palm Beach's projected primary service area is reasonable. Just as Select-Palm Beach, Kindred proposes to serve the entire District. Kindred proposes that its facility be based in Palm Beach County because of the percentage of the district's population in the county as well as because more than 70% of the district's general acute care hospitals are in the county. Its selection of the District as its service area, consistent with the Agency's view, is reasonable. Currently there are no LTCHs in District 9. Availability, Utilization and Quality of Like Services The second topic is "availability, utilization and quality of like services." There are no "like" services available to District residents in the District. Select-Palm Beach and Kindred, therefore, contend that they meet the criteria of the second topic. There are like services in other AHCA Districts. For example, AHCA District 10 has at total of 188 beds at two Kindred facilities in Fort Lauderdale and Hollywood. The Agency, however, did not present evidence of their quality, that they were available or to what extent they are utilized by the residents of AHCA District 9. Medical Treatment Trends The third topic is medical treatment trends. Caring for patients with chronic and long term care needs is becoming increasingly more important as the population ages and as medical technology continues to emerge that prolongs life expectancies. Through treatment provided the medically complex and critically ill with state of the art mechanical ventilators, metabolic analyzers, and breathing monitors, LTCHs meet needs beyond the capability of the typical general acute care hospitals. In this way, LTCHs fill a niche in the continuum of care that addresses the needs of a small but growing patient population. Treatment for these patients in an LTCH, who otherwise would be cared for without adequate reimbursement to the general acute care hospital or moved to an alternative setting with staff and services inadequate to meet their needs, is a medical trend. Market Conditions The fourth topic to be addressed by the applicant is market conditions. The federal government's development of a distinctive prospective payment system for LTCHs (LTC-DRG), has created a market condition favorable to LTCHs. General acute care hospitals face substantial losses for the medically complex patient who uses far greater resources than expected on the basis of individual diagnoses. Medicare covers between 80 and 85 percent of LTCH patients. The remaining patients are covered by private insurance, managed care and Medicaid. LTCH programs allow for shorter lengths of stay in a general acute care facility, reduces re-admissions and provide more discharges to home. These benefits are increasingly recognized. Numeric Need Analysis Kindred presented a set of needs assessment methodologies that yielded numeric need for the beds applied for by Kindred. Select-Palm Beach did the same. Unlike Kindred, however, all of the needs assessment methodologies presented by Select-Palm Beach demonstrated numeric need in excess of the 130 beds proposed by both applications. Select-Palm Beach's methodologies, overall, are superior to Kindred's. Select-Palm Beach used two sets of needs assessment methodologies and sensitivity testing of one of the sets that confirmed the methodology's reasonableness. The two sets or needs assessment methodologies are: (1) a use rate methodology and (2) length of stay methodologies. The use rate methodology yielded projected bed need for Palm Beach County alone in excess of the 130 beds proposed by the two applicants. For the year "7/05 - 6/06" the bed need is projected to be 256; for the year "7/06 - 6/07" the bed need is projected to be 261; and, for the year "7/07 - 6/08" the bed need is projected to be 266. See Select Ex. 1, Bates Stamp p. 000036 and the testimony of Ms. Greenberg at tr. 114. If the use rate analysis had been re-computed to include two districts whose data was excluded from the analysis, the bed need yielded for Palm Beach County alone was 175 beds, a numeric need still in excess of the 130 beds proposed by both applicants. The use rate methodology is reasonable.4 The length of stay methodologies are also reasonable. These two methodologies also yielded numeric need for beds in excess of the 130 beds proposed. The two methodologies yielded need for 167 beds and 250 beds. Agency Denial The Agency's general concerns about LTCHs are not without basis. For many years, there were almost no LTCH CON applications filed with the Agency. A change occurred in 2002. The change in the LTCH environment in the last few years put AHCA in the position of having "to adapt to a rapidly changing situation in terms of [Agency] understanding of what has been going on in recent years with long-term care hospitals." (Tr. 358.) "... [I]n the last couple of years long-term care hospital applications have become [AHCA's] most common type of application." (Tr. 359.) At the time of the upsurge in applications, there was "virtually nothing ... in the academic literature about long- term care hospitals ... that could [provide] ... an understanding of what was going on ... [nor was there anything] in the peer reviewed literature that addressed long-term care hospitals" id., and the health care planning issues that affected them. Two MedPAC reports came out, one in 2003 and another in 2004. The 2003 report conveyed the information that the federal government was unable to identify patients appropriate for LTCH services, services that are overwhelmingly Medicare funded, because of overlap of LTCH services with other types of services. The 2004 report gave an account of the federal government decision to change its payment policy for a type of long-term care hospitals that are known as "hospitals-within- hospitals" (tr. 368) so that "hospitals within hospitals as of this past summer [2004] can now only treat 25 percent of their patients from the host hospital." Id. Both reports roused concerns for AHCA. First, if appropriate LTCH patients cannot be identified and other types of services overlap appropriately with LTCH services, AHCA cannot produce a valid needs assessment methodology. The second produces another concern. In the words of Mr. Gregg, The problem ... with oversupply of long-term care hospital beds is that it creates an incentive for providers to seek patient who are less appropriate for the service. What we know now is that only the sickest patient ... with the most severe conditions are truly appropriate for long-term care hospital placement. * * * ... [T]he MedPAC report most recently shows us that the greatest indicator of utilization of long-term care hospital services is the mere availability of those services. Tr. 368-369. The MedPAC reports, themselves, although marked for identification, were not admitted into evidence. Objections to their admission (in particular, Kindred's) were sustained because they had not been listed by AHCA on the stipulation required by the Pre-hearing Order of Instructions.

Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be issued by the Agency for Health Care Administration that: approves Select-Palm Beach's application, CON 9661; and approves Kindred's application CON 9662 with the condition that financing of the project be provided by Kindred Healthcare. DONE AND ENTERED this 18th day of April, 2005, in Tallahassee, Leon County, Florida. S DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of April, 2005.

Florida Laws (6) 120.569, 120.57, 408.031, 408.037, 408.039, 408.045

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PALMS RESIDENTIAL TREATMENT CENTER, INC., D/B/A MANATEE PALMS RESIDENTIAL TREATMENT CENTER vs. FLORIDA RESIDENTIAL TREATMENT CENTERS, 87-002036 (1987)

Division of Administrative Hearings, Florida Number: 87-002036 Latest Update: Dec. 22, 1987

Florida Laws (3) 120.57, 395.002, 395.003

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FIRST HOSPITAL CORPORATION vs. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, 84-003768RX (1984)

Division of Administrative Hearings, Florida Number: 84-003768RX Latest Update: Oct. 24, 1985

Florida Laws (4) 120.54, 120.56, 120.57, 120.68

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NAPLES COMMUNITY HOSPITAL, INC., D/B/A NCH NORTH NAPLES HOSPITAL CAMPUS vs AGENCY FOR HEALTH CARE ADMINISTRATION, 13-002558CON (2013)

Division of Administrative Hearings, Florida Filed:Tallahassee, Florida Jul. 11, 2013 Number: 13-002558CON Latest Update: Jun. 04, 2014

Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration issue a Final Order denying CON application no. 10185. DONE AND ENTERED this 28th day of March, 2014, in Tallahassee, Leon County, Florida. S ELIZABETH W. MCARTHUR Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of March, 2014.

Florida Laws (10) 120.52, 120.569, 120.57, 408.031, 408.032, 408.033, 408.035, 408.037, 408.039, 408.0455

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MOUNT SINAI MEDICAL CENTER OF GREATER MIAMI, INC., D/B/A MOUNT SINAI MEDICAL CENTER vs MIAMI BEACH HEALTHCARE GROUP, LTD., D/B/A MIAMI HEART INSTITUTE, 94-004755CON (1994)

Division of Administrative Hearings, Florida Filed:Tallahassee, Florida Aug. 30, 1994 Number: 94-004755CON Latest Update: Aug. 24, 1995

The Issue Whether the Agency for Health Care Administration (AHCA or the Agency) should approve the application for certificate of need (CON) 7700 filed by Miami Beach Healthcare Group, LTD. d/b/a Miami Heart Institute (Miami Heart or MH).

Florida Laws (4) 120.57, 408.032, 408.035, 408.036 Florida Administrative Code (1) 59C-1.040

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